Re: Comments on Proposed National Organic Program Regulations; Docket No. TMD-00-02-PR2

Mr. Keith Jones
Program Manager
National Organic Program
U.S. Department of Agriculture
Room 2945-So., Ag Stop 0275
PO Box 96456
Washington, DC 20090-6456

Re:    Comments on Proposed National Organic Program Regulations; Docket No. TMD-00-02-PR2

Dear Mr. Jones:

The Food Marketing Institute is pleased to comment on the U.S. Department of Agriculture’s (USDA’s) proposed National Organic Program regulations. 65 Fed. Reg. 13512 (March 13, 2000). As discussed more fully below, we agree with the Agency that foods produced with biotechnology, irradiation, or sewage sludge should not be labeled “organic.” Moreover, we support USDA’s proposed rules with respect to retailer certification, with the clarifications discussed below.

FMI is a non-profit association that conducts programs in research, education, industry relations and public affairs on behalf of its 1,500 members and their subsidiaries. Our membership includes food retailers and wholesalers, as well as their customers, in the United States and around the world. FMI’s domestic member companies operate approximately 21,000 retail food stores with a combined annual sales volume of $300 billion, which accounts for more than half of all grocery sales in the United States. FMI’s retail membership is composed of large multi-store chains, small regional firms, and independent supermarkets. Our international membership includes 200 members from 60 countries.

I.     Background

The Organic Food Production Act of 1990 (“OFPA” or “the Act”) requires USDA to develop a National Organic Program to implement the Act’s mandate to establish a uniform national system to regulate the production and handling of organic foods. 7 U.S.C. §§ 6501, et seq. On December 16, 1997, USDA issued proposed rules for the Program. 62 Fed. Reg. 65850 (Dec. 16, 1997). FMI was among the more than 275,000 entities that commented on the proposal. Given the overwhelming response, USDA reissued proposed regulations earlier this year that addressed the concerns raised in the comments and gave the public an opportunity to comment on these changes. 65 Fed. Reg. 13512 (March 13, 2000).

II.     Comments on Re-Issued Proposal

     A.     Excluded Methods and Prohibited Substances

The 1997 proposal would have authorized the use of several controversial production methods and substances in foods that would be allowed to be labeled “organic.” In particular, biotechnology techniques and ionizing radiation would have been permitted, as would sewage sludge. FMI and many others commented that these methods and substances were inconsistent with current organic practices and principles.

USDA acknowledged the general discomfort with the use of these methods and substances in the reissued proposed rules. Specifically, the National List of substances that may be used in the production of foods that will be labeled organic does not include any materials produced with biotechnology. 65 Fed. Reg. at 13587, col. 3. Moreover, proposed Section 205.301 prohibits products that are sold, labeled or represented as “100% organic,” “organic,” or “made with [specific organic ingredients]” from containing any ingredients produced using an excluded method¹ (i.e., biotechnology), irradiation or sewage sludge. Only those products that contain less than 50% organic ingredients and, therefore, may only use the word “organic” as a modifier of the specific ingredients in the ingredient line, may incorporate ingredients produced with excluded methods or practices for the nonorganic portion of the product. Proposed Section 205.301(d).

USDA stated in the preamble that there is no scientific evidence that these methods present an unacceptable risk to the environment or human health. 65 Fed. Reg. at 13532, col. 3. Nonetheless, the Agency decided to prohibit their use because the organic standards are essentially marketing standards and the use of these methods and substances in foods labeled “organic” runs counter to consumer expectations. See 65 Fed. Reg. at 13513-14. Therefore, foods produced through these methods will not be allowed to carry organic labeling. 65 Fed. Reg. at 13535, col. 1; see also, see 65 Fed. Reg. at 13549, cols. 2, 3.

FMI supports the reissued regulations with respect to the proposed prohibition on biotechnology, irradiation and sewage sludge in the production of foods that will be labeled as “100% organic,” “organic” or “made with [organic ingredients].” Although a more stringent approach would prohibit the use of “excluded methods” and prohibited substances for even the nonorganic portion of products with less than 50% organic ingredients, we believe USDA has taken a balanced approach that recognizes both (1) the difficulty that producers may have in sourcing some ingredients that are not produced through biotechnology and (2) that consumer confusion is unlikely to occur since “organic” will only appear in the ingredient line with reference to specific ingredients.
     
