An SOP may contain more restrictive requirements governing the production and handling 266 of organic products within the State. Such requirements must be based on environmental conditions or specific production or handling practices particular to the State or region of the United States, which necessitates the more restrictive requirement. More restrictive requirements must be justified and shown to be consistent with and to further the purposes of the Act and the regulations in this part. Requirements necessitated by an environmental condition that is limited to a specific geographic area of the State should only be required of organic production and handling operations operating within the applicable geographic area. If approved by the Secretary, the more restrictive requirements will become the NOP regulations for organic producers and handlers in the State or applicable geographical area of the State. All USDAaccredited certifying agents planning to operate within a State with an SOP will be required to demonstrate their ability to comply with the SOP's more restrictive requirements.

No provision of an SOP shall discriminate against organic agricultural products produced by production or handling operations certified by certifying agents accredited or accepted by USDA pursuant to section 205.500. Specifically, an SOP may not discriminate against agricultural commodities organically produced in other States in accordance with the Act and the regulations in this part. Further, an SOP may not discriminate against agricultural commodities organically produced by production or handling operations certified by foreign certifying agents operating under: ( 1) standards determined by USDA to meet the requirements of this part or ( 2)

an equivalency agreement negotiated between the United States and a foreign government.

To receive approval of its SOP, a State must assume enforcement obligations in the State for the requirements of this part and any more restrictive requirements included in the SOP and approved by the Secretary. Specifically, the State must ensure compliance with the Act, the 267 regulations in this part, and the provisions of the SOP by certified production and handling operations operating within the State. The SOP must include compliance and appeals procedures equivalent to those provided for under the NOP.

An SOP and any amendments thereto must be approved by the Secretary prior to implementation by the State.

State Organic Program Approval Process An SOP and subsequent amendments thereto must be submitted to the Secretary by the SOP's governing State official for approval prior to implementation. A request for approval of an SOP must contain supporting materials that include statutory authorities, program descriptions,

documentation of environmental or ecological conditions or specific production and handling practices particular to the State which necessitate more restrictive requirements than the requirements of this part, and other information as may be required by the Secretary. A request for amendment of an approved SOP must contain supporting materials that include an explanation and documentation of the environmental or ecological conditions or specific production practices particular to the State or region, which necessitate the proposed amendment. Supporting material also must explain how the proposed amendment furthers and is consistent with the purposes of the Act and the regulations in this part.

Each request for approval of an SOP or amendment to an SOP and its supporting materials and documentation will be reviewed for compliance with the Act and these regulations.

Within 6 months of receiving the request for approval, the Secretary will notify the SOP's governing State official of approval or disapproval. A disapproval will include the reasons for disapproval. A State receiving a notice of disapproval of its SOP or amendment to its SOP may 268 submit a revised SOP or amendment to its SOP at any time.

Review of State Organic Programs SOP's will be reviewed at least once every 5 years by the Secretary as required by section 6507( c)( 1) of the Act. The Secretary will notify the SOP's governing State official of approval or disapproval of the program within 6 months after initiation of the review.

State Organic Programs  Changes Based on Comments This portion of subpart G differs from the proposal in several respects as follows:

( 1) Publication of SOP's and Consideration of Public Comments. Some commenters assert that the USDA should not publish SOP provisions for public comment in the Federal Register. These commenters argued that it is not appropriate for the NOP to have nonresidents commenting on a particular State program as nearly all States have a mechanism to ensure full public participation in their regulation promulgation. They believe the comment process set forth in the proposed rule is a redundant and unacceptable intrusion on State sovereignty.

We will not publish for public comment the provisions of SOP's under review by the Secretary in the Federal Register. We have removed the provision from this final rule, described in section 205.621( b), requiring the Secretary to publish in the Federal Register for public comment a summary of the SOP and a summary of any amendment to such a program.

Alternatively, we will announce which SOP's are being reviewed through the NOP website. The NOP will issue public information notices that will announce each approved SOP and any approved amendments to an existing State program. The notices will identify the characteristics of the approved State program that warranted the more restrictive organic production or handling requirements. We also will include a summary of the new program on the NOP website. 269 ( 2) NOP Oversight of SOP's. Several commenters stated that, in the proposed rule, the provisions did not provide a comprehensive description of organic programs operated by States that would be under NOP authority. Some commenters implied that the proposed rule would only include States with organic certification programs, while other commenters inquired whether the sections 205.620 to 205.622 included other SOP activities beyond certification.

