Organic Research, Promotion, and Information Order; Referendum Procedures

Federal Register, Volume 82 Issue 11 (Wednesday, January 18, 2017)

Federal Register Volume 82, Number 11 (Wednesday, January 18, 2017)

Proposed Rules

Pages 5438-5445

From the Federal Register Online via the Government Publishing Office www.gpo.gov

FR Doc No: 2017-00599

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1255

Document Number AMS-SC-16-0112; PR-B

RIN 0581-AD55

Organic Research, Promotion, and Information Order; Referendum Procedures

AGENCY: Agricultural Marketing Service, Department of Agriculture.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on procedures for conducting a referendum to determine whether the issuance of a proposed Organic Research, Promotion, and Information Order (proposed Order) is favored by certified organic producers, certified organic handlers, and importers of certified organic products. The organic market includes a range of agricultural commodities such as fruits, vegetables, dairy, meat, poultry, breads, grains, snack foods, condiments, beverages, and packaged and prepared foods, as well as non-food items such as fiber (linen and clothing), personal care products, pet food, and flowers. The procedures would also be used for any subsequent referendum under the proposed Order. The proposed Order is being published separately in this issue of the Federal Register. This document also announces the Agricultural Marketing Service's (AMS) intent to request approval by the Office of Management and Budget (OMB) of new information collection requirements to implement the program.

DATES: Comments must be received by March 20, 2017. Pursuant to the Paperwork Reduction Act (PRA), comments on the information collection burden that would result from this proposal must be received by March 20, 2017.

ADDRESSES: Interested persons are invited to submit written comments concerning this rule. Comments may be submitted on the Internet at: http://www.regulations.gov or to the Promotion and Economics Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW., Room 0632-S, Stop 0244, Washington, DC 20250-0244; facsimile: (202) 205-

2800. All comments should reference the docket number and the date and page number of this issue of the Federal Register and will be made available for public inspection, including name and address, if provided, in the above office during regular business hours or it can be viewed at http://www.regulations.gov.

Pursuant to the PRA, comments regarding the accuracy of the burden estimate, ways to minimize the burden, including the use of automated collection techniques or other forms of information technology, or any other aspect of this collection of information, should be sent to the above address. In addition, comments concerning the information collection should also be sent to the Desk Office for Agriculture, Office of Information and Regulatory Affairs, OMB, New Executive Office Building, 725 17th Street NW., Room 725, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Heather Pichelman, Division Director, Promotion and Economics Division, Specialty Crops Programs, AMS, USDA, 1400 Independence Avenue SW., Room 0632-S, Stop 0244, Washington, DC 20250-0244; facsimile: (202) 205-2800; or electronic mail: Heather.Pichelman@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued pursuant to the Commodity Promotion, Research, and Information Act of 1996 (7 U.S.C. 7411-7425).

Page 5439

Executive Order 12866 and Executive Order 13563

This rule has been determined to be not significant for purposes of Executive Order 12866, as supplemented by Executive Order 13563, and therefore has not been reviewed by the Office of Management and Budget (OMB).

Executive Order 12988

What is the purpose of this action?

This proposed rule invites comments on procedures for conducting a referendum to determine whether covered domestic certified organic producers, certified organic handlers and importers of organic products favor issuance of a proposed Order.\1\ Accordingly, this rule would add subpart B to part 1255 that would establish procedures for conducting the referendum. The procedures would cover definitions, voting instructions, use of subagents, ballots, the referendum report, and confidentiality of information. The U.S. Department of Agriculture (USDA) would conduct the referendum. The program would be implemented if it is favored by a majority of domestic certified organic producers, certified organic handlers and importers of organic products voting in the referendum. The procedures would be applicable for the initial referendum and future referenda under the proposed Order.

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\1\ For clarification, the phrase ``organic products'' used throughout the proposed Order and referendum procedures is synonymous with the terms: ``certified products'' or ``certified organic products''. The words ``certified organic'' are used to modify the terms ``certified organic handler'' at section 1255.9 and ``certified organic producer'' at section 1255.10 for the purpose of reiterating the concept that certified products originate from certified entities.

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This document also announces AMS's intent to request approval by the OMB of new information collection requirements to implement the program. The proposed Order is being published separately in this issue of the Federal Register.

What are the key statutes and regulations governing this action?

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. Section 524 of the Commodity Promotion, Research, and Information Act of 1996 (7 U.S.C. 7411-7425) (Act) provides that it shall not affect or preempt any other Federal or state law authorizing promotion or research relating to an agricultural commodity.

