1 DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 205 [ Docket Number: TMD 00 02 FR]

RIN: 0581 AA40 National Organic Program AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final Rule with request for comments.

SUMMARY: This final rule establishes the National Organic Program ( NOP or program) under the direction of the Agricultural Marketing Service ( AMS), an arm of the United States Department of Agriculture ( USDA). This national program will facilitate domestic and international marketing of fresh and processed food that is organically produced and assure consumers that such products meet consistent, uniform standards. This program establishes national standards for the production and handling of organically produced products, including a National List of substances approved for and prohibited from use in organic production and handling. This final rule establishes a national level accreditation program to be administered by AMS for State officials and private persons who want to be accredited as certifying agents.

Under the program, certifying agents will certify production and handling operations in compliance with the requirements of this regulation and initiate compliance actions to enforce program requirements. The final rule includes requirements for labeling products as organic and containing organic ingredients. This final rule also provides for importation of organic agricultural products from foreign programs determined to have equivalent organic program 2 requirements. This program is authorized under the Organic Foods Production Act of 1990, as amended.

EFFECTIVE DATE: This rule becomes effective [ 60 days after publication in the Federal Register].

Comments: Comments on specified aspects of the final regulations must be submitted on or before [ 90 days after publication in the Federal Register].

ADDRESSES: Interested persons are invited to submit written comments on specified aspects of the final regulation to: Keith Jones, Program Manager, National Organic Program, USDA

AMSTMP NOP, Room 2945 So., Ag Stop 0275, P. O. Box 96456, Washington, DC 20090 6456.

Comments may also be filed via the Internet through the National Organic Program's homepage at: www. ams. usda. gov/ nop. Written comments on specified aspects of the final regulations should be identified with the docket number TMD 00 02 FR. To facilitate the timely scanning and posting of comments to the NOP homepage, multiple page comments submitted by regular mail should not be stapled or clipped.

It is our intention to have all comments to this final rule, whether mailed or submitted via the Internet, available for viewing on the NOP homepage in a timely manner. Comments submitted in response to this final rule will be available for viewing at USDA AMS,

Transportation and Marketing Programs, Room 2945 South Building, 14th and Independence Avenue, SW, Washington, DC, from 9: 00 a. m. to 12: 00 noon and from 1: 00 p. m. to 4: 00 p. m.,

Monday through Friday ( except for official Federal holidays). Persons wanting to visit the USDA South Building to view comments received in response to this final rule are requested to make an appointment in advance by calling ( 202) 720 3252. 3 FOR FURTHER INFORMATION CONTACT: Richard Mathews, Senior Agricultural Marketing Specialist, USDA AMS TMP NOP, Room 2510 So., P. O. Box 96456, Washington,

DC 20090 6456; Telephone: ( 202) 205 7806; Fax: ( 202) 205 7808.

SUPPLEMENTARY INFORMATION:

Prior Documents in this Proceeding This final rule is issued pursuant to the Organic Food Production Act of 1990 ( Act or OFPA), as amended ( 7 U. S. C. 6501 et seq.). This final rule replaces the proposed rule published in the Federal Register March 13, 2000. The public submitted 40,774 comments on the proposed rule. Comments to the proposed rule were considered in the preparation of this final rule.

The following notices related to the National Organic Standards Board ( NOSB) and the development of this proposed regulation have been published in the Federal Register. Six notices of nominations for membership on the NOSB were published between April 1991 and June 2000 ( 56 FR 15323, 59 FR 43807, 60 FR 40153, 61 FR 33897, 64 FR 33240, 65 FR 35317). Two notices of extension of time for submitting nominations were published on September 22, 1995,

and September 23, 1996 ( 60 FR 49246, 61 FR 49725). Twenty notices of meetings of the NOSB were published between March 1992 and November 2000 ( 57 FR 7094, 57 FR 27017, 57 FR 36974, 58 FR 85, 58 FR 105, 58 FR 171, 59 FR 58, 59 FR 26186, 59 FR 49385, 60 FR 51980,

60 FR 15532, 61 FR 43520, 63 FR 7389, 63 FR 64451, 64 FR 3675, 64 FR 28154, 64 FR 54858,

65 FR 11758, 65 FR 33802, 65 FR 64657). One notice of public hearings on organic livestock and livestock products was published on December 30, 1993 ( 58 FR 69315). Two notices specifying a procedure for submitting names of substances for inclusion on or removal from the National List of Approved and Prohibited Substances were published on March 27, 1995 ( 60 FR 4 15744), and July 13, 2000 ( 65 FR 43259. A rule proposing the NOP was published on December 16, 1997 ( 62 FR 65850). An extension of the time period for submitting comments to the proposed rule was published on February 9, 1998 ( 63 FR 6498). One request for comments on Issue Papers was published on October 28, 1998 ( 63 FR 57624). A notice of a program to assess organic certifying agencies was published on June 9, 1999 ( 64 FR 30861). A rule proposing the NOP was published on March 13, 2000 ( 65 FR 13512). A notice of public meeting and request for comments on organic production and handling of aquatic animals to be labeled as organic was published on March 23, 2000 ( 65 FR 15579). One advance notice of proposed rulemaking and request for comments on reasonable security for private certifying agents was published on August 9, 2000 ( 65 FR 48642).

This preamble includes a discussion of the final rule and supplementary information,

including the Regulatory Impact Assessment, Unfunded Mandates Reform Act Statement,

Regulatory Flexibility Act Analysis, Federalism Impact Statement, and Civil Justice Impact Statement. The Civil Rights Impact Analysis is not included as an attachment but may be obtained by writing to the address provided above or via the Internet through the National Organic Program's homepage at: http:// www. ams. usda. gov/ nop.

Approval of Paperwork Reduction Act Requirements for this Final Rule The reporting requirements and recordkeeping burden imposed by this rule were published in the March 13, 2000, Federal Register for public comment. The Agency addressed these comments in the final rule to ensure that the least amount of the burden is placed on the public.

The information collection and recordkeeping requirements have been reviewed and approved by the Office of Management and Budget under OMB Number 0581 0191, National Organic 5 Program.

National Organic Program Overview Subpart A  Definitions Description of Regulations This subpart defines various terms used in this part. These definitions are intended to enhance conformance with the regulatory requirements through a clear understanding of the meaning of key terms.

We have amended terms and definitions carried over from the proposed rule where necessary to make their wording consistent with the language used in this final rule. We have revised the definitions of the following words for greater clarity: person, practice standard, inert ingredient, processing, tolerance. We have removed the definitions for the following terms because the terms are not used in this final rule or have been determined to be unnecessary:

accredited laboratory, estimated national mean, system of organic production and handling. We received comments on some of these definitions that have been deleted. We have not addressed those comments here because the relevant definitions have been deleted.

Definitions  Changes Based on Comments This subpart differs from the proposed rule in several respects as follows:

( 1) Many commenters requested changes to the definition of " excluded methods."

Comments included requests to use the more common term, " genetically modified organisms( GMO)"; to include the products of excluded methods/ GMO's in the definition; to more closely follow the NOSB definition by adding gene deletion, doubling, introduction of a foreign gene, and changing gene position; to include that excluded methods are prohibited by the 6 Act and by the regulations in this part; to change the wording of the reference to " recombinant DNA"; and to add that the definition of excluded methods only covers " intentional use."

We have accepted some of the comments and have modified the definition accordingly.

Specifically, we have included reference to the " methods"   gene deletion, gene doubling, changing positions of genes, and introducing foreign genes   that were included in the original NOSB definition. This will make the definition even more closely parallel the NOSB recommendation.

We also refer to recombinant DNA technology, which is technically more accurate than the proposed rules reference to recombinant DNA as a " method."

We have not accepted the comments that requested adding the products of excluded methods to the definition. The emphasis and basis of these standards is on process, not product.

We have specifically structured the provisions relating to excluded methods to refer to the use of methods. Including the products of excluded methods in the definition would not be consistent with this approach to organic standards as a process based system. For the same reason, we have retained the term, " excluded methods," to reinforce that process based approach.

We have also rejected comments requesting that we include the prohibition on excluded methods in the definition and, likewise, those requesting that we refer to " intentional use" of excluded methods. The final rule maintains and clarifies the prohibition on the use of excluded methods in organic production systems. The prohibition is most properly addressed in the appropriate provisions of the regulations, particularly in Section 205.105, and not in the definition. Similarly, although we recognize that a distinction between intentional and unintentional use of excluded methods may be meaningful, particularly as it pertains to issues of drift, this is an issue that is best handled in the sections of the regulation governing use of 7 excluded methods, not in the definition. The definition for " excluded methods" now reads:

A variety of methods used to genetically modify organisms or influence their growth and development by means that are not possible under natural conditions or processes and are not considered compatible with organic production. Such methods include cell fusion,

microencapsulation and macroencapsulation, and recombinant DNA technology ( including gene deletion, gene doubling, introducing a foreign gene, and changing the position of genes when achieved by recombinant DNA technology). Such methods do not include the use of traditional breeding, conjugation, fermentation, hybridization, in vitro fertilization, or tissue culture."

( 2) Many commenters objected to the definition of " compost" in the proposed rule because it required that compost must be produced in a facility that was in compliance with the Natural Resource Conservation Service's ( NRCS) practice standard for a composting facility.

We agree with these commenters and removed the requirement to comply with the NRCS practice standard. However, the final rule incorporates new requirements for the production of compost that are included in the definition. The final rule requires that compost must be produced through a process that combines plant and animal materials with an initial C: N ratio of between 25: 1 and 40: 1. Furthermore, producers using an in vessel or static aerated pile system must maintain the composting materials at a temperature of between 131 E F and 170 E F for 3 days.

Producers using a windrow system must maintain the composting materials at a temperature between 131 E F and 170 E F for 15 days, during which time, the materials must be turned a minimum of five times. We developed the requirements in the final rule for producing an allowed composted material by integrating standards used by the Environmental Protection Agency ( EPA)

and USDA's Natural Resources Conservation Service ( NRCS). The requirements for the carbon 8 to nitrogen ( C: N) ratio for composting materials is the same as that found in the NRCS practice standard for a composting facility. The time and temperature requirements for in vessel, static aerated pile, and window composting systems are consistent with those which EPA regulates under 40 CFR 503 for the production of Class A sewage sludge. Additionally, AMS reviewed these compost production requirements with USDA's Agricultural Research Service ( ARS). This subject is discussed further under subpart C, Crop Production, Changes Based on Comment.

( 3) Some commenters stated that allowing nonagricultural or synthetic substances as feed supplements contradicted the definition for " feed supplement" in the proposed rule. These commenters stated that the definition stipulated that a feed supplement must, itself, be a feed material and that the proposed definition for " feed" did not include nonagricultural or synthetic substances. These commenters stated that the definition of " feed supplement" needed to be amended to accommodate nonagricultural or synthetic substances, or such substances should not be allowed. We agree with these commenters and amended the definition for " feed supplement"

to read " a combination of feed nutrients added to livestock feed to improve the nutritional balance or performance of the total ration." One commenter recommended modifying the definition of " feed additive" to " a substance added to feed in micro quantities to fulfill a specific nutritional need; i. e., essential nutrients in the form of amino acids, vitamins, and minerals." We agree that this modification provides a more precise description of " feed additive" and have included the change. The changes to the definitions for " feed supplement" and " feed additive" are further discussed under item ( 4) of Livestock Production  Changes Based on Comments.