To address the commenters' concerns, we have modified the section heading by adding the term, " organic," and removing the term, " certification," from the description and definition of SOP's. We have taken this action to clarify that, while certification is one component of the requirements, it does not define the extent of evaluation of State programs that will be conducted by the NOP. SOP's can choose not to conduct certification activities under their existing organic program. State programs whose provisions fall within the scope of the eleven general provisions described in the Act ( 7 U. S. C. 6506) will require Departmental review.

States may conduct other kinds of organic programs that will not need review and approval by the NOP. Examples of these other programs may include: organic promotion and research projects, marketing; transition assistance or cost share programs, registration of State organic production and handling operations, registration of certifying agents operating within the State, or a consumer referral program. The NOP will not regulate such State activities. Such programs may not advertise, promote, or otherwise infer that the State's organic products are more organic or better than organic product produced in other States. Such programs and projects would be beyond the scope of this national program and will not be subject to the Secretary's review.

State Organic Programs  Changes Requested But Not Made 270 ( 1) Limitations on SOP More Restrictive Requirements. Commenters expressed concern that limiting a State's ability to craft a regulation designated as a more restrictive requirement to environmental conditions or specific production and handling practices would hinder the ongoing development of SOP's. They were concerned that any State legislation modifying the SOP would need to be preapproved by the Secretary.

We have retained the provision limiting the scope of more restrictive requirements States can include in their organic program as described in section 205.620( c). We believe the language contained in the provision is broad enough to facilitate the development of SOP's without hindering development or State program implementation and enforcement. Section 6507( b)( 1) of the Act provides that States may establish more restrictive organic certification requirements;

paragraph ( b)( 2) establishes parameters for those requirements. More restrictive SOP requirements must: further the purposes of the Act, be consistent with the Act, not discriminate against other State's agricultural commodities, and be approved by the Secretary before becoming effective. We expect that a State's more restrictive requirements are likely to cover specific organic production or handling practices to address a State's specific environmental conditions.

The Secretary will approve State's requests for more restrictive State requirements that are consistent with the purposes of the Act. However, we believe requests from States for more restrictive requirements will be rare. Although SOP's can impose additional requirements, we believe States will be reluctant to put their program participants at a competitive disadvantage when compared to producers and handlers in other States absent compelling environmental conditions or a compelling need for special production and handling practices. While preapproval of State legislation modifying an existing SOP is not required, the NOP envisions a close 271 consultation with States with existing programs to ensure consistency with the final rule.

( 2) SOP Enforcement Obligations. Some commenters expressed concern about States having adequate resources available to implement enforcement activities that they are obligated to conduct under the NOP. A few of these commenters argue that the enforcement obligation will result in their State programs being discontinued. A few commenters cited a lack of federal funding to support State enforcement obligations and suggested the NOP provide funding for enforcement activities.

The proposed rule indicated that States with organic programs must assume enforcement obligations for this regulation within their State. We have retained this enforcement obligation in section 205.620( d). Many States currently have organic programs with the kind of comprehensive enforcement and compliance mechanisms necessary for implementing any State regulatory program. Assuming those enforcement activities are consistent with the NOP, this final rule adds no additional regulatory burden to the SOP's. The costs associated with the enforcement activities of an approved SOP should be similar to the enforcement costs associated with the existing State program. Additional clarification of SOP enforcement obligations is in the Accreditation, Appeals, and Compliance preamble discussions.

( 3) SOP Evaluation Notification Period. A few commenters indicated that the SOP review and decision notification period described in section 205.621( b) of the proposed rule could hinder a State's ability to develop or implement an SOP. These commenters cited potential cases in which particular States have requirements for regulatory promulgation that must occur within 6 months under a State legislative session that is held once every 2 years. These commenters suggested the NOP should reduce the notification time to 1 to 3 months. 272 We disagree with the commenters. In the proposed rule in section 205.621( b), the Secretary is required to notify the SOP's governing State official within 6 months of receipt of submission of documents and information regarding the approval of the SOP. We have retained this time period. We will review SOP applications as quickly as possible and will endeavor to make decisions in less than 6 months whenever possible. However, some SOP's may be very complex and require more review time. The NOP envisions working closely with the States and State officials to ensure a smooth transition to the requirements of this final rule.

