Roger Blobaum of Blobaum & Associates, The National Conference on Organic Food Exports, April 25, 2000, in Beijing, China.
This presentation includes: (1) a description of the U.S. organic agriculture sector; (2) a description of the U.S. organic market; (3) a description of the current U.S. regulatory framework; (4) a discussion of proposed regulatory changes likely to be implemented, and (5) a discussion of special requirements for organic exports to the U.S.
It is important to note that the numbers in this presentation are, almost without exception, best estimates from non-government sources. Neither the federal government nor the states have attempted to compile information on organic agriculture. Although federal agency reports now include some figures gathered from non-government sources, there are no official organic sector statistics. Most of the numbers cited are from national surveys conducted every two years by the Organic Farming Research Foundation, a California-based nonprofit organization, and from organic trade sources.
It is important to emphasize that the federal organic food regulatory system is in transition and that it may be as long as two years before a proposed new system can be fully implemented. It appears certain that the current regulatory system will be replaced. But a number of important issues must be resolved before the proposed new system can become fully operational. In this presentation, as a result, both systems and the requirements for each will be fully described.
Related to this is the possibility that a change in government at the beginning of next year could interrupt or delay the implementation of the proposed organic regulatory system and change the level of government support for the organic sector. The new president elected in November will, following tradition, appoint a new Secretary of Agriculture and a new team of administrators at the U.S. Department of Agriculture. This agency now administers the National Organic Program.
The political party that now controls Congress by only a slim majority could lose enough seats in the November elections to change the balance of power in the legislative branch of government. This is important because Congress determines the level of funding for the national organic program and can enact new laws that would change the organic regulatory system. Although major changes are highly unlikely, some political uncertainty exists.
II. Characteristics of the U.S. Organic Agriculture Sector
Although individual farmers began the organic farming movement in the United States in the 1960s, it received little public notice until J. R. Rodale began promoting it nationwide. He advocated this new farming approach primarily through an organic farming and gardening magazine and other activities carried out through his Pennsylvania-based publishing company. Organic farming methods were adopted by farmers concerned about the environment, the health of livestock, the effects of farm chemical use on family health, and by soil health concerns. They also were embraced by many of the young people who participated at that time in the so-called back to the land movement. The Rodale effort also introduced organic farming to several hundred thousand consumers who subscribed to the monthly farm and gardening magazine.
Organic farming systems were developed for all types of crop and livestock operations by farmers, who began selling to consumers through direct marketing, farmer’s markets, and food cooperatives. Organic farming information was spread primarily through alternative agriculture publications, small companies set up to sell natural fertilizers and other supplies to organic farmers, state and regional conferences, and farmer-to-farmer information exchange. This information dissemination system became more structured, starting in the 1970s, with the establishment of state and regional organic farmer organizations.
Evolution of the Existing Regulatory System. The national government, with one exception, refused to become involved through the 1970s and 1980s and strongly opposed enactment of the 1990 law setting up the national organic program. The exception was a late 1970s move by Secretary of Agriculture Bob Berglund that established an organic farming coordinator at the U.S. Department of Agriculture and began work on a plan to provide some research and education help for the evolving organic farming sector. This was stopped abruptly in 1981 when a new national government took over. Organic farmers were unable to receive either recognition or help of any kind from the national government for the next 10 years. One result in the organic community’s low level of trust in government in general and the federal government in particular.
A number of state governments, however, were both supportive and innovative. Three of the 50 states adopted legal definitions of organic agriculture in the 1970s and provided for the labeling of organic foods. The number of states with underlying organic statutes and state-approved or state-operated programs had grown to 27 by the end of the 1980s. California adopted the most comprehensive law and Texas and Washington State broke new ground by establishing certification programs.
The states that are involved have developed a wide range of approaches. Some, like California, require only that organic producers meet state registration requirements and make certification voluntary. Some, like Texas and Washington State, require certification by the state’s own agents. Some require certification but permit the certification to be done by a private certifier. The least stringent requirement among states with organic legislation is that products marketed as organic comply with their definition of organic but both registration and certification are voluntary.