( 4) One commenter stated that the definition for " forage" inaccurately described it as " vegetable matter," and suggested that " vegetative matter" was a more suitable description. We 9 agree with the suggestion and have incorporated the change.

( 5) Some commenters stated that the definition for " mulch" implied that all mulch materials must either be organic or included on the National List. These commenters maintained that, if this was the intent of the proposed rule, the provision was too restrictive. They recommended revising the definition to clarify that natural but nonorganic plant and animal materials, if managed to prevent contamination from prohibited substances, could be used as mulch without being added to the National List. This was the intent in the proposed rule, and we have modified the definition to make this provision clearer.

( 6) Many commenters stated that the final rule should include a definition of " organic production" that required that certified operations must preserve or protect biodiversity. These commenters stated that the preservation of biodiversity is a requirement in many existing organic certification standards, including the Codex guidelines. They also stated that the NOSB had included the requirement to preserve biodiversity in its definition of organic. We agree with the intent of these comments but prefer the term, " conserve," to " preserve" because it reflects a more dynamic, interactive relationship between the operation and biodiversity over time. We included a definition for organic production as " a production system that is managed in accordance with the Act and regulations in this part to respond to site specific conditions by integrating cultural,

biological, and mechanical practices that foster cycling of resources, promote ecological balance,

and conserve biodiversity." We deleted the definition for " organic system of production and handling" in the final rule.

( 7) Several commenters, including the NOSB, were concerned that the definition for " planting stock" as " any plant or plant tissue, including rhizomes, shoots, leaf or stem cuttings, 10 roots, or tubers, used in plant production or propagation" was sufficiently broad to be applied to annual seedlings. We agree that it is important to establish that annual seedlings are not covered by the definition of " planting stock" and amended the definition to exclude them. The definition for planting stock in the final rule states " any plant or plant tissue other than annual seedlings but including rhizomes, shoots, leaf or stem cuttings, roots, or tubers, used in plant production or propagation." The final rule retains the definition for " annual seedling " from the proposed rule.

( 8) Several commenters recommended that the definition of " processing" should be amended to include " distilling" as an allowed practice. We agree with this comment and added distilling as an allowed processing practice.

( 9) Several commenters recommended that the final rule include a definition for " processing aid" that is consistent with the definition proposed by the NOSB and used by the Food and Drug Administration ( FDA). We agree with these commenters and have included a definition for processing aid that is the same as the definition used by FDA and found in 21 CFR Part 101.100( a)( 3)( ii).

( 10) Many commenters questioned whether the term, " State organic certification program," in the proposed rule included organic programs from States that did not offer certification services. These commenters stated that the final rule should include provisions for all State organic programs regardless of whether they functioned as certifying agents. We agree with these commenters and have amended the final rule by incorporating the term, " State organic program," as " a State program that meets the requirements of section 6506 of the Act, is approved by the Secretary, and is designed to ensure that a product that is sold or labeled as organically produced under the Act is produced and handled using organic methods." The term, 11 " State organic program," encompasses such programs whether they offer certification services or not.

( 11) One commenter stated that the definition for " wild crop" only referred to a plant or part of a plant that was harvested from " an area of land." This commenter was concerned that the definition would preclude the certification of operations that produce wild aquatic crops, such as seaweed, and stated that the OFPA does allow for certifying such operations. We agree with this commenter and changed the definition to refer to a plant or part of a plant harvested from a " site."

( 12) Many commenters stated that the soil fertility and crop nutrient management practice standard lacked a definition for " manure." These commenters maintained that the different provisions contained in the practice standard for " manure" and " compost" would be difficult to enforce without clear definitions to differentiate between the two materials. We agree with these comments and added a definition for manure as " feces, urine, other excrement, and bedding produced by livestock that has not been composted."

( 13) Some commenters stated that the National List in the final rule should include an annotation for narrow range oils to limit their use to a specific subset of such materials recommended by the NOSB. We agree with this comment but, rather than add an annotation, we have included the specifications recommended by the NOSB in a new definition for narrow range oils. Narrow range oils are defined as " petroleum derivatives, predominately of paraffinic and napthenic fractions with a 50 percent boiling point ( 10 mm Hg) between 415 E F and 440 E F.

( 14) Many commenters maintained that the final rule needed a definition of the term,

" pasture," to describe the relationship between ruminants and the land they graze. These commenters stated that a meaningful definition of " pasture" must incorporate the nutritional 12 component that it provides livestock, as well as the necessity to manage the land in a manner that protects the natural resources of the operation. We agree with these commenters and have added a definition of " pasture" as " land used for livestock grazing that is managed to provide feed value and maintain or improve soil, water, and vegetative sources."

( 15) Many commenters stated that a definition for " split operation" was necessary to prevent commingling between organic and nonorganic commodities on operations that produced or handled both forms of a commodity. We agree with these comments and have included a definition for " split operation" as " an operation that produces or handles both organic and nonorganic agricultural products."

Definitions  Changes Requested But Not Made This subpart retains from the proposed rule terms and their definitions on which we received comments as follows:

( 1) Many commenters objected to the definition of " sewage sludge" because it excluded ash generated in a sewage sludge incinerator and grit and screenings generated during preliminary treatment of domestic sewage in treatment works. We have not changed the definition for " sewage sludge" because it provides the most comprehensive and enforceable description of the types of materials that commenters wanted to prohibit. The definition for " sewage sludge" in the proposed rule arose in response to significant public comment on the first proposed rule for national organic standards ( 62 Federal Register, No. 241) that recommended prohibiting biosolids in organic production. When incorporating those comments into the proposed rule, we did not use the term, " biosolids," because it does not have a standardized definition under Federal regulations. The term, " biosolids," is commonly used to refer to " sewage sludge," which is the 13 regulatory term established in 40 CFR Part 503. We incorporated the precise definition from 40 CFR Part 503, even though it does not include ash, grit, or screenings, because it provided the clearest description of the types of materials identified in public comment.

While commenters are correct that ash, grit, or screenings from the production of sewage sludge are not prohibited by this definition, these materials are prohibited elsewhere in the regulation. The soil fertility and crop nutrient management practice standard in section 205.203 establishes the universe of allowed materials and practices. These allowed materials and practices are crop rotations, cover crops, plant and animal materials ( including their ash), nonagricultural,

natural materials, and, under appropriate conditions, mined substances of low and high solubility and synthetic materials included on the National List. Ash, grit, or screenings from the production of sewage sludge cannot be included in any of these categories and, therefore, cannot be used in organic production. We retained the definition of " sewage sludge" because it most clearly conveys the wide array of commercially available soil amendments that might be considered for organic production but that the final rule expressly prohibits. We have not added specific exclusions for sewage sludge, ash, grit, or screenings because these materials are prohibited through other provisions in the practice standard.

( 2) The proposed rule prohibited the handler of an organic handling operation from using ionizing radiation for any purpose. The vast majority of commenters agreed with this prohibition and further recommended that the term, " ionizing radiation," should be defined to identify the specific applications that are prohibited. Most commenters supported a definition based on the FDA requirements in 21 CFR part 179.26 for the treatment or processing of food using ionizing radiation. While agreeing with the prohibition on ionizing radiation, these commenters favored 14 allowing certain forms of irradiation such as the use of X rays to inspect for debris such as stones that were inadvertently commingled with organically handled food. Other commenters recommended a prohibition on all forms of irradiation, which would include X rays for inspection purposes, ultraviolet light, and microwaves in addition to ionizing radiation. Finally, a number of commenters stated that ionizing radiation is a safe and effective process for handling food and,

therefore, should not be prohibited in organic handling.

We have not added a definition for " ionizing radiation" to the final rule because we have incorporated specific references to the applications that are prohibited in the regulatory text. The final rule prohibits the handler of an organic handling operation from using ionizing radiation as specified under 21 CFR part 179.26. These are the FDA approved uses of ionizing radiation that commenters most frequently recommended that we prohibit in organic handling operations. They include the use of cobalt 60, cesium 137, and other sources of radiation for the purpose of controlling microbial contaminants, pathogens, and pests in food or to inhibit the growth and maturation of fresh foods. At its June 2000 meeting, the NOSB recommended prohibiting ionizing radiation for the purpose of controlling microbial contaminants, pathogens, parasites, and pests in food, preserving a food, or inhibiting physiological processes such as sprouting or ripening. The final rule does not prohibit the handler of an organic handling operation from using the FDA approved applications of X rays for inspecting food. The prohibition on ionizing radiation in the final rule is based solely on consumer preference as reflected in the overwhelming public comment stating that organically handled foods should not be treated in that manner.

( 3) Some commenters recommend that the final rule incorporate definitions for the terms,

" food additives," " extraction methods," " incidental additive," and " substantially transform." 15 However, these terms are not used in the final rule and do not require a definition.

Definitions  Clarifications Following our review of the definitions provisions in the proposed rule, we decided to further clarify the following provision in the final rule:

We were concerned that " State entity," the meaning of which encompasses both domestic and foreign political subdivisions, may be confused with " State," the meaning of which is limited to the States of the United States, its territories, the District of Columbia, and Puerto Rico. To avoid any possible confusion as to which provisions in this final rule apply to States and which apply to the broader political subdivisions, we have replaced the term, " State entity," with the term, " governmental entity," while retaining the same definition language in the proposed rule.

Subpart B  Applicability This subpart provides an overview of what has to be certified under the National Organic Program ( NOP); describes exemptions and exclusions from certification; addresses use of the term, " organic"; addresses recordkeeping by certified production and handling operations; and addresses allowed and prohibited substances, methods, and ingredients in organic production and handling.

Description of Regulations Except for exempt and excluded operations, each production or handling operation or specified portion of a production or handling operation that produces or handles crops, livestock,

livestock products, or other agricultural products that are intended to be sold, labeled, or represented as " 100 percent organic," " organic," or " made with organic ( specified ingredients or food group( s))" must be certified. Certified operations must meet all applicable requirements of 16 these regulations.

This final rule becomes effective 60 days after its publication in the Federal Register and will be fully implemented 18 months after its effective date. Eighteen months after the effective date, all agricultural products that are sold, labeled, or represented as " 100 percent organic,"

" organic," or " made with..." must be produced and handled in compliance with these regulations.

Products entering the stream of commerce prior to the effective date will not have to be relabeled.

The U. S. Department of Agriculture ( USDA) seal may not be affixed to any " 100 percent organic" or " organic" product until 18 months after the final rule's effective date.

We anticipate that certifying agents and production and handling operations will move as quickly as possible after the effective date of the final rule to begin operating under the national organic standards. Certifying agents must begin certifying organic production and handling operations to the national standards upon receipt of their accreditation from the Administrator.

Any production or handling operation or specified portion of a production or handling operation that has been already certified by a certifying agent on the date that the certifying agent receives its accreditation under this part shall be deemed to be certified under the Act until the operation's next anniversary date of certification. We have taken this approach because we believe that such certifying agents will, upon the effective date of the final rule, demonstrate their eligibility for accreditation by applying the national standards to the certification and renewal of certification of their clients. We also believe this approach will provide relief to certified operations which might otherwise have to be certified twice within a 12 month period ( prior to their certifying agent's accreditation and again following their certifying agent's accreditation). This relief will only be available to those certified operations certified by a certifying agent that receives its accreditation 17 within 18 months from the effective date of the final rule.