State Organic Programs  Clarifications ( 1) Discrimination Against Organic Products. Several commenters requested the addition of a provision prohibiting an SOP from discriminating against agricultural commodities organically produced in other States. Discrimination by a State against organically produced agricultural products produced in another State is prevented in two ways. First, any organic program administered by a State must meet the requirements for organic programs specified in the Act and be approved by the Secretary. Finally, a USDA accredited certifying agent must accept the certification decisions made by another USDA accredited certifying agent as its own.

( 2) Potential Duplication Between the Accreditation and SOP Review Process. Some commenters asked about possible duplication between the process for reviewing SOP's and the process of accreditation review. These commenters have asked the NOP to eliminate any duplication that may exist between the two review processes. The NOP will be conducting a review process for SOP's and a separate review process for accrediting State and private certifying agents. The two reviews are different. The SOP review is the evaluation of SOP compliance with the Act and the NOP regulations. If approved, the SOP becomes the NOP 273 standards for the particular State with which all certifying agents operating in that State must comply. Approved SOP's must be in compliance with the Act and the NOP regulations. They cannot have weaker standards than the NOP. States can have more restrictive requirements than the NOP if approved by the Secretary.

The accreditation review is an evaluation of the ability of certifying agents to carry out their responsibilities under the NOP. This review is a measure of the competency of certifying agents to evaluate compliance to national organic standards. Certifying agents will not be unilaterally establishing regulations or standards related to the certification of organic products.

They will only provide an assessment of compliance.

Thus, SOP reviews and accreditation reviews are separate evaluations of different procedures. We acknowledge some of the information for the two evaluations may be similar;

e. g., compliance procedures. The reviews do not duplicate the same requirements. However, the NOP envisions working with States to ensure documentation is not duplicated.

( 3) Scope of Enforcement by States. A number of State commenters have requested clarification on the proposed rule provision specifying that approved SOP's must assume enforcement obligations in their State for the requirements of the NOP and any additional requirements approved by the Secretary. These commenters have indicated that they remain uncertain as to what is expected by the term, " enforcement obligation."

Approved SOP's will have to administer and provide enforcement of the requirements of the Act and the regulations of the NOP. The administrative procedures used by the State in administering the approved SOP should have the same force and effect as the procedures use by AMS in administering this program. This final rule specifies that the requirements for 274 environmental conditions or for special production and handling practices are necessary for establishing more restrictive requirements. These factors establish our position that a State must agree to incurring increased enforcement responsibilities and obligations to be approved as an SOP under the NOP. For instance, a State with an approved organic program will oversee compliance and appeals procedures for certified organic operations in the State. Those procedures must provide due process opportunities such as rebuttal, mediation, and correction procedures. Once approved by the Secretary, the State governing official of the SOP must administer the SOP in a manner that is consistent and equitable for the certified parties involved in compliance actions.

( 4) SOP's That Do not Certify and NOP Oversight. A few commenters requested that the NOP develop new provisions to include State programs that have organic regulations but do not conduct certification activities. These commenters argue that any SOP that has a regulatory impact on organic producers, regardless of whether or not the program includes certification, be approved by the Secretary.

This regulation, in section 205.620( b), provides for NOP oversight of SOP's that do not conduct certification activities.

( 5) State's Use of Private Certifying Agents. Some commenters have requested that the NOP provide clarification of the proposed rule sections 205.620 through 205.622 on how these sections will affect States that delegate certification activities to private certifying agents. These commenters asked how the NOP intends to oversee this type of State activity.

The NOP intends to give considerable latitude to States in choosing the most appropriate system or procedures to structure their programs. This may include a State establishing its own 275 certifying agent or relying on private certifying agents. However, States will not be accrediting certifying agents operating in their State. Accreditation of all certifying agents operating in the United States is the responsibility of USDA. Establishment of a single national accreditation program is an essential part of the NOP. As stated elsewhere in this final rule, any accreditation responsibilities of a State's current organic program will cease with implementation of this program. Pursuant to the Compliance provisions of this subpart, the governing State official charged with compliance oversight under the SOP may investigate and notify the NOP of possible compliance violations on the part of certifying agents operating in the State. However, the State may not pursue compliance actions or remove accreditation of any certifying agent accredited by the Secretary. That authority is the sole responsibility of the Secretary. If more restrictive State requirements are approved by the Secretary, we will review certifying agent qualifications in the State, as provided by section 205.501( a)( 20), and determine whether they are able to certify to the approved, more restrictive requirements. Our accreditation responsibilities include oversight of both State and private certifying agents, including any foreign certifying agents that may operate in a State.