The current U.S. system of organic production laws and organic certification bodies reflects the grassroots evolution of organic agriculture. At the present time the U.S. has 36 private organic certifiers and 13 states that operate their own certification systems. The certification entities range from small nonprofit organizations that certify only a few farms to large certifiers that operate in the U.S. and a long list of developing countries and certify large numbers of growers and processors.
Conclusions that can be drawn from this brief historical background are (1) the organic production sector remains strong at the grassroots, has consumer support and varied marketing approaches, and will continue to expand with or without government support; (2) the complex regulatory/certification system that includes significant state government involvement will continue at least two more years and, even under the proposed new federal program, is expected to undergo few changes, and (3) the non-government entities that now provide most of the organic certification services in the U.S. are likely to continue to provide them.
Commitment to Organic Principles. The philosophy developed during the evolution of organic agriculture has become incorporated into general principles and specific rules that are now applied and enforced by certification bodies. In the U.S. these organic principles also have been codified in state and national laws. Internationally these general principles have been incorporated into basic standards developed by the International Federation of Organic Agriculture Movements (IFOAM), regulations adopted by the European Union, and international organic guidelines developed by Codex Alimentarius.
Fundamental international principles were first adopted in 1977 at a meeting of organic farmers and organic agriculture organization representatives in Switzerland. They called for an agriculture based on reduced consumption lifestyles, working within closed farming systems, avoiding all forms of agricultural pollution, reducing the use of fossil fuels, using appropriate technology, and using decentralized systems for the processing, distribution, and marketing of organic products.
These general principles have been modified and refined since and have become generally accepted as international norms. They are incorporated in the international organic standards adopted by the organic community, the proposed Codex organic guidelines, the European Union regulations, the standards of U.S. certifiers, U.S. state laws, and the 1990 U.S. federal law that still has not been implemented.
These are the most important principles that should be followed in the production of organic foods exported into the U.S. market:
-Enhancement of biological diversity within the whole farm system
-Production methods that increase long-term soil health and fertility, such as use of nitrogen-fixing legumes and crop rotations
-Production methods that increase biological activity in the soil
-Recycling of plant and animal wastes to return nutrients to the land and reduce the use of non-renewable resources
-Maximum use of renewable resources in locally organized agricultural systems
-Minimize all forms of pollution that may result from agricultural practices
-Integration of crop and livestock production
-Provide livestock with living conditions that provide for basic aspects of innate behavior
-Processing methods that maintain the organic integrity and quality of the product
-Continuing progress toward an ecologically responsible and socially just farming system.
U.S. Organic Farming Sector Description and Trends. Organic farming has become one of the fastest growing sectors of U.S. agriculture. Calculations based on the Organic Farming Research Foundation’s national survey of organic producers in 1997 suggests the number of certified organic farmers is about 7,000 and that the amount of land under their management is about 600,000 hectares.
The survey did not include the estimated 50 percent or more of all U.S. organic farmers that are not certified. In California, for example, 1,372 farmers are registered with the state as organic growers but only 517 of these farms are certified. The best estimate at this time is that the U.S. has about 14,000 organic growers and that the number is growing at a rate of 14 percent a year for certified growers and eight percent a year for non-certified growers. The number of certified growers is growing faster because buyers purchasing organic production for organic food processors, for sale in established retail markets, and for export require certification.
The future plans of growers also point to likely production increases. The Organic Farming Research Foundation survey showed that most U.S. organic farmers plan to increase the size of their operations. The survey showed that 87 percent of U.S. organic farmers are single family operations or family partnerships and that the average size of U.S. organic farms is about 57 hectares. The average is low because a large number of these farms produce fruits and vegetables.
Despite its rapid growth of 20 percent or more a year since 1989, the organic sector accounts for an extremely small percentage of total U.S. agricultural production. The majority of U.S. organic farms also are classified by the government as small farms. Industry group figures indicate that less than one percent of important crops like wheat, corn, barley, rice, sunflowers, soybeans, tomatoes, citrus fruits, and potatoes are grown organically. Organic producers account for 1-2 percent of the production of oats, rye, dry peas, lentils, lettuce, carrots, apples, and grapes. Organic producers, on the other hand, account for 30-40 percent of all buckwheat and culinary and medicinal herbs marketed.
