( 3) Organic Processing Aids. Several industry leaders and SOP managers questioned whether the proposed rule intended to exclude the use of certified organic processing aids in the creation of " 100 percent organic" products. Commenters pointed out that a handler should be able to use organically produced processing aids to create products that are labeled as " 100 percent organic." The processing aid can be a by product of an organic agricultural product; e. g.,

a filter made of rice hulls from organically produced rice. AMS concurs. Accordingly, a change is made in paragraph ( f)( 4) of section 205.301 to provide for use of organically produced processing aids in products labeled " 100 percent organic."

To help clarify this and correct an incomplete reference in the proposed rule preamble, we have changed the column heading of the fourth prohibited practice in the preamble table 1.

( 4) Content of " 100 Percent Organic Products." Certifying agents and several industry commenters called attention to the regulatory text of section 205.301( a) describing 100 percent organic products. They argued that the proposed rule would allow products with one or more 95 percent plus " organic" ingredients to be combined as components and have the resulting product be labeled as " 100 percent organic."

We did not intend to allow any ingredient that is less than 100 percent organic to be used in a product labeled " 100 percent organic." To leave no doubt as to the nature of any product labeled " 100 percent organic," we have changed the wording of paragraph ( a) of section 205.301 to clarify that a multiingredient " 100 percent organic" product must be comprised entirely of 100 percent organic ingredients. 135 ( 5) Labeling of Organic Percentage. We received many comments requesting clearer display of a product's percentage of organic content. Most suggested that any product containing less than 100 percent organic ingredients should be required to display the organic percentage on the pdp. They argued that display of the organic percentage on the front of the package would enable consumers to more easily determine organic content, compare competing products, and make better purchase decisions. The NOSB did not recommend display of organic percentage on the pdp for all products containing organic ingredients.

We also received several comments from handlers concerned that the required display of a product's organic percentage can be a burden on handlers. They stated that, to save packaging and printing costs, handlers order bulk quantities of printed packages, labels, and other printed marketing materials. When printed in advance of a growing season and harvest, the handler may not be able to assemble a product that is exactly consistent with the preprinted labeling information, particularly the percentage of organic content. One commenter representing a commodity association opposed the required percentage labeling because the association believes consumers will not understand any organic claim if a percentage of less than 100 percent is displayed.

We believe that display of the percentage of organic content is important product information that can be very helpful to consumers in their purchase decisions. We also believe that the opportunity to display the percentage content of organically produced ingredients can be a positive factor in encouraging handlers to use more organic ingredients in their multiingredient products. At the same time, we understand the financial commitment involved in preprinting bulk quantities of packages and labels well in advance of harvests, which determine availability of 136 needed ingredients.

This final rule implements changes in sections 205.303 and 205.304 for products labeled " organic" and " made with organic ingredients." The requirement to display the percentage of organic content on the information panel is removed. That requirement is replaced with optional labeling of the product's organic percentage on the pdp or any other package panels. This will allow those handlers to display the percentage of their product's organically produced contents on the pdp where it will be most immediately visible to consumers. Handlers who cannot, with certainty, display their product's organic percentage or who choose not to display the percentage,

are not required to do so.

This revised labeling provision also removes the requirement in section 205.305 that products with less than 70 percent organic content display the product's organic percentage on the information panel. Under this final rule, that percentage labeling is optional but is still restricted to the information panel. The percentage of a less than 70 percent organic product may not be displayed on the pdp and may not be displayed if the organic ingredients are not identified in the ingredient statement.

( 6) Designation of Organically Produced Ingredients. A certifying agent suggested that identification of organic ingredients in ingredient statements should be allowed to be made with an asterisk or similar mark, with the asterisk defined on the information panel. The commenter stated that the repetitive use of the word, " organic," may cause space problems on some small packages and that use of a mark is a common industry practice. We agree with the comment and have changed sections 205.303( b)( 1), 205.304( b)( 1), and 205.305( a)( i) of the regulatory text accordingly. Thus, organic ingredients may be identified in the ingredient statement with either 137 the term, " organic," or an asterisk or other mark, provided that the asterisk or other mark is defined on the information panel adjacent to the ingredient statement.

( 7) Minimum Organic Percentage for Labeling. In the proposed rule's preamble, we asked for public comment on whether the 50 percent minimum organic content for pdp labeling should be increased. The 50 percent minimum content was established in section 6505( c) of the Act. However, the Act also provides the Secretary with the authority to require such other terms and conditions as are necessary to implement the program. Thus, the minimum organic content level for pdp labeling could be changed if the change would further the purposes of the Act.

Comments to the first ( 1997) proposal and to the revised proposed rule suggested that the minimum organic content for labeling purposes should be increased. All comments received,

including comments from certifying agents, a leading organic association, the EU and other international commenters recommended that the minimum organic content to qualify for pdp labeling should be raised to 70 percent, which is the EU's minimum. All comments stated that the increase is necessary to make the NOP standards consistent with international organic standards.

Commenters also pointed to advances in organic production and processing technologies and to increases in the availability of organically produced products and processed ingredients. These factors should make it easier for handlers to assemble food products with higher organic content.

We concur with the comments. We view this as a tightening of labeling requirements in that pdp labeling now requires a higher percentage of organic ingredients and makes the U. S.

standard consistent with international norms.

In the proposed rule's preamble, we also asked for specific public comment on whether a minimum percentage of total product content should be required for any single organic ingredient 138 that is included in the pdp statement " made with organic ( specified ingredients)." No commenters responded to this question. Therefore, no required minimum percentage for a single organic ingredient in " made with..." products is established.

( 8) " Made With Organic ( Specified Food Groups)." Several industry organizations suggested that, as an alternative to listing up to three organic ingredients in the " made with..."

label, the rule should also allow for identification of food " groups" or " classes" of food in the " made with" label. Commenters suggested, for instance, that a soup ( with 70 percent or more organic ingredients, less water and salt) containing organically produced potatoes, carrots, and onions may be labeled as " soup made with organic potatoes, carrots, and onions" or, alternatively,

" soup made with organic vegetables."

We agree that this label option offers handlers of such multiingredient products with more flexibility in their labeling. All ingredients in the identified food group must be organically produced and must be identified in the ingredient statement as " organic." In the above example, if soup also contains conventionally produced cauliflower, only " soup made with organic potatoes,

carrots, and onions" can be displayed.

We also believe that some parameters must be established as to what are considered as food groups or classes of food. For the purposes of this regulation, products from the following food groups may be labeled as " organic" in a " made with..." label: beans, fruits, grains, herbs,

meats, nuts, oils, poultry, seeds, spices, and vegetables. In addition, organically produced and processed butter, cheeses, yogurt, milk, sour cream, etc. may be combined in a product and identified as " organic milk products." Organically produced and processed sugar cane, sugar beets, corn syrup, maple syrup, etc. may be used in a product and identified as " organic 139 sweeteners."

Finally, to be consistent with the " made with..." labeling for individual ingredients, up to three food groups can be identified in the " made with..." statement. Section 205.304 is changed accordingly.

( 9) Labeling Products from Exempt and Excluded Operations. A change is made in redesignated section 205.310 which provides for labeling of organic products produced by exempt and excluded operations. SOP managers and an organic handler pointed out that the preamble suggested restrictions on labeling that would prevent exempt and excluded operations from identifying their products as " organic." After review of the proposed rule, we have revised redesignated section 205.310 to more clearly specify labeling opportunities for exempt operations.

The regulatory text more clearly states that such operations may not label or represent their organic products as being " certified" as organic and that such exempt and excluded operations must comply with applicable production and handling provisions of subpart C. Labeling must be consistent with the four labeling categories based on the product's organic content.

A State organic advisory board recommended that proposed section 205.309 be revised to apply to exempt and excluded operations which choose to be certified under this program. We do not believe it is necessary to provide separate regulatory text for exempt and excluded operations that are certified. An exempt operation is not precluded from organic certification, if qualified.

( 10) Redesigned USDA Seal. Leading industry members, certifying agents, SOP managers, and many individual commenters opposed the proposed wording and design of the USDA seal. Comments generally stated the following points: ( 1) the proposed Seal wording indicates that USDA is the certifying agent rather than accredited certifiers; ( 2) international 140 Organization for Standardization ( ISO) Guide 61 prohibits government bodies from acting or appearing as certifying agents; and ( 3) The shield or badge design indicates a certification of product " quality" and assurance of safety which is inconsistent with the NOP's claim to be a certification of " process" only. Commenters suggested several alternative seal statements,

including: " Certified Organic  USDA Accredited," " Certified Organic  USDA Approved,"

" USDA Certified Organic Production," " Meets USDA Organic Production Requirements."

Based on comments received, we are implementing a revised USDA seal which is shown in the regulatory text under section 301.311. It is a circular design with the words, " USDA Organic." The color scheme is a white background, brown outer circle, white and green inner semicircles, and green and white words. A black and white color scheme also may be used if preferred by the handler.

Some commenters suggested changing the shape of the USDA seal to a circle or triangle which, they state, is more in keeping with recognized recycling and sustainability logos. We did not choose a triangle design because processors have commented that triangle designs may cause tears in shrink wrap coverings at the points of the triangle.

Labeling  Changes Requested But Not Made ( 1) " Organic" in Company Names. Many commenters stated that the term, " organic,"

must not be used as part of a company name if the company does not market organically produced foods. They are concerned that the term in a company name would incorrectly imply that the product, itself, is organically produced.

While we understand commenter concerns, we do not know the extent of the problem.

We do not believe those concerns require such a prohibition in the regulations at this time. These 141 regulations may not be the best mechanism to address the issue. Section 6519( b) of the Act provides the Secretary with the authority to take action against misuse of the term, " organic."

USDA will monitor use of the term, " organic," in company names and will work with the FTC to take action against such misuse of the term. These determinations must be made on a case

bycase basis. The proposed rule did not specifically address this issue. We have added a sentence to paragraph ( a) of section 205.300 to this effect.

( 2) The " 100 Percent Organic" Label. A large number of commenters opposed the " 100 percent organic" label for different reasons. A few claimed that the label is not authorized under the Act. Several commenters suggested that consumers will not understand the difference between multiingredient products labeled " 100 percent organic" and " organic." Others raised the concern that the " 100 percent organic" phrase to modify raw, fresh fruits and vegetables in produce sections and farmers markets may be confusing to consumers.

Regarding the first comment, the term is not specifically provided for in the Act.

However, the Secretary has the authority under section 6506( a)( 11) to require other terms and conditions as may be necessary to develop a national organic program. When a product is wholly organic, pursuant to the production and handling requirements of the NOP, we believe the handler should have the option to differentiate it from products which, by necessity, are less than 100 percent organic. We believe the label meets the purposes of the Act.

Regarding consumer confusion, we believe consumers will understand the difference between the two kinds of organic products and will make their organic purchases accordingly.

Regarding the labeling of raw, fresh product as " 100 percent organic," organically produced products can be labeled to a lower labeling category. Raw, fresh fruits and vegetables 142 which qualify for a " 100 percent organic" label may be labeled simply as " organic," if the producer or retail operator believes that label is best for marketing purposes.