Subpart G  Fees This portion of subpart G sets forth the regulations on fees and other charges to be assessed for accreditation and certification services under the National Organic Program ( NOP).

These regulations address the kinds of fees and charges to be assessed by the U. S. Department of Agriculture ( USDA) for the accreditation of certifying agents, the level of such fees and charges,

and the payment of such fees and charges. These regulations also address general requirements to be met by certifying agents in assessing fees and other charges for the certification of producers 276 and handlers as certified organic operations. Finally, these regulations address the Secretary's oversight of a certifying agent's fees and charges for certification services.

Description of Regulation Fees and Other Charges for Accreditation Fees and other charges will be assessed and collected from applicants for initial accreditation and accredited certifying agents submitting annual reports or seeking renewal of accreditation. Such fees will be equal as nearly as may be to the cost of the accreditation services rendered under these regulations. Fees for service will be based on the time required to render the service provided calculated to the nearest 15 minute period. Activities to be billed on the basis of time used include the review of applications and accompanying documents and information, evaluator travel, the conduct of on site evaluations, review of annual reports and updated documents and information, and the preparation of reports and any other documents in connection with the performance of service. The hourly rate will be the same as that charged by the Agricultural Marketing Service ( AMS), through its Quality System Certification Program, to certification bodies requesting conformity assessment to the International Organization for Standardization " General Requirements for Bodies Operating Product Certification Systems"

( ISO Guide 65).

Applicants for initial accreditation and accredited certifying agents submitting annual reports or seeking renewal of accreditation during the first 18 months following the effective date of subpart F will receive service without incurring an hourly charge for such service.

Applicants for initial accreditation and renewal of accreditation must pay at the time of application, effective 18 months following the effective date of subpart F, a nonrefundable fee of 277 $ 500.00. This fee will be applied to the applicant's fees for service account.

When service is requested at a place so distant from the evaluator's headquarters that a total of one half hour or more is required for the evaluator( s) to travel to such a place and back to the headquarters or from a place of prior assignment on circuitous routing requiring a total of one half hour or more to travel to the next place of assignment on the circuitous routing, the charge for such service will include all applicable travel charges. Travel charges may include a mileage charge administratively determined by USDA, travel tolls, or, when the travel is made by public transportation ( including hired vehicles), a fee equal to the actual cost thereof. If the service is provided on a circuitous routing, the travel charges will be prorated among all the applicants and certifying agents furnished the service involved. Travel charges will become effective for all applicants for initial accreditation and accredited certifying agents on the effective date of subpart F. The applicant or certifying agent will not be charged a new mileage rate without notification before the service is rendered.

When service is requested at a place away from the evaluator's headquarters, the fee for such service shall include a per diem charge if the employee( s) performing the service is paid per diem in accordance with existing travel regulations. Per diem charges to applicants and certifying agents will cover the same period of time for which the evaluator( s) receives per diem reimbursement. The per diem rate will be administratively determined by USDA. Per diem charges shall become effective for all applicants for initial accreditation and accredited certifying agents on the effective date of subpart F. The applicant or certifying agent will not be charged a new per diem rate without notification before the service is rendered.

When costs, other than fees for service, travel charges, and per diem charges, are 278 associated with providing the services, the applicant or certifying agent will be charged for these costs. Such costs include but are not limited to equipment rental, photocopying, delivery,

facsimile, telephone, or translation charges incurred in association with accreditation services.

The amount of the costs charged will be determined administratively by USDA. Such costs will become effective for all applicants for initial accreditation and accredited certifying agents on the effective date of subpart F.

Payment of Fees and Other Charges Applicants for initial accreditation and renewal of accreditation must remit the nonrefundable fee along with their application. Remittance must be made payable to the Agricultural Marketing Service, USDA, and mailed to: Program Manager,

USDA AMS TMP NOP, Room 2945 South Building, P. O. Box 96456, Washington, DC 20090 6456 or such other address as required by the Program Manager. All other payments for fees and other charges must be received by the due date shown on the bill for collection, made payable to the Agricultural Marketing Service, USDA, and mailed to the address provided on the bill for collection. The Administrator will assess interest, penalties, and administrative costs on debts not paid by the due date shown on a bill for collection and collect delinquent debts or refer such debts to the Department of Justice for litigation.