Organic production received a boost a year ago when the sale of organically produced meat received government approval. The organic livestock sector, which also includes milk and eggs and other poultry and dairy products, has become a fast growing sector that also has created a strong market for organically grown hay and other feed for livestock and poultry. This is making it easier for organic growers to market small grains and alfalfa and clover hay and other crops grown in the required rotations.
Processing Sector Evolution and Trends. The processing sector probably offers the best long-term opportunity for exporters of organic food from China to the U.S. Prior to the 1990s, processing standards had not been developed and little organically grown food was processed. Almost all organically grown food marketed before 1990 was either fresh produce and herbs, whole grains and flour and cereal, or dry beans and lentils.
It is estimated that there now are more than 1,200 U.S. food processors and that the multi-ingredient products sold include the full range of processed foods. Baby food and cereals and fruit juices were among the first processed organic products marketed. This category now includes organic soups and sauces, canned and frozen and dried fruits and vegetables, ice cream and yogurt and other processed dairy products, frozen pizza and other frozen meals, and bakery items. The rapid growth in the multi-ingredient products sector creates a strong demand for organically grown spices, herbs, and other ingredients not available from U.S. organic growers.
Rapid growth in the processed organic food sector also has attracted the attention of large conventional food companies that are buying small independent organic food processors as a way of gaining quick access to the organic market. The challenge for exporters into the U.S. market is providing long-term guarantees of substantial supplies of high-quality ingredients.
All U.S. certifiers have adopted organic processing and inspection requirements that are similar and that generally meet international norms. All of the larger certifiers are certifying substantial numbers of organic processors.
Retail Sector Characteristics and Trends. Organic retailing has expanded rapidly in terms of both volume of sales and utilization of the full range of food marketing outlets. It is estimated that annual retail sales of fresh and processed organic foods, including tropical fruits and coffee and tea and other imports, has reached $8 billion. Retail sales, which total only about one percent of all U.S. food retail sales, are heaviest in Northeast and West Coast states.
Prior to the 1990s, most organic retail sales were made through food cooperatives and buying clubs, mail order outlets, and natural food stores. Mail order sales have become much less important and food cooperative sales have shown modest gains. The big increases have come in the natural foods sector, which includes many small independent stores, several smaller regional chains, and two fast-growing national supermarket chains that offer consumers the full range of organic foods.
Large conventional supermarket chains in many areas also carry some organically grown fruits and vegetables and some organic food products like baby food, cereal, soups, and juices that are consumed mainly by children.
Exports of U.S. Organic Products. The U.S. is both an importer and an exporter of organic foods. The largest markets for organic foods outside the U.S. are in Europe, Japan, and Canada. The organic food market in the European Union was estimated at $5.2 billion in 1997.
The most recent survey of U.S. certified organic farmers shows the export areas they view as most promising are livestock products, grains, and oilseed crops. All U.S. organic exports are certified and unprocessed foods are usually shipped in sealed containers.
The U.S. is the most important non-EU supplier of organic products to EU countries. Import authorizations have been approved for a number of raw and processed commodities, including sunflowers, buckwheat, walnuts, beans, sugar, and applies.
Inspection. Certification, and Accreditation Services. The U.S. currently has 49 certifiers, 36 in the private sector plus the 13 states that operate certification programs. Most of the private sector certifiers are operated by farmer-controlled nonprofit organizations. Two large certifiers, Quality Assurance International (QAJ) and Farm Verified Organic (FVO), are privately owned entities.
Large U.S. certification bodies that operate outside the country as well and are accredited by the IFOAM Accreditation Program are California Certified Organic Farmers (CCOF), Oregon Tilth, Organic Growers & Buyers Association (OGBA), and FVO. Two others, the Organic Crop Improvement Association (OCIA) and Global Organic Alliance (GOA), have applied for IFOAM accreditation and are currently being evaluated. IFOAM-accredited certifiers are in compliance with both the IFOAM basic standards and the IFOAM criteria for certification.
Together the four IFOAM-accredited U.S. certifiers operate in 15 other countries. Two of them, FVO and OGBA, report that they are certifying organic producers in China. The IFOAM Accreditation Program prepares annual compliance reports on behalf of accredited certifiers for some of the competent authorities in European Union countries.