( 3) Explain Why Product Is Not 100 Percent Organic. A large number of commenters also suggested any " product that is less than 100 percent organic should carry that information on the main display panel..." By " that information," we assume the commenters are referring to the reasons why a product cannot be certified as " 100 percent organic."

AMS believes such a labeling requirement is impractical. Products may fail to qualify for a " 100 percent organic" label for very technical, or little understood, reasons. Contemporary food processing often uses ingredients, processing technologies, and product formulations that are complicated, technical, and probably not of interest to the general organic consumer. Such information is not required on nonorganically produced products for the simple reason that it is not considered useful to consumers. Explanations of the different processing technologies used in food products would be cumbersome and would interfere with other product labeling.

We believe the optional display of the organic percentage and required identification of organic ingredients on the information panel provides sufficient information for consumers to make purchase decisions. Other descriptive information regarding processing substances and procedures may, of course, be provided at the handler's option and placed in accordance with other Federal labeling requirements.

( 4) Check the Appropriate Organic Category. One commenter suggested that packages of organically produced product display a small box listing the four organic label categories and a check mark beside the category which fits the product.

We understand the simplicity and comparative nature of such a standardized organic label 143 that allows easy comparison of similar products. However, we believe that the optional display of the product's organic percentage and required identification of organic ingredients will be more helpful to consumers and makes the grid box redundant.

( 5) Nonorganic Ingredients in Organic Products. A large number of comments were received on the composition and use of nonorganic ingredients in products labeled " made with..."

and on conventional products with less than 50 ( now 70) percent organic ingredients. Several industry commenters suggested that nonorganic ingredients in " made with..." products must be " natural" ( nonsynthetic agricultural substances) and not be artificially produced. Commenters argued that all ingredients in " made with..." and less than 70 percent products should be produced in accordance with the prohibited practices under sections 205.105 and 205.301( f). A significant number of commenters opposed identification of organic ingredients in what they called " natural food" products.

First, we do not agree that the nonorganic ingredients in " made with..." products must be restricted to only " natural" products. Such restrictions on the composition of nonorganic ingredients would significantly reduce handlers' options in producing those products and, thus,

reduce consumers' options in purchasing products with organic ingredients.

Regarding prohibited practices, this rule implements the strong industry and consumer demand that the prohibited practices found under section 205.105 ( excluded methods, irradiation,

and sewage sludge) not be used in nonorganic ingredients in " made with..." products. However,

we do not believe that restrictions on use of the other prohibited practices, found in section 205.301( f), would further the purposes of the Act. Application of all prohibited practices on the nonorganic ingredients in the " made with..." and less than 70 percent organic products would 144 essentially require that those products be organically produced. The Act allows for products that are not wholly organic. We believe the " made with..." label and the labeling restrictions on the less than 70 percent organic products clearly states to consumers that only some of the ingredients in those products are organically produced.

If accepted, these comments would unnecessarily restrict a handler's ability to truthfully represent and market a conventionally produced agricultural product with some organic ingredients. A handler should not be prohibited from making a truthful claim about some ingredients in a less than 70 percent organic product.

( 6) Alternative " Made With..." Labels. A few SOP managers commented that the phrase,

" made with...," is confusing. They stated that many processed foods contain at least 50 percent organic ingredients but do not make an organic claim on the pdp. They believe the label would be less confusing if it stated a minimum organic percentage rather than identifying the organic ingredients. They suggest the labeling category be changed to " contains at least 50 percent organic ingredients ( or, as revised in this rule, " contains at least 70 percent organic ingredients").

We disagree. Identification of up to three organically produced ingredients or food groups on the pdp gives consumers useful, specific information about the product's organic ingredients. This label, combined with the optional display of the percentage content on the pdp and required identification of organic ingredients, should provide enough information for consumers to make good decisions.

A few commenters contended that the statement " made with organic ( specified ingredients)" is unclear and " open ended" and that consumers may assume the entire product is organically produced. The " made with..." labeling claim refers only to the organic ingredients and 145 not to the whole product. We do not believe that consumers will be confused by the label.

( 7) Use of Other Terms as Synonymous for " Organic". A few commenters representing international organic standards suggested that use of the terms, " biologic" and " ecologic," which are synonymous with " organic" in other countries, should be allowed under the NOP.

Commenters claimed these terms are approved by Codex and their inclusion in this regulation would facilitate international trade and equivalency agreements.

These terms were addressed in the proposed rule and are not accepted. Under the NOP,

these terms may be used as eco labels on a product package but may not be used in place of the term, " organic." Although such terms may be considered synonymous with " organic" in other countries, they are not widely used or understood in this country. We believe their use as synonymous for " organic" would only lend to consumer confusion. Regarding the Codex labeling standard, we point out that Codex also provides that terms commonly used in a country may be used in place of " biologic" and " ecologic." Thus, the use of " organic" in the United States is consistent with Codex standards.

With regard to the commenters' claim that the alternate labels would facilitate international trade, this regulation allows alternative labeling of products which are being shipped to international markets. Thus, a certified organic operation in the United States may produce a product to meet contracted organic requirements of a foreign buyer, label the product as " biologic" or " ecologic" on the pdp consistent with the market preferences of the receiving country, and ship the product to the foreign buyer.

Other terms were suggested by commenters as alternatives to the term, " organic,"

including " grown by age old, natural methods," " grown without chemical input," and " residue 146 Free." These phrases may be consumer friendly but clearly do not convey the extensive and complex nature of contemporary organic agriculture. These phrases may be used as additional,

eco labels, provided they are truthful labeling statements. They are not permitted as replacements for the term, " organic."

( 8) Reconstituted Organic Concentrates. A certifying agent objected to paragraph ( a)( 2)

of section 205.302, which allows labeling of an organically produced concentrate ingredient which is reconstituted with water during assembly of the processed product. The commenter claimed that this provision gives consumers the message that reconstituted juice is equivalent to fresh juice when, the commenter claims, it is not the same.

AMS disagrees. This labeling is consistent with current industry practices. The Act does not prohibit such labeling of concentrates. We believe it is in the interest of the program to allow labeling of organically produced concentrates, provided that the process to produce the concentrate and the reconstitution process is consistent with organic principles and the National List.

( 9) Calculating Reconstituted Versus Dehydrated Weight. Several comments were received regarding specific problems encountered in the calculation of the percentage of organic content as provided under section 295.302. A handler claimed the reconstituted weight of an organically produced spice should be counted in the percentage calculation rather than the dehydrated weight of the spice used in the formulation. A similar comment was received from a food cooperative suggesting that, if an organically produced concentrate ( in powdered form) is added to the same organically produced ingredient in its organic liquid form ( not from concentrate), then the product's organic percentage should be calculated based on the 147 concentrate's single strength reconstituted weight plus the weight of the natural organic liquid.

AMS disagrees with these comments. This regulation provides for an ingredient's weight to be calculated, excluding added water and salt. If an organically produced spice is added to a product in its natural form, the weight of the spice is calculated. If the spice ingredient is in dehydrated, powdered form when added in the product formulation, the dehydrated weight of the spice must be the basis for its percentage of content calculation. If an organically produced dehydrated spice is reconstituted with water prior to product assembly, the spice must still be calculated at its dehydrated weight because percentage calculations are based on the ingredient weight, excluding water and salt. It would be misleading to calculate the weight of the concentrate ingredient in its reconstituted form.

Likewise, if a powdered ingredient is added to the same organically produced ingredient in its natural, liquid form, the weight of the powdered ingredient must be used. Using the reconstituted weight of the powdered ingredient would increase the percentage of the ingredient above the actual weight of the ingredient in the product. We believe that if the comment were accepted, the handler would be able to use less natural organic liquid than the organic percentage and ingredient statement indicates.

( 10) Calculate Organic Percentage in Tenths of a Percent. A trade organization suggested that the organic percentage be rounded to tenths of one percent to accommodate products that may contain a minor ingredient or additive that comprises less than 1 percent of the product. The example provided was Vitamin D in milk. The comment suggested that it is misleading to consumers to suggest that 1 percent of a milk product is nonorganic when the Vitamin D additive may be comprise only a few tenths of one percent of the product. 148 AMS disagrees. Rounding down the percentage to a whole number is sufficient for consumer information and does not misrepresent the product's organic content. A handler may add a qualifying statement regarding the minor ingredient's weight in relation to the whole product weight.

( 11) Verifying Calculations. A State department of agriculture comment suggested that the paragraph ( c) of section 205.302 be revised slightly to provide that percentage calculations must be verified " to the satisfaction" of the certifying agent. The commenter believes that the suggested language allows the handler the flexibility to determine the number calculations that need to be checked in order to verify that the organic percentage calculation is correct.

We do not believe the suggested change is necessary. We assume that any use of a certifying agent's seal on a product means that the certifying agent has checked and approves of the method of calculating the product's organic percentage. If the calculations are not to the certifying agent's satisfaction, the agent would not certify the handling process.

While we appreciate the point made by the commenter, we do not believe the suggested change means what the commenter intends. Paragraph ( c) of section 205.302 does not specify the number and methods of calculations that need to be carried out by a certifying agent because that will depend on the handling process being certified and the ingredients in the product. We leave that to the discretion of the certifying agent. Also, the basis for a product's organic percentage calculation should be clarified in the organic plan. It is assumed that the certifying agent will either be satisfied that the methodology for calculating organic percentage is correct or the methodology will be changed.

( 12) Labeling Nonretail Shipping Containers. A few State departments of agriculture 149 commented that shipping and storage containers with organic products should be required to be labeled as containing organic product. Other commenters recommended that shipping containers be required to display the name of the grower and the certifying agent. They cite these requirements as current industry practice.

This regulation does not require organic labeling on shipping and storage containers because those containers are not used in the marketplace. The only information required by the NOP is the production lot number of the product, if a lot number exists for the particular product.

Product content and shipper information may be displayed, as required by other Federal or State regulations or at the discretion of the handler. Proper identification of the organic nature of a product with special instructions for shipment or storage could prevent exposure to prohibited substances that would lead to subsequent loss of the shipment as an organic product.

( 13) Disclaimers on Organic Products. Several commenters complained that consumers are misled by the organic labeling and the NOP. They claimed that when science based technologies ( genetic engineering, irradiation, chlorination, etc.) are not used on products, the food is less safe than conventionally produced foods. Some of the commenters suggested that a disclaimer regarding food safety and nutritional value be required on packages with organic labeling.

AMS disagrees. The USDA seal indicates only that the product has been certified to a certain production and/ or handling " process" or " system." The seal does not convey a message of food safety or more nutritional value. The NOP prohibitions on use of excluded methods,

ionizing radiation, sewage sludge, and some substances and materials are not intended to imply that conventionally produced products made by those methods or containing those prohibited 150 substances are less safe or nutritious than organically produced products. We do not believe that organic food packages or labeling should carry disclaimers of what the USDA seal or a certifying agent's seal does not represent. Other Federal and State seals and marketing claims are placed on consumer products, including food products, without disclaimers regarding those seals and claims. A disclaimer displayed in relation to USDA seal or a certifying agent's seal would confuse consumers. Finally, disclaimer statements also would present space problems on small product packages.