Fees and Other Charges for Certification Fees charged by a certifying agent must be reasonable, and a certifying agent may charge applicants for certification and certified production and handling operations only those fees and charges that it has filed with the Administrator. The certifying agent must provide each applicant with an estimate of the total cost of certification and an estimate of the annual cost of updating 279 the certification. The certifying agent may require applicants for certification to pay at the time of application a nonrefundable fee that must be applied to the applicant's fees for service account. A certifying agent may set the nonrefundable portion of certification fees; however, the nonrefundable portion of certification fees must be explained in the fee schedule submitted to the Administrator. The fee schedule must explain what fee amounts are nonrefundable and at what stage during the certification process the respective fees become nonrefundable. The certifying agent must provide all persons inquiring about the application process with a copy of its fee schedule.

Fees  Changes Based on Comments This subpart differs from the proposal in the following respects:

Nonrefundable Portion of Certification Fees. Commenters were not satisfied with the provision in section 205.642 that stated, " The certifying agent may require applicants for certification to pay at the time of application a nonrefundable fee of no more than $ 250.00, which shall be applied to the applicant's fee for service account." Some commenters believed we were requiring the certifying agents to bill fees for inspection services separately. One State agency expressed a concern that we were placing a limit on the initial fee the certifying agent could collect. As a result, the State agency commented that by not being allowed to collect the full certification fee at the time of application, the certifying agent, in effect, would be extending credit to the applicant. Commenters reported that some State agencies are prevented by statute from extending credit and are required to collect all fees at the time of application. Several commenters stated that the amount of $ 250.00 was too low and would not cover the costs the certifying agents could incur during the certification process. One organization noted that we should 280 consider prorating the amount of the of the fee to be refunded when an applicant for certification withdraws before the completion of the certification process. The organization recommended that the amount of the prorated fee should be based on how far along in the certification process the applicant had progressed before withdrawal. Another commenter believed it was inappropriate for USDA to set any fees for private certification programs and that the fees should be market driven.

It was not our intent to limit the initial amount that certifying agents could collect from the applicant for certification. Our intent was to limit the portion of the fee that would be nonrefundable in order to reduce the potential liability for the small producer/ handler who may need to withdraw prematurely from the certification process. However, we acknowledge that this provision could be misinterpreted. We also realize that certifying agents may incur initial costs during the preliminary stage of the certification process that may be more or less than the $ 250.00 application rate proposed. As a result, we have removed the provision that stated certifying agents could collect a nonrefundable fee of not more than $ 250.00 at the time of application from applicants for certification.

Certifying agents may set the nonrefundable portion of their certification fees. However,

the nonrefundable portion of their certification fees must be explained in the fee schedule submitted to the Administrator. The fee schedule must explain what fee amounts are nonrefundable and at what stage during the certification process the respective fees become nonrefundable. Certifying agents will also provide all persons inquiring about the application process with a copy of its fee schedule.

Fees  Changes Requested But Not Made 281 This subpart retains from the proposed rule regulations on which we received comments as follows:

( 1) Farm Subsidy/ Transition Program. Many commenters asked that USDA subsidize or develop a cost share program for small farmers/ producers who are certified or who are in transition to organic farming. Some commenters wanted these costs to be fully subsidized; a few commenters suggested that USDA pay for any extra site visit costs; and many others wanted USDA to pay premium prices to farmers for their products during the period of transition to organic production. In addition, many commenters argued that USDA should fully fund certification costs. Finally, many commenters suggested that the USDA should provide additional financial support to the organic industry because the industry is relatively young and composed of a large number of small, low resource businesses.

We have considered the commenters requests but have not made the suggested changes.

The NOP under AMS is primarily a user fee based Federal program. Section 2107( a)( 10) of the Organic Food Production Act of 1990 ( OFPA) requires that the NOP provide for the collection of reasonable fees from producers, certifying agents, and handlers who participate in activities to certify, produce, or handle agricultural products as organically produced. Therefore, under the statutory authority of OFPA, it is outside of the scope of the NOP to provide for the subsidization of producers, handlers, and certifying agents as desired by some commenters. We have, however,

established provisions in this part that we believe will minimize the economic impact of the NOP on producers, handlers, and certifying agents.

( 2) Small Farmer Exemption Versus Lower Certification Fees. Many commenters suggested that certification fees be lowered or based on a sliding scale rather than instituting an 282 exemption from certification for small farmers and handlers.

