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NOP: Draft Guidance on Handling Bulk, Unpackaged Organic Products 3/3/2012 - Organic Trade Association
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NOP: Draft Guidance on Handling Bulk, Unpackaged Organic Products 3/3/2012

 

April 3, 2012

Toni Strother, Agricultural Marketing Specialist
National Organic Program, USDA–AMS–NOP
Room 2646–So., Ag Stop 0268
1400 Independence Ave., S.W.
Washington, DC 20250–0268

RE: National Organic Program; Notice of Draft Guidance NOP 5031: Handling Bulk, Unpackaged Organic Products. Doc. #AMS–NOP–11–0073; NOP–11–14

Dear Ms. Strother:

Thank you for the opportunity to comment on the National Organic Program’s (NOP) Draft Guidance on Handling Bulk, Unpackaged Organic Products. OTA welcomes NOP’s draft guidance clarifying the requirements and limitations of 7 CFR 205.101(b)1 of the NOP regulations. We commend both the NOSB and NOP for the efforts being made to improve the transparency of the organic supply chain and prevent the misrepresentation and sale of non-organic goods sold with an organic claim.

The Organic Trade Association (OTA) is the membership-based business association for organic agriculture and products in North America. Its members include growers, shippers, processors, certifiers, farmers’ associations, distributors, importers, exporters, consultants, retailers and others. OTA’s Board of Directors is democratically elected by its members, and its mission is to promote and protect the growth of organic trade to benefit the environment, farmers, the public and the economy (http://www.ota.com/).

OTA represents hundreds of certified operations that will be impacted by this proposed guidance.

OTA is generally supportive of the draft guidance, however we would like to see it clearly convey the conditions by which a broker, trader or distributor MUST be certified. The policy section of the draft guidance states that brokers, traders or distributors must either obtain certification OR be covered under the Organic System Plan (OSP) of the certified seller or buyer. We’re concerned that the inclusion of both options will be confusing if the guidance doesn’t specify the conditions that would require an operator to seek and obtain certification.

OTA believes the intent of the guidance is to communicate that brokers, traders and distributors of unpackaged organic commodities should fall under the oversight of certification, and depending on the nature of the operation, the handler should either be certified or referenced under the OSP of the certified seller and/or certified buyer. We believe a distinction can and should be made between brokers, distributors and traders who take ownership of an organic commodity versus a hauler or transportation company who moves an organic commodity from one certified operation to another. When ownership is transferred to an uncertified entity, certification should be required because the chain of custody is broken, and transportation activity cannot be adequately covered under the OSP of the buyer and seller.

In order to improve the effectiveness and consistent interpretation of the guidance, we urge the NOP to clarify the following:

  • The guidance should clearly state that traders, brokers and distributors must seek and obtain certification when the conditions of § 205.101(b) are not met AND ownership is transferred from the certified operator to the uncertified broker, trader, or distributor. When ownership is transferred, the chain of custody is broken providing an opportunity for fraudulent activity.

  • The guidance should clearly state that when ownership is not transferred, the broker, trader, or distributor may seek certification OR may be referenced under the respective seller and/or buyer’s Organic System Plans. A mass balance in this case can be conducted, and the product can be traced from the seller to the buyer.

  • The guidance to “specifically” include brokers, traders or distributors “by direct reference” in the OSP is not the critical information needed in the OSP. The OSP will be more useful if it generally describes the transportation being used along with the systems and documents used to oversee and verify compliance of each company or hauler. The OSP should describe the plan for compliance, and provide enough information for the inspector to request corresponding documentation in order to obtain the specifics that would allow for review & inspection if needed.

OTA respectfully submits the following more specific comments on the NOP Draft Guidance:

Certification vs. Reference in the OSP

OTA agrees that § 205.101(b) does not exclude handlers of bulk, unpackaged organic commodities from certification oversight. However, we believe that when transportation is conducted from one certified operator to another and under the control of the certified seller or buyer, fraudulent activity is not of great concern. Furthermore, contamination and commingling prevention measures and product traceability systems can be described in the responsible party’s OSP, approved by the certifier and verified during inspection.