Labeling  Clarifications Clarification is given on the following issues raised by commenters:

( 1) Certification Is to an Organic Process, Not Organic Product. Several commenters suggested that the final rule more clearly state that the NOP provides for certification of an organic process or system of agriculture and not certification of products, themselves, as " organic." They stated that the phrase "... contain or be created using..." in paragraphs ( a), ( b),

and ( c) of section 205.301 implies certification of the product's content and not to the processedbased organic system of agriculture.

We agree and have revised the wording in those paragraphs to clarify that such products must be organically produced in accordance with organic production and handling requirement of this regulation.

( 2) Phasing Out Use of Old Labels and Packages. Citing FDA regulations, the NOSB,

certifying agents, and some State agencies suggested a minimum 18 month period for handlers to use up their current supplies of packages and labels before complying with the new labeling requirements. 151 This rule provides for an interim period of 18 months between publication of the final rule and the implementation date of the program. Publication of this final rule serves notice to certified producers and handlers that they should begin planning for phasing out use of labels that are not in accordance with these requirements.

The implementation process is discussed in Applicability, subpart B. An organic operation will automatically be certified under this program when its certifying agent is accredited by AMS.

At that time, the operation may begin following these labeling requirements but may not display the new USDA seal until the implementation date. AMS assumes that certifying agents and their client certified operations will maintain frequent contact as to the status of the agent's application for accreditation so that the certified operation may schedule the phasing out of old labels and purchase of new labels and packages. AMS expects to accredit all currently operating certifying agents by the implementation date of this regulation. Stick on labels to comply with the new requirements are acceptable.

Newly established organic operations certified for the first time must immediately begin using labels in accordance with this program.

( 3) Labeling of Products With Minor Ingredients. Several commenters questioned how the minor ingredients ( spices, flavors, colorings, preservatives, oils, vitamins, minerals, accessory nutrients, processing aids, and incidental food additives) needed for formulation or processing of many multiingredient products will be treated under the " 100 percent organic" and " organic"

labeling categories. Because minor ingredients may not exist or are difficult to obtain in organic form, their use in a product can affect the labeling of the product, even though the percentage of the ingredient is extremely small compared to the rest of the product's ingredients. 152 Minor ingredients and processing aids must be treated as any other ingredient or substance which is used as an ingredient in or in the processing of an organically produced product. To be added as an ingredient or used in the processing of a product labeled " 100 percent organic," a minor ingredient must be extracted from a certified organic source without the use of chemicals or solvents. To be added as an ingredient or used in the processing of a product labeled " organic," a minor ingredient must be from an organic agricultural source, if commercially available. If not commercially available, the ingredient must be an agricultural product or a substance consistent with the National List.

( 4) Reusing Containers. A commenter complained that small producers should not be subjected to costly packaging and labeling requirements when their products are sold directly to the public at farmers markets and roadside stands. The commenter requested that small producers be able to reuse retail boxes and labels. The commenter did not specify which labeling provisions presented burdensome costs on small entities.

We agree that costs for exempt operations, indeed all organic operations, should be kept to a minimum. NOP does not prohibit reuse of containers provided their labeling does not misrepresent product and does not allow organic product to come into contact with prohibited substances from the container's previous contents.

( 5) Clarifying Prohibited Labeling Practices. Commenters identified a few inconsistencies between the preamble and regulatory text regarding the seven prohibited production and processing practices now specified in section 205.301( f). We have made the following changes to clarify the intent of the regulation.

A commenter correctly pointed out that the regulatory text of paragraph ( f) incorrectly 153 refers only to ingredients that cannot be produced using the seven prohibited production and handling practices listed in the paragraph. That text is not consistent with the preamble, which correctly states that whole products, as well as ingredients, labeled as " organic" cannot be produced or processed using the seven prohibited practices. The term, " whole products," is added to the introductory sentence of new section 205.301( f).

A few commenters pointed out that all seven practices are prohibited in the production of nonorganic ingredients used in products labeled as " organic." The second sentence of proposed paragraph ( b) of section 205.301 ( products labeled " organic") incorrectly listed only the first three prohibited practices. A phrase is added to the introductory sentence of new paragraph ( f) to specify that the 5 percent or less of nonorganic ingredients in products labeled as " organic" may not be produced or handled using any of the seven prohibited practices.

Finally, with the addition of the commercial availability requirement in section 205.201, a conforming change is needed in section 205.301( f)( 6) regarding use of nonorganic ingredients when organically produced ingredients are available.

( 6) Consistency with State Labeling Requirements. One State organic association commented that the State's law requires identification of the certifying agent if the term, " certified organic," appears on the label. The comment was not clear about where on the package the certifier must be identified; e. g., with the " certified organic" term on the pdp or anywhere on the package. The commenter did not specifically suggest changing the labeling provisions to include the certifying agent on the pdp.

This regulation allows a handler the option of displaying the certifying agent's seal or logo on the pdp for products with 70 percent or more organically produced ingredients. This 154 regulation also requires identification of the certifying agent on the information panel of all products containing 70 percent or more organically produced ingredients. The identification must include an address or contact information and be placed adjacent to identification of the manufacturer, required by FDA. We believe these provisions are sufficient to meet the State's labeling requirements. The NOP will be available to consult with States regarding alternative labeling required to be used in the State.

( 7) Clarifying Labeling of Products in Other Than Packaged Form. We have modified sections 205.308 and 205.309 to clarify that products in other than packaged form at the point of retail sale that are prepared by an exempt or excluded operation may be labeled as " 100 percent organic," " organic," or " made with..." as appropriate. Consistent with the general restrictions on the labeling of products from such operations, which are found in section 205.310, such products may not display the USDA seal or any certifying agent's seal or other identifying mark or otherwise be represented as a certified organic product.

Subpart E  Certification This subpart sets forth the requirements for a national program to certify production and handling operations as certified organic production or handling operations. This certification process will be carried out by accredited certifying agents.

Description of Regulations General Requirements Production and handling operations seeking to receive or maintain organic certification must comply with the Act and applicable organic production and handling regulations. Such operations must establish, implement, and annually update an organic production or handling 155 system plan that is submitted to an accredited certifying agent. They must permit on site inspections by the certifying agent with complete access to the production or handling operation,

including noncertified production and handling areas, structures, and offices.

As discussed in subpart B, certified operations must maintain records concerning the production and handling of agricultural products that are sold, labeled, or represented as " 100 percent organic," " organic," or " made with organic ( specified ingredients or food group( s))"

sufficient to demonstrate compliance with the Act and regulations. Records applicable to the organic operation must be maintained for not less than 5 years beyond their creation. Authorized representatives of the Secretary, the applicable State organic program's ( SOP) governing State official, and the certifying agent must be allowed access to the operation's records during normal business hours. Access to the operation's records will be for the purpose of reviewing and copying the records to determine compliance with the Act and regulations.

Certified operations are required to immediately notify the certifying agent concerning any application, including drift, of a prohibited substance to any field, production unit, site, facility,

livestock, or product that is part of the organic operation. They must also immediately notify the certifying agent concerning any change in a certified operation or any portion of a certified operation that may affect its compliance with the Act and regulations.

Certification Process To obtain certification, a producer or handler must submit an application for certification to an accredited certifying agent. The application must contain descriptive information about the applicant's business, an organic production and handling system plan, information concerning any previous business applications for certification, and any other information necessary to determine 156 compliance with the Act.

Applicants for certification and certified operations must submit the applicable fees charged by the certifying agent. An applicant may withdraw its application at anytime. An applicant who withdraws its application will be liable for the costs of services provided up to the time of withdrawal of the application.

The certifying agent will decide whether to accept the applicant's application for certification. A certifying agent must accept all production and handling applications that fall within its area( s) of accreditation and certify all qualified applicants to the extent of its administrative capacity to do so. In other words, a certifying agent may decline to accept an application for certification when the certifying agent is not accredited for the area to be certified or when the certifying agent lacks the resources to perform the certification. However, the certifying agent may not decline to accept an application on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family status.

Upon acceptance of an application for certification, a certifying agent will review the application to ensure completeness and to determine whether the applicant appears to comply or may be able to comply with the applicable production or handling regulations. As part of its review, the certifying agent will verify that an applicant has submitted documentation to support the correction of any noncompliances identified in a previously received notification of noncompliance or denial of certification. We anticipate that at a future date the certifying agent will also review any available U. S. Department of Agriculture ( USDA) data on production and handling operations for information concerning the applicant. 157 We anticipate using data collected from certifying agents to establish and maintain a password protected Internet database only available to accredited certifying agents and USDA.

This database would include data on production and handling operations issued a notification of noncompliance, noncompliance correction, denial of certification, certification, proposed suspension or revocation of certification, and suspension or revocation of certification. Certifying agents would use this Internet database during their review of an application for certification.

This data will not be available to the general public because much of the data would involve ongoing compliance issues inappropriate for release prior to a final determination.

After a complete review of the application, which shall be conducted within a reasonable time, the certifying agent will communicate its findings to the applicant. If the review of the application reveals that the applicant may be in compliance with the applicable production or handling regulations, the certifying agent will schedule an on site inspection of the applicant's operation to determine whether the applicant qualifies for certification. The initial on site inspection must be conducted within a reasonable time following a determination that the applicant appears to comply or may be able to comply with the requirements for certification.

The initial inspection may be delayed for up to 6 months to comply with the requirement that the inspection be conducted when the land, facilities, and activities that demonstrate compliance or capacity to comply can be observed.

The certifying agent will conduct an initial on site inspection of each production unit,

facility, and site that produces or handles organic products and that is included in the applicant's operation. As a benchmark, certifying agents should follow auditing guidelines prescribed by the International Organization for Standardization Guide 10011 1, " Guidelines for auditing quality 1 ISO Guide 10011 1 is available for viewing at USDA AMS, Transportation and Marketing Programs, Room 2945 South Building, 14th and Independence Ave., SW, Washington, DC, from 9: 00 a. m. to 4: 00 p. m., Monday through Friday ( except official Federal holidays). A copy may be obtained from the American National Standards Institute, 11 West 42d Street, New York, NY 10036; Website: www. ansi. org; E mail: ansionline@ ansi. org; Telephone: 212 642 4900; Facsimile: 212 398 0023.

158 systems  Part 1: Auditing" ( ISO Guide 10011 1). 1 The certifying agent will use the on site inspection in determining whether to approve the request for certification and to verify the operation's compliance or capability to comply with the Act and regulations. Certifying agents will conduct on site inspections when an authorized representative of the operation who is knowledgeable about the operation is present. An on site inspection must also be conducted when land, facilities, and activities that demonstrate the operation's compliance with or capability to comply with the applicable production or handling regulations can be observed.