Certifying agents can apply for accreditation anytime after the effective date of the rule.

Applications will be processed on a first come, first served basis. Those certifying agents who apply for accreditation within the first 6 months after the effective date of the final rule and are determined by the Administrator to meet the requirements for accreditation will be notified of their status approximately 12 months after the final rule's effective date. This approach is being taken because of the market advantage that could be realized by accredited certifying agents if USDA did not announce the accreditations simultaneously.

Exempt and Excluded Operations This regulation establishes several categories of exempt or excluded operations. An exempt or excluded operation does not need to be certified. However, operations that qualify as exempt or excluded operations can voluntarily choose to be certified. A production or handling operation that is exempt or excluded from obtaining certification still must meet other regulatory requirements contained in this rule as explained below.

Exempt Operations ( 1) A production or handling operation that has $ 5,000 or less in gross annual income from organic sales is exempt from certification. This exemption is primarily designed for those producers who market their product directly to consumers. It will also permit such producers to market their products direct to retail food establishments for resale to consumers. The exemption is not restricted to U. S. producers. However, as a practical matter, we do not envision any significant use of the exemption by foreign producers because: ( 1) the products from such operations cannot be used as ingredients identified as organic in processed products produced by 18 another handling operation, and ( 2) it is unlikely that such operations will be selling their products directly to consumers in the United States.

An exempt producer or handler must comply with the labeling requirements of section 205.310 and the organic production and handling requirements applicable to its type of operation.

For example, a producer of organic vegetables that performs no handling functions would have to comply with the labeling requirements of section 205.310 and the applicable production requirements in sections 205.202 through 205.207. The labeling and production and handling requirements protect the integrity of organically produced products.

( 2) A retail food establishment or portion of a retail food establishment that handles organically produced agricultural products but does not process them is exempt from all of the requirements in these regulations.

( 3) A handling operation or portion of a handling operation that handles only agricultural products containing less than 70 percent organic ingredients by total weight of the finished product ( excluding water and salt) is exempt from the requirements in these regulations, except the recordkeeping provisions of section 205.101( c); the provisions for prevention of contact of organic products with prohibited substances in section 205.272; and the labeling regulations in sections 205.305 and 205.310. The recordkeeping provisions maintain an audit trail for organic products. The prevention of contact with prohibited substances and the labeling requirements protect the integrity of organically produced products.

( 4) A handling operation or portion of a handling operation that uses the word, " organic,"

only on the information panel is exempt from the requirements in these regulations, except the recordkeeping provisions of section 205.101( c); the provisions for prevention of contact of 19 organic products with prohibited substances as provided in section 205.272; and the labeling regulations in sections 205.305 and 205.310. The recordkeeping provisions maintain an audit trail for organic products. The prevention of contact with prohibited substances and labeling requirements protect the integrity of organically produced products.

As noted above, exempt handling operations producing multiingredient products must maintain records as required by section 205.101( c). This would include records sufficient to: ( 1)

prove that ingredients identified as organic were organically produced and handled and ( 2) verify quantities produced from such ingredients. Such records must be maintained for no less than 3 years, and the operation must allow representatives of the Secretary and the applicable State program's governing State official access to the records during normal business hours for inspection and copying to determine compliance with the applicable regulations.

Excluded Operations ( 1) A handling operation or portion of a handling operation that sells organic agricultural products labeled as " 100 percent organic," " organic," or " made with..." that are packaged or otherwise enclosed in a container prior to being received or acquired by the operation, remain in the same package or container, and are not otherwise processed while in the control of the handling operation is excluded from the requirements in these regulations, except for the provisions for prevention of commingling and contact of organic products with prohibited substances in section 205.272. The requirements for the prevention of commingling and contact with prohibited substances protect the integrity of organically produced products.

This exclusion will avoid creating an unnecessary barrier for handlers who distribute nonorganic products and who want to offer a selection of organic products. 20 ( 2) A retail food establishment or portion of a retail food establishment that processes on the premises of the retail food establishment raw and ready to eat food from certified agricultural products labeled as " 100 percent organic," " organic," or " made with..." is excluded from the requirements in these regulations, except for the provisions for prevention of contact of organic products with prohibited substances as provided in section 205.272 and the labeling regulations in section 205.310. The prevention of commingling and contact with prohibited substances and labeling requirements protect the integrity of organically produced products.

Excluded retail food establishments include restaurants; delicatessens; bakeries; grocery stores; or any retail outlet with an in store restaurant, delicatessen, bakery, salad bar, or other eatin or carry out service of processed or prepared raw and ready to eat food.

There is clearly a great deal of public concern regarding the handling of organic products by retail food establishments. We have not required certification of retail food establishments at this time because of a lack of consensus as to whether retail food establishments should be certified, a lack of consensus on retailer certification standards, and a concern about the capacity of existing certifying agents to certify the sheer volume of such businesses. Retail food establishments, not exempt under the Act, could at some future date be subject to regulation under the NOP. Any such regulation would be preceded by rulemaking with an opportunity for public comment.

No retailer, regardless of this exclusion and the exceptions found in the definitions for " handler" or " handling operation," may sell, label, or provide market information on a product unless such product has been produced and handled in accordance with the Act and these regulations. Any retailer who knowingly sells or labels a product as organic, except in accordance 21 with the Act and these regulations, will be subject to a civil penalty of not more than $ 10,000 per violation under this program.

Recordkeeping Requirements for Certified Operations A certified operation 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..." sufficient to demonstrate compliance with the Act and regulations. Such records must 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 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 regulations. Certified operations must make the records required by this regulation available for inspection by authorized representatives of the Secretary, the applicable State organic program's ( SOP) governing State official, and the certifying agent. Access to such records must be provided during normal business hours.

Examples of Records Each exempt, excluded, and certified operation should maintain the records which demonstrate compliance with the Act and the regulations applicable to it and which it believes establish an audit trail sufficient to prove to the Secretary, the applicable SOP's governing State official, and the certifying agent that the exempt, excluded, or certified operation is and has been in compliance with the Act and regulations.

Examples of records include: application and supporting documents for certification;

organic system plan and supporting documents; purchased inputs, including seeds, transplants,

livestock, and substances ( fertilizers, pesticides, and veterinary biologics consistent with the 22 livestock provisions of subpart C), cash purchase receipts, receiving manifests ( bills of lading),

receiving tickets, and purchase invoices; field records ( planting, inputs, cultivation, and harvest);

storage records ( bin register, cooler log); livestock records, including feed ( cash purchase receipts, receiving manifests ( bills of lading), receiving tickets, purchase invoices, copies of grower certificates), breeding records ( calendar, chart, notebook, veterinary documents),

purchased animals documentation ( cash purchase receipts, receiving manifests ( bills of lading),

receiving tickets, purchase invoices, copies of grower certificates), herd health records ( calendar,

notebook, card file, veterinary records), and input records ( cash purchase receipts, written records, labels); producer invoice; producer contract; receiving manifests ( bills of lading);

transaction certificate; producer certificate; handler certificate; weigh tickets, receipts, and tags;

receiving tickets; cash purchase receipts; raw product inventory reports and records; finished product inventory reports and records; daily inventories by lot; records as to reconditioning,

shrinkage, and dumping; production reports and records; shipping reports; shipping manifests ( bills of lading); paid freight and other bills; car manifests; broker's contracts; broker's statements;

warehouse receipts; inspection certificates; residue testing reports; soil and water testing reports;

cash receipt journals; general ledgers and supporting documents; sales journals; accounts payable journals; accounts receivable journals; cash disbursement journals; purchase invoices; purchase journals; receiving tickets; producer and handler contracts; cash sales receipts; cash purchase journals; sales invoices, statements, journals, tickets, and receipts; account sales invoices; ledgers;

financial statements; bank statements; records of deposit; canceled checks; check stubs; cash receipts; tax returns; accountant's or other work papers; agreements; contracts; purchase orders;

confirmations and memorandums of sales; computer data; computer printouts; and compilations 23 of data from the foregoing.

Allowed and Prohibited Substances A certified operation must only use allowed substances, methods, and ingredients for the production and handling of agricultural products that are sold, labeled, or represented as " 100 percent organic," " organic," or made with..." for these products to be in compliance with the Act and the NOP regulations. Use of ionizing radiation, sewage sludge, and excluded methods are prohibited in the production and handling of organic agricultural products.

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

( 1) Violations of the Act or Regulations. We have amended section 205.100 by adding a new paragraph ( c), which addresses violations of the Act and these regulations. A number of commenters advocated for provisions within the final rule describing what legal proceedings USDA would conduct against operations or persons that violate the NOP. We agree that this rule should include provisions addressing violations of the Act and these regulations. Accordingly, we have added at section 205.100 the misuse of label provisions and false statement provisions of section 2120 ( 7 U. S. C. 6519) of the Act. Specifically, section 205.100( c) provides that persons not in compliance with the labeling requirements of the Act or these regulations are subject to a civil penalty of not more than $ 10,000 per violation and that persons making false statements under the Act to the Secretary, a governing State official, or an accredited certifying agent shall be subject to the provisions of section 1001 of Title 18, United States Code. The provisions of the Act and these regulations apply to all operations or persons that sell, label, or represent their agricultural product as organic. 24 ( 2) Prohibition on Use of Excluded Methods. We have moved section 205.600 from subpart G, Administrative, to subpart B, Applicability, and replaced paragraph ( d), which referred the reader to section 205.301, with new paragraphs ( d) through ( g). As amended, this section,

redesignated as section 205.105, includes all of the provisions covered under old section 205.600.

The vast majority of commenters strongly supported the prohibition on the use of excluded methods in organic production and handling but raised concerns that they could not point to one provision that prohibited use of excluded methods in all aspects of organic production and handling. To close what they perceived to be " loopholes" in the prohibition,

commenters made several suggestions for inclusion of new provisions prohibiting use of excluded methods in particular aspects of organic production and handling that they believed were not covered in the proposed rule. Other commenters pointed to inconsistencies in the way the prohibition on use of excluded methods was described in different sections, raising concerns that these apparent inconsistencies may create confusion for organic operations, certifiers, and consumers.

Although we intended that use of excluded methods would be prohibited in all aspects of organic production and handling, the structure of the proposed rule may not have made that clear.

We also share the concerns that, in attempting to identify all aspects of organic production and handling where excluded methods might be used, we may inadvertently have left out some provisions, creating confusion for organic operations, certifying agents, and consumers and creating doubt as to the scope of the prohibition on use of excluded methods. Similarly, to the extent that the prohibition on excluded methods may have been described differently in various sections of the proposed rule, we also share the concern that these inconsistencies could create 25 confusion.

As a result of these concerns, we have created a new provision in section 205.105 that prohibits the use of excluded methods ( and ionizing radiation and sewage sludge) generally. This provision should alleviate perceptions that some areas of organic production may not have been covered by the prohibitions in the proposed rule. It also allows us to eliminate from the regulation most of the individual references to the prohibition on use of these methods, thereby eliminating any potential confusion where these provisions may have appeared inconsistent.

These changes do not lift the prohibition on use of these methods in those sections. In fact, the purpose of this new provision is to make clear that use of these methods is prohibited in the production and handling of organic products.