     B.     Retail-Related Provisions

          1.     Background

                        a.     Statutory Authority

The OFPA requires USDA to establish an organic certification program for producers and handlers of agricultural products that have been produced using the organic methods provided for in the Act. 7 U.S.C. § 6503(a). USDA’s program must require agricultural products that are sold or labeled as organically produced to be produced only on certified organic farms and handled only through certified organic handling operations. 7 U.S.C. § 6506. Producers and handlers that would like to participate in a program of this nature must develop an organic plan that is submitted to the appropriate certifying agent for review. 7 U.S.C. § 6513(a).

Congress recognized that placing stringent certification requirements on final retailers of agricultural products that do not process them would be burdensome and would not provide a meaningful benefit. Accordingly, these final retailers are expressly excluded from the OFPA’s definitions of “handler” and “handling operation” and, therefore, are not required to undergo the certification process. See 7 U.S.C. §§ 6502(9), (10).

To understand the exemption that Congress enacted, it is helpful to look at the relevant definitions. The term “handle” is defined as “to sell, process or package agricultural products.” 7 U.S.C. § 6502(8). A “handler” is “any person engaged in the business of handling agricultural products, except such term shall not include final retailers of agricultural products that do not process agricultural products.” 7 U.S.C. § 6502(9) (emphasis added). A “handling operation” is defined as “any operation or portion of an operation (except final retailers of agricultural products that do not process agricultural products) that (A) receives or otherwise acquires agricultural products and (B) processes, packages or stores such products.” 7 U.S.C. § 6502(10) (emphasis added).

Thus, by subtracting the references to “process” and “processing” from the “handler” and “handling operation” definitions, it is clear that final retailers who only “sell . . . or package agricultural products” are not considered handlers, and retailers who simply “receive or otherwise acquire agricultural products and . . . package or store such products” are not properly considered handling operations. As such, final retailers who engage in these activities cannot be subject to the OFPA’s mandatory certification requirements as a matter of law.

          b.     Proposed Regulations

In keeping with the OFPA, the 1997 proposed rules included a specific exemption for retail operations, or portions of such operations, that handle organically produced agricultural products but do not process them. 1997 Proposed Section 205.202(a)(2). USDA additionally proposed an exclusion for certain preparatory activities because the Agency determined that requiring certification would be burdensome and unnecessary, and would not contribute to assuring the integrity of the organically produced product. 1997 Proposed Section 205.202(b)(3); 62 Fed. Reg. at 65904-05. To qualify, retailers would have been required to use only products that had been labeled as organic or made with certain organic ingredients and the activities would need to occur in the course of the retailer’s normal business practices, solely for the purpose of presenting or offering the product to a consumer. 62 Fed. Reg. at 65905. Washing and sorting fresh organic produce, cutting and labeling organic cheese from a bulk wheel, and allowing consumers to package their own bags of organic grain from a bulk container are examples of the types of activities that the Agency considered appropriate for this exclusion. 62 Fed. Reg. at 65905.

The 2000 proposal also incorporates the statutory exemption. Specifically, proposed Section 205.101(a)(2) states that, “a handling operation that is a retail food establishment or portion of a retail food establishment that handles organically produced agricultural products but does not process them is exempt from the requirements in this part.” Proposed Section 205.101(a)(2). In addition, USDA has added the following proposed exclusion:

(2)     A handling operation that is a retail food establishment or portion of a retail food establishment that processes or prepares, on the premises of the retail food establishment, raw and ready-to-eat food from agricultural products that are previously labeled as “100 percent organic,” “organic,” or “made with organic [specified ingredients]” is excluded from the requirements in this part, except:
             (i) the requirements for the prevention of contact with prohibited substances as set forth in § 205.272; and
      (ii) the labeling provisions of § 205.309.

Proposed Section 205.101(b)(2). Thus, retailers who only prepare raw and ready-to-eat organic foods will not be required to undergo certification, but they will be required to prevent commingling and to adhere to the regulatory labeling standards.²

          2.     Exemptions and Exclusions from Certification Requirements

As explained more fully below, we believe that the proposed exemption and exclusion for retailers from the certification requirements are justified by the law and well-reasoned, and we urge the Agency to adopt them in the final regulations with the clarifications discussed below.