The on site inspection must verify that the information provided to the certifying agent accurately reflects the practices used or to be used by the applicant or certified operation and that prohibited substances have not been and are not being applied to the operation. Certifying agents may use the collection and testing of soil; water; waste; plant tissue; and plant, animal, and processed products samples as tools in accomplishing this verification.

The inspector will conduct an exit interview with an authorized representative of the operation who is knowledgeable about the inspected operation to confirm the accuracy and completeness of inspection observations and information gathered during the on site inspection.

The main purpose of this exit interview is to present the inspection observations to those in charge of the firm in such a manner so as to ensure they clearly understand the results of the inspection.

The firm is not required to volunteer any information during the exit interview but would be 159 required to respond to questions or requests for additional information. The inspector will raise and discuss during the exit interview any known issues of concern, taking into account their perceived significance. As a general rule, the inspector will not make recommendations for improvements to the operation during the exit interview. However, the certifying agent will have the discretion to decide the extent to which an inspector may discuss any compliance issue. At the time of the inspection, the inspector shall provide the operation's authorized representative with a receipt for any samples taken by the inspector. There shall be no charge to the inspector for the samples taken.

The certifying agent shall, within a reasonable time, provide the inspected operation with a copy of the on site inspection report, as approved by the certifying agent, for any on site inspection performed and provide the operation with a copy of the test results for any samples taken by an inspector.

Notification of Approval A certifying agent will review the on site inspection report, the results of any analyses for substances, and any additional information provided by the applicant within a reasonable time after completion of the initial on site inspection. The certifying agent will grant certification upon making two determinations: ( 1) that the applicant's operation, including its organic system plan and all procedures and activities, is in compliance with the Act and regulations and ( 2) that the applicant is able to conduct operations in accordance with its organic systems plan.

Upon determining the applicant's compliance and ability to comply, the agent will grant certification and issue a " certificate of organic operation." The certification may include requirements for the correction of minor noncompliances within a specified time period as a 160 condition of continued certification. A certificate of organic operation will specify the name and address of the certified operation; the effective date of certification; the categories of organic operation, including crops, wild crops, livestock, or processed products produced by the certified operation; and the name, address, and telephone number of the certifying agent. Once certified, a production or handling operation's organic certification continues in effect until surrendered by the organic operation or suspended or revoked by the certifying agent, the SOP's governing State official, or the Administrator.

Denial of Certification Should the certifying agent determine that the applicant is not able to comply or is not in compliance with the Act, the certifying agent will issue a written notification of noncompliance to the applicant. The notification of noncompliance will describe each noncompliance, the facts on which the notification is based, and the date by which rebuttal or correction of each noncompliance must be made. Applicants who receive a notification of noncompliance may correct the noncompliances and submit, by the date specified, a description of correction and supporting documentation to the certifying agent. As an alternative, the applicant may submit a new application to another certifying agent, along with the notification of noncompliance and a description of correction of the noncompliances and supporting documentation. Applicants may also submit, by the date specified, written information to the issuing certifying agent to rebut the noncompliance described in the notification of noncompliance. When a noncompliance cannot be corrected, a notification of noncompliance and a " notification of denial of certification" may be combined in one notification.

The certifying agent will evaluate the applicant's corrective actions taken and supporting 161 documentation submitted or the written rebuttal. If necessary, the certifying agent will conduct a followup on site inspection of the applicant's operation. When the corrective action or rebuttal is sufficient for the applicant to qualify for certification, the certifying agent will approve certification. When the corrective action or rebuttal is not sufficient for the applicant to qualify for certification, the certifying agent will issue the applicant a written notice of denial of certification. The certifying agent will also issue a written notice of denial of certification when an applicant fails to respond to the notification of noncompliance. The notice of denial of certification will state the reasons for denial and the applicant's right to reapply for certification,

request mediation, or file an appeal.

An applicant who has received a notification of noncompliance or notice of denial of certification may apply for certification again at any time with any certifying agent. When the applicant submits a new application to a different certifying agent, the application must include,

when available, a copy of the notification of noncompliance or notice of denial of certification.

The application must also include a description of the actions taken, with supporting documentation, to correct the noncompliances noted in the notification of noncompliance. When a certifying agent receives such an application, the certifying agent will treat the application as a new application and begin a new application process.

A certifying agent has limited authority to deny certification without first issuing a notification of noncompliance. This authority may be exercised when the certifying agent has reason to believe that an applicant for certification has willfully made a false statement or otherwise purposefully misrepresented its operation or its compliance with the requirements for certification. 162 Continuation of Certification Each year, the certified operation must update its organic production or handling system plan and submit the updated information to the certifying agent and pay the certification fees to continue certification. The updated organic system plan must include a summary statement,

supported by documentation, detailing deviations from, changes to, modifications to, or other amendments to the previous year's organic system plan. The updated organic system plan must also include additions to or deletions from the previous year's organic system plan, intended to be undertaken in the coming year. The certified operation must update the descriptive information about its business and other information as deemed necessary by the certifying agent to determine compliance with the Act and regulations. The certified operation must also provide an update on the correction of minor noncompliances previously identified by the certifying agent as requiring correction for continued certification.

Following receipt of the certified operation's updated information, the certifying agent will, within a reasonable time, arrange and conduct an on site inspection of the certified operation.

When it is impossible for the certifying agent to conduct the annual on site inspection following receipt of the certified operation's annual update of information, the certifying agent may allow continuation of certification and issue an updated certificate of organic operation on the basis of the information submitted and the most recent on site inspection conducted during the previous 12 months. However, the annual on site inspection must be conducted within the first 6 months following the certified operation's scheduled date of annual update. As a benchmark, certifying agents should follow auditing guidelines prescribed by ISO Guide 10011 1. Upon completion of the inspection and a review of updated information, the certifying agent will determine whether 163 the operation continues to comply with the Act and regulations. If the certifying agent determines that the operation is in compliance, certification will continue. If any of the information specified on the certificate of organic operation has changed, the certifying agent will issue an updated certificate of organic operation. If the certifying agent finds that the operation is not complying with the Act and regulations, a written notification of noncompliance will be issued as described in section 205.662.

In addition to annual inspections, a certifying agent may conduct additional on site inspections of certified operations that produce or handle organic products to determine compliance with the Act and regulations. The Administrator or SOP's governing State official may also require that additional inspections be performed by the certifying agent to determine compliance with the Act and regulations. Additional inspections may be announced or unannounced and would be conducted, as necessary, to obtain information needed to determine compliance with identified requirements.

Such on site inspections would likely be precipitated by reasons to believe that the certified operation was operating in violation of one or more requirements of the Act or these regulations. The policies and procedures regarding additional inspections, including how the costs of such inspections are handled, would be the responsibility of each certifying agent. Misuse of such authority would be subject to review by USDA during its evaluation of a certifying agent for reaccreditation and at other times in response to complaints. Certified production and handling operations can file complaints with USDA at any time should they believe a certifying agent abuses its authority to perform additional inspections.

Certification After Suspension or Revocation of Certifying Agent's Accreditation 164 When the Administrator revokes or suspends a certifying agent's accreditation, affected certified operations will need to make application for certification with another accredited certifying agent. The certification of the production or handling operation remains in effect during this transfer of the certification. The certified production or handling operation may seek certification by any qualified certifying agent accredited by the Administrator. To minimize the burden of obtaining the new certification, the Administrator will oversee transfer of the original certifying agent's file on the certified operation to the operation's new certifying agent.

Upon initiation of suspension or revocation of a certifying agent's accreditation or upon suspension or revocation of a certifying agent's accreditation, the Administrator may initiate proceedings to suspend or revoke the certification of operations certified by the certifying agent.

The Administrator's decision to suspend or revoke a producer's or handler's certification in light of the loss of its certifying agent's accreditation would be made on a case by case basis. Actions such as fraud, bribery, or collusion by the certifying agent, which cause the Administrator to believe that the certifying agent's clients do not meet the standards of the Act or these regulations, might require the immediate initiation of procedures to suspend or revoke certification from some or all of its client base. Removal of accreditation, regardless of the reason, in no way affects the appeals rights of the certifying agent's clients. Further, a certified operation's certification will remain in effect pending the final resolution of any proceeding to suspend or revoke its certification.

A private entity certifying agent must furnish reasonable security for the purpose of protecting the rights of operations certified by such certifying agent. This security is to ensure the performance of the certifying agent's contractual obligations. As noted elsewhere in this rule, the 165 specific amount and type of security that must be furnished by a private certifying agent will be the subject of future rulemaking by USDA. We anticipate that the amount of the security will be tied to the number of clients served by the certifying agent and the anticipated costs of certification that may be incurred by its clients in the event that the certifying agent's accreditation is suspended or revoked. We anticipate that the security may be in the form of cash, surety bonds, or other financial instrument ( such as a letter of credit) administered in a manner comparable to cash or surety bonds held under the Perishable Agricultural Commodities Act.

Certification  Changes Based on Comments This subpart differs from the proposal in several respects as follows:

( 1) Access to Production and Handling Operation. We have amended section 205.400( c)

by changing " noncertified areas and structures" to " noncertified production and handling areas,

structures, and offices." A commenter requested that section 205.400( c) be amended to allow for access to farm related structures only. The commenter believes that the requirements of section 205.400( c) could be interpreted as giving inspectors access to residential property. We agree with the commenter that residential privacy should be maintained. However, if a certified operation conducts business from or stores records at a residential property, the certified operation will be considered to be maintaining an office at the residential property. The records in such office shall be made accessible for review and copying. Accordingly, we have amended section 205.400( c) to further clarify which areas and structures are to be made accessible during an on site inspection.

( 2) Application for Certification. We have amended the first paragraph of section 205.401 by replacing the word, " request," each time it occurred with the word, " application." A 166 commenter recommended that we amend the first paragraph of section 205.401 by replacing the word, " request," with " application." We have accepted the commenter's recommendation because the amendment makes the language in the first paragraph consistent with the title and the requirements of the section.

( 3) Verification of Correction of Noncompliances. To make section 205.402( a)( 3)

consistent with section 205.401( c) we have amended the language in section 205.402( a)( 3) to require that the certifying agent verify that an applicant who previously applied to another certifying agent and received a notification of denial of certification has submitted documentation to support the correction of any noncompliances identified in the notification of denial of certification. A commenter recommended that section 205.402( a)( 3) be amended by inserting " or denial of certification" after the phrase, " notification of noncompliance." We have accepted the commenter's recommended amendment because it is consistent with the requirements of section 205.401( c). Section 205.401( c) requires an applicant for certification to include the name( s) of any organic certifying agent( s) to which application has previously been made, the year( s) of application, and the outcome of the application( s) submission. The applicant is also required to include, when available, a copy of any notification of noncompliance or denial of certification issued to the applicant for certification. The words, " when available," have been added to this requirement in this final rule to satisfy concerns regarding the status of applicants who cannot find or no longer have a copy of any notification of noncompliance or denial of certification previously received. We see no down side to relaxing this requirement since the applicant must still comply with each of the other provisions in section 205.401( c), including the requirement that the applicant include a description of the actions taken to correct the noncompliances noted in any 167 notification of noncompliance or denial of certification, including evidence of such correction.