( 3) Animal Vaccines. The proposed rule specifically asked for public comment on the potential impact of the prohibition on use of excluded methods as it relates to animal vaccines. A number of commenters raised concerns that there may be some critical vaccines that are only available in forms produced using excluded methods. Several commenters requested that we prohibit use of animal vaccines produced using excluded methods but that we provide for a temporary exemption until such time as vaccines produced without using excluded methods are approved for use on the National List. Other commenters requested that we prohibit use of vaccines produced using excluded methods without exception.

We have concluded that the potential impact of prohibiting vaccines produced using excluded methods on animal production systems is still unknown. We do not know of any critical animal vaccine that is only available in a form produced using excluded methods, but it is unclear whether producers and certifying agents are tracking the possible use of such vaccines. There 26 also appears to be no international consensus on the use in organic production systems of animal vaccines produced using excluded methods, although there is precedent for such an exemption.

European Union regulations, for example, allow for use of animal vaccines produced using excluded methods.

Based on comments received and because the potential impact of the prohibition on use of excluded methods is still uncertain, we have created the possibility at section 205.105( e) for the NOSB to exercise one very narrow exception to allow use of animal vaccines produced using excluded methods but only if they are explicitly approved on the National List. We believe the issue of animal vaccines requires further deliberation and that it is most appropriate to consider it through the National List process, which mandates review by the NOSB and Technical Advisory Panels. Consideration of animal vaccines produced using excluded methods is appropriate for the National List review process because animal vaccines, we believe, are most appropriately considered synthetic materials. That is why the provision is structured so that vaccines produced using excluded methods could only be used in organic production if they are affirmatively included on the National List. We do not believe that a broad based exemption of the type suggested in some comments, even if only temporary, is appropriate.

The Act allows use of animal vaccines in organic livestock production. Given the general prohibition on the use of excluded methods, however, we believe that animal vaccines produced using excluded methods should not be allowed without an explicit consideration of such materials by the NOSB and without an affirmative determination from the NOSB that they meet the criteria for inclusion on the National List. It is for that reason that we have not granted this request of commenters but, rather, provided an opportunity for review of this narrow range of materials 27 produced using excluded methods through the National List process.

It is important to make clear, however, that this provision does not open all potential applications of excluded methods to a case by case review in the context of the National List, nor are we proposing that any particular vaccines be reviewed for inclusion on the National List at this time. The prohibition on use of excluded methods applies across the board to all phases of organic production and handling. We are simply responding to comments suggesting that a narrow exception for animal vaccines may be appropriate and providing for the possibility that such an exception could be invoked upon thorough review and recommendation by the NOSB Applicability  Changes Requested But Not Made This subpart retains from the proposed rule regulations on which we received comments as follows:

( 1) Exemption of Handling Operations Producing Multiingredient Products. Some commenters asserted that only certified handling operations should be allowed to identify ingredients in multiingredient products as organic. These commenters believe that consumers will be misled if noncertified handling operations are allowed to identify ingredients as organic even if the organic claim is limited to the information panel. We do not agree with these assertions and have retained the proposed rule provisions that do not require handler certification when a product only identifies ingredients as organic within the information panel. Although handling operations only making organic claims on the information panel are exempt from certification,

these operations are required to use organic product from certified operations. They are also required to prevent contact of organic products with prohibited substances as set forth in section 205.272, adhere to the labeling provisions of sections 205.305 and 205.310, and maintain records 28 in accordance with section 205.101( c). We believe consumers will understand the distinction between products that have the organic nature of the product stated on the principal display panel and those that merely identify an ingredient as organic on the information panel.

( 2) Retailer Exclusion from Certification. Many commenters objected to the provisions of section 205.101( b)( 2) which exclude retail food establishments from certification. These commenters assert that only final retailers that do not process agricultural products should be excluded from certification. There is clearly a great deal of public concern regarding the handling of organic products by retail food establishments. We have not required certification of retail food establishments at this time because of a lack of consensus as to whether retail food establishments should be certified, a lack of condenses on retailer certification standards, and a concern about the capacity of existing certifying agents to certify the sheer volume of such businesses. In addition, most existing certification programs do not include retail food establishments, and we do not believe there is sufficient consensus to institute such a significant expansion in the scope of certification at this time. However, since a few States have established procedures for certifying retail food establishments, we will assess their experience and continue to seek consensus on this issue of establishing retailer provisions under the NOP. Any such change would be preceded by rulemaking with an opportunity for public comment. The exclusion of nonexempt retail food establishments from this final rule does not prevent a State from developing an organic retail food establishment program as a component of its SOP. However, as with any component of an SOP, the Secretary will review such components on a case by case basis.

( 3) Producer Exemption Level. Several commenters advocated for an increase in the 29 producer exemption level above the $ 5,000 limit. Comments supporting the exemption suggested increasing the statutory limit for qualifying for the exemption to as high as $ 75,000. Other commenters stated that all producers should be certified and opposed the exemption even though it is required by the Act. These commenters were concerned about maintaining the integrity of the organic product and about the lack of verification of the exempt operations.

We have not increased or removed the $ 5,000 producer exemption because the exemption is mandated by section 2106( d) ( 7 U. S. C. 6505( d)) of the Act. Our purpose is to limit the financial burdens of certification on such operations but not to exempt them from the standards for organic production and handling. Accordingly, exempt production and handling operations must comply with the applicable organic production and handling requirements of subpart C and the labeling requirements of section 205.310.

Some of the commenters wanting a change in the producer exemption level suggested that the NOP add provisions for restricting these producers to marketing at farmers markets or roadside stands. We disagree with these comments. While we believe that most producers qualifying for the exemption are indeed likely to be small producers who market their products directly to consumers, we do not believe it is in the best interest of these producers to restrict their market opportunity to a specific sales method.

A few comments suggested that we establish a sliding scale certification fee based upon either the size of the operation or sales of agricultural product instead of the exemption. The NOP does not establish fees for certification. Certifying agents may establish a sliding scale system as long as their fees are reasonable and applied in a consistent and nondiscriminatory manner. 30 Finally, some commenters expressed concern that exempt operations were forbidden from certification. This interpretation is not correct. Any production or handling operation, including an exempt operation, which makes application for certification as an organic operation and meets the requirements for organic certification may be certified.

( 4) Handler exemption. Many commenters disagreed with the proposed rule provision providing for an exemption of $ 5,000 to handlers. These commenters asked the NOP to remove the phrase, " or handlers," from the exemption provision. The commenters argue that the handler exemption is not authorized by the Act. We disagree with the commenters, and we have retained the handler exemption in the final rule. The Act states that the exemption is available to " persons"

selling not more than $ 5,000 annually in value of agricultural products. The Act's definition of " persons" includes handlers. Thus, handlers grossing $ 5,000 or less qualify for the exemption.

( 5) Categories of Income to Qualify for an Exemption. Some commenters want the $ 5,000 producer/ handler exemption to include all sales of agricultural products, not just sales of organic agricultural products. These commenters perceive this provision to be a loophole for large, split operations. We disagree with these commenters, and we have retained the $ 5,000 producer/ handler exemption based upon total sales of organic agricultural products. We do not believe there is a significant number of split operations which only gross $ 5,000 in annual sales of organic products and, therefore, qualify for this exemption. In setting the exemption levels, the Department sought to maximize the benefits to small producers afforded by the Act while setting a threshold level that minimizes the potential of product mislabeling.

( 6) Limiting Handler Exclusions. Many commenters argued that brokers, distributors,

warehousers, and transporters should not be excluded from certification. We do not agree with 31 these commenters. Brokers, distributors, warehousers and transporters do not alter the product and, in many cases, do not take title to the product. Certifying these handlers would be an unnecessary burden on the industry. Traditionally, distributors and trucking companies have been excluded from State and private certification requirements.

( 7) Recordkeeping Requirements for Excluded Operations. Several commenters argued that excluded operations should be required to comply with the same recordkeeping requirements as exempt operations. Some commenters expressed concern over the inability to verify compliance for either exempt or excluded operations and asked that exempt or excluded operations be subject to additional recordkeeping requirements. We disagree with these commenters and have retained the provisions from the proposed rule on recordkeeping for excluded operations. Given the nature of these excluded operations, for example, operations that only sell prepackaged organic products, we believe that extensive recordkeeping requirements would be an unwarranted regulatory burden.

( 8) Recordkeeping Burden on Small Certified Operations. Some commenters questioned whether small certified operations have the ability to implement a recordkeeping system which complies with the provisions of section 205.103. These commenters argue that recordkeeping requirements must be tailored to the scale of the operation. We do not believe that the recordkeeping requirements as described in section 205.103 conflict with the suggestions of the commenters. The recordkeeping requirements provide that the records must be adapted to the particular business that the certified operation is conducting and be sufficient to demonstrate compliance with the Act and regulations. It is USDA's intent that each production and handling operation decide for itself what recordkeeping scheme is appropriate, given the complexity and 32 scope of the individual business. These provisions provide considerable latitude for each production and handling operation to decide what records are necessary to demonstrate its compliance with the Act and the NOP regulations.

( 9) Public Access to Records. Several commenters asked that the public have full access to any certifying agent record on organic production and/ or handling operations. Other commenters expressed concerns about certifying agents divulging confidential business information and asked that records containing confidential business information not be taken from the business' physical location.

We have not changed this provision. The recordkeeping requirements are designed to seek a balance between the pubic's right to know and a business's right to retain confidential business information. Certifying agents must have access to certain records during their review of the operation to determine the operation's compliance with the NOP. However, certifying agents are required to protect an operation's confidential business information. Requiring full public access could compromise a business' competitive position and place an unfair burden on the organic industry.

( 10) Fair Labor Practices on Organic Farms. Many commenters asked the NOP to develop fair labor practice standards as a part of the final rule. We have not adopted these comments. Other statutes cover labor and worker safety standards. The Act does not provide the authority to include them in these regulations. However, these regulations do not prohibit certifying agents from developing a voluntary certification program, separate from organic certification, that address fair labor and worker safety standards.

( 11) " Transitional Organic" Label. Several commenters requested that the NOP adopt 33 regulations on the conversion of operations to organic production and create a " transitional organic" label. We have not included provisions within the final rule that provide for " transitional organic" labeling. Although many commenters requested that we provide for transition labeling,

there does not appear to be sufficient consensus to establish such a standard at this time. Given this lack of consensus, it is unclear what marketplace value such a label might have, and we are concerned that allowing such a label at this point might lead to greater consumer confusion rather than providing clarity.

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

( 1) " Genetic" drift. Many commenters raised issues regarding drift of the products of excluded methods onto organic farms. These commenters were concerned that pollen drifting from near by farms would contaminate crops on organic operations and that, as a result, organic farmers could lose the premium for their organic products through no fault of their own. Many commenters argued that we should use this rule to somehow shift the burden to the technology providers who market the products of excluded methods or the nonorganic farming operations that use their products. Some, for example, suggested that this regulation should require that the nonorganic operations using genetically engineered varieties plant buffer strips or take other steps to avoid drift onto organic farms. Others suggested that the regulation could provide for citizens'

right to sue in cases of drift.

While we understand the concerns that commenters have raised, the kind of remedies they suggested are outside the scope of the Act and this regulation. The Act only provides for the regulation of organic operations. We cannot use this regulation to impose restrictions, such as 34 requiring buffer strips or other measures, on operations that are not covered by the Act.