The real concern, and the critical situation that we believe drove the NOSB recommendation, is the scenario where a non-certified broker, trader, or distributor takes title or ownership of bulk, unpackaged organic commodities, such as hay or grains, and sells to multiple buyers. This situation results in a gap in the audit trail and supply chain, providing an opportunity for fraud.

Transportation from the certified producer to the certified handler, whether it’s contracted to a third-party entity or directly carried out by the certified producer or handler, has not been historically viewed as “handling.” This point is supported by the NOP definition of “handle”:


Handle. To sell, process, or package agricultural products, except such term shall not include the sale, transportation, or delivery of crops or livestock by the producer thereof to a handler.

In contrast to the situation where the non-certified broker takes ownership of the organic product, certified operators commonly contract with third-party truckers or transportation companies to move organic product from one certified entity (seller) to another certified entity (buyer). In this situation, the transportation company does not take ownership or title to the product. The responsible certified parties will describe in their OSP the activities and documentation (Bills of Lading, transaction agreements, trucker affidavits, etc.) used to ensure that the organic integrity of the product is maintained from shipping through transportation to receiving. This has been common practice for years.


When ownership is not transferred to an uncertified entity, the chain of custody is not broken, transportation activity and verification of organic integrity can be reviewed adequately under the respective seller's and buyer’s Organic System Plans, and a mass balance can be conducted. In the latter situation where ownership is not transferred, certification would not be required. Instead the broker, trader or distributor and corresponding transportation activity could be referenced in the OSP of the certified seller and/or buyer, and subject to approval and inspection.

It’s important to recognize the difference between contracted transportation from one certified entity to another certified entity vs. transportation from a certified entity to a noncertified broker or distributor that takes ownership of organic product. Considering the two and the potential risk involved in each, OTA is requesting that the guidance clearly state that traders, brokers and distributors must seek and obtain certification when the conditions of § 205.101(b) are not met AND ownership is transferred from the certified operator to the uncertified broker, trader, or distributor.

The examples provided in the guidance paired with the policy options are confusing.


The guidance provides (but is not limited to) seven examples of handling operations that are NOT excluded from the requirements of certification. Examples can be helpful, but they inevitably lead to more questions if they are not bound by clearly written policy. The examples provided correspond with two policy options:


  • Seek and obtain organic certification, or;

  • Be specifically included by direct reference in the Organic System Plan (OSP) of the certified seller or buyer of the organic products, subject to approval and inspection by the certifying agent of the certified operation.

We strongly believe the policy should provide the option of becoming: 1) certified; or 2) referenced in the OSP, BUT the conditions for each need to be explicitly stated. For the purposes of our comments, we will use the following examples to demonstrate our point:
  • Hay brokers that receive, sell, transport or deliver certified organic baled hay;

  • Milk tankers that are picking up from organic farms and delivering bulk milk to an organic
    processing plant.

Hay

Hay is typically transported in bales of various sizes and configurations on trailers without packaging. If hay is sold from a certified farm to an uncertified broker, the broker/trader/distributor should be required to seek and obtain certification. In this example, ownership has been transferred, and the chain of custody or audit trail is broken, providing an opportunity for fraudulent activity.

However, if the hay is sold directly from a certified farm to another certified operator, and the certified producer contracts a hauler to transport the hay, the hauler/hauling company should not be required to be certified. The transportation would be covered under the producer’s OSP, as would the receiving of the hay be covered under the OSP of the certified buyer.

Milk

Milk is typically transported in tankers. Although the milk in the tanker is “enclosed in a container,” the milk may be transferred into another milk tanker or storage tank in route to its final destination. If the milk is sold from a certified dairy to an uncertified broker, the broker/trader/distributor should be certified. The chain of custody or audit trail, is broken providing an opportunity for fraudulent activity.

In contrast, if the ownership of the milk is transferred from a certified dairy to a certified handler, and the certified producer contracts the transportation of the milk, the broker or hauler/hauling company should not be required to be certified. The transportation and any transfer along the way would be covered under the responsible party’s OSP and subject to inspection, as would the receiving of the milk be covered under the OSP of the certified buyer/handler.