Further, the certifying agent will be using USDA's database of certification actions during its review of an application for certification.

( 4) Timely Communication to the Applicant. We have amended section 205.402( b), by requiring at paragraph ( b)( 1) that the certifying agent, within a reasonable time, review the application materials received and communicate its findings to the applicant. A commenter requested that we amend section 205.402( b) which required a certifying agent to communicate to the applicant its findings on the review of application materials submitted by the applicant.

Specifically, the commenter requested that section 205.402( b) be amended by adding to the end thereof, " in a timely manner so as to prevent the avoidable tillage of native habitat that had been identified in the application as lands for organic production."

We concur that certification decisions should be timely. There are many reasons ( e. g.,

financial and contractual) for why certification must be timely. It would be impractical, however,

to attempt to address all of the reasons for timely certification in these regulations. We have,

therefore, amended section 205.402( b) as noted above. This amendment is consistent with the requirement in section 205.402( a) that the certifying agent, upon acceptance of an application for certification, review the application for completeness, determine by a review of the application materials whether the applicant appears to comply or may be able to comply with the requirements for certification, and schedule an on site inspection. The " upon acceptance"

requirement necessitates that the certifying agent review the application for certification and provide feedback to the applicant in a timely manner.

( 5) On site Inspections. We have amended section 205.403( a)( 1) by specifying that the 168 initial and annual on site inspections of each production unit, facility, and site in an operation applies to those units, facilities, and sites that produce or handle organic products. A commenter recommended that section 205.403( a)( 1) be amended to specify that on site inspections of each production unit, facility, and site will include just those that produce or handle organic products.

The commenter stated that this change was necessary because some retail corporations choose to certify all store locations regardless of whether the location sells organic products. The commenter went on to say that, if a location does not stock any organic products, the certifying agent should have the discretion to modify the inspection requirement.

We have excluded all retail food establishments from certification. The exclusion is found in section 205.101( b)( 2). Accordingly, the commenter's recommendation is not applicable to retail food establishments. We have, however, made the recommended amendment to section 205.403( a)( 1) because of its potential applicability to other operations which may apply for certification.

( 6) Scheduling Initial On site Inspection. We have amended section 205.403( b) to provide that the initial inspection may be delayed for up to 6 months to comply with the requirement that the inspection be conducted when the land, facilities, and activities that demonstrate compliance or capacity to comply with the organic production and handling requirements can be observed. We received a comment stating that if an application is received in January for a crop that will be planted in May, it would be necessary to delay the inspection until late May or June to observe the crop in the field. The commenter went on to say that the alternative would be to conduct the initial inspection before the crop is planted, in order to meet the " within a reasonable time" requirement, and then conduct a reinspection during the growing 169 season. The commenter recommended amending section 205.403( b) to allow the certifying agent to delay the initial on site inspection until the land, facilities, and activities that demonstrate compliance or capacity to comply can be observed.

We have accepted the recommendation because there may be situations where a later onsite inspection will prove mutually beneficial to the certifying agent and the operation to be inspected. However, certifying agents are reminded that the operation may be certified following a demonstration that the operation is able to comply with the organic production and handling requirements found in subpart C of these regulations. Accordingly, certifying agents should not unnecessarily delay the certification of an organic production or handling operation by insisting that the inspection only be performed when the operation can demonstrate its actual compliance with the organic production and handling requirements. Applicants who believe that the certifying agent is abusing its authority to delay the on site inspection may file a complaint with the Administrator.

We have also amended the second sentence in section 205.403( b) by inserting the word,

" all," and removing both references to " applicant" to clarify that the provision applies to all onsite inspections.

( 7) Exit Interview. We have amended section 205.403( d) by requiring that the inspector conduct an exit interview with " an authorized representative of the operation who is knowledgeable about the inspected operation" rather than " an authorized representative of the inspected operation" as required in the proposed rule. This amendment is consistent with the requirement in section 205.403( b) that an on site inspection be conducted when an authorized representative of the operation who is knowledgeable about the operation is present. 170 A commenter requested that we define " authorized representative." Another commenter recommended changing the term, " authorized representative," to " responsible executive." Our amendment of section 205.403( d) responds to both of these comments by clarifying the qualifications of an authorized representative.

A third commenter stated that an exit interview is not a practical requirement and that an initial interview is often preferred. The commenter stressed that verification that the inspector has correctly understood what is presented is ongoing. This commenter also expressed the belief that there may be times when it may not be appropriate for the inspector to address issues of concern and that such issues may be best left to the certifying agent. The commenter recommended that the requirement for an exit interview be deleted or presented as an option. Another commenter suggested that issues of concern are often identified and discussed with the operation's representative during the course of the inspection. This commenter believes that it is unnecessarily confrontational to require an exit interview during which these issues of concern are repeated. This commenter recommended replacing the required exit interview with a communications provision that would require the inspector to discuss the need for any additional information as well as any issues of concern. The recommended provision would also authorize the certifying agent to provide the applicant with a summary of the inspector's areas of concern.

While we agree that the language in section 205.403( d) needed clarification, we do not agree that the exit interview is impractical or unnecessarily confrontational. The exit interview is intended to give the inspector an opportunity to confirm the accuracy and completeness of inspection observations and information gathered during the on site inspection, to request any additional information necessary to establish eligibility for certification, and to raise and discuss 171 any known issues of concern. Issues of concern that may involve compliance issues will be handled as authorized by the certifying agent. The exit interview is also intended to give the inspected operation's authorized representative general information concerning the inspector's observations. Such exit interviews are required under ISO Guide 10011 1. Accordingly,

requiring exit interviews is consistent with ISO standards and our expectation, as stated earlier in this preamble, that certifying agents benchmark their on site inspection procedures to ISO Guide 10011 1.

( 8) On site Inspection Documentation. We have amended section 205.402( b) by adding the requirements that the certifying agent: ( 1) provide the applicant with a copy of the on site inspection report, as approved by the certifying agent, for any on site inspection performed and ( 2) provide the applicant with a copy of the test results for any samples taken by an inspector.

We have also amended section 205.403 by adding a new paragraph ( e) that requires the inspector,

at the time of the inspection, to provide the operation's authorized representative with a receipt for any samples taken by the inspector. This new paragraph also addresses the requirement that the certifying agent provide the operation inspected with a copy of the inspection report and any test results. Having the certifying agent issue the on site inspection report to the operation inspected is consistent with ISO Guide 65, section 11( b).

Several commenters recommended that section 205.403 be amended to require that the inspector issue a copy of the on site inspection report to the operation at the exit interview. They also recommended that the inspector be required to provide the operation with a receipt for samples collected for testing. The commenters, further, recommended that the certifying agent be required to provide the operation with a written report on the results of the testing performed on 172 the samples taken. A commenter also recommended that the operation be paid for any samples taken. One of the commenters recommended that section 205.403 be amended by adding protocol for an exit interview.

We concur that the applicant for certification and certified operations should be provided with a copy of the on site inspection report, a receipt for samples taken, and a copy of the test results for samples taken. Accordingly, we have amended sections 205.402( b) and 205.403 as noted above.

The protocol for an exit interview will be set forth in the certifying agent's procedures to be used to evaluate certification applicants, make certification decisions, and issue certification certificates. The NOP is available to respond to questions and to assist certifying agents in the development of these procedures which are required under section 205.504( b)( 1). Accordingly,

AMS is not amending the section to include a protocol for exit interviews. AMS is also not including a requirement that the certifying agent pay the applicant for samples taken, since such charges would just be charged back to the applicant as a cost for processing the applicant's application for certification.

( 9) Granting Certification. We have amended the last sentence of section 205.404( a) by removing the word, " restrictions," and replacing it with " requirements for the correction of minor noncompliances within a specified time period." A commenter suggested that the last sentence of section 205.404( a) be amended to read: " The approval may include restrictions or requirements as a condition of continued certification, which includes a time line for fulfilling the requirement."

Another commenter requested that we define " restrictions." This commenter also recommended amending section 205.404( a) to clarify the meaning of " restrictions" and to require corrective 173 action by the operator within a specific time period. We agree with the commenters that the last sentence of section 205.404( a) was in need of further clarification. We also agree that it is appropriate for the regulations to require that the requirements for correction include a specified time period within which the corrections must be made. Accordingly, we amended section 205.404( a) as noted above. The certifying agent will make the determination of whether a violation of the Act and regulations is minor. Minor noncompliances are those infractions that, by themselves, do not preclude the certification or continued certification of an otherwise qualified organic producer or handler. The certifying agent would be free to modify the time period for correction should it believe it to be appropriate.

We have also made editorial changes to section 205.404( a) consistent with suggestions we received on section 205.506. In the title to section 205.404 we have replaced " Approval of" with " Granting." In section 205.404( a) we have replaced " approve" with " grant" and " approval" with " certification." This change makes the language in section 205.404 consistent with ISO Guide 65,

section 4.6, which addresses the granting of certification.

( 10) Payment of Fees. We have amended the introductory statement within section 205.406( a) by adding the requirement that, to continue certification, a certified operation annually pay the certifying agent's certification fees. A commenter recommended amending section 205.404( c) by adding a sentence providing that a certified operation's failure to pay the certifying agent's certification fees may be a cause for suspension or revocation of certification. We agree that the issue of payment of fees should be addressed but not in section 205.404( c), which deals with the duration of a certified operation's certification. We believe the issue of payment of certification fees is more appropriately addressed in section 205.406, which deals with 174 continuation of certification. Accordingly, we have amended section 205.406( a) to require payment of the certifying agent's fees as a condition of continued certification. This addition would allow a certifying agent to initiate suspension or revocation proceedings against any operation that fails to pay the required fees. The certifying agent is not required to initiate suspension or revocation proceedings for failure to pay the fees. In fact, the certifying agent is encouraged to use one or more of the legal debt collection alternatives available to it.

( 11) Denial of Certification. We have amended section 205.405 to include noncompliance and resolution provisions originally included by cross reference to section 205.662( a). We have made this amendment in response to a comment that these regulations do not provide an opportunity for a hearing upon denial of certification. We disagree with the commenter's assessment but have amended section 205.405( a) to eliminate confusion that may result from the cross reference to section 205.662( a). We have determined that section 205.662( a) may cause confusion for certification applicants because the section does not specifically address applicants.

As amended, section 205.405( a) required a written notification of noncompliance that describes each noncompliance, the facts on which the noncompliance is based, and the date by which the applicant must rebut or correct each noncompliance and submit supporting documentation of each such correction when correction is possible. Section 205.405( b) lists the options available to the applicant, including the options of correcting the noncompliance or submitting written information to rebut the noncompliance. Successful correction or rebuttal will result in an approval of certification. When the corrective action or rebuttal is not sufficient for the applicant to qualify for certification, the certifying agent will issue a written notice of denial of 175 certification. This notice will state the reason( s) for denial and the applicant's right to request mediation in accordance with section 205.663 or to file an appeal in accordance with section 205.681.