The proposed language for the regulatory exemption for retailers attempts to codify the statute; namely, retailers that do not process agricultural products are exempt from the requirements of the organics regulations. We recommend, however, that the Agency clarify the exemption so that it reflects the statutory exemption more closely. Specifically, USDA should include the italicized language to the final rule:

(2)     A handling operation that is a retail food establishment or portion of a retail food establishment that handles organically produced agricultural products but does not process them is exempt from the requirements in this part. A retail food establishment that receives or otherwise acquires agricultural products and packages or stores such products is exempt from the requirements in this part, provided that the retailer does not otherwise process the agricultural products.

Furthermore, we recommend that the Agency clarify in the final rule that certain minimal preparatory activities do not constitute “processing” within the meaning of the exemption. As noted above, in the 1997 proposal, USDA did not consider activities such as washing and sorting organic produce, allowing customers to package their own organic grain or cutting cheese from a bulk wheel and affixing a weight label to be “processing” for the purpose of the regulations. See 62 Fed. Reg. 65905.

The preamble for the current proposal already provides some important clarification in this regard. For example, in response to the 1997 proposal, a commenter suggested that USDA revise the “processing” definition to include repackaging for weight. 65 Fed. Reg. at 13519, col. 3. USDA replied that, “affixing a weight label to a product is a normal retail activity that does not warrant the expense and effort necessary to certify all retailers who routinely affix weight labels to organic product.” Id. Therefore, we encourage the Agency to continue with its current line of thinking and clarify that the customary activities necessary for retail sale should not be considered “processing” for the purposes of the exemption. Indeed, requiring certification for such minimal activities might discourage conventional retailers from carrying organic products at all, which would be detrimental to the overall organic food industry.

As noted above, the proposed regulation would also exclude retailers that only process or prepare raw or ready-to-eat food on the premises from agricultural products that are previously labeled from all of the requirements except the labeling standards and the prohibition on commingling. We agree that the proposed exclusion is a reasonable standard, although we recommend one clarification. The proposed regulation states that the food must be prepared “on the premises of the retail food establishment.” Proposed Section 205.101(b)(2). In today’s retail environment, many retailers prepare foods at a central kitchen or commissary from which the foods are distributed to several retail locations. In light of current retail practice, we submit that “on the premises” should be broadly interpreted to include central kitchens or commissaries and that USDA should clarify this interpretation in the final regulations. Otherwise, the exemption will be rendered meaningless for many retailers.

Finally, with respect to applicability, the preamble states that a retail operation that contracts for the production, packaging, or labeling of organic product need not be certified because the certified production or handling operation is responsible for meeting the applicable requirements under the OFPA and the regulations. 65 Fed. Reg. at 13528, col. 3. We agree with the Agency’s interpretation. Retailers should not and cannot be held responsible for errors committed by their suppliers. If the retailer contracts with a supplier who holds itself out as a certified producer or handler and, therefore, as an expert in the area, it is the supplier’s responsibility to ensure that all necessary regulatory and statutory requirements are followed. For example, it would not be fair to hold a retailer accountable for its private label, pre-packaged “organic” cereal if the producer of the cereal did not follow the appropriate recordkeeping requirements.

          3.     Commingling and Labeling Requirements

As noted above, the exclusion for retailers that prepare ready-to-eat organic foods on their premises requires retailers to abide by the prohibition on commingling in proposed Section 205.272 and the labeling requirements in proposed Section 205.309.

Proposed Section 205.272 requires the implementation of measures necessary to prevent the commingling of organic and nonorganic products and to protect organic products from prohibited substances. Moreover, proposed Section 205.272 prohibits the use of packaging materials or storage containers or bins that contain a synthetic fungicide, preservative, or fumigant in the handling of foods labeled 100% organic, organic, or made with organic ingredients. Similarly, organic foods may not be placed in contact with bags or containers that were formerly used with substances that might compromise the integrity of the organic foods, unless the container has been thoroughly cleaned so that it will not pose a risk that prohibited materials will contact the organic foods. FMI supports the proposed separation requirements for retailers that are excluded from the certification requirements under Section 205.101(b).