In the above examples where the certified product is transported from the certified producer to the certified handler via contracted hauling, the OSP would describe the commingling and contamination prevention requirements that each hauler must adhere to (i.e., Bill of Lading, certificate of agreements, cleaning procedures and materials, truck/trailer/tanker/equipment inspection, clean-truck affidavits, receiving documents, etc.), and it would include a description of the record and ID system used to track the product from the seller to the buyer.

Under this system: 1) organic integrity is preserved; 2) the chain of custody is not broken; 3) certified product can be tracked from the seller to the buyer; 3) a mass balance can be performed; and 4) fraud could be detected.

The examples provided in the guidance do not specify whether the broker, trader or distributor is contracted, or whether they are taking ownership of the organic products. We’re concerned that this may create confusion and uncertainty as to which situation requires certification and which situation can be referenced in the OSP. OTA is suggesting that the examples are retained, but qualified with the conditions that would dictate certification. We have suggested language in Appendix A.

Referencing contracted transportation in the OSP


The policy in the draft guidance includes two options for bringing brokers, traders and distributors under certification. The second policy option requires uncertified brokers, traders or distributors of bulk, unpackaged organic commodities or livestock to “be specifically included by direct reference in the Organic System Plan (OSP) of the certified seller or buyer of the organic products, subject to approval and inspection by the certifying agent of the certified operation.”

While it may not be intended, the draft guidance could be read to mean that each truck or each hauler should be listed in the OSP. This kind of specificity would be unnecessary and cumbersome. Instead, the certified operator should be able to generally list the transportation companies and/or the various types of transportation used (tanker, rail car, truck, barge, pack animal, plane, etc.). The information provided should allow for the inspector to request corresponding documentation that will give all the details needed

to review and/or inspect if needed. This will prevent the need to update the OSP every time a change is made to a certified company’s transporter or hauler, while still allowing the certified operator to update corresponding documentation and make it available by request or upon inspection.

More importantly, the information that should be provided in the OSP is a description of transportation oversight and the handling requirements every company and every operator of each load transported must follow in order to prevent contamination and commingling, and maintain the audit trail. This would include reference to SOPs and related documents used to verify contamination prevention practices and perform traceability and mass balance audits. Furthermore the OSP should describe the monitoring practices the certified operator will follow to ensure the OSP is effectively implemented as per 205.201(3)2. Reference to and the use of documents such as the invoice, Bill of Lading, certificate of origin, certificate of agreements, cleaning procedures and approved sanitizer list, truck/trailer/tanker/equipment inspection tags, wash tags, clean-truck affidavits, and dock and warehouse receipts should provide inspectors and certifiers with the information needed to adequately verify compliance with NOP regulations.



Conclusion

Once again, OTA welcomes NOP’s draft guidance, and we agree that it is critical to improve the transparency of the organic supply chain. We also agree that brokers, traders and distributors of unpackaged organic commodities should fall under the oversight of certification. We approve of the direction of this document, but we offer some clarifications to refine the proposal. We request that the guidance clearly articulate that the intent is to require traders, brokers and distributors to become certified when the conditions of § 205.101(b) are not met AND ownership is transferred from the certified operatorto the uncertified broker, trader, or distributor.

We also request that the guidance does not require each company or hauler to be listed specifically in the OSP. Instead, the OSP may generally refer to the types of transportation used and the documents that can be reviewed to obtain specifics (company name, etc.). It should include a description of transportation oversight and the handling requirements every company and every operator of each transported load must follow in order to prevent contamination and commingling, and maintain the audit trail.

We have provided suggested revisions reflecting our comments to the draft guidance in Appendix A.

Again, on behalf of our members across the supply chain and the country, OTA thanks NOP for the opportunity to comment and for carefully considering our comments.

Respectfully submitted,

Gwendolyn Wyard
 Associate Director of Organic Standards and Industry Outreach
Organic Trade Association

cc: Laura Batcha
 Executive Vice President,
Organic Trade Association



Appendix A: Revised Draft Guidance

2 § 205.201 Organic production and handling system plan. An organic production or handling system plan must include: (3) A description of the monitoring practices and procedures to be performed and maintained, including the frequency with which

they will be performed, to verify that the plan is effectively implemented.