( 12) Rebuttal of a Noncompliance. We have amended section 205.405( b)( 3) to clarify that rebuttal of a noncompliance shall be submitted to the certifying agent that issued the notification of noncompliance. We made this amendment in response to a commenter's question about who has authority to evaluate a written rebuttal.

( 13) Correction of Minor Noncompliances. We have amended section 205.406( a) by adding a new paragraph ( 3) which requires the certified operation to include with its annual reporting an update on the correction of minor noncompliances previously identified by the certifying agent as requiring correction for continued certification. A commenter recommended adding at 205.406( a) a requirement that the certified operation address any restrictions that have been applied to its certification under 205.404( a). We agree with the commenter that the annual reporting by the certified operation should include an update addressing the certified operation's compliance with the certifying agent's requirements for the correction of minor noncompliances.

Accordingly, we amended section 205.406( a) as noted above and redesignated paragraph ( 3) as paragraph ( 4). The certifying agent will make the determination of whether a violation of the Act and regulations is minor. Minor noncompliances are those infractions that, by themselves, do not preclude the certification or continued certification of an otherwise qualified organic producer or handler.

( 14) Scheduling Annual On site Inspections. We have amended section 205.406( b) to provide that, when it is impossible for the certifying agent to conduct the annual on site inspection 176 following receipt of the certified operation's annual update of information, the certifying agent may allow continuation of certification and issue an updated certificate of organic operation on the basis of the information submitted and the most recent on site inspection conducted during the previous 12 months. The annual on site inspection, required by section 205.403, must, however,

be conducted within the first 6 months following the certified operation's scheduled date of annual update.

A commenter expressed the belief that the requirement for an on site inspection after receipt of the certified operation's annual update of information would have required that all annual on site inspections be performed at the same time of the year. The commenter went on to express the belief that, to avoid inspecting certified operations twice a year, certifying agents would have to schedule the annual update to occur during the growing season in order to comply with the requirement for timing inspections when normal production activities can be observed.

The commenter stated that certifying agents should be given more flexibility for scheduling inspections and conducting their certification programs according to management procedures best suited to their agency. The commenter recommended amending section 205.406( b) by adding to the end thereof: " or base the decision regarding eligibility for renewal on an on site inspection conducted during the previous 12 months."

We agree with the commenter that certifying agents should be given more flexibility for scheduling on site inspections so as to best meet the management needs of the certifying agent.

Accordingly, we have amended section 205.406( b) to allow continuation of certification and issuance of an updated certificate of organic operation on the basis of the information submitted and the most recent on site inspection conducted during the previous 12 months. This option will 177 be available to the certifying agent when renewal is scheduled for a time when it is impossible to conduct the annual on site inspection following receipt of the annual update and at a time when land, facilities, and activities that demonstrate the operation's compliance or capability to comply can be observed. This change does not affect the requirement in section 205.403( a)( 1) that the certifying agent conduct an annual on site inspection of each certified operation. Further, the annual on site inspection must be conducted within the first 6 months following the certified operation's scheduled date of annual update.

Certification  Changes Requested But Not Made This subpart retains from the proposed rule regulations on which we received comments as follows:

( 1) Number of On site Inspections. A commenter recommended that section 205.403( a)( 1) be amended by adding a requirement that production operations be under active organic management for the last year of the 3 year land conversion period and that two on site inspections be performed prior to organic certification.

Section 205.403( a)( 1) provides that the certifying agent must conduct an initial on site inspection of each production unit, facility, and site that produces or handles organic products and that is included in an operation for which certification is requested. The requirement does not preclude a certifying agent from conducting additional on site inspections, if necessary, to establish the applicant's eligibility for certification. The Act requires a 3 year period immediately preceding harvest, during which the production operation must be free from the application of prohibited substances. The Act does not, however, require that land be under active organic management during this period, and we do not believe such a requirement in these regulations is 178 necessary. Such a requirement, for example, would necessitate some process for verifying that an operation is under active organic management, which would, in effect, require a certification type decision a year before certification is granted and the operation can begin to label products as certified organic. Accordingly, we disagree with the commenter's recommendation that an operation be under active organic management for the last year of the 3 year land conversion and that two on site inspections be required.

( 2) Unannounced Inspections. A commenter recommended that section 205.403( a)( 2)( iii) be amended to require additional unannounced inspections either by defining the circumstances under which the inspections should be undertaken or by setting a minimum percentage of unannounced inspections. The commenter claimed that 5 percent is a common percentage adopted by certifying agents around the world.

Section 205.403 requires an initial on site inspection, annual on site inspection, and additional on site inspections to determine compliance with the Act and regulations, to verify that information provided reflects actual practices, and to verify, through testing if necessary, that prohibited substances are not used by the operation. Because of the widely disparate nature of certified operations, we believe the certifying agent is in the best position to determine the need for additional on site inspections. Accordingly, we have rejected the commenter's request that the regulations require additional unannounced visits either by defining the circumstances under which these should be undertaken or by setting a minimum percentage.

( 3) Timeliness of Certifying Agent Review Information. A commenter requested that section 205.404( a) be amended to specify a timeframe of 60 days rather than " Within a reasonable time" as the time by which the certifying agent must review the on site inspection report, the 179 results of any analyses for substances, and any additional information requested from or supplied by the applicant.

Section 205.404( a) requires the certifying agent, within a reasonable time after completion of the initial on site inspection, to review the on site inspection report, the results of any analyses for substances conducted, and any additional information requested from or supplied by the applicant. Section 205.504( b)( 1) requires the certifying agent to submit a copy of the procedures to be used to evaluate certification applicants, make certification decisions, and issue certification certificates. Such procedures and the certifying agent's performance in making timely certification decisions will be subject to review during accreditation and reaccreditation of the certifying agent. Certifying agents are expected to make timely decisions regarding whether to certify an applicant and whether a certified operation is in compliance with the Act and regulations. Applicants with complaints regarding timeliness of service could forward their complaints to the Administrator. Accordingly, timely service will be in the best interest of certifying agents since such complaints could have an impact on their reaccreditation or continued accreditation. Further, our original position is consistent with those commenters requesting flexibility in determining what constitutes reasonable time. Accordingly, we have not amended section 205.404( a) as requested.

( 4) Categories of Organic Operation. We received a variety of comments regarding the requirement that the certifying agent issue a certificate of organic operation which specifies the categories of organic operation, including crops, wild crops, livestock, or processed products produced by the certified operation. One commenter recommended that section 205.404( b)( 3) be amended, with regard to processing, to only require a processing category to be specified on the 180 certificate, such as food processing or feed processing. The commenter stated that it should not be necessary to list every product on the certificate. Specifically, the commenter recommended amending section 205.404( b)( 3) by inserting the words, " general categories of," immediately in front of the word, " processed." Another commenter recommended amending section 205.404( b)( 3) to require the identity of specific crops and the specific processing operations certified. Still another commenter requested that section 205.404( b) be amended by adding a new paragraph requiring that the certificate include the number of livestock of each species produced on the certified operation. This same commenter also recommended the addition of a new paragraph requiring that the certificate identify the specific location of each certified organic field and handling operation. We also received support for section 205.404( b)( 3) as written. This commenter does not support the addition of information regarding the number of livestock or the location of fields.

We disagree with the suggestion that the certificate list every crop, wild crop, livestock, or processed product produced by the certified operation. We believe that listing categories of organic operation is sufficient. This does not, however, prevent the certifying agent, in cooperation with the certified operation, from listing specific crops, livestock, or processed products on the certificate. Such information could always be listed on the certificate when requested by the certified operation. We also disagree with the commenter who requested that certifying agents display the number of livestock of each species produced by the certified operation and the specific location of each certified organic field and handling operation. We do not believe it is necessary to list the quantity of product to be produced or handled at a certified operation, nor do we believe it is necessary to list the location of a certified operation's fields or 181 facilities. Such information may, however, be listed on the certificate upon the written request of the certified operation. By requiring the name, address, and telephone number of the certifying agent, the certificate would provide interested persons with a contact for obtaining releasable information concerning the certified operation. Further, the certifying agent is the first line of compliance under this program and, as such, is the person to whom all questions and concerns should be addressed about certified operations.

( 5) Annual Renewal of Certification. Numerous commenters requested that section 205.404( b)( 2) be amended to provide for the placement of an expiration date on the certificate of organic operation. The commenters want yearly expiration of certification and yearly expiration of the certificate of organic operation. Commenters also requested that section 205.404( c) be amended to provide that once certified, a production or handling operation's organic certification continues in effect until the expiration date on the certificate, until surrendered by the organic operation, or until suspended or revoked by the certifying agent, the SOP's governing State official, or the Administrator. Some commenters recommended the addition of a new paragraph 205.406( e) that would provide for automatic suspension of a certification if the certified operation did not provide the information required in paragraph 205.406( a) by the expiration date to be placed on the certificate of organic operation.

We disagree with the commenters who have requested annual renewal of certification and that the certified operation's certification and its certificate of organic operation expire annually.

We prefer continuous certification due to the very real possibility that the renewal process might not always be completed before expiration of the certification period. Expiration of the certification period would result in termination of the operation's certification. Even a short 182 period of interruption in an operation's organic status could have severe economic ramifications.

Further, we believe that a regular schedule of expiration of certification is unnecessary inasmuch as all certified operations are required to annually update their organic system plan and submit any changes to their certifying agent. More importantly, unlike accreditation, where the Act provides for expiration and renewal, the Act does not provide for an expiration or renewal of certification.

Therefore, it is also our position that once granted certification the production or handling operation retains that certification until voluntarily surrendered or removed, following due process, for violation of the Act or these regulations.

( 6) Denial of Certification. A commenter recommended that section 205.405( e) be amended to place a time restriction on reapplication for certification after denial of certification.

The commenter suggested a 3 year period. We disagree with this recommendation because the reasons for denial include a wide range of noncompliances. The ability to correct noncompliances will vary as will the time needed to correct the noncompliances.

( 7) Production and Handling Operation Certification Following Suspension or Revocation of Certifying Agent Accreditation. A few commenters requested amendment of section 205.406 through the addition of a new paragraph ( f). Specifically, the commenters requested provisions that would provide for USDA notification of certified operations regarding the suspension or revocation of their certifying agent's accreditation. Some of these commenters requested that the provisions also allow the affected certified operation to use current market labels for a maximum period of 12 months, provided the certified operation made application for certification with another USDA accredited certifying agent within 3 months of being notified of their certifying agent's suspension or revocation of accreditation. Another commenter requested that the new 183 paragraph provide that the affected certified operation will continue to operate as if certified by the USDA and will be allowed to use current market labels for a maximum period of 12 months.

The commenter stated that this amendment would provide the certified operation with the time needed to obtain recertification by an accredited certifying agent and to prepare new labels.