The Act authorizes USDA to establish agricultural commodity research and promotion orders which may include a combination of promotion, research, industry information, and consumer information activities funded by mandatory assessments. These programs are designed to maintain and expand markets and uses for agricultural commodities. To date, there are 10 commodity promotion programs (i.e., research and promotion programs or R&P programs) operating under the authority of the Act. On February 7, 2014, section 10004 of the Agricultural Act of 2014 (2014 Farm Bill) (Pub. L. 113-79) amended section 501 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7401), which authorizes generic commodity promotion programs under the various commodity promotion laws, to allow for an organic commodity promotion order. Specifically, the definition of ``agricultural commodity'' under section 513(1)(E) of the Act was amended to include ``products, as a class, that are produced on a certified organic farm (as defined in 7 U.S.C. 6502); and certified to be sold or labeled as ``organic'' or ``100 percent organic'' (as defined in part 205 of title 7, Code of Federal Regulations (or a successor regulation)). Should this proposed rule become final, pursuant to section 10004 of the 2014 Farm Bill, the regulatory language currently exempting organic commodities from assessment by generic commodity promotion programs created under the various commodity promotion laws (7 U.S.C. 7401(e)) shall no longer be in effect. Such commodities would then become ``dual-covered commodities'', and persons producing, handling and importing them would need to elect to pay assessments to the commodity-specific program, or the organic commodity promotion program.

The 2014 Farm Bill amendments to the Act allowed the organic industry to submit a proposal for an organic R&P program. As the membership-based business association for the organic industry in North America, the Organic Trade Association (OTA) took on the role as a proponent group in the development of an organic R&P program proposal. OTA represents businesses across the organic supply chain and addresses all things organic, including food, fiber/textiles, personal care products, and new sectors as they develop. To develop the proposal, OTA established and collaborated with the 7-member GRO Organic Core Committee. The GRO Organic Core Committee is a subset of OTA's larger Organic Research and Promotion Program Steering Committee. It included OTA subcommittee chairs and other industry leaders who built on the outreach and input from the larger committee to guide the development of a proposed Order.

Under section 519 of the Act, a person subject to an order may file a written petition with USDA stating that an order, any provision of an order, or any obligation imposed in connection with an order, is not established in accordance with the law, and request a modification of an order or an exemption from an order. Any petition filed challenging an order, any provision of an order, or any obligation imposed in connection with an order, shall be filed within two years after the effective date of an order, provision, or obligation subject to challenge in the petition. The petitioner will have the opportunity for a hearing on the petition. Thereafter, USDA will issue a ruling on the petition. The Act provides that the district court of the United States for any district in which the petitioner resides or conducts business shall have the jurisdiction to review a final ruling on the petition, if the petitioner files a complaint for that purpose not later than 20 days after the date of the entry of USDA's final ruling.

What are organic products?

To make an organic claim or use the USDA Organic Seal, the final product must follow the applicable production, handling and labeling regulations and go through the organic certification process specified at 7 CFR part 205. To become certified, producers and handlers must apply to a USDA-accredited certifying agent, develop and implement an organic system plan, and be inspected. Organic certification allows producers and handlers to sell their raw, processed, and multi-

ingredient products as organic. Each production or handling operation that produces or handles crops, livestock, livestock products, or other agricultural products that are intended to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' must be certified according to the USDA organic regulations (7 CFR part 205).\2\

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\2\ USDA organic regulations at 7 CFR 205.101 provides for some exclusions and exemptions from certification. For example, a production or handling operation that sells agricultural products as ``organic'' but whose gross agricultural income from organic sales totals $5,000 or less annually is exempt from organic certification but must comply with the applicable organic production and handling requirements as specified at 7 CFR 205.101(a)(1).

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Page 5440

Who would be assessed under this program?

Consistent with the definition of ``covered person'' at 7 U.S.C. 7401, which describes who may be subject to an organic commodity promotion order as ``a producer, handler, marketer, or importer of an organic agricultural commodity'', the definition for ``assessed entity'' at section 1255.4 states that this order is applicable to any certified organic producer or certified organic handler that has gross organic sales in excess of $250,000 for the previous marketing year, any importer with a transaction value greater than $250,000 in organic products during the previous marketing year, and any voluntarily assessed entity. The proposed Order would provide for an initial assessment rate of one-tenth of one percent of net organic sales for domestic certified organic producers and certified organic handlers with gross organic sales greater than $250,000 in the previous marketing year. Net organic sales would be equal to total gross sales in certified organic products minus (a) the cost of certified organic ingredients, feed, and inputs used in the production of certified products, and (b) the cost of any non-organic agricultural ingredients used in the production of certified products.\3\ Certified organic handlers may also deduct the cost of certified organic products purchased from producers. Importers with transaction value that exceeds $250,000 in organic products during the prior year would remit one-

tenth of one percent of the declared transaction value of those certified organic products at the time of importation. This means that importers would remit assessments to the Board upon taking ownership of the imported product.

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\3\ Examples of organic input costs that may be deducted from gross sales include fertilizer, lime, and soil conditioners; agricultural chemicals and other organic materials for pest control; seeds, plants, vines and trees; livestock purchased or leased; and feed purchased for livestock and poultry.