We have not accepted the commenters' suggestion. We cannot remove the small farmer exemption because section 2106( d) of the Act requires that small farmers be provided an exemption from organic certification if they sell no more than $ 5,000 annually in value of agricultural products. Also, certification fees cannot be lowered by USDA because NOP under AMS is primarily a user fee based Federal agency. It is not our goal or objective to make a profit on our accreditation activities. However, our fees associated with the accreditation process are targeted toward recovering costs incurred during the accreditation process. Commenters expressed a concern that the accreditation fees charged by USDA would have an impact on the certification fees prescribed by certifying agents to operations seeking organic certification. We understand the commenters' concern that accreditation fees charged to certifying agents will most likely be calculated into the fees that certifiers charge their clients. However, we believe that our provision to waive the hourly service charges for accreditation during the first 18 months of implementation of the NOP should help reduce accreditation costs of the certifying agent and should, therefore, result lower certification fee charged by certifying agents. As provided by the Act and the regulations in this part, fees charged by certifying agents must be reasonable. Also,

certifying agents must submit their fee schedule to the Administrator and may only charge those fees and charges filed with the Administrator. In addition, certifiers are required to provide their approved fee schedules to applicants for certification. Therefore, applicants for certification will be able to base their selection of a certifying agent on price if they choose. Moreover, there are no provisions in the regulations that preclude certifying agents from pricing their services on a sliding scale, as long as their fees are consistent and nondiscriminatory and are approved during 283 the accreditation process.

( 3) Accreditation Fees. Many industry commenters suggested that we reevaluate our accreditation fee structure. They believe the hourly accreditation rate proposed is unacceptable.

Commenters were concerned that high accreditation costs would lead to high certification costs,

which would have a greater impact on small operations. Some industry commenters also noted that we should be required to provide a fee schedule such as the certifiers are required to do.

They stated that unless USDA provided a fee schedule that included travel costs, they would not be able to accurately budget for these costs. A few commenters wanted USDA to forgo charging travel costs or not charge travel time at the full rate. Several commenters also stated that the hourly rate stated in the proposal is much higher than what the people who actually perform the accreditations will earn. However, a large majority of the commenters favored the 18 month period in which AMS will not charge the hourly accreditation rate to applicants.

As stated in the proposal, the hourly rate will be the same as that of AMS' Quality Systems Certification Program. Due to the fact that AMS' Quality Systems Certification Program publishes one rate that is readily available to the public, it is our belief that it is unnecessary for the NOP to set up a separate fee schedule. The NOP will notify accredited certifying agents and applicants for accreditation of any proposed rate changes and final actions on such rates by AMS.

We will also periodically report the status of fees to the National Organic Standards Board.

Those applicants and certifying agents who need accreditation cost estimates, including travel, for budgetary or other reasons may notify the NOP. The NOP staff will provide the applicant with a cost estimate, based on information provided by the applicant. As stated in an earlier response (( 2)  Changes Requested But Not Made), the objective of the fee that is charged 284 to accredit certifying agents is not to gain a profit for accreditation activities but to recover costs incurred during the accreditation process. As such, these costs include but are not limited to salaries, benefits, clerical help, equipment, supplies, etc.

Compliance This portion of subpart G sets forth the enforcement procedures for the National Organic Program ( NOP). These procedures describe the compliance responsibilities of the NOP Program Manager, State organic programs' ( SOP) governing State officials, and State and private certifying agents. These provisions also address the rights of certified production and handling operations and accredited certifying agents operating under the NOP. The granting and denial of certification and accreditation are addressed under subparts E and F.

Description of Regulations The Secretary is required under the Act to review the operations of SOP's, accredited certifying agents, and certified production or handling operations for compliance with the Act and these regulations. The Program Manager of the NOP may carry out compliance proceedings and provide oversight of compliance proceedings on behalf of the Secretary and the Administrator.

The Program Manager will initiate proceedings to suspend or revoke a certified operation's certification if a certifying agent or SOP's governing State official fails to take appropriate enforcement action. The Program Manager may also initiate proceedings to suspend or revoke a certified operation's certification if the operation is found to have been erroneously certified by a certifying agent whose accreditation has been suspended or revoked. We anticipate, however,

that most investigations, reviews, and analyses of certification noncompliance and initiation of suspension or revocation will be conducted by the certified operation's certifying agent. With 285 regard to certifying agents, the Program Manager will, when appropriate, initiate proceedings to suspend or revoke the accreditation of a certifying agent for noncompliance with the Act and these regulations.