We disagree with the recommendations. USDA does not perform organic certification activities under any circumstance, including upon surrender, suspension, or revocation of an accredited certifying agent's accreditation. Operations certified by a certifying agent that surrenders or loses its USDA accreditation will be notified by USDA and given an opportunity to immediately begin seeking certification by the USDA accredited certifying agent of their choice.

Certified operations shall not affix the seal or other representation of a certifying agent to any product that they produce after the certifying agent has surrendered or had its accreditation revoked. The certified operation may use the USDA organic seal. In the case of suspension of the certifying agent, the reasons for the suspension and the terms of the suspension will determine whether the certifying agent's certified operations will have to seek recertification or stop affixing the certifying agent's seal or other representation to their products. USDA will announce the suspension or revocation of a certifying agent's accreditation, and the announcement will address the status of operations certified by the certifying agent.

Certification  Clarifications Clarification is given on the following issues raised by commenters as follows:

( 1) Recordkeeping. A commenter stated that most computerized recordkeeping systems used at retail and wholesale are set up to save the data for a maximum of 2 years; adding 3 additional years to that requirement would be extremely costly as systems modifications and 184 additional hardware and support would be required to meet the mandate. The commenter suggested that since food product is generally sold and consumed within a matter of months ( if not weeks), shortening this requirement to 2 years should meet the goal for tracking of any product through the distribution system. This commenter was referring to the requirement in section 205.400( d) that records be maintained for not less than 5 years beyond their creation.

Section 205.103 requires that a certified operation maintain records; that the records be adapted to the particular business that the certified operation is conducting, fully disclose all activities and transactions of the certified operation in sufficient detail as to be readily understood and audited, be maintained for not less than 5 years beyond their creation, and be sufficient to demonstrate compliance with the Act and the regulations in this part; and that the certified operation must make such records available for inspection and copying during normal business hours by authorized representatives of the Secretary, the applicable SOP's governing State official, and the certifying agent. The requirements do not state in what form ( i. e., paper,

electronic, film) that the records must be maintained. Therefore, in answer to the commenter's concern, database records more than 2 years old could be stored in any form, including on an electronic storage device, which would permit retrieval upon request.

( 2) Application Fees. A commenter recommended that section 205.401 be amended by adding a new paragraph ( e) which would require an applicant for certification to include, along with the other required application information, the application fees required by the certifying agent.

The requested language is unnecessary because section 205.400( e) requires submission of the applicable fees charged by the certifying agent as a general requirement for certification. 185 ( 3) Applicant Identification. In reference to section 205.401( c) a commenter stated that an applicant that is a corporation could easily change the name of the corporation in order to avoid having to report applications submitted and denied under the previous name. The commenter went on to state that there must be a database available to certifying agents that includes names and location addresses of operations that have received a notification of noncompliance, denial of certification, or a suspension or revocation of certification.

Section 205.401( b) requires the applicant to include in its application the name of the person completing the application; the applicant's business name, address, and telephone number;

and, when the applicant is a corporation, the name, address, and telephone number of the person authorized to act on the applicant's behalf.

As we stated in the preamble to the proposed rule, we anticipate using the data collected under section 205.501( a)( 15) to establish and maintain two Internet databases. The first Internet database would be accessible to the general public and would include the names and other appropriate data on certified organic production and handling operations. The second Internet database would be password protected and only available to accredited certifying agents and USDA. This second database would include data on production and handling operations issued a notification of noncompliance, noncompliance correction, denial of certification, certification,

proposed suspension or revocation of certification, and suspension or revocation of certification.

Certifying agents would use the second Internet database during their review of an application for certification.

( 4) Withdrawal of Application. Several commenters expressed the belief that allowing an applicant to voluntarily withdraw its application will be used as a tool to avoid denial of 186 certification. They expressed concern that voluntary withdrawal before denial of certification will allow the applicant to make application with a different certifying agent with a clean record.

These commenters were responding to the provision in section 205.402( e) which allows an applicant for certification to withdraw its application at any time.

We continue to believe that operations should not be unnecessarily stigmatized because they applied for certification before the operation was ready to meet all requirements for certification. While some operations may use voluntary withdrawal as a means to avoid the issuance of a notification of noncompliance or a notice of denial of certification, this should not adversely affect the National Organic Program ( NOP) because all certifying agents are responsible for using qualified personnel in the certification process and for ensuring an applicant's eligibility for certification. Further, all applicants for certification are required under section 205.401( c) to include in their application the name( s) of any organic certifying agent( s) to which application has previously been made, the year( s) of application, and the outcome of the application( s)

submission.

( 5) On site Inspections. Section 205.403( a)( 2)( ii) provides that the Administrator or SOP's governing State official may require that additional inspections be performed by the certifying agent for the purpose of determining compliance with the Act and the regulations in this part. In commenting on this provision, a commenter asked, " Who is running this program: State or Federal officials?"

This is a national organic program administered by the Agricultural Marketing Service of the United States Department of Agriculture. States may administer their own organic program.

However, all SOP's are subject to USDA approval. The National Organic Standards and a 187 State's organic standards under a USDA approved SOP are the National Organic Standards for that State. The State, under USDA's approval of the SOP, has enforcement responsibilities for the Federal and State components of the organic program within the State.

( 6) Verification of Information. A commenter stated that section 205.403( c) is insufficiently comprehensive. The commenter stated that organic inspection is assessment of a process evaluated against comprehensive standards and, as such, it requires specific rules to provide confidence in the quality of the inspection. The commenter recommended amending section 205.403( c) by including requirements on minimum verification methods.

Section 205.403( c) identifies what must be verified during the on site inspection. The details on how the verification will be accomplished will be set forth in the certifying agent's procedures to be used to evaluate certification applicants, make certification decisions, and issue certification certificates and the certifying agent's procedures for reviewing and investigating certified operation compliance with the Act and regulations. The NOP is available to respond to questions and to assist certifying agents in complying with the on site inspection requirements,

including those for the verification of information.

( 7) Notifying Customers of Change in Certification Status. A commenter stated that the regulations do not indicate when a certified organic producer must stop using the organic seal or whether they must notify customers of their denial of certification. The commenter recommended amending section 205.405 to include a provision for notifying customers of a certified operation's change in certification status.

Any producer or handler who plans to sell, label, or represent its product as " 100 percent organic," " organic," or " made with..." must be certified unless exempted under the small 188 operation exemption under section 205.101( a)( 1) or not regulated under the NOP ( i. e., a producer of dog food). Only certified operations may represent themselves as certified.

Operations denied certification may not represent their products as " 100 percent organic,"

" organic," or " made with..." Operations that have had their certification suspended or revoked will be subject to the terms and conditions of their suspension or revocation relative to the labeling of product produced prior to the suspension or revocation. No product produced by an operation after suspension or revocation of certification may be sold, labeled, or represented as " 100 percent organic," " organic," or " made with..."

Buyers of organic product can request to see the producer's or handler's certificate of organic operation. Operations that have lost their organic status will be unable to obtain an updated certificate. Buyers with questions regarding an operation's organic status may also contact the certifying agent identified on a certificate of organic operation. Further, as previously noted, we anticipate using the data collected under section 205.501( a)( 15) to establish and maintain an Internet database accessible to the general public that will include the names and other appropriate data on certified organic production and handling operations.

( 8) Continuation of Certification. A few commenters recommended amending section 205.406 to include a safety net for producers who are certified by a certifying agent that does not become accredited by USDA. They stated that the rule must clearly state that a certified organic producer will have the full 18 month implementation period starting from the effective date of the final rule to get recertified if their certifying agent is not accredited. One of the commenters stated that because the NOP anticipates that the accreditation process will require 12 months,

producers will, in effect, have 6 months to be certified by a new certifying agent should the 189 producer's certifying agent not be accredited.

Certification under the NOP will become mandatory 18 months after the effective date of the final rule. Applications for accreditation will be processed on a first come, first served basis.

Accreditations will be announced approximately 12 months after the effective date of the final rule for those qualified certifying agents who apply within the first 6 months following the effective date and for any other applicants that AMS determines eligible. Certifying agents will begin the process of certifying organic production and handling operations to the national standards upon receipt of their USDA accreditation. All production and handling operations certified by an accredited certifying agent will be considered certified to the national standards until the certified operation's anniversary date of certification. This phase in period will only be available to those certified operations certified by a certifying agent that receives its accreditation within 18 months from the effective date of the final rule. We anticipate that certifying agents and production and handling operations will move as quickly as possible to begin operating under the national organic standards. Operations certified by a certifying agent, which fails to apply for or fails to meet the requirements for USDA accreditation under the NOP, must seek and receive certification by a USDA accredited certifying agent before they can sell, label, or represent their products as organic, effective 18 months after the effective date of the final rule.

Subpart F  Accreditation of Certifying Agents This subpart sets forth the requirements for a national program to accredit State and private entities as certifying agents to certify domestic or foreign organic production or handling operations. This subpart also provides that USDA will accept a foreign certifying agent's accreditation to certify organic production or handling operations if: ( 1) USDA determines, upon 2 ISO/ IEC Guide 65 is available for viewing at USDA AMS, Transportation and Marketing Programs, Room 2945 South Building, 14th and Independence Ave., SW, Washington, DC, from 9: 00 a. m. to 4: 00 p. m., Monday through Friday ( except official Federal holidays). A copy may be obtained from the American National Standards Institute, 11 West 42d Street, New York, NY 10036; Website: www. ansi. org; E mail: ansionline@ ansi. org; Telephone: 212 642 4900; Facsimile: 212 398 0023.

190 the request of a foreign government, that the standards under which the foreign government authority accredited the foreign certifying agent meet the requirements of this part; or ( 2) the foreign governmental authority that accredited the certifying agent acted under an equivalency agreement negotiated between the United States Government and the foreign government.

This National Organic Program ( NOP) accreditation process will facilitate national and international acceptance of U. S. organically produced agricultural commodities. The accreditation requirements in these regulations will, upon announcement of the first group of accredited certifying agents, replace the voluntary fee for service organic assessment program,

established by AMS under the Agricultural Marketing Act of 1946. That assessment program verifies that State and private organic certifying agents comply with the requirements prescribed under the International Organization for Standardization/ International Electrotechnical Commission Guide 65, " General Requirements for Bodies Operating Product Certification Systems" ( ISO Guide 65). 2 ISO Guide 65 provides the general requirements that a certifying agent would need to meet to be recognized as competent and reliable. That assessment program was originally established to enable organic certifying agents in the absence of a U. S. national organic program to comply with European Union ( EU) requirements beginning on June 30, 1999.

That assessment program verifies that State and private organic certifying agents are operating third party certification systems in a consistent and reliable manner, thereby facilitating 191 uninterrupted exports of U. S. organic agricultural commodities to the EU. ISO Guide 65 was used as a benchmark in developing the accreditation program described in this final rule.

Certifying agents accredited under the NOP that maintain compliance with the Act and these regulations will meet or exceed the requirements of ISO Guide 65; therefore, the organic assessment program is no longer needed.

