Comments on Proposed Free Trade Agreement
With Republic of Korea
For the organic industry in the United States, it is very important that non-discriminatory treatment of the imports of U.S. organic ingredients, food and beverages is negotiated during the United States-Republic of Korea Free Trade Agreement. With the elimination of the non-tariff trade barriers and duties, Korea could well become a very significant market for U.S. high-value certified organic products.
The Republic of Korea currently imports many consumer products. However, U.S. organic exports dropped significantly due to the imposition of the zero tolerance for adventitious GMO presence. Based on research conducted in August and September of 2005 for the Organic Trade Association, U.S. exports of corn and soy based products were projected to drop by $5-10 million in 2006.
In addition, the Republic of Korea’s request to know the manufacturer for each product and to have it shown on each shipment has forced several U.S. consumer food companies to no longer offer their products to the Korean market. U.S. companies should not be required to divulge proprietary information. These requirements put U.S. companies at risk because confidential business information is accessible at non-secure inspection points. Loss of export sales from these companies could be in the $2-5 million range.
The requirements for zero tolerance for adventitious GMO presence in organic crops and products and the additional documentation requirements for organic shipments are not consistent with international standards for trade in non-organic products and are hugely restrictive non-tariff barriers to trade. Further, these requirements are inconsistent with the Republic of Korea’s general import requirements and are not required at this level by any other countries that participate in the World Trade Organization.
If both the duties and the non-tariff trade barriers are reduced or eliminated, Korea could become one of the largest markets for U.S. organic products and become as important to the organic industry as it is to the U.S. meat industry.
OTA is seeking a solution that is minimally burdensome on trade and requests that the United States-Republic of Korea Free Trade Agreement includes the recognition and acceptance of the U.S. National Organic Program standards, certification and enforcement system as the sole requirement for U.S. organic crops and products to be sold in Korea as organic. Or, in a process complementing the Free Trade Agreement negotiations, an agreement on the equivalency of standards and government enforcement of the production, processing, labeling and marketing of organic crops and products is completed.
The Organic Trade Association is the only business association representing the entire supply chain of the organic industry in North America. Our 1,670 members include growers, shippers, retailers, processors, certifiers, farmer associations, brokers, consultants, importers, exporters, restaurants, distributors and others involved in producing or selling organic products or providing services to those producers and handlers. Established in 1985 as the Organic Foods Production Association of North America (OFPANA), the association changed its name was changed in 1994 to the Organic Trade Association (OTA) to better represent the diversity of our membership and their interests.
OTA’s mission is to promote and protect the growth of organic trade to benefit the environment, farmers, the public and the economy. OTA envisions organic products becoming a significant part of everyday life, enhancing people’s lives and the environment. To accomplish this mission, the goals of the Organic Trade Association are to provide leadership consistent with organic principles and values; create and expand market opportunity; promote awareness and understanding of organic production; provide a unified voice on legislative, regulatory and policy issues affecting the business of organic production; promote the sustainability of a balanced ecosystem, and protect the integrity of organic standards.
Since 1999 the Organic Trade Association has received funds through the U.S. Department of Agriculture Market Access Program to promote the sale of organic crops and products to export markets. An international marketing plan has been developed and is being implemented. The European Union, Japan and the Republic of Korea have been identified as key export markets in this plan. Market awareness and demand in these countries has grown as a result of the funds invested in these markets but sales have been severely restricted because of trade barriers imposed on U.S. organic products or the absence of bi-lateral equivalency agreements regarding organic crops and products.
Consumer purchases of organic products worldwide in 2005 totaled $27 billion with the United States as the leading market for organic products with $15 billion in organic sales, approximately 2% of all food sold at retail. There were 8,035 certified organic farms in the United States in 2003 representing nearly 2.2 million acres under organic management, according to statistics released in November by the U.S. Department of Agriculture’s Economic Research Service (ERS). Once a net exporter of organic products, the United States imported an estimated $1.0-$1.5 billion in organic food in 2002, and the ratio of imported to exported organic products was about 8 to 1, according to a report by the U.S. Department of Agriculture’s Foreign Agriculture Service (FAS).
In the past fifteen years, governments around the world have adopted standards for organic production to reduce transaction costs by providing consumers, intermediaries, and producers with a standardized definition of an organic product, thus facilitating local and international trade. In 1990, the United States adoped the Organic Foods Production Act which was then implemented in 2002 by the U.S. Department of Agriculture. Currently there are no equivalency agreements between nations regarding production, processing, labeling and marketing of organically produced foods. In 1999, Codex Alimentarius accepted Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods and in 2001, approved provisions for livestock and livestock products. The Codex Alimentarius standards provide an internationally agreed-upon framework for organic food moving in international trade.
Specific Comments on Non-Tariff Trade Barriers for Organic Products Exported to Republic of Korea
§ Zero tolerance for the adventitious presence of genetically modified organisms (GMO) in organic crops and products
In March 2005, a policy statement was issued clarifying that organic crops and products must be able to test at zero for GMO presence to be sold in the Republic of Korea. In the United States, the guarantee of organic integrity is based on the prohibition of the use of genetically engineered seeds and prevention of co-mingling and cross-pollution, as opposed to simply testing for GMOs. The Codex Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods does not set a tolerance level or require testing to determine adventitious contamination but rather relies on a process-based verification system that confirm no genetically engineered seeds were used and that measures were taken to prevent co-mingling and cross-pollution of organic and genetically engineered crops. The Codex Guidelines, state “Organic agriculture practices cannot ensure that products are complete free of residues, due to general environmental pollution.”