Similarly, while citizens may have the ability to bring suit under other laws, the Act itself does not provide for the right to bring suit as a Federal cause of action, and we could not grant it through this regulation.

Drift has been a difficult issue for organic producers from the beginning. Organic operations have always had to worry about the potential for drift from neighboring operations,

particularly drift of synthetic chemical pesticides. As the number of organic farms increases, so does the potential for conflict between organic and nonorganic operations.

It has always been the responsibility of organic operations to manage potential contact of organic products with other substances not approved for use in organic production systems,

whether from the nonorganic portion of a split operation or from neighboring farms. The organic system plan must outline steps that an organic operation will take to avoid this kind of unintentional contact.

When we are considering drift issues, it is particularly important to remember that organic standards are process based. Certifying agents attest to the ability of organic operations to follow a set of production standards and practices that meet the requirements of the Act and the regulations. This regulation prohibits the use of excluded methods in organic operations. The presence of a detectable residue of a product of excluded methods alone does not necessarily constitute a violation of this regulation. As long as an organic operation has not used excluded methods and takes reasonable steps to avoid contact with the products of excluded methods as detailed in their approved organic system plan, the unintentional presence of the products of excluded methods should not affect the status of an organic product or operation. 35 Issues of pollen drift are also not confined to the world of organic agriculture. For example, plant breeders and seed companies must ensure genetic identity of plant varieties by minimizing any cross pollination that might result from pollen drift. Under research conditions,

small scale field tests of genetically engineered plants incorporate various degrees of biological containment to limit the possibility of gene flow to other sexually compatible plants. Federal regulatory agencies might impose specific planting requirements to limit pollen drift in certain situations. Farmers planting nonbiotechnology derived varieties may face similar kinds of questions if cross pollination by biotechnology derived varieties alters the marketability of their crop. These discussions within the broader agricultural community may lead to new approaches to addressing these issues. They are, however, outside the scope of this regulation by definition.

( 2) Additional NOP Standards for Specific Production Categories. Many commenters asked that the NOP include in the final rule certification standards for apiculture, greenhouses,

mushrooms, aquatic species, culinary herbs, pet food, and minor animal species ( e. g., rabbits)

food. The NOP intends to provide standards for categories where the Act provides the authority to promulgate standards. During the 18 month implementation period, the NOP intends to publish for comment certification standards for apiculture, mushrooms, greenhouses and aquatic animals. These standards will build upon the existing final rule and will address only the unique requirements necessary to certify these specialized operations.

Some of the other questions raised by commenters are already addressed in the final rule.

For example, feed for minor species is covered by livestock feed provisions within subpart C and the livestock feed labeling provisions within subpart D. The production and utilization of culinary herbs, including herbal teas, is covered by the provisions of the final rule. We do not envision 36 needing to do additional rulemaking on these two categories.

Other requests by commenters have not been addressed. We have not addressed the labeling of pet food within this final rule because of the extensive consultation that will be required between USDA, the NOSB, and the pet food industry before any standards on this category could be considered.

( 3) Standards for Cosmetics, Body Care Products, and Dietary Supplements. A few commenters asked that the NOP include in the final rule certification standards for cosmetics,

body care products, and dietary supplements. Producers and handlers of agricultural products used as ingredients in cosmetics, body care products, and dietary supplements could be certified under these regulations. Producers and handlers of these ingredients might find an increased market value for their products because of the additional assurance afforded by certification. The ultimate labeling of cosmetics, body care products, and dietary supplements, however, is outside the scope of these regulations.

( 4) Private Label Products. Many commenters asked about the certification status of so called " private label products." Private label products are items for which a retailer contracts with a processor to produce the product to the retailer's specifications and to be sold under the retailer's name. Commenters believe the proposed rule was unclear on the certification requirements for these products. Any product labeled as " 100 organic," " organic," or " made with..." must be certified regardless of the business arrangements under which the product was produced. When a retail operation contracts for the production, packaging, or labeling of organic product, it is the certified production or handling operation that is responsible for complying with the applicable organic production or handling regulations. 37 ( 5) State Oversight of Exempt and Excluded Operations. Many commenters asked for clarification on the State's enforcement responsibility for exempt and excluded operations. The NOP is ultimately responsible for the oversight and enforcement of the program, including oversight of exempt and excluded operations and cases of fraudulent or misleading labeling. We expect, however, that States would want to monitor for false claims or misleading labeling under these regulations and would forward any complaints to the NOP. States that have an approved SOP which includes regulation of operations excluded under the NOP would be required to enforce those provisions.

( 6) Nonedible Fibers Products in the NOP. Some commenters asked the NOP to clarify the certification status of fibers such as cotton and flax. The final rule allows for certification of organically produced fibers such as cotton and flax. However, the processing of these fibers is not covered by the final rule. Therefore, goods that utilize organic fibers in their manufacture may only be labeled as a " made with..." product; e. g., a cotton shirt labeled " made with organic cotton."

( 7) Recordkeeping for Operations That Produce Organic and Nonorganic Product.

Several commenters recommended that " split operations," which are operations producing organic and nonorganic agricultural products, be required to maintain separate records. These commenters believe that the proposed rule did not provide adequate provision for the maintenance of separate recordkeeping. The provisions within section 205.103( b)( 1) and ( b)( 2)

do indicate that operations which produce both organic and nonorganic agricultural products must maintain a recordkeeping system that differentiates the organic portion of the operations from the records related to other portions of operations. 38 ( 8) NOP Program Manual. A few commenters, particularly States, noted that the proposed rule made several references to program manuals as a mechanism for further clarifying certain portions of the rule. These commenters asked whether certifying agents should consider information contained in these manuals as enforceable regulations. NOP program manuals cannot be and are not intended to be the equivalent of regulations. Rather, the NOP envisions development of a program manual to serve as guidance for certifying agents regarding implementation and certification related issues. Material contained within the program manual will be designed to address the organic agriculture principles of each final rule section, as appropriate, and to offer information that certifying agents should consider in making certification decisions that will be reliably uniform throughout the country. The use of program manuals as guidance to assist in developing uniform certification decisions is a standard industry practice, and the NOP has compiled examples of program manuals from both large and small certifiers.

Because the NOP intends to use the examples it has acquired as the basis for any NOP guidance manual, we believe that most certifying agents will find such NOP manual, when developed,

familiar and useful. Additionally, we will use the NOSB public meeting process to seek guidance from industry and the public on what information would be useful in a program manual and to provide input on the program manual as it is developed. Of course, if in developing program guidance, it appears that modifications or changes in the NOP final rule are required, such modifications would be made through notice and comment rulemaking.

( 9) Use of Products from Exempt Operations as Organic Ingredients. A few commenters responded to the question in the proposed rule in which we asked whether handlers should be allowed to identify organically produced products produced by exempt production operations as 39 organic ingredients. The proposed rule provided that all ingredients identified as organic in a multiingredient product must have been produced by a production or handling operation certified by an accredited certifying agent.

The commenters supported this position. These commenters believe that the potential for mislabeling outweighed any financial benefit that might accrue to exempt producers through expanded market opportunities. We concur, and, therefore, have retained the prohibition on using products produced by an exempt production or handling operation as organic ingredients ( 10) Exemption of Handling Operations Producing Multiingredient Products. We have amended section 205.101( a)( 3) by changing " 50 percent" to " 70 percent" to make it consistent with the amendments to the labeling provisions. We have also edited section 205.101( a)( 4) for clarification purposes. Additionally, we amended sections 205.101( a)( 3) and 205.101( a)( 4) by citing the labeling requirements of section 205.305. These amendments have been made to clarify that handling operations exempted under these sections are subject to the labeling requirements of section 205.305.

( 11) Production and Handling in Compliance with Federal Statutes. We have amended section 205.102 by removing paragraph ( c). This paragraph provided that any agricultural product that is sold, labeled, or represented as " 100 percent organic," " organic," or " made with organic ( specified ingredients)" must be produced and handled in compliance with applicable Federal statutes and their implementing regulations. We have taken this action because the provision is an identical restatement of section 2120( f) ( 7 U. S. C. 6519( f)) of the Act. The Act makes clear that all production and handling operations are to comply with all applicable Federal statutes and their implementing regulations. Therefore, it is unnecessary to repeat the requirement 40 in these regulations.

( 12) Foreign Applicants. We have removed section 205.104, which provided that the regulations in this part, as applicable, apply equally to domestic and foreign applicants for accreditation, accredited certifying agents, domestic and foreign applicants for certification as organic production or handling operations, and certified organic production and handling operations unless otherwise specified. These regulations, as written, apply equally to all applicants for accreditation, accredited certifying agents, applicants for organic certification, and certified organic operations. Accordingly, we have determined that section 205.104 is not necessary.

Subpart C  Organic Crop, Wild Crop, Livestock, and Handling Requirements Description of Regulations General Requirements This subpart sets forth the requirements with which production and handling operations must comply in order to sell, label, or represent agricultural products as " 100 percent organic,"

" organic," or " made with organic ( specified ingredients or food group( s))." The producer or handler of an organic production or handling operation must comply with all applicable provisions of subpart C. Any production practice implemented in accordance with this subpart must maintain or improve the natural resources, including soil and water quality, of the operation.

Production and handling operations which sell, label, or represent agricultural products as organic in any manner and which are exempt or excluded from certification must comply with the requirements of this subpart, except for the development of an organic system plan.

Production and Handling ( General) 41 The Organic Food Production Act of 1990 ( OFPA or Act) requires that all crop, wild crop, livestock, and handling operations requiring certification submit an organic system plan to their certifying agent and, where applicable, the State organic program ( SOP). The organic system plan is a detailed description of how an operation will achieve, document, and sustain compliance with all applicable provisions in the OFPA and these regulations. The certifying agent must concur that the proposed organic system plan fulfills the requirements of subpart C, and any subsequent modification of the organic plan by the producer or handler must receive the approval of the certifying agent.

The organic system plan is the forum through which the producer or handler and certifying agent collaborate to define, on a site specific basis, how to achieve and document compliance with the requirements of certification. The organic system plan commits the producer or handler to a sequence of practices and procedures resulting in an operation that complies with every applicable provision in the regulations. Accreditation qualifies the certifying agent to attest to whether an organic system plan comports with the organic standard. The organic system plan must be negotiated, enacted, and amended through an informed dialogue between certifying agent and producer or handler, and it must be responsive to the unique characteristics of each operation.

An organic system plan contains six components. First, the organic system plan must describe the practices and procedures used, including the frequency with which they will be used,

in the certified operation. Second, it must list and characterize each substance used as a production or handling input, including the documentation of commercial availability, as applicable. Third, it must identify the monitoring techniques which will be used to verify that the organic plan is being implemented in a manner which complies with all applicable requirements. 42 Fourth, it must explain the recordkeeping system used to preserve the identity of organic products from the point of certification through delivery to the customer who assumes legal title to the goods. Fifth, the organic system plan must describe the management practices and physical barriers established to prevent commingling of organic and nonorganic products on a split operation and to prevent contact of organic production and handling operations and products with prohibited substances. Finally, the organic system plan must contain the additional information deemed necessary by the certifying agent to evaluate site specific conditions relevant to compliance with these or applicable State program regulations. Producers or handlers may submit a plan developed to comply with other Federal, State, or local regulatory programs if it fulfills the requirements of an organic system plan.