The U.S. Department of Agriculture also entered the accreditation field a year ago when it began verifying certifiers to International Organization for Standardization (ISO) Guide 65. It is a recognition that the certifier satisfies the business capacity standards of ISO 65. This kind of accreditation does not consider whether organic standards are being complied with. EU authorities have accepted verification of certifying agents to ISO Guide 65 as an interim measure to facilitate exports pending full implementation of the 1990 U.S. national organic law.
One-week inspection training courses are currently offered several times a year by the Independent Organic Inspectors Association (IOIA), an organization of about 160 organic inspectors and several certification bodies. Most U.S. inspectors are independent contractors retained by certifiers and many are qualified to carry out both producer and processor inspections.
Role of the Larger Organic Community. An important contribution to the growth and vitality of the U.S. organic agriculture sector is the important part played by non-governmental support groups. Included are large national organizations of consumers, environmentalists, animal protection advocates, chefs, and others who provide political support for organic farmers in particular and organic food and farming in general.
These organizations were influential in shaping the 1990 national organic law and many of them have closely monitored the long implementation process. Their involvement and support is based on the view that organic agriculture provides many benefits in terms of environmental protection, food safety, animal protection, and health.
The political strength of these organizations was demonstrated two years ago when 275,000 written comments, nearly all critical of the U.S. Department of Agriculture, were filed in response to the agency’s implementation plan for the new national organic law. This was by far the largest number of comments the agricultural agency had ever received on any proposal submitted to the public for review and comment and the second highest ever received by any U.S. government agency. The Department of Agriculture, as a result, was forced to withdraw the plan, something that rarely happens, and to shape another that was responsive to all the critical comments. The decision to withdraw the plan and prepare a substitute for public review and comment has delayed the implementation of the 1990 law by about two years.
It is important for those exporting organic food into the U.S. market to be aware that organic principles and integrity and high standards are increasingly important to members of many large organizations and that they, like the highly organized consumers in Europe, will mobilize politically and nationally against any attempts to weaken organic standards or undermine the status of organic farmers. The most recent example is the role of these organizations in support of the position of the global organic community that genetically modified organisms (GMOs) have no place in organic production or processing.
III. The U.S. Organic Market
It is estimated that the size of the U.S. organic foods market reached $8 billion at the end of 1999, making it by far the largest organic market of any single country. Although no official statistics are available, organic industry sources have reported market size increases of at least 20 percent per year every year since 1989. Supporters of the 1990 organic law contend the rate of growth will be even higher when the law is fully implemented.
Market Size and General Trends. The size of the market is expanding because the number of consumers purchasing organic food is increasing, the variety of organic foods being marketed is increasing, and the number and type of retail outlets for organic food are increasing. The variety in the market has expanded to include an organically grown version of almost the full range of fresh and processed foods now available from non-organic sources. This also includes organic wine and beer, organically grown tropical fruits and other imported food items and, as mentioned earlier, organically raised beef, pork, poultry, and lamb.
The high quality of organic food available to consumers also is an important factor. Organic produce available today, whether at a farmer’s market or food cooperative or other retail outlet, is usually fresh and attractive. Organic fruit and vegetable growers now have coolers and modern packing facilities that help guarantee fast and proper handling needed to preserve quality.
Consumers say in surveys that they also buy organic foods because they taste better. One reason organic fruit tastes better, for example, is because it is riper when it is picked. Another reason is that organic growers select varieties that taste best. This is a turnaround from the often wilted and insect-damaged organic produce available to consumers in health food stores and food cooperatives until the early 1990s. Fresh produce also is becoming available in much larger quantities, a requirement of large retailers that need a large, uniform, and dependable supply.
The best selling organic products, according to a recent report, are fresh fruits and vegetables. Their top sales status is due in part to the fact that they are available in all kinds of retail outlets. Strawberries lead the list followed, in order, by lettuce, carrots, broccoli, apples, grapes, bananas, and potatoes. All except bananas are produced in large quantities in the U.S.
Probably the fastest growing sectors are organic eggs and organic milk, yogurt, cheese, and other dairy products. Organic dairy product sales have jumped from $30 million in 1995 to $200 million in 1999. Sales of organic herbs, both cultivated and wild harvested, also are growing because of rising consumer demand for fresh herbs for cooking and because of their use in manufacturing vitamin and food supplement products.
The market also is expanding for clothing, bedding, and other items made from organic cotton and for organically grown flowers and other non-food items.