Although rigorous control and oversight on the farm and throughout the supply chain minimize the presence of GMOs in organic corn, canola and soybeans, it is increasingly difficult to guarantee a zero level of GMO presence in these crops. A zero level is unrealistic and out of step with requirements of all other countries in the world. In addition, this policy specifically targeting organic products is far more stringent than the existing policy in the Republic of Korea allowing a 3% tolerance level for GMO presence in products sold as non-GMO. In fact, the Republic of Korea does not allow GMO-free labels because such a label would be deceiving to the public as it would be difficult to achieve. Clearly there is inconsistency in the treatment of identity-preserved products and organic products. To further exacerbate this situation, there has been no consistent guidance provided on the enforcement of this policy.
OTA members who engage in trade with Korea report that organic products have been recalled and that because of this policy, their clients in Korea because of this policy have canceled orders. In addition, businesses, have deciding that the risk of product rejection is too great, have chosen to stop shipping organic corn, soybeans, grains, and corn and soy-based products to Korea. It is alarming that the U.S. is rapidly losing this potentially strong market for organic products. Two business confidential reports regarding the impact of this policy on organic product sales to the Republic of Korea and GMO testing for organic corn, soybeans and canola will accompany this submission of comments.
During the discussion of the Free Trade Agreement (FTA), the Organic Trade Association requests that this issue be addressed and reviewed with the Republic of Korea to determine if its policy and implementation are consistent with World Trade Organization policies.
§ Requirement for organic certificates for each stage of the supply chain
The Codex Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Food states: “An integral component of certification is the inspection of the organic management system” and “To minimize deceptive practices in the market place, specific measures are necessary to ensure that trade and processing enterprises can be audited effectively. Therefore, the regulation of a process, rather than the final product, demands responsible action by all involved parties.” In addition, “Import requirements should be based on the principles of equivalency and transparency as set out in the Principles for Food Import and Export Inspection and Certification (CAC/GL 20-1995). In accepting imports of organic products, countries would usually assess the inspection and certification procedures and the standards applied in the exporting country.”
Currently the Republic of Korea requires that the organic certificates for each stage of the supply chain (grower/packer/manufacturer) accompany the organic product from the United States. The U.S. National Organic Program process-based verification system requires that each stage of production and handling is certified as organic and that as an ingredient or a crop moves through the supply chain, each subsequent certification includes verification of organic certificates from the previous step in the chain. It also requires that these certificates will be kept on record for five years.
The Organic Trade Association (OTA) requests that during the FTA discussions, the United States ask that the Republic of Korea accept the U.S. National Organic Program system of certification as compliant with the Codex Guidelines. If the Republic of Korea would like an organic certificate to accompany each shipment, then OTA requests that the organic certificate of the U.S. certified exporter be accepted. As the attached chain of custody chart shows, the last company in the chain has just as much responsibility to be compliant as any organic certified company within the chain. If should not matter if the organic certificate states processor, grower, distributor or trader, all have the same responsibility to ensure a product remains compliant within the U.S. National Organic Program.
§ Requirement that organic ingredient percentages be put on original manufacturer’s letterhead for each order
An ingredient statement from the marketing company (owner of the brand) is required before the first commercial shipment of a non-organic product. This ingredient statement is the first and last statement that is sent to a customer or KFDA government official. For organic products, each shipment must be accompanied by another ingredient statement. The Codex Principles for Food Import and Export Inspection and Certification (CAC/GL 20-1995) do not include such a requirement that such documentation be provided on a shipment-by-shipment basis. This requirement is inconsistent with the requirements for shipments of non-organic products to the Republic of Korea. Thus, we believe it is an arbitrary and discriminating policy in regard to organic products. Because the Republic of Korea does not yet have standards for processed organic food products, this requirement may be imposed to substitute for a process-based certification system.
The Organic Trade Association requests that during the FTA discussions, the United States ask that the Republic of Korea accept the U.S. National Organic Program system of certification for processed organic products and recognizes that this system and the final organic certificate for the product ensures that the ingredient percentages are audited by accredited certification agents and verified by on-site inspections. Organic products should be expected to comply with the same requirements of their non-organic counterparts: a one-time requirement of an ingredient statement before the first commercial shipment and not with each subsequent order.
§ Requirement for fumigation of walnuts and all imported fruit
Organic standards worldwide require that organic foods are produced and handled without the use of prohibited substances. Fumigants that are synthetic and chemical-based are not allowed for use on organic crops. Instead, other methods of controlling pests and disease are applied in order to meet the organic requirements as well as any sanitary and phyto-sanitary requirements. Controlled temperature and controlled atmosphere are two such methods that have been successfully used in many countries worldwide in the treatment and storage of organic nuts and fresh fruit.
The Organic Trade Association would like to request that this non-tariff trade barrier be eliminated in the FTA, opening up new market opportunities for U.S. producers of fresh fruits and nuts. Import requirements for nuts and fresh fruit in the Republic of Korea should address the necessity to handle organic nuts and fresh fruit with methods and materials acceptable under organic standards.
The Organic Trade Association appreciates the opportunity to comment on the proposed Free Trade Agreement with the Republic of Korea. The non-tariff barriers to trade that we have addressed are essentially blocking export of U.S. organic products to Korea. As one of the most vibrant sectors of American agriculture, U.S. organic producers are eager and capable of meeting the demand of this emerging market for organic products. Elimination of these non-tariff trade barriers will help equalize the import-to-export ratio for organic products and contribute to the reduction of the U.S. trade deficit. The United States has one of the most recognized and rigorous standards for organic production, processing, and labeling in the world. Therefore, the Organic Trade Association suggests that a solution for all of these barriers to trade for organic products can be resolved in the Free Trade Agreement by the acceptance and recognition of all aspects of the U.S. National Organic Program standards, certification, and enforcement system by the Republic of Korea.