In States with an approved SOP, the SOP's governing State official is responsible for administering a compliance program for enforcement of the NOP/ SOP. SOP's governing State officials may review and investigate complaints of noncompliance involving organic production or handling operations operating within their State and, when appropriate, initiate suspension or revocation of certification. SOP's governing State officials may also review and investigate complaints of noncompliance involving accredited certifying agents operating within their State.

They must report the findings of any review and investigation of a certifying agent to the Program Manager along with any recommendations for appropriate action.

The compliance provisions of the NOP are consistent with the requirements of the Administrative Procedure Act ( APA) ( 5 U. S. C. 553 559) in that this program provides for due process including an opportunity for hearing, appeal procedures, written notifications of noncompliance, and opportunities to demonstrate or achieve compliance before any suspension or revocation of organic certification or accreditation is invoked. A compliance action regarding certification carried out under an approved SOP's compliance procedures will have the same force and effect as a certification compliance action carried out under these NOP compliance procedures. The notification process for denying certification and accreditation is laid out in subparts E and F, respectively.

Each notification of noncompliance, rejection of mediation, noncompliance resolution,

proposed suspension or revocation, and suspension or revocation issued under these regulations 286 must be sent to the recipient's place of business via a delivery service which provides return receipts. Certified operations and certifying agents must respond to all compliance notifications via a delivery service which provides return receipts.

Noncompliance Procedure for Certified Operations The Act provides for the enforcement of certification requirements. Statutory oversight of production and handling operations by certifying agents includes review of organic plans, on site inspections, residue and tissue testing, authority to conduct investigations and initiate suspension or revocation actions, and responsibility to report violations.

Notification of Noncompliance A written notification of noncompliance will be sent to the certified operation when an inspection, review, or investigation reveals any noncompliance with the Act or these regulations.

A noncompliance notification may encompass the entire operation or a portion of the operation.

For instance, a violation at one farm may not warrant loss of certification at other farms of the certified operation not affected by the violation. The notification of noncompliance will provide:

( 1) a description of each condition, action, or item of noncompliance; ( 2) the facts upon which the notification is based; and ( 3) the date by which the certified operation must rebut the notification or correct the noncompliance and submit supporting documentation of the correction. A certified operation may continue to sell its product as organic upon receiving a notification of noncompliance and throughout the compliance proceeding and any appeal procedure which might follow the compliance proceeding unless otherwise notified by a State or Federal government agency.

If a certified operation believes the notification of noncompliance is incorrect or not well 287 founded, the certified operation may submit a rebuttal to the certifying agent or SOP's governing State official, as applicable, providing supporting data to refute the facts stated in the notification.

The opportunity for rebuttal is provided to allow certifying agents and certified operations to informally resolve noncompliance issues. The rebuttal process should be helpful in resolving differences which may be the result of misinterpretation of requirements, misunderstandings, or incomplete information. Alternatively, the certified operation may correct the identified noncompliances and submit proof of such corrections. When the certified operation demonstrates that each noncompliance has been corrected or otherwise resolved, the certifying agent or SOP's governing State official, as applicable, will send the certified operation a written notification of noncompliance resolution.

Proposed Suspension or Revocation of Certification If the noncompliance is not resolved or is not in the process of being resolved by the date specified in the notification of noncompliance, the certifying agent or SOP's governing State official will send the certified operation a written notification of proposed suspension or revocation of certification for the entire operation or a portion of the operation affected by the noncompliance. The notification will state: ( 1) the reasons for the proposed suspension or revocation; ( 2) the proposed effective date of the suspension or revocation; ( 3) the impact of the suspension or revocation on the certified operation's future eligibility for certification; and ( 4) that the certified operation has a right to request mediation or to file an appeal. The impact of a proposed suspension or revocation may include the suspension or revocation period or whether the suspension or revocation applies to the entire operation or to a portion or portions of the operation. 288 If a certifying agent or SOP's governing State official determines that correction of a noncompliance is not possible, the notification of noncompliance and the proposed suspension or revocation of certification may be combined in one notification of proposed suspension or revocation. The certified operation will have an opportunity to appeal the proposed suspension or revocation.

If a certifying agent or SOP's governing State official has reason to believe that a certified operation has willfully violated the Act or regulations, a notification of proposed suspension or revocation will be sent to the certified operation. The proposed suspension or revocation will be for the entire operation or a portion of the operation. This notification, because it involves a willful violation, will be sent without first issuing a notification of noncompliance.