With respect to labeling, proposed Section 205.309 and the preamble seem somewhat contradictory. Specifically, proposed Section 205.309 provides than an organization that is exempt or excluded from certification and that chooses not to be certified may not label its products in a way that indicates that the operation has been certified as organic. Proposed Section 205.309(a); 65 Fed. Reg. 13556, col. 2.   The proposed regulation further states that an agricultural product produced or handled on an exempt or excluded operation may be identified as an organic product or organic ingredient in a multiingredient product produced by the exempt or excluded operation. Proposed Section 205.309(b).

In contrast, however, the preamble states that the terms “100% organic,” “organic,” and “made with [organic ingredients]” are reserved for use by processors that have been certified.65 Fed. Reg. at 13356, col. 2. The preamble also, however, appears to allow for the labeling of agricultural products as organic -- even if the retailer is not certified -- provided that no misrepresentations regarding certification are made. See id.³

Accordingly, the proposal apparently contains some potentially contradictory statements. While we agree that it would be misleading for organizations that have not been certified to claim that they were certified, we disagree that the use of the term “organic,” standing alone would serve as a representation that the organization had been certified.

          4.     Recordkeeping

The 2000 proposal requires handling operations exempt from certification under Section 205.101(a)(3) or (a)(4) to maintain records for three years that are sufficient to prove the source and identity of organic ingredients. See Proposed Section 205.101(c). However, retailers are exempt from certification under paragraph (a)(2) of Section 205.101, consequently, the recordkeeping provision in paragraph (c) does not apply to retailers.

We agree that retailers who offer organic products to their consumers but are exempt or excluded from the certification requirements should not be required to maintain records to document their status. Consistent with the preamble language, we agree that retailers might choose to maintain records to demonstrate their compliance with the Act. See 65 Fed. Reg. at 13523, col. 3.

          5.     Facility Pest Control

The 1997 proposal permitted the use of pesticides to control pests in organic foods facilities, provided that the pesticides were cleared by the appropriate regulatory authorities and the substances were applied in a manner that would prevent contact with any organic products. Despite objections from some commenters, the 2000 proposal permits facilities to use pesticides to maintain sanitary conditions. In this regard, proposed Section 205.271 provides standards for organic food production and handling facilities that need to apply pesticides to control pests that might otherwise lead to food safety problems in the facility. This approach is consistent with the comments FMI filed in 1998, in which we expressed concern that retailers might be prohibited from using the tools necessary to comply with current sanitation standards.

          6.     OTA’s “Guidelines for Retailing of Organic Products”

The Organic Trade Association (OTA) has drafted a document entitled, “Guidelines for Retailing of Organic Products” (December 1999) (hereinafter “OTA Guidelines”). OTA’s Guidelines recommend that retailers adopt Good Organic Retail Practices or GORP in meeting their responsibilities under the OFPA. We understand that GORP might reasonably include preferred practices for handling and storage, product preparation, cleaning and sanitation, personnel, and labeling.

FMI believes that a voluntary GORP program may help individual retailers meet their statutory and regulatory requirements and offer customers organic products with integrity. Therefore, we recommend that food retailers that offer organic products consider adopting a system of good organic retail practices.

     C.     State Organic Programs

The preamble provides that the federal “exclusion of retail food establishments from this proposal does not prevent a State from developing an organic retail food establishment certification program or otherwise regulating retail food establishments that prepare, package or process organic agricultural products.” 65 Fed. Reg. at 13523, col. 3; see also id. at 13529, col. 3. We agree that states may develop a voluntary retail food establishment certification program,⁴ but we do not believe that the OFPA grants states the authority to “otherwise regulate” retail food establishments that qualify for the statutory exemption and proposed exclusion.

The OFPA allows states to develop their own organic certification programs. See 7 U.S.C. §§ 6506(c), 6507. The State plan must be approved by USDA and must meet certain statutory requirements. Id. at § 6507(a). Under these circumstances, the OFPA permits State organic certification programs to contain “more restrictive requirements governing the organic certification of farms and handling operations and the production and handling of agricultural products that are to be sold or labeled as organically produced” than is required by the federal program. Id. at § 6507(b)(1) (emphasis added). Section 6507(a)(2) includes the further proviso that any additional requirements “shall not be inconsistent” with the OFPA. Id. at § 6507(a)(2)(B).