The U.S. trends are in line with those in other countries where organic food sales are increasing. A new market study by the International Trade Center in Geneva, Switzerland, concludes that organic food sales may jump from their current one percent share to 10 percent of total retail food sales in major markets over the next 10 years. The report shows that retail sales of organic food and beverages in Western Europe, Japan, and the United States totaled approximately $13 billion in 1998 and could reach $20 billion by the end of this year.
The best prospects for suppliers of organic products, according to the report, are items not produced domestically in the targeted country such as coffee, tea, cocoa, spices, tropical and citrus fruits, and vegetables. In addition to the markets in these countries for “out of season” fruits and vegetables, opportunities exist for sales of organic “in season” fruits and vegetables and other food items where growing demand cannot be met in the country involved. All of these factors apply to the U.S. market and should provide encouragement for those exporting into this market.
Realistically it can be assumed that the U.S. organic market will continue to grow at a rate of 20 percent or more per year well the future, that the demand for organic imports will grow, and that the U.S. organic market will reach a point where it moves from “niche” status to mainstream.
Consumer Demand Trends. A leading organic market researcher reported recently that organic is no longer a “niche” market in terms of consumer interest. Surveys by his company, the Hartman Group, found last fall that 90 percent of Americans were either buying some organic food or had considered it. This is up from 60 percent reported from a similar survey two years earlier.
Those who purchase organic food tend to be better educated, to have higher incomes, to live in urban centers in Northeast or West Coast states, and to be younger. Consumer demand has been led by the so-called “baby boomers,” the segment of the population born in the late 1940s and early 1950s. These consumers tend to be less price sensitive and are willing to spend more overall for food.. They tend to be more concerned about health and fitness and more worried about chemical residues and animals drugs and GMOs in the food supply. The also are more willing to make food purchases that have a positive impact on the environment, on the humane treatment of animals, and on the status and profitability of small farms.
Market analysts also have identified the “green” consumer, a category that includes those that buy some organic foods and that totals more than 50 percent of all American consumers. The most comprehensive report concludes that the following changes are driving the market for agricultural products considered “earth sustaining”:
-Increased environmental awareness that impacts lifestyle activities
-Growing consumer interest in making environmentally sound purchases
-Declining cost of organic and other earth-sustaining food products
-Growth of retail outlets that offer organic and other earth-sustaining products
-Movement toward worldwide harmonizing of standards for organic and other earth-sustaining foods.
Organic Retail Market Structure. Three general categories of retailers account for most U.S. sales of organic food. They are food cooperatives, natural food stores, and conventional supermarkets.
Food cooperatives, which are owned by their members, can be found almost everywhere in America. Most early sales of organic food, mostly fresh produce and whole foods, were made in food cooperatives that also were dedicated to principles of community activism, social justice, and healthful foods. They were the only retail source of organic foods in most areas for many years. Many small food cooperatives still operate much like they did in the 1970s and 1980s with small stores, whole foods sold in bulk, and a limited produce line.
Many food cooperatives in urban areas, especially those with university centers, have large supermarket operations that carry a full line of organic foods. Seven large regional cooperative warehouses wholesale much of the organic food sold in food cooperatives and provide storage, trucking, and other services. Food cooperatives are the dominant organic food retailers in the Upper Midwest, which has a long tradition of supporting cooperatives of all kinds.
The second important retail category, and one that is growing rapidly, is natural food stores. Hundreds of these small independent stores, known earlier as “health food stores,” sold mostly vitamins and food supplements. Partly because of limited space, they were slow to market organic foods beyond what could be obtained from local farmers.
This category of retailing now is expanding rapidly and large, modern natural foods supermarkets account for a significant share of organic food sales. These retailers are committed to food quality and good customer service, have a strong commitment to organic food and farming, and offer a full line of products that include health supplements and body care products.
The largest natural foods supermarket chain is Whole Foods, which began as a small health food store in Austin, Texas, and now has more than 100 large stores located in most large U.S. cities. It grew in size partly through acquisitions of smaller natural foods supermarkets such as Bread and Circus, Fresh Fields, and Mrs. Gooch’s. Its main competitor is Wild Oats, a large chain based in Boulder, Colorado, that has 45 supermarket outlets in eight states and British Columbia. It has received recognition as one of the fastest growing companies in the U.S. Both Whole Foods and Wild Oats are publicly-held companies.