Participation in the NOP does not preclude the accredited certifying agent from conducting other business operations, including the certification of agricultural products,

practices, and procedures to standards that do not make an organic claim. An accredited certifying agent may not, however, engage in any business operations or activities which would involve the agent in a violation of or in a conflict of interest under the NOP.

Description of Regulations The Administrator will accredit qualified domestic and foreign applicants in the areas of crops, livestock, wild crops, or handling or any combination thereof to certify domestic or foreign production or handling operations as certified organic operations. Qualified applicants will be accredited for 5 years.

Application Process Certifying agents will apply to the Administrator for accreditation to certify production or handling operations operating under the NOP. The certifying agent's application must include basic business information, must identify each area of operation for which accreditation is requested and the estimated number of each type of operation to be certified annually, and must include a list of each State or foreign country where it currently certifies production or handling operations and where it intends to certify such operations. Certifying agents must also submit 192 personnel, administrative, conflict of interest, current certification, and other documents and information to demonstrate their expertise in organic production or handling techniques, their ability to comply with and implement the organic certification program, and their ability to comply with the requirements for accreditation. Certifying agents planning to certify production or handling operations within a State with an approved State organic program ( SOP) must demonstrate their ability to comply with the requirements of the SOP.

The administrative information submitted by the applicant must include copies of its procedures for certifying operations, for ensuring compliance of its certified operations with the Act and regulations, for complying with recordkeeping requirements, and for making information available to the public about certified operations. The procedures for certifying operations encompass the processes used by the certifying agent to evaluate applicants, make certification decisions, issue certification certificates, and maintain the confidentiality of any business information submitted by the certified operation. The procedures for ensuring compliance of the certified operations will include the methods used to review and investigate certified operations,

for sampling and residue testing, and to report violations.

The personnel information submitted with the application must demonstrate that the applicant uses a sufficient number of adequately trained personnel to comply with and implement the organic certification program. The certifying agent will also have to provide evidence that its responsibly connected persons, employees, and contractors with inspection, analysis, and decision making responsibilities have sufficient expertise in organic production or handling techniques to successfully perform the duties assigned. They must also show that all persons who review applications for certification perform on site inspections, review certification documents, 193 evaluate qualifications for certification, make recommendations concerning certification, or make certification decisions and that all parties responsibly connected to the certifying agent have revealed existing or potential conflicts of interest.

Applicants who currently certify production or handling operations must also submit a list of the production and handling operations currently certified by them. For each area in which the applicant requests accreditation, the applicant should furnish copies of inspection reports and certification evaluation documents for at least three operations. If the applicant underwent any other accrediting process in the year previous to the application, the applicant should also submit the results of the process.

Certifying agents are prohibited from giving advice or providing consultancy services to certification applicants or certified operations for overcoming identified barriers to certification.

This requirement does not apply to voluntary education programs available to the general public and sponsored by the certifying agent.

The Administrator will provide oversight of the fees to ensure that the schedule of fees filed with the Administrator is applied uniformly and in a nondiscriminatory manner. The Administrator may inform a certifying agent that its fees appear to be unreasonable and require that the certifying agent justify the fees. The Administrator will investigate the level of fees charged by an accredited certifying agent upon receipt of a valid complaint or under compelling circumstances warranting such an investigation.

Statement of Agreement.

Upon receipt of the certifying agent's application for accreditation, the Administrator will send a statement of agreement to the person responsible for the certifying agent's day to day 194 operations for signature. The statement of agreement affirms that, if granted accreditation as a certifying agent under this subpart, the applicant will carry out the provisions of the Act and the regulations in this part. Accreditation will not be approved until this statement is signed and returned to the Administrator.

The statement of agreement will include the applicant's agreement to accept the certification decisions made by another certifying agent accredited or accepted by USDA pursuant to section 205.500 and the applicant's agreement to refrain from making false or misleading claims about its accreditation status, the USDA accreditation program, or the nature or qualities of products labeled as organically produced. Further, the statement will include the applicant's agreement to pay and submit the fees charged by AMS and to comply with, implement, and carry out any other terms and conditions determined by the Administrator to be necessary. Applicants are also required to affirm through this statement of agreement that they will: ( 1) conduct an annual performance evaluation of all persons who review applications for certification, perform on site inspections, review certification documents, evaluate qualifications for certification, make recommendations concerning certification, or make certification decisions and implement measures to correct any deficiencies in certification services; and ( 2) have an annual program review conducted of their certification activities by their staff, an outside auditor, or a consultant who has expertise to conduct such reviews and implement measures to correct any noncompliances with the Act and the regulations in this part that are identified in the evaluation.

A private entity certifying agent must additionally agree to hold the Secretary harmless for any failure on the agent's part to carry out the provisions of the Act and regulations. A private entity certifying agent's statement will also include an agreement to furnish reasonable security for 195 the purpose of protecting the rights of operations certified by such certifying agent. Such security will be in an amount and according to such terms as the Administrator may by regulation prescribe. A private entity certifying agent must agree to transfer all records or copies of records concerning its certification activities to the Administrator if it dissolves or loses its accreditation.

This requirement for the transfer of records does not apply to a merger, sale, or other transfer of ownership of a certifying agent. A private entity certifying agent must also agree to make such records available to any applicable SOP's governing State official.

Granting Accreditation.

Upon receiving all the required information, including the statement of agreement, and the required fee, the Administrator will determine if the applicant meets the requirements for accreditation. The Administrator's determination will be based on a review of the information submitted and, if necessary, a review of the information obtained from a site evaluation. The Administrator will notify the applicant of the granting of accreditation in writing. The notice of accreditation will state the area( s) for which accreditation is given, the effective date of the accreditation, any terms or conditions for the correction of minor noncompliances, and, for a private entity certifying agent, the amount and type of security that must be established.

Certifying agents who apply for accreditation and do not meet the requirements for accreditation will be provided with a notification of noncompliance which will describe each noncompliance, the facts on which the notification is based, and the date by which the applicant must rebut or correct each noncompliance and submit supporting documentation of each such correction when correction is possible. If the applicant is successful in its rebuttal or provides acceptable evidence demonstrating correction of the noncompliances, the NOP Program Manager 196 will send the applicant a written notification of noncompliance resolution and proceed with further processing of the application. If the applicant fails to correct the noncompliances, fails to report the corrections by the date specified in the notification of noncompliance, fails to file a rebuttal by the date specified in the notification of noncompliance, or is unsuccessful in its rebuttal, the Program Manager will issue a written notification of accreditation denial to the applicant. An applicant who has received written notification of accreditation denial may apply for accreditation again at any time or file an appeal of the denial of accreditation with the Administrator by the date specified in the notification of accreditation denial.

Once accredited, a certifying agent may establish a seal, logo, or other identifying mark to be used by certified production and handling operations. However, the certifying agent may not require use of its seal, logo, or other identifying mark on any product sold, labeled, or represented as organically produced as a condition of certification. The certifying agent also may not require compliance with any production or handling practices other than those provided for in the Act and regulations as a condition for use of its identifying mark. However, certifying agents certifying production or handling operations within a State with more restrictive requirements, approved by the Administrator, shall require compliance with such requirements as a condition of use of their identifying mark by such operations.

Site Evaluations.

One or more representatives of the Administrator will perform site evaluations for each certifying agent in order to examine the certifying agent's operations and to evaluate compliance with the Act and regulations. Site evaluations will include an on site review of the certifying agent's certification procedures, decisions, facilities, administrative and management systems, and 197 production or handling operations certified by the certifying agent. A site evaluation of an accreditation applicant will be conducted before or within a reasonable time after issuance of the applicant's notification of accreditation. Certifying agents will be billed for each site evaluation conducted in association with an initial accreditation, amendments to an accreditation, and renewals of accreditation. Certifying agents will not be billed by USDA for USDA initiated site evaluations conducted to determine compliance with the Act and regulations.

As noted above, a certifying agent may be accredited prior to a site evaluation. If the Program Manager finds, following the site evaluation, that an accredited certifying agent is not in compliance with the Act or regulations, the Program Manager will issue the certifying agent a written notification of noncompliance. If the certifying agent fails to correct the noncompliances,

report the corrections by the date specified in the notification of noncompliance, or file a rebuttal by the date specified in the notification of noncompliance, the Administrator will begin proceedings to suspend or revoke the accreditation. A certifying agent that has had its accreditation suspended may at any time, unless otherwise stated in the notification of suspension,

submit a request to the Secretary for reinstatement of its accreditation. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and regulations. A certifying agent whose accreditation is revoked will be ineligible for accreditation for a period of not less than 3 years following the date of such determination.

Peer Review Panels.

The Administrator shall establish a peer review panel pursuant to the Federal Advisory Committee Act ( FACA) ( 5 U. S. C. App. 2 et seq.). The peer review panel shall be composed of 3 ISO/ IEC Guide 61 is available for viewing at USDA AMS, Transportation and Marketing Programs, Room 2945 South Building, 14th and Independence Ave., SW, Washington, DC, from 9: 00 a. m. to 4: 00 p. m., Monday through Friday ( except official Federal holidays). A copy may be obtained from the American National Standards Institute, 11 West 42d Street, New York, NY 10036; Website: www. ansi. org; E mail: ansionline@ ansi. org; Telephone: 212 642 4900; Facsimile: 212 398 0023.

198 not fewer than three members who shall annually evaluate the NOP's adherence to the accreditation procedures in subpart F of these regulations and ISO/ IEC Guide 613, General requirements for assessment and accreditation of certification/ registration bodies, and the NOP's accreditation decisions. This will be accomplished through the review of: ( 1) accreditation procedures, ( 2) document review and site evaluation reports, and ( 3) accreditation decision documents or documentation. The peer review panel shall report its finding, in writing, to the NOP Program Manager.

Continuing Accreditation.

An accredited certifying agent must submit annually to the Administrator, on or before the anniversary date of the issuance of the notification of accreditation, the following reports and fees:

( 1) a complete and accurate update of its business information, including its fees, and information evidencing its expertise in organic production or handling and its ability to comply with these regulations; ( 2) information supporting any changes requested in the areas of accreditation; ( 3) a description of measures implemented in the previous year and any measures to be implemented in the coming year to satisfy any terms and conditions specified in the most recent notification of accreditation or notice of renewal of accreditation; ( 4) the results of the most recent performance evaluations and annual program review and a description of adjustments to the certifying agent's operation and procedures implemented or to be implemented in response to the performance 199 evaluations and program review; and ( 5) the required AMS fees.

Certifying agents will keep the Administrator informed of their certification activities by providing the Administrator with a copy of: ( 1) any notice of denial of certification, notification of noncompliance, notification of noncompliance correction, notification of proposed suspension or revocation, and notification of suspension or revocation issued simultaneously with its issuance and ( 2) a list, on January 2 of each year, including the name, address, and telephone number of each operation granted certification during the preceding year.

One or more site evaluations will occur during the 5 year period of accreditation to determine whether an accredited certifying agent is complying with the Act and regulations.

USDA will establish an accredited certifying agent compliance monitoring program, which will involve no less than one randomly selected site evaluation of each certifying agent during its 5