The first element of the organic system plan requires a narrative or other descriptive format that identifies the practices and procedures to be performed and maintained, including the frequency with which they will be performed. Practices are tangible production and handling techniques, such as the method for applying manure, the mechanical and biological methods used to prepare and combine ingredients and package finished products, and the measures taken to exclude pests from a facility. Procedures are the protocols established for selecting appropriate practices and materials for use in the organic system plan, such as a procedure for locating commercially available, organically produced seed. Procedures reflect the decision making process used to implement the organic system plan.

By requiring information on the frequency with which production and handling practices and procedures will be performed, the final rule requires an organic system plan, to include an implementation schedule, including information on the timing and sequence of all relevant 43 production and handling activities. The plan will include, for example, information about planned crop rotation sequences, the timing of any applications of organic materials, and the timing and location of soil tests. Livestock management practices might describe development of a rotational grazing plan or addition of mineral supplements to the feed supply. A handling operation might identify steps involved in locating and contracting with farmers who could produce organic ingredients that were in short supply.

The second element that must be included in an organic system plan is information on the application of substances to land, facilities, or agricultural products. This requirement encompasses both natural and synthetic materials allowed for use in production and handling operations. For natural materials which may be used in organic operations under specific restrictions, the organic plan must detail how the application of the materials will comply with those restrictions. For example, farmers who apply manure to their fields must document in their organic system plans how they will prevent that application from contributing to water contamination. A producer and handler who bases the selection of seed and planting stock material under section 205.204 or an agricultural ingredient under section 205.301 on the commercial availability of that substance must provide documentation in the organic system plan.

The third element of the organic system plan is a description of the methods used to evaluate its effectiveness. Producers and handlers are responsible for identifying measurable indicators that can be used to evaluate how well they are achieving the objectives of the operation. For example, production objectives could be measured through regular tallies of bushels or pounds of product sold from the farm or in numbers of cases sold from a handling operation. Indicators that can identify changes in quality or effectiveness of management 44 practices could be relatively simple, such as the information contained in a standard soil test. The specific indicators used to evaluate a given organic system plan will be determined by the producer or handler in consultation with the certifying agent. Thus, if the organic system plan calls for improvements in soil organic matter content in a particular field, it would include provisions for analyzing soil organic matter levels at periodic intervals. If herd health improvement is an objective, factors such as somatic cell count or observations about changes in reproductive patterns might be used as indicators.

The fourth element of the organic system plan is a description of the recordkeeping system used to verify and document an audit trail, as appropriate to the operation. For each crop or wildcrop harvested, the audit trail must trace the product from the field, farm parcel, or area where it is harvested through the transfer of legal title. A livestock operation must trace each animal from its entrance into through removal from the organic operation. A handling operation must trace each product that is handled and sold, labeled, or represented as organic from the receipt of its constituent ingredients to the sale of the processed product.

The fifth element which must be included in an organic system plan pertains to split production or handling operations. This provision requires an operation that produces both organic and nonorganic products to describe the management practices and physical barriers established to prevent commingling of organic and nonorganic products. This requirement addresses contact of organic products, including livestock, organic field units, storage areas, and packaging to be used for organic products, with prohibited substances.

The specific requirements to be included in an organic system plan are not listed here. The accreditation process provides an assurance that certifying agents are competent to determine the 45 specific documentation they require to review and evaluate an operation's organic system plan.

Section 205.200( a)( 6) allows a certifying agent to request additional information needed to determine that an organic system plan meets the requirements of this subpart. The site specific nature of organic production and handling necessitates that certifying agents have the authority to determine whether specific information is needed to carry out their function.

Crop Production Any field or farm parcel used to produce an organic crop must have been managed in accordance with the requirements in sections 205.203 through 205.206 and have had no prohibited substances applied to it for at least 3 years prior to harvest of the crop. Such fields and farm parcels must also have distinct, defined boundaries and buffer zones to prevent contact with the land or crop by prohibited substances applied to adjoining land.

A producer of an organic crop must manage soil fertility, including tillage and cultivation practices, in a manner that maintains or improves the physical, chemical, and biological condition of the soil and minimizes soil erosion. The producer must manage crop nutrients and soil fertility through rotations, cover crops, and the application of plant and animal materials. The producer must manage plant and animal materials to maintain or improve soil organic matter content in a manner that does not contribute to contamination of crops, soil, or water by plant nutrients,

pathogenic organisms, heavy metals, or residues of prohibited substances. Plant and animal materials include raw animal manure, composted plant and animal materials, and uncomposted plant materials. Raw animal manure must either be composted, applied to land used for a crop not intended for human consumption, or incorporated into the soil at least 90 days before harvesting an edible product that does not come into contact with the soil or soil particles and at 46 least 120 days before harvesting an edible product that does come into contact with the soil or soil particles. Composted plant or animal materials must be produced through a process that establishes an initial carbon to nitrogen ( C: N) ratio of between 25: 1 and 40: 1 and achieves a temperature between 131 E F and 170 E F. Composting operations that utilize an in vessel or static aerated pile system must maintain a temperature within that range for a minimum of 3 days.

Composting operations that utilize a windrow composting system must maintain a temperature within that range for a minimum of 15 days, during which time the materials must be turned five times.

In addition to these practices and materials, a producer may apply a crop nutrient or soil amendment included on the National List of synthetic substances allowed in crop production. The producer may apply a mined substance of low solubility. A mined substance of high solubility may only be applied if the substance is used in compliance with the annotation on the National List of nonsynthetic materials prohibited in crop production. Ashes of untreated plant or animal materials which have not been combined with a prohibited substance and which are not included on the National List of nonsynthetic substances prohibited for use in organic crop production may be used to produce an organic crop. A plant or animal material that has been chemically altered by a manufacturing process may be used only if it is included on the National List of synthetic substances allowed for use in organic production. The producer may not use any fertilizer or composted plant and animal material that contains a synthetic substance not allowed for crop production on the National List or use sewage sludge. Burning crop residues as a means of disposal is prohibited, except that burning may be used to suppress the spread of disease or to stimulate seed germination. 47 The producer must use organically grown seeds, annual seedlings, and planting stock.

The producer may use untreated nonorganic seeds and planting stock when equivalent organic varieties are not commercially available, except that organic seed must be used for the production of edible sprouts. Seed and planting stock treated with substances that appear on the National List may be used when an organically produced or untreated variety is not commercially available.

Nonorganically produced annual seedlings may be used when a temporary variance has been established due to damage caused by unavoidable business interruption, such as fire, flood, or frost. Planting stock used to produce a perennial crop may be sold as organically produced planting stock after it has been maintained under a system of organic management for at least 1 year. Seeds, annual seedlings, and planting stock treated with prohibited substances may be used to produce an organic crop when the application of the substance is a requirement of Federal or State phytosanitary regulations.

The producer is required to implement a crop rotation, including but not limited to sod,

cover crops, green manure crops, and catch crops. The crop rotation must maintain or improve soil organic matter content, provide for effective pest management in perennial crops, manage deficient or excess plant nutrients, and control erosion to the extent that these functions are applicable to the operation.

The producer must use preventive practices to manage crop pests, weeds, and diseases,

including but not limited to crop rotation, soil and crop nutrient management, sanitation measures,

and cultural practices that enhance crop health. Such cultural practices include the selection of plant species and varieties with regard to suitability to site specific conditions and resistance to prevalent pests, weeds, and diseases. Mechanical and biological methods that do not entail 48 application of synthetic substances may be used as needed to control pest, weed, and disease problems that may occur. Pest control practices include augmentation or introduction of pest predators or parasites; development of habitat for natural enemies; and nonsynthetic controls such as lures, traps, and repellents. Weed management practices include mulching with fully biodegradable materials; mowing; livestock grazing; hand weeding and mechanical cultivation;

flame, heat, or electrical techniques; and plastic or other synthetic mulches, provided that they are removed from the field at the end of the growing or harvest season. Disease problems may be controlled through management practices which suppress the spread of disease organisms and the application of nonsynthetic biological, botanical, or mineral inputs. When these practices are insufficient to prevent or control crop pests, weeds, and diseases, a biological or botanical substance or a synthetic substance that is allowed on the National List may be used provided that the conditions for using the substance are documented in the organic system plan. The producer must not use lumber treated with arsenate or other prohibited materials for new installations or replacement purposes that comes into contact with soil or livestock.

A wild crop that is to be sold, labeled, or represented as " 100 percent organic," " organic,"

or " made with organic ( specified ingredients or food group( s))" must be harvested from a designated area that has had no prohibited substances applied to it for a period of 3 years immediately preceding the harvest of the wild crop. The wild crop must also be harvested in a manner that ensures such harvesting or gathering will not be destructive to the environment and will sustain the growth and production of the wild crop.

Livestock Production Any livestock product to be sold, labeled, or represented as organic must be maintained 49 under continuous organic management from the last third of gestation or hatching with three exceptions. Poultry or edible poultry products must be from animals that have been under continuous organic management beginning no later than the second day of life. Milk or milk products must be from animals that have been under continuous organic management beginning no later than 1 year prior to the production of such products, except for the conversion of an entire, distinct herd to organic production. For the first 9 months of the year of conversion, the producer may provide the herd with a minimum of 80 percent feed that is either organic or produced from land included in the organic system plan and managed in compliance with organic crop requirements. During the final 3 months of the year of conversion, the producer must provide the herd feed in compliance with section 205.237. Once the herd has been converted to organic production, all dairy animals shall be under organic management from the last third of gestation. Livestock used as breeder stock may be brought from a nonorganic operation into an organic operation at any time, provided that, if such livestock are gestating and the offspring are to be organically raised from birth, the breeder stock must be brought into the organic operation prior to the last third of gestation.

Should an animal be brought into an organic operation pursuant to this section and subsequently moved to a nonorganic operation, neither the animal nor any products derived from it may be sold, labeled, or represented as organic. Breeder or dairy stock that has not been under continuous organic management from the last third of gestation may not be sold, labeled, or represented as organic slaughter stock. The producer of an organic livestock operation must maintain records sufficient to preserve the identity of all organically managed livestock and all edible and nonedible organic livestock products produced on his or her operation. 50 Except for nonsynthetic substances and synthetic substances included on the National List that may be used as feed supplements and additives, the total feed ration for livestock managed in an organic operation must be composed of agricultural products, including pasture and forage,

that are organically produced. Any portion of the feed ration that is handled must comply with organic handling requirements. The producer must not use animal drugs, including hormones, to promote growth in an animal or provide feed supplements or additives in amounts above those needed for adequate growth and health maintenance for the species at its specific stage of life.

The producer must not feed animals under organic management plastic pellets for roughage or formulas containing urea or manure. The feeding of mammalian and poultry slaughter byproducts to mammals or poultry is prohibited. The producer must not supply animal feed, feed additives, or feed supplements in violation of the Federal Food, Drug, and Cosmetic Act.