The third and so far much less important category is organic food sales in conventional supermarkets. A significant number of these large stores began selling some organic produce in the early 1990s but this has never become an important part of their produce department sales. This is partly because only a few organic items are usually available and because many produce managers do not know much about organic food or how to handle or promote it with customers. Probably half of all conventional supermarkets carry a small amount of organic produce and some organic foods that are bought for children like milk, baby food, and cereal. This is often done in an attempt to meet competition from the large natural foods supermarkets. Industry sources suggest, however, that the number of organic food items in conventional supermarkets will continue to increase in response to consumer requests.
A very small amount of organic food is now being carried by huge discount retailers, such as Wal-Mart and K-Mart, and this is likely to increase due to rising consumer demand. Small ethnic-based food stores that are found in most urban areas and sell Hispanic and Asian foods and spices and other special products for cooking, still do not, for the most part, sell organic foods. This could probably be developed into a market opportunity for those exporting organic food from China into U.S. markets.
It also is important to note that the retail sector, rather than the production and processing sector, is where most of the organic foods profits are being made. That is helping to finance the expansion of natural foods retailers, especially the large supermarket chains like Whole Foods and Wild Oats.
Sales to Non-Retail Markets. Anyone exporting organic food into the U.S. market also needs to attempt to reach processors, who buy a wide variety of organic ingredients, including sweeteners, herbs and spices, flavors, oils, nuts, and fresh and dried fruits and vegetables. This rapidly growing organic sector is providing new markets for many kinds of organic ingredients. Manufacturers or distributors may import these products directly or obtain them through an ingredient importer. At least 70 ingredient suppliers, many operating worldwide, sell to U.S. organic food processors.
The institutional market, mainly schools and hospitals and airline caterers, also are becoming buyers of organic food.
Markets for Organic Imports. About 10 percent of the food consumed in the U.S. is imported with fresh fruits and vegetables accounting for at least one-third of the total. No statistics are available on the volume or the value of organic foods exported into the U.S. market. It is known, however, that a significant amount of organic food comes from developing countries. The foods imported into the U.S. generally fall into five categories:
-Products that can not be grown in the U.S., such as tea, coffee, cocoa, spices, vanilla, and tropical fruits and vegetables
-Off-season fruits and vegetables
-Products that are not grown or processed in large enough quantities in the U.S. to meet market demand
-Products for which the exporting country has an established reputation, such as cheeses from France
-Special products, such as flavorings and herbs, that are needed by U.S. companies as ingredients in processed foods.
Those exporting organic food into the U.S. market would probably need to retain consultants or market research companies to size up the specific markets for their products and to identify potential buyers. The Foreign Agricultural Service and other U.S. agencies that promote U.S. organic food exports have no interest, of course, in trying to increase imports and, because of that, do not offer this kind of assistance.
Outlook for Organic Premiums. U.S. consumers view organically grown food as a value-added product and, like consumers in Europe, have consistently been willing to pay premium prices for organic food. Surveys and other research show that consumers buy organic products because they believe that, in doing so, they help to protect the environment while safeguarding their own health and the health of farmworkers. Premiums are paid at the farm level and are reflected in the final retail price.
Prices paid for organic corn, soybeans, wheat, and oats in the Midwest have been consistently higher than prices paid for conventionally grown products. Prices at the farm for organically grown corn, for example, were 35 percent higher in 1995, 44 percent higher in 1996, and 73 percent higher in 1997. Prices for organic soybeans were more than double the price paid for conventionally grown soybeans in 1995 and 1997 and almost double in 1996.
Continued rapid growth of the U.S. organic sector is needed to achieve the production and sales levels that would move this sector beyond the “niche” market status into the mainstream. Some studies suggest that growth in the supply that is too rapid can undermine or even wipe out premiums. Exporters of organic food into the U.S. market can be confident that demand will exceed supply in the foreseeable future and that good premiums will continue to be paid.
