February 9, 2016
Editor’s Note: We originally published the following post on December 31, 2015, when the the final rule to expand the organic exemption from commodity promotion (checkoff) programs was published in the Federal Register. The expanded exemption takes effect later this month, on February 29, 2016.
We are now re-posting this update to include a recorded presentation that the U.S. Department of Agriculture (USDA)’s Agriculture Marketing Service (AMS) has made available on its website to review changes to the organic assessment exemption regulations. The presentation includes an overview of the statutory authorities that govern the production and marketing of organic products, the rulemaking process that led to the final rule, and the exemption application procedure. The presentation also explains how the amendments to the exemption will be applied to each of the checkoff programs moving forward.
The recorded presentation can be accessed online here.
The 2014 Farm Bill directed USDA to expand the rule that exempts organic farmers, handlers, and manufacturers from paying into commodity promotion (checkoff) programs to advertise, research, and promote conventional products. Under the old rules based on a 2002 Farm Bill provision, only farms and businesses producing 100 percent organic goods and no conventional goods were eligible for the exemption from the mandatory checkoff tax.
Under the new, final rule published in the Federal Register on December 31, all organic products certified through the USDA National Organic Program, whether 100 percent organic or not, are eligible, as are crops and products grown on farms or marketed by firms that also grow or handle conventional, non-organic products.
The new rule becomes effective in 60 days, and applies to farmers, handlers, marketers, processors, manufacturers, feeders, and importers.
The new rule removes a provision previously included in some but not all of the checkoff programs which allowed incidental conventional sales of organic product to retain the exemption. These incidental sales can occur due to State-declared emergency spraying programs, isolated use of antibiotics to treat disease, and use of buffer zones to stop chemical or genetic drift. Under the new rule, any sale into the conventional market, no matter the reason, will count as conventional product and hence be subject to the full checkoff tax.
The new rule retains a controversial distinction from the old rule, providing for the exemption for marketing and product research under a Federal marketing order program, but not for farm production research. The reasoning for this distinction seems to be that while marketing and product research clearly aids only conventional products, farm production research for conventional operations may have some applicability to organic farms even if it is not at all focused on organic systems.
The 2014 Farm Bill directed that the organic assessment exemption is effective only until such time as USDA institutes an organic checkoff program. An organic industry proposal for a checkoff was submitted to USDA this past May and USDA is currently reviewing the proposal.
Among other concerns, the production research issue in that proposal is also ripe with controversy, as the research definition and funding allocations for the proposed checkoff appear to be heavily weighted to industry product marketing research and not farmer production concerns.
It is not yet known when or if USDA will decide to move forward with the organic checkoff proposal. In the meantime, the newly expanded exemptions from conventional checkoff programs will be operational, beginning this March.