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Under the permissive terms under section 516 of the Act, the term ``assessed entity'' also allows orders to provide exemptions for covered persons. More specifically, certified organic producers and certified organic handlers with gross organic sales less than or equal to $250,000 of certified organic products for the previous marketing year would be exempt, and have the option to choose to pay assessments into the program as ``voluntarily assessed'' entities. Importers with $250,000 or less in transaction value of imported organic products during the prior marketing year are exempt from remitting assessments to the board, and could also opt to be voluntarily assessed. Finally, certified organic producers, certified organic handlers, and importers of dual-covered commodities would be eligible to apply for an exemption.\4\ Such entities also have the option to choose to pay assessments into the program as ``voluntarily assessed'' entities, which would make them eligible to participate in the referendum. The purpose of the program would be to strengthen the position of certified organic products in the marketplace, support research to benefit the organic industry, and improve access to information and data across the organic sector.

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\4\ The 2014 Farm Bill amendments to 7 U.S.C. 7401 also included a requirement for an organic research and promotion order to allow covered persons (which can include producers, handlers, and importers, depending upon the order) to elect whether to be assessed under the organic commodity promotion order or another applicable agricultural commodity promotion order. For example, an organic blueberry producer would have the option to pay into the blueberry program or the organic program.

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What products would be covered under this program?

Understanding that section 7412(1)(E)(ii) of the Act specified that the scope of an ``agricultural commodity'' as limited to products that are ``certified to be sold or labeled as ``organic'' or ``100 percent organic'', this proposal would assess only the value added of the certified organic ingredient content of ``made with organic'' products rather than the entire certified product. Consequently, the scope of covered products spans a range of agricultural commodities such as fruits, vegetables, dairy, meat, poultry, breads, grains, snack foods, condiments, beverages, and packaged and prepared foods, as well as non-

food items such as fiber (linen and clothing), personal care products, pet food, and flowers. While the USDA organic regulations do not detail standards specific to non-food items, items that are agricultural products (e.g., pet food) and that meet the certification requirements of the USDA organic regulations can be certified and labeled ``organic'', irrespective of the end use of the product.\5\ There are currently 38 Harmonized Tariff Schedule (HTS) codes representative of imported organic agricultural products. These codes and their product descriptions are listed in the table below.

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\5\ In August 2005, the NOP issued a Policy Memorandum 11-2 to certifying agents, stating that agricultural products which meet the NOP certification standards can be certified and labeled ``organic,'' irrespective of the end use of the product. Policy Memo 11-2 is available on the AMS Web site in the NOP Handbook at: http://www.ams.usda.gov/rules-regulations/organic/handbook.

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HTS Code HTS Description

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0409000005.................. NATURAL, HONEY, CERTIFIED FOR ORGANIC.

0703200005.................. GARLIC, FRESH WHOLE BULBS, CERTIFIED

ORGANIC.

0709604015.................. SWT BELL PEPPER, FRT OF CAPSICUM/PIMENTA,

GRNHSE, CERT ORGANIC.

0709604065.................. SWT BELL PEPER, OTH, FRUIT, CAPSICUM/

PIMENTA, CERT ORGANIC, OTHER.

0802120005.................. SHELLED ALMONDS, CERTIFIED ORGANIC

0803900025.................. FRESH BANANAS, CERTIFIED ORGANIC

0804400020.................. AVOCADOS, HASS&HASS LIKE, CERTIFIED

ORGANIC

0804504045.................. FRESH MANGOES ENTERED SEPT 1 TO MAY 31,

CERTIFIED ORGANIC

0804506045.................. FRESH MANGOES ENTERED JUNE 1 TO AUG 31,

CERTIFIED ORGANIC

0808100045.................. APPLES, FRESH, VALUED> $0.22 PER KG,

CERTIFIED ORGANIC

0808302015.................. PEARS, ORGANIC, ENTERED 4/1-6/30, FRESH

0808304015.................. PEARS, ORGANIC, ENTERED 7/1-3/31, FRESH

0808402015.................. QUINCES; FRESH, APR 1 THRU JUNE 30,

CERTIFIED ORGANIC

0808404015.................. QUINCES; ORGANIC, ENTERED 7/1-3/31, FRESH

0810400026.................. BLUEBERRIES, FRESH, CULTIVATED, CERTIFIED

ORGANIC

0901110015.................. ARABICA COFFEE NOT ROAST/DECAFFEINATED,

CERTIFIED ORGANIC

0901110045.................. COFFEE, NOT ROASTED, NOT DECAFFEINATED,

OTHER, CERTIFIED ORGANIC

0901120015.................. COFFEE, DECAFFEINATED, NOT ROASTED,

CERTIFIED ORGANIC

0901210035.................. COFFEE, ROASTED; NOT DECAFFEINATED, $1.59 PER LITER, ORG

2204215035.................. RED WINE, >$1.05 PER L, ALCHL STRGTH BY

VOLM $1.05 L, ALCHOL STRNGTH BY

VOLUM

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