Appendix A

Draft Guidance (NOP 5031)

Handling Bulk, Unpackaged Organic Products

1. Purpose

This guidance document clarifies the requirements and limitations of 7 CFR § 205.101 of the National Organic Program (NOP) regulations regarding the organic certification of handlers and the handling of bulk, unpackaged organic products.

2. Scope

This policy applies to all accredited certifying agents, certified operations, and non-certified handlers of certified organic products.


3. Background

The NOP regulations require handlers of organic products to be certified, unless specifically exempt or excluded as described in § 205.101(b) of the NOP regulations. In an October 2010 recommendation, the National Organic Standards Board (NOSB) expressed concerns regarding the potential for fraud in the organic market place due to the movement of organic products through unregulated segments of the marketing chain. The NOSB requested that the NOP clarify the limits of § 205.101(b), which excludes handlers of packaged organic products from the certification requirement if they receive in and ship out products in the same container without opening, relabeling or otherwise handling the products. The NOSB noted that uncertified brokers, distributors, and traders lack the regular oversight of accredited certifying agents and the NOP.

While the regulations at § 205.101(b)(1) exclude handlers of finished packaged products from certification, they do not exclude handlers of unpackaged organic products such as bulk grain, soybeans, hay, milk, and livestock. In response to the NOSB, the NOP is issuing guidance to clarify the requirements of § 205.101 regarding the organic certification of handlers and the handling of bulk, unpackaged organic products.


4. Discussion

Section 205.101 of the NOP regulations describes the exemptions and exclusions from the requirements for certification. Section 205.101(b)(1) provides two conditions which must be met in order for persons other than retailers who handle organic products to be excluded from the requirements for organic certification. These conditions exclude operations or portions of operations that sell organic agricultural products labeled as “100 percent organic,” “organic,” or “made with organic [specified ingredients]” from certification only (emphasis added) if:
  1. The products are packaged or otherwise enclosed in a container prior to being received or acquired by the operation; and (emphasis added)

  2. The products remain in the same package or container and are not otherwise processed while in the control of the handling operation.

Examples of handling operations that are excluded under this provision include, but are not limited to:
  1. Wholesale distribution houses that receive certified organic products in wholesale or retail containers and ship them out in the same container without opening, reconstituting, altering, repackaging, relabeling or otherwise handling the products;

  2. Trucking or other transportation companies that transport certified organic products in retail or wholesale containers that have been labeled in accordance with NOP regulations; and

  3. Produce brokers who do not open boxes, repack, trim, re-label, or otherwise handle the product.

Examples of handling operations that are NOT excluded from the oversight of certification under § 205.101(b)(1) include, but are not limited to:

  1. Hay brokers that receive, sell, transport or deliver certified organic baled hay;

  2. Trucking, rail, or other transportation companies that move bulk certified organic grain from elevators to milling facilities;

  3. Fruit and vegetable terminal market vendors that receive and reconstitute containers of certified organic produce for resale as organic;

  4. Livestock hauling companies (other than the certified producer) that move certified organic livestock from production operations to auctions or slaughter facilities; Livestock auctions;

  5. Milk tankers that are picking up from organic farms and delivering bulk milk to an organic processing plant; and

  6. Brokers, traders, or distributors that manage or direct the movement of organic products in anything other than sealed retail or wholesale containers that are labeled in compliance with the NOP regulations.

In the above examples, when ownership of the organic product is transferred from a certified entity to an uncertified broker, trader, or distributor and the chain of custody is broken, the broker, trader, or distributor must be certified. When ownership is not transferred, the broker, trader, or distributor may seek certification OR be referenced under the respective seller's and/or buyer’s Organic System Plan (OSP) and subject to approval and inspection.

For example, if hay is sold from a certified farm to an uncertified broker, the broker/trader/distributor must seek and obtain certification. In this example, ownership has been transferred and the chain of custody or audit trail is broken, providing an opportunity for fraudulent activity. If the hay, however, is sold directly from a certified farm to another certified operator and the certified producer contracts a hauler to transport the hay, the hauler/hauling company may be referenced under the producer’s OSP.