Special Structural Changes. The U.S. market for organic foods, much like the U.S. organic regulatory system, is undergoing some changes. These changes, for the most part, are in the processing and marketing areas and involve both business consolidations and big new players. Large companies like General Mills and H. J. Heinz are beginning to acquire processors and other organic companies and to make a major commitment to doing business in the organic sector. Venture capital has become available to existing organic companies that want to expand or buy other organic companies in order to get bigger.
Those large companies that have operated until now in the conventional food system can be expected to emphasize specialization, uniformity, and control in dealing with suppliers. These changes would appear to offer new opportunities for those who export organic food into the U.S. and are able to guarantee a large and dependable supply of quality certified ingredients for organic processing.
IV. Current U.S. Regulatory System
Currently there are no federal government restrictions on importing organic products into the U.S. in addition to those regulations applying to conventional products. State laws, as a result, now govern the sale of organic food in the U.S. and are the laws that exporters of organic food into the U.S. market must comply with. These state laws lack uniformity and, for the most part, are not enforced.
The main exception is California, which has a comprehensive law that is actively enforced. The requirements of this law should be met for any imported organic food that might be sold in California, which is the largest market for organic food in the U.S.
The requirements of the California Organic Foods Act apply to all foods sold as organic in the state. Products from China, as a result, must be produced according to the California standards if they are sold in California. Exporters into the California market must make certain that the importer has been supplied with documentation that traces the product back to the field. If the product is labeled as certified organic, the name of the certifier must be on the label.
The certifier, in turn, ;must have official recognition from the California organic agency. This recognition is granted only when it is determined that the certifier has standards that comply with the California law. The label on each produce also must state that the product was grown and/or processed according to California organic standards.
It is very important for Chinese exporters of organic food into the U.S. to comply fully with the provisions of the California law and to gain a reputation for product quality and organic integrity. The certifier involved should have standards in line with those used by U.S.-based certifiers. One suggestion might be to have certification carried out by an IFOAM-accredited certifier. This does not provide any special official status. But IFOAM accreditation is recognized in the U.S. market as an indication that a certifier has high standards and is in compliance with ISO 65 and all other important inspection, record keeping, and other requirements.
Proposed Regulatory Framework. The new U.S. regulatory system that is expected to be fully operational in about two years was mandated by the 1990 Organic Foods Production Act. The stated purpose of this law is to (1) establish national standards governing the marketing of certain agricultural products as organically produced products; (2) assure consumers that organically produced products meet a consistent standard, and (3) facilitate interstate commerce in fresh and processed food that is organically produced.
The law established a National Organic Program within the Agricultural Marketing Service at the U.S. Department of Agriculture and established a National Organic Standards Board charged with submitting recommendations for detailed national standards to the Secretary of Agriculture. The board also is empowered to determine what can be added to a national list of allowed synthetics. The board is made up of organic farmers, retailers, processors, certifiers, scientists, environmentalists, and consumers.
The normal procedure for follow up to Congressional approval of a new federal law is to have the responsible federal agency, the Department of Agriculture in this case, promulgate rules for implementing the law. In December of 1977, nearly seven years after the law was enacted, the Department of Agriculture proposed a set of implementation rules for public review and comment. The proposed rules fell far short of what the organic community expected, however, and set off a storm of opposition. The opposition of the organic community and of consumer and environmental and other organizations was so intense that the agency was forced to withdraw these rules and agree to rewrite them and submit them to the public a second time.
The disputed rules did not follow many of the recommendations of the National Organic Standards Board, undermined the board’s authority, and opened the door to the possibility of allowing genetically engineered products, irradiation, and sewage sludge in organic agriculture. Opponents identified more than 60 significant problems with the proposed rule that would have resulted in weak national standards, violated organic principles, and compromised organic integrity.
Early last month the U.S. Department of Agriculture submitted a second version of the proposed rule for public review and comment. The comment period lasts for 90 days and ends on June 7. This new version, too, has generated significant opposition. The general impression so far, however, is that it is much better than the first version and that most of these problems can be fixed before the rule becomes final at the end of this year. After that, probably at the end of 2001, a set of manuals must be completed and submitted for public review and comment. They will contain all of the details of the new regulatory system. The final step is accreditation by the U.S. Department of Agriculture of all U.S. and foreign certifiers that certify organic food marketed in the U.S.