Under the foregoing statutory parameters, USDA may approve a State plan that allows retailers to obtain organic certification, but the statute does not authorize States to require retailers to be certified under circumstances in which they are not required to be certified in the federal program. Specifically, to the extent that retailers and the activities they perform are exempt from the OFPA’s definition of “handling” and “handling operations,” the statute’s authority to provide more restrictive requirements does not apply. As noted above, Section 6507(b)(1) only allows States to impose more restrictive requirements on the organic certification of farms and handling operations and the production and handling of agricultural products. Therefore, States may not impose more restrictive requirements on retailers who are not farms, handlers or handling operations. Any attempts to do so would clearly be inconsistent with the OFPA, thereby violating Section 6507(a)(2)(B).

Consistent with the statutory language that prohibits any stricter standards from being inconsistent with the Act, the proposed regulations state that any more restrictive standards must be based on unique environmental conditions or specific production or handling practices particular to the state or portion of the state. Proposed Section 205.620(c); see also, 65 Fed. Reg. at 13592, col. 1. The preamble further clarifies that the more restrictive standards should be narrowly tailored, such as requiring a more restrictive buffer zone to protect an endangered lake or estuary. Id. at col. 2. To support such a change, States must include complete documentation in their submission to the Agency that explains the unique environmental or ecological conditions or specific production practices particular to the State or region that necessitate the proposed amendment. Proposed Section 205.621(a)(2).

Thus, the Agency is clearly signaling its interpretation of the Act that would allow a State to impose narrowly tailored, stricter standards when a clear need unique to that State is demonstrated, and not simply for the purpose of establishing broad new requirements. Indeed, allowing States to establish sweeping new and stricter programs would undermine one of the central reasons for the enactment of the OFPA, namely the establishment of uniform standards for organic foods. See S. Rep. No. 357, 101 Cong., 289, reprinted in 1990 U.S. Code Cong. & Admin. News 4656, 4943. Therefore, we believe that the preamble language suggesting that states may develop mandatory retailer certification programs is inaccurate and recommend that the Agency clarify this point in the preamble to the final regulations.

     D.     Organic Seal

The OFPA states that a label may be used to indicate that an agricultural product meets the regulatory standards for organic production and that the seal may incorporate the Department of Agriculture seal. 7 U.S.C. § 6505(a)(2).

The 1997 notice proposed a design for a USDA seal that could be used on organic food products to indicate their compliance with the regulatory standards. The proposed seal was a triangular shape behind a circle of recycling arrows around a globe figure with the word “organic” printed diagonally across the globe. 62 Fed. Reg. at 65947. USDA received “hundreds of comments” opposing the proposed seal on various grounds, including that the logo was too busy. 65 Fed. Reg. at 13559, col. 2.

Accordingly, USDA has proposed a redesigned seal that is substantially simpler than the 1997 model. Specifically, the newly proposed seal is a shield shape in which the words “USDA CERTIFIED ORGANIC” appear. Proposed Section 205.310. The seal may be printed in red, white and blue inks.

Although we agree that a simpler seal is more consumer-friendly, we are concerned that the proposed seal looks like an official USDA endorsement of organic foods. Indeed, the results of consumer research circulated in May suggest that the proposed seal will seriously mislead consumers into thinking that USDA is stating that organic products are safer, better in quality or more nutritious than foods produced by conventional means.   The survey found that 2/3 of participants would interpret a product labeled “USDA Certified Organic” to be safer, healthier, and generally “better” than non-organic foods.

As the Agency takes great pains to point out throughout the preamble, the organic regulations are a marketing standard and are not intended to represent that the food is safer or of a better quality. Moreover, although the statute allows the USDA seal to be incorporated in the organic seal, it is not required. Accordingly, we recommend that the Agency re-design the seal so that it does not imply an official endorsement of organic foods by USDA.

                                  *         *       *

We are pleased that USDA is proceeding with the organics rulemaking required by the OFPA, and hope you will apply the foregoing comments to the final rules. If you would like further information from us on any of these issues, please do not hesitate to let us know.

Sincerely,

George Green
Vice President
General Counsel