5. Policy

NOP regulations require brokers, traders or distributors of bulk, unpackaged organic commodities or livestock to be certified organic operations, maintaining product segregation and records sufficient to verify compliance with NOP regulations. Uncertified brokers, traders or distributors of bulk, unpackaged organic commodities or livestock must either:

1. Seek and obtain organic certification when the conditions of § 205.101(b) are not met AND ownership is transferred from the certified operator to the uncertified broker, trader, or distributor,

or

2. Be specifically included by direct reference in the Organic System Plan (OSP) of the certified seller or buyer of the organic products, subject to approval and inspection by the certifying agent of the certified operation. The OSP should list the transportation companies and/or the various types of transportation used (tanker, rail car, truck, barge, pack animal, plane, etc.) along with a description of their oversight and the standard operating procedures that are established in order to maintain the chain of custody and prevent contamination and commingling. The information provided in the OSP should allow the inspector to identify and request corresponding documentation that will allow conducting a mass balance exercise and/ or inspect the transportation entity if necessary.

Unpackaged certified organic commodities that are handled by an uncertified, non-retail operation that is not specified in the OSP of a certified organic operation lose their certified organic status and may no longer be sold, labeled or represented as organic. Handlers currently engaged in brokering, trading or distributing organic products beyond the exclusions provided in § 205.101(b) are not in compliance with the NOP regulations, and may be subject to civil penalties of up to $11,000 pursuant to § 205.100(c)(1).

Certified organic operations that receive bulk products from uncertified handlers and subsequently label the products as organic are in violation of NOP regulations, and are also subject to proposed suspension or revocation of certification and possible civil penalties. Certifying agents are required to review OSPs to ensure producers and handlers receive hay, grain, milk, livestock, or other non-packaged organic products via a certified organic handler.

6. References

6.1 NOP Regulations


§ 205.2 Terms defined.

Commingling. Physical contact between unpackaged organically produced and non-organically produced agricultural products during production, processing, transportation, storage or handling, other than during the manufacture of a multi-ingredient product containing both types of ingredients.

Handle. To sell, process, or package agricultural products, except such term shall not include the sale, transportation, or delivery of crops or livestock by the producer thereof to a handler.

Handler. Any person engaged in the business of handling agricultural products, including producers who handle crops or livestock of their own production, except such term shall not include final retailers of agricultural products that do not process agricultural products.

Handling operation. Any operation or portion of an operation (except final retailers of agricultural products that do not process agricultural products) that receives or otherwise acquires agricultural products and processes, packages, or stores such products.

Organic system plan. A plan of management of an organic production or handling operation that has been agreed to by the producer or handler and the certifying agent and that includes written plans concerning all aspects of agricultural production or handling described in the Act and the regulations in subpart C of this part.


§ 205.101 Exemptions and exclusions from certification.

(b) Exclusions. (1) A handling operation or portion of a handling operation is excluded from the requirements of this part, except for the requirements for the prevention of commingling and contact with prohibited substances as set forth in § 205.272 with respect to any organically produced products, if such operation or portion of the operation only sells organic agricultural products labeled as “100 percent organic,” “organic,” or “made with organic (specified ingredients or food group(s))” that:
(i) Are packaged or otherwise enclosed in a container prior to being received or acquired by the operation; and

(ii) Remain in the same package or container and are not otherwise processed while in the control of the handling operation.

6.2 NOSB Recommendations

October 2010 NOSB Meeting - Clarifying the Limitations of § 205.101(b)

1205.101(b) – Exclusion from Certification. Products must be packaged or otherwise enclosed in a container prior to being received by the operation AND remain in the same package or container and not otherwise processed while in control of the handling operation.

2 § 205.201 Organic production and handling system plan. An organic production or handling system plan must include: (3)A description of the monitoring practices and procedures to be performed and maintained, including the frequency with which they will be performed, to verify that the plan is effectively implemented.  


 
 
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