The producer of an organic livestock operation must establish and maintain preventive animal health care practices. The producer must select species and types of livestock with regard to suitability for site specific conditions and resistance to prevalent diseases and parasites. The producer must provide a feed ration including vitamins, minerals, protein, and/ or amino acids,

fatty acids, energy sources, and, for ruminants, fiber. The producer must establish appropriate housing, pasture conditions, and sanitation practices to minimize the occurrence and spread of diseases and parasites. Animals in an organic livestock operation must be maintained under conditions which provide for exercise, freedom of movement, and reduction of stress appropriate to the species. Additionally, all physical alterations performed on animals in an organic livestock operation must be conducted to promote the animals' welfare and in a manner that minimizes stress and pain. 51 The producer of an organic livestock operation must administer vaccines and other veterinary biologics as needed to protect the well being of animals in his or her care. When preventive practices and veterinary biologics are inadequate to prevent sickness, the producer may administer medications included on the National List of synthetic substances allowed for use in livestock operations. The producer may not administer synthetic parasiticides to breeder stock during the last third of gestation or during lactation if the progeny is to be sold, labeled, or represented as organically produced. After administering synthetic parasiticides to dairy stock,

the producer must observe a 90 day withdrawal period before selling the milk or milk products produced from the treated animal as organically produced. Every use of a synthetic medication or parasiticide must be incorporated into the livestock operation's organic system plan subject to approval by the certifying agent.

The producer of an organic livestock operation must not treat an animal in that operation with antibiotics, any synthetic substance not included on the National List of synthetic substances allowed for use in livestock production, or any substance that contains a nonsynthetic substance included on the National List of nonsynthetic substances prohibited for use in organic livestock production. The producer must not administer any animal drug, other than vaccinations, in the absence of illness. The use of hormones for growth promotion is prohibited in organic livestock production, as is the use of synthetic parasiticides on a routine basis. The producer must not administer synthetic parasiticides to slaughter stock or administer any animal drug in violation of the Federal Food, Drug, and Cosmetic Act. The producer must not withhold medical treatment from a sick animal to maintain its organic status. All appropriate medications and treatments must be used to restore an animal to health when methods acceptable to organic production standards 52 fail. Livestock that are treated with prohibited materials must be clearly identified and shall not be sold, labeled, or represented as organic.

A livestock producer must document in his or her organic system plan the preventative measures he or she has in place to deter illness, the allowed practices he or she will employ if illness occurs, and his or her protocol for determining when a sick animal must receive a prohibited animal drug. These standards will not allow an organic system plan that envisions an acceptable level of chronic illness or proposes to deal with disease by sending infected animals to slaughter. The organic system plan must reflect a proactive approach to health management,

drawing upon allowable practices and materials. Animals with conditions that do not respond to this approach must be treated appropriately and diverted to nonorganic markets.

The producer of an organic livestock operation must establish and maintain livestock living conditions for the animals under his or her care which accommodate the health and natural behavior of the livestock. The producer must provide access to the outdoors, shade, shelter,

exercise areas, fresh air, and direct sunlight suitable to the species, its stage of production, the climate, and the environment. This requirement includes access to pasture for ruminant animals.

The producer must also provide appropriate clean, dry bedding, and, if the bedding is typically consumed by the species, it must comply with applicable organic feed requirements. The producer must provide shelter designed to allow for the natural maintenance, comfort level, and opportunity to exercise appropriate to the species. The shelter must also provide the temperature level, ventilation, and air circulation suitable to the species and reduce the potential for livestock injury. The producer may provide temporary confinement of an animal because of inclement weather; the animal's stage of production; conditions under which the health, safety, or well being 53 of the animal could be jeopardized; or risk to soil or water quality. The producer of an organic livestock operation is required to manage manure in a manner that does not contribute to contamination of crops, soil, or water by plant nutrients, heavy metals, or pathogenic organisms and optimizes nutrient recycling.

Handling Mechanical or biological methods can be used to process an agricultural product intended to be sold, labeled, or represented as " 100 percent organic," " organic," or " made with organic ingredients" for the purpose of retarding spoilage or otherwise preparing the agricultural product for market. Processed multiingredient products labeled " 100 percent organic," may only use wholly organic ingredients, pursuant to paragraph ( a) of section 205.301. Nonagricultural substances that are allowed for use on the National List and nonorganically produced agricultural products may be used in or on " organic" and " made with..." products pursuant to paragraphs ( b)

and ( c) of section 205.301, respectively. Documentation of commercial availability of each substance to be used as a nonorganic ingredient in products labeled " organic" must be listed in the organic handling system plan in accordance with section 205.201.

Handlers are prohibited from using: ( 1) ionizing radiation for the treatment or processing of foods; ( 2) ingredients produced using excluded methods; or ( 3) volatile synthetic solvents in or on a processed product or any ingredient which is sold, labeled, or represented as organic. The prohibition on ionizing radiation for the treatment or processing of foods is discussed under Applicability, section 205.105. This rule does not prohibit an organic handling operation from using Food and Drug Administration ( FDA) approved X rays for inspecting packaged foods for foreign objects that may be inadvertently commingled in the packaged product. 54 The two paragraphs on excluded methods and ionizing radiation in section 205.270( c) of the proposed rule are replaced with new paragraph ( c)( 1) which cross references those practices under paragraphs ( e) and ( f) of section 205.105. New section 205.105 clearly specifies that ionizing radiation and excluded methods are two practices that handlers must not use in producing organic agricultural products and ingredients. The prohibition on the use of volatile synthetic solvents, also included under paragraph ( c) of section 205.270 does not apply to nonorganic ingredients in " made with..." products.

The practice standard for facility pest management under section 205.271 requires the producer or handler operating a facility to use management practices to control and prevent pest infestations. Prevention practices in paragraph ( a) include removing pest habitats, food sources,

and breeding areas; preventing access to handling facilities; and controlling environmental factors,

such as temperature, light, humidity, atmosphere, and air circulation, to prevent pest reproduction. Permitted pest control methods in paragraph ( b) include mechanical or physical controls, such as traps, light, or sound. Lures and repellents using nonsynthetic substances may be used as pest controls. Lures and repellents with synthetic substances that are allowed on the National List also may be used. Prevention and control practices in paragraphs ( a) and ( b) may be used concurrently.

If the practices in paragraphs ( a) and ( b) are not effective, amended paragraph ( c) provides that handlers may then use a nonsynthetic or synthetic substance consistent with National List. If the measures and substances provided under paragraphs ( a), ( b), and ( c) are not effective,

synthetic substances not on the National List may be used to control pest infestations. Under new paragraph ( d), the handler and the operation's certifying agent, prior to using such a substance, 55 must agree on the substance to be used to control the pest, measures to be taken to prevent contact with organically produced product, and ingredients that may be in the handling facility.

This rule recognizes that certain local, State, and Federal laws or regulations may require intervention with prohibited substances before or at the same time substances allowed in paragraphs ( b) and ( c) are used. To the extent that this occurs, this rule permits the handler to follow such laws and regulations to market a product as organically handled, provided that the product does not come into contact with the pest control substance used.

The extent of pest infestation cannot be foreseen when an organic plan is submitted by the certified operation and approved by the certifying agent. A handler who uses any nonsynthetic or synthetic substance to control facility pests must update its organic handling system plan to address all measures taken or intended to be taken to prevent contact between the substance and any organically produced ingredient or finished product.

Section 205.272 provides additional practice standards that must be followed by an organic handling operation to prevent the commingling of organic and nonorganic products and to protect organic products from contact with prohibited substances. An organic handling operation must not use packaging materials and storage containers or bins that contain a synthetic fungicide,

preservative, or fumigant in handling an organic product. The operation also must not use or reuse any storage bin or container that was previously in contact with any prohibited substance unless the reusable bin or container has been thoroughly cleaned and poses no risk of prohibited materials contacting the organic product.

Temporary Variances This subpart establishes conditions under which certified organic operations may receive 56 temporary variances from the production and handling provisions of this subpart. The Administrator may establish temporary variances due to: ( 1) Natural disasters declared by the Secretary; ( 2) unavoidable business interruption caused by natural catastrophes such as drought,

wind, fire, flood, excessive moisture, hail, tornado, or earthquake; or ( 3) to conduct research on organic production and handling techniques or inputs. An SOP's governing State official or a certifying agent may recommend that the Administrator establish a temporary variance for various reasons including an unavoidable business interruption. The Administrator will determine how long a temporary variance will be in effect at the time it is established, subject to such extension as the Administrator deems necessary. Temporary variances may not be issued to allow use of any practice, material, or procedure which is prohibited under section 205.105.

The proposed rule inadvertently omitted the SOP's governing State official as having authority to recommend a temporary variance to the Administrator. We have added that authority in paragraph ( b) of section 205.290.

Upon notification by the Administrator that a temporary variance has been established, the certifying agent must inform each production and handling operation it certifies that may be affected by the temporary variance. For example, if a drought causes a severe shortage of organically produced hay, a dairy operation may be permitted to substitute some nonorganic hay for a portion of the herd's diet to prevent liquidation of the herd. The producer must keep records showing the source and amount of the nonorganic hay used and the timeframe needed to restore the total feed ration to organic sources. The certifying agent may require that the next organic plan include contingency measures to avoid the need to resort to nonorganic feed in case of a future shortage. 57 General  Changes Based on Comments This subpart differs from the proposal in several respects as follows:

( 1) Maintain or Improve Provision for Production Operations Only. A number of commenters questioned whether the requirement in the proposed rule that an operation must " maintain or improve the natural resources of the operation, including soil and water quality"

applied to handling as well as production operations. They stated that handling operations are not integrated into natural systems the way that production systems are. As a result, these commenters were uncertain how handlers could fulfill the " maintain or improve" requirement.

The " maintain or improve" requirement addresses the impact of a production operation on the natural resource base that sustains it and, as such, does not apply to handling operations. We have modified the final rule in section 205.200 by limiting the " maintain or improve" requirement to production practices.

( 2) Management Practices and Physical Barriers to Prevent Commingling. Many commenters, including numerous certifying agents, stated that the proposed provisions for an organic system plan were not adequate for the task of certifying an operation that produces both organic and nonorganic products. The commenters requested that the final rule incorporate the provisions established in the OFPA for certifying these split operations. These provisions include separate recordkeeping for the organic and nonorganic operations and the implementation of protective practices to prevent the commingling of product and the unintentional contact of organic product with prohibited substances. We have amended the provisions for an organic system plan in section 205.201( a)( 5) to require greater accountability regarding the segregation of organic and nonorganic products in a split operation. The changes we made incorporate language 58 from the OFPA (" physical facilities, management practices") to provide clear criteria for producers, handlers and certifying agents to agree upon an organic system plan that protects the integrity of organic product.

( 3) Commercial Availability. The proposed rule required that a raw or processed agricultural product sold, labeled, or represented as organic must contain not less than 95 percent organically produced raw or processed agricultural product. Additionally, section 205.606 of the proposed rule allowed any nonorganically produced agricultural product to be used in the 5 percent nonorganic component of an agricultural product sold, labeled, or represented as organic.

Many commenters objected to these provisions and recommended that nonorganically produced agricultural products should only be allowed in an organic product when the organically produced form was not commercially available. Commenters stated that allowing nonorganically produced agricultural products within the 5 percent would significantly weaken demand for many organically produced commodities, especially herbs and spices. These commenters stated that herbs and spices often constitute less than 5 percent of the ingredients in a raw or processed agricultural product and that handlers producing an organic product would instinctively seek out the less expensive nonorganic variety. They also indicated that the 5 percent component is an important market for many products produced from organically produced livestock, such as milk derivatives and meat by products, that are not typically marketed directly to consumers.