Certifier Accreditation and Equivalency of Imported Products. The 1990 law empowers the U.S. Department of Agriculture to accredit certifying bodies so they can certify that producers and processors that represent their products as organic have complied with the U.S. standards. The proposed accreditation program establishes requirements an applicant must meet in order to become an accredited certifying “agent,” and the procedures and requirements for maintaining accredited status.
Certifiers applying for accreditation must meet these requirements:
-Employ personnel, including inspectors, who have sufficient experience and training in organic production and handling to carry out certification activities
-Demonstrate ability to certify organic producers or handlers; maintain proper records; communicate with producers, processors, and the public, and communicate with the U.S. Department of Agriculture about decisions made
-Prevent conflicts of interest and maintain strict confidentiality
-Conduct annual performance appraisals of their inspectors
-Have an annual program evaluation of their certification activities.
The accreditation process includes submitting an application and paying for a site visit by a U.S. Department of Agriculture evaluator. The evaluation report would be reviewed by Department of Agriculture staff members and a peer review panel. Accreditation would be for five years. Certifying bodies would be required to submit annual updates on their activities. One or more site evaluations would be conducted during the 5-year period to determine compliance with the law and the regulations.
The law requires the U.S. Department of Agriculture to review certification programs under which imported organic products are produced to ensure that they meet all requirements of the 1990 law. Certifying bodies operating in foreign countries could apply for accreditation. They would be evaluated based on the same criteria as U.S. certifiers.
If a foreign certifier did not want to be accredited in the process established for U.S. certifiers, two other options would be possible:
-Receive accreditation when the U.S. Department of Agriculture has determined, upon the request of a foreign government, that the foreign certifier’s government authority is able to assess and accredit certifiers as meeting the requirements of the U.S. organic regulatory system
-Receive recognition as meeting requirements equivalent to the requirements of the U.S. regulatory system under an equivalency agreement between the U.S. government and the foreign government.
Once accreditation or equivalency is granted, as just described, organic products produced under the oversight of the certifier or foreign government would be eligible to be imported into the U.S. and labeled as organic.
Interim Strategies for Chinese Exporters Selling into the U.S. Market. Probably the best short-term approach is to produce products for export to the U.S. according to standards that are equivalent to the written standards of major U.S. certifiers. The certifier could be a U.S. certifier, a European certifier operating in China, or a Chinese certification body. The next two years offers the time needed to be sure the certifier involved does adopt equivalent standards and is prepared to meet U.S. requirements for accreditation by the U.S. Department of Agriculture when the 1990 law is fully operational.
U.S. Organic Fallback Possibility. It appears almost certain, as already indicated, that the 1990 organic law will be fully implemented within the next two years. But if something should happen to upset the proposed U.S. government regulatory system, an alternative has already beer developed in the private organic sector. The Organic Trade Association has completed work on the American Organic Standards and they have substantial support as a possible alternative to th government program. It is important for exporters of organic food from China to the U.S. to be aware of this alternative and to know that if something did occur to stop implementation of the 1990 organic law that something else is now available to take its place.
Special Issues to Watch. Anyone planning to export organic food into the U.S. market should pay special attention to the GMO issue. The use of genetically modified organisms in agriculture is a new technology that works by moving DNA between species in ways that are no1 possible in nature. The IFOAM basic standards prohibit the use of GMOs in organic agriculture and the proposed U.S. regulatory system attempts to do the same thing. It is possible through testing to detect the presence of GMOs in extremely tiny amounts that could result from pollen pollution of organic production from conventional farms nearby. Producers of organic food in China that have an interest in the U.S. market need to be extremely careful to make certain no GMOs are used in production or processing and that pollen pollution is avoided as well.
Another area of concern is the ability of a producer to know for sure whether a fertilizer, soil amendment, pest control, or inert is permitted in organic agriculture. The U.S. organic industry has established the Organic Materials Review Institute, a nonprofit organization that evaluates products on the market and publishes a list of approved and prohibited products. Genetically engineered organisms and products made from them are of special concern.
Those in China who plan to export organic food into the U.S. market may want to seek government assistance in establishing a list of allowed and prohibited substances and to set up a system for reviewing organic inputs that come on the market. It also might be possible for certifiers in China to make an agreement with the Organic Materials Review Institute in the U.S to help with this while a Chinese system can be fully developed.