Commenters stated that the preponderance of current certification programs use the commercial availability criterion when determining whether a nonorganically produced agricultural product may be used within the 5 percent component. Commenters cited the National Organic Standards Board's ( NOSB) recommendation that organic agricultural products be used in this 5 percent 59 component unless they are commercially unavailable and requested that the final rule incorporate the criteria for determining commercial availability that accompanied that NOSB recommendation.

We agree with commenters that a preference for organically produced agricultural commodities, when commercially available, can benefit organic producers, handlers, and consumers in a variety of ways. We believe that the commercial availability requirement may allow consumers to have confidence that processed products labeled as " organic" contain the highest feasible percentage of organic ingredients. Some producers may benefit from any market incentive to supply organically produced minor ingredients that handlers need for their processed products. We recognize that the provision does impose an additional requirement on handlers who must ascertain whether the agricultural ingredients they use are commercially available in organic form. The NOSB recommended that the final rule contain a commercial availability provision based upon the guidelines developed by the American Organic Standards project of the Organic Trade Association. For these reasons, we have amended the final rule to require that an agricultural commodity used as an ingredient in a raw or processed product labeled as organic must be organic when the ingredient is commercially available in an organic form.

While recognizing the potential benefits of applying the commercial availability standard to all agricultural ingredients in a processed product, we are concerned that enforcing this provision could impose an excessive burden on handlers. Although many commenters stated that some existing certifying agents apply a commercial availability standard, we do not have complete information on the criteria used by these certifying agents, and we are unsure whether a consensus exists on criteria for commercial availability within the organic community. Additionally, we are 60 concerned that, unless the standard is clearly articulated and consistently interpreted and enforced,

it will not be effective. Disagreement among certifying agents regarding when and under what circumstances an ingredient is commercially available would undermine our intent to create an equitable and enforceable standard.

AMS is soliciting additional comment and information on a number of issues concerning the development of standards for the commercial availability of organically produced agricultural commodities used in processed products labeled as " organic." On the basis of these comments and information and additional recommendations that the NOSB may develop, AMS will develop a commercial availability standard for use in implementing the final rule. AMS intends to develop the commercial availability standard and incorporate it within the final rule prior to the commencement of certification activities by accredited certifying agents. This approach will provide organic handlers and certifying agents the standard necessary to incorporate the consideration of commercial availability of ingredients in an organic system plan at the time that the USDA organic standard comes into use. Specifically, AMS requests comments and information addressing the following questions:

What factors, such as quantity, quality, consistency of supply, and expense of different sources of an ingredient, should be factored into the consideration of commercial availability?

What relative importance should each of these factors possess, and are there circumstances under which the relative importance can change?

What activities and documentation are sufficient to demonstrate that a handler has taken appropriate and adequate measures to ascertain whether an ingredient is commercially available?

How can AMS ensure the greatest possible degree of consistency in the application of the 61 commercial availability standard among multiple certifying agents?

Could potentially adverse effects of a commercial availability standard, such as uncertainty over the cost and availability of essential ingredients, impact or impede the development of markets for organically processed products?

What economic and administrative burdens are imposed by the commercial availability standards found in existing organic certification programs?

How would producers benefit from market incentives to increase use of organic ingredients that result from a commercial availability standard?

Would lack of a commercial availability standard provide a disincentive for handlers of products labeled " organic" to seek out additional organic minor ingredients? What impacts could this have on producers of minor ingredients?

AMS welcomes any new or unpublished research results or information that exists concerning a commercial availability standard. AMS specifically invites comment from establishments which currently operate using commercial availability or a comparable provision in the conduct of their business. AMS will receive comment on this issue until 90 days after publication of the final rule.

( 4) Conservation of Biodiversity. Many commenters recommended amending the definition of organic production to include the requirement that an organic production system must promote or enhance biological diversity ( biodiversity). Commenters stated that the definitions for organic production developed by the NOSB and the Codex Commission include this requirement. We agree with these commenters and have amended the definition of organic production to require that a producer must conserve biodiversity on his or her operation. The use 62 of " conserve" establishes that the producer must initiate practices to support biodiversity and avoid, to the extent practicable, any activities that would diminish it. Compliance with the requirement to conserve biodiversity requires that a producer incorporate practices in his or her organic system plan that are beneficial to biodiversity on his or her operation.

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

Organic Plan Excessively Restrictive. One organic inspector was concerned that the requirements of the organic system plan were too prescriptive and would create an excessive paper work burden for producers and handlers. The commenter stated that the excessive specificity of certain requirements ( composition and source of every substance used), combined with the ambiguity of others ( soil and tissue testing required but with no mention of the frequency), would confuse the working relationship between a producer or handler and his or her certifying agent. The commenter was concerned that strict adherence to the specifications in the organic system plan would compromise the ability of producers and handlers to run their businesses. While agreeing that flexibility in the development of the organic system plan was valuable, the commenter stated that producers and handlers, not the certifying agent, must retain the primary managerial role for their operation. Other commenters maintained that the organic system plan requirements were too ambiguous and would inhibit certifying agents' efforts to review necessary information. For example, a trade association commented that the absence of specific recordkeeping requirements for livestock feed materials, medications, and health care activities would impair compliance monitoring. 63 The provisions for an organic system plan were one of the most significantly revised components of the proposed rule, and, with minor changes related to split operations, we have retained them in the final rule. These provisions provide ample discretion for producers, handlers,

and certifying agents to perform their duties while recognizing that mutual consent is a prerequisite for them to meet their responsibilities. The organic system plan enables producers and handlers to propose and certifying agents to approve site and operation specific practices that fulfill all applicable program requirements. Producers and handlers retain the authority to manage their operations as they deem necessary, but any actions they undertake that modify their organic system plan must be approved by the certifying agent. With regard to recordkeeping, certifying agents are authorized to require the additional information, such as the livestock records mentioned in the comment, that they deem necessary to evaluate compliance with the regulations.

One certifying agent stated that the requirement to maintain or improve the natural resources of the operation was worthy in principle but unreasonable to achieve. This commenter stated that the long term consequences of an organic system plan could not be foreseen and recommended requiring that producers " must endeavor" to maintain or improve the operation's natural resources. We have not changed this requirement because the vast majority of commenters supported an organic system plan that mandated the " maintain or improve" principle.

A good working relationship between the producer and his or her certifying agent, including the annual inspection and accompanying revisions to the organic system plan, can rectify the unforeseen and unfavorable conditions that arise.

Crop Production  Changes Based on Comments This subpart differs from the proposal in several respects as follows: 64 ( 1) Crop nutrient management. The fundamental requirement of the soil fertility and crop nutrient management practice standard, that tillage, cultivation, and nutrient management practices maintain or improve the physical, chemical, and biological condition of the soil and minimize erosion, remains unaltered. The proposed rule required that a producer budget crop nutrients by properly utilizing manure or other animal and plant materials, mined substances of low or high solubility, and allowed synthetic amendments. Many commenters disagreed with using the term, " budget," which they considered too limiting to characterize nutrient management in organic systems. These commenters recommended that the practice standard instead emphasize the diverse practices used in organic systems to cycle nutrients over extended periods of time.

We agree with these commenters and have amended the final rule to require that producers manage crop nutrients and soil fertility through the use of crop rotations and cover crops in addition to plant and animal materials. Additionally, we clarified that producers may manage crop nutrients and soil fertility by applying mined substances if they are used in compliance with the conditions established in the National List. Finally, we removed the word,

" waste," from our description of animal and plant materials in the proposed rule to emphasize the importance of these resources in organic soil fertility management.

( 2) Compost Practice Standard. The proposed rule required that a composted material used on an organic operation must be produced at a facility in compliance with the Natural Resource Conservation Service ( NRCS) practice standard. While many commenters agreed with the need for greater oversight of the feedstocks and procedures used to produce compost, most stated that the NRCS practice standard would not be suitable for this purpose. Commenters 65 stated that the requirements in the NRCS practice standard were not designed for organic operations and would prohibit many established, effective composting systems currently used by organic producers. For example, adoption of the NRCS practice standard would prevent producers from using nonfarm wastes as compost feedstocks. Materials such as food processing by products and leaves from curbside collection programs have long been used with beneficial results.

Commenters also stated that the minimum acceptable requirements for the design,

construction, and operation of a composting facility contained in the practice standard were appropriate for a voluntary cost share program but were excessive as a compliance requirement for organic certification. Commenters questioned whether producers could justify the investment of time and resources needed to comply with the multiple design and operation criteria specified in the NRCS practice standard.

We agree with commenters who stated that, given the diversity of composting systems covered by a national organic standard, requiring full compliance with the NRCS practice standard would be overly prescriptive. We maintain, however, that implementation of the OFPA requires a rigorous, quantitative standard for the production of compost. The OFPA contains significant restrictions on applying raw manure that are reflected in the soil fertility and crop nutrient management practice standard. These restrictions pertain to raw manure and do not apply once fresh animal materials are transformed into a composted material. An organic producer using a composted material containing manure must comply with the nutrient cycling and soil and water conservation provisions in his or her organic system plan but is not constrained by the restrictions that apply to raw manure. Therefore, producers intending to apply soil 66 amendments will require clear and verifiable criteria to differentiate raw manure from composted material. We developed the requirements in the final rule for producing an allowed composted material by integrating standards used by the Environmental Protection Agency ( EPA) and USDA's Natural Resources Conservation Service ( NRCS). The requirements for the carbon

tonitrogen ( C: N) ratio for composting materials are the same as that found in the NRCS practice standard for a composting facility. The time and temperature requirements for in vessel, static aerated pile, and windrow composting systems are consistent with that EPA regulates under 40 CFR Part 503 for the production of Class A sewage sludge. Additionally, AMS reviewed these compost production requirements with USDA's Agricultural Research Service ( ARS).

The conditions in the final rule for producing an allowed composted material begin with the selection of appropriate feedstocks. The producer's first responsibility is to identify the source of the feedstocks used in the composting system. This requirement ensures that only allowed plant and animal materials are included in the composting process, that they are not contaminated with prohibited materials, and that they are incorporated in quantities suitable to the design of the composting system. Certifying agents will exercise considerable discretion for evaluating the appropriateness of potential feedstock materials and may require testing for prohibited substances before allowing their use. For example, a certifying agent could require a producer to monitor off farm inputs such as leaves collected through a municipal curbside program or organic wastes from a food processing facility. Monitoring may be necessary to protect against contamination from residues of prohibited substances, such as motor oil or heavy metals, or gross inert materials such as glass shards that can enter the organic waste stream.

The final rule further requires that the producer adhere to quantitative criteria when 67 combining and managing the plant and animal materials that are being composted. When combining feedstocks to initiate the process, producers must establish a C: N ratio of between 25: 1 and 40: 1. This range allows for very diverse combinations of feedstock materials while ensuring that, when properly managed, the composting process will yield high quality material.

While some commenters maintained that specifying any C: N ratio in the final rule would be too restrictive, it would be far more problematic not to establish a range. The 25: 1 to 40: 1 range ensures that producers will establish appropriate conditions under which the additional requirements in this practice standard, most notably the time and temperature criteria, can be achieved with minimal producer oversight. Composting operations using a C: N ratio lower than 25: 1 require increasingly intensive management as the ratio drops due to the risk of putrefaction.