Mediation A production or handling operation may request mediation of any dispute regarding denial of certification or proposed suspension or revocation of certification. Mediation is not required prior to filing an appeal but is offered as an option which may resolve the dispute more quickly than the next step, which is filing an appeal. When mediation is requested, it must be requested in writing to the applicable certifying agent. The certifying agent will have the option of accepting or rejecting the request for mediation. If the certifying agent rejects the request for mediation, the certifying agent must provide written notification to the applicant for certification or certified operation. The written notification must advise the applicant for certification or certified operation of the right to request an appeal in accordance with section 205.681. Any such appeal must be requested within 30 days of the date of the written notification of rejection of the request for mediation. If mediation is accepted by the certifying agent, such mediation must be conducted 289 by a qualified mediator mutually agreed upon by the parties to the mediation. If an SOP is in effect, the mediation procedures established in the SOP, as approved by the Secretary, must be followed. The parties to the mediation will have no more than 30 days to reach an agreement following a mediation session. If mediation is unsuccessful, the production or handling operation will have 30 days from termination of mediation to appeal the denial of certification or proposed suspension or revocation in accordance with the appeal procedures in section 205.681.

Any agreement reached during or as a result of the mediation process must be in compliance with the Act and these regulations. The Secretary reserves the right to review any mediated agreement for conformity to the Act and these regulations and to reject any agreement or provision not in conformance with the Act or these regulations Suspension or Revocation The certifying agent or SOP's governing State official will suspend or revoke the certified operation's certification when the operation fails to resolve the issue through rebuttal or mediation, fails to complete needed corrections, or does not file an appeal. The operation will be notified of the suspension or revocation by written notification. The certifying agent or SOP's governing State official must not send a notification of suspension or revocation to a certified operation that has requested mediation or filed an appeal while final resolution of either is pending.

The decision to suspend or revoke certification will be based on the seriousness of the noncompliance. Such decisions must be made on a case by case basis. Section 6519 of the Act establishes that willful violations include making a false statement, knowingly affixing a false label,

or otherwise violating the purposes of the Act. 290 In addition to suspension or revocation, a certified operation that knowingly sells or labels a product as organic, except in accordance with the Act, will be subject to a civil penalty of not more than $ 10,000 per violation. Further, a certified operation that makes a false statement under the Act to the Secretary, an SOP's governing State official, or a certifying agent will be subject to the provisions of section 1001 of title 18, United States Code.

A certified operation whose certification has been suspended under this section may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its certification. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the NOP.

A certified operation or a person responsibly connected with an operation that has had its certification revoked will be ineligible to receive certification for an operation in which such operation or person has an interest for 5 years following the date of revocation. Accordingly, an operation will be ineligible for organic certification if one of its responsibly connected parties, was a responsibly connected party of an operation that had its certification revoked. The Secretary may, when in the best interest of the certification program, reduce or eliminate the period of ineligibility.

Noncompliance Procedure for Certifying Agents The Program Manager, on behalf of the Secretary, may initiate a compliance action against an accredited certifying agent who violates the Act or these regulations. Compliance proceedings may be initiated as a result of annual reviews for continuation of accreditation, site evaluations, or investigations initiated in response to complaints of noncompliant activities. 291 Compliance proceedings also may be initiated on recommendation of an SOP's governing State official.

A written notification of noncompliance will be sent by the Program Manager to an accredited certifying agent when an inspection, review, or investigation of such person reveals any noncompliance with the Act or these regulations. A notification of noncompliance will provide a description of each noncompliance found and the facts upon which the notification is based.

Additionally, the notification will provide the date by which the certifying agent must rebut or correct each noncompliance described and submit supporting documentation of each correction.

When documentation received by the Program Manager demonstrates that each noncompliance has been resolved, the Program Manager will send the certifying agent a written notification of noncompliance resolution.

If a noncompliance is not resolved by rebuttal or correction, the Program Manager will issue a notification of proposed suspension or revocation of accreditation. The notification will state whether the suspension or revocation will be for the certifying agent's entire accreditation,

that portion of the accreditation applicable to a particular field office, or a specific area of accreditation. For instance, if a certifying agent with field offices in different geographic areas is cited for a compliance violation at one field office, the Program Manager could determine that only that portion of the accreditation applicable to the noncompliant field office should be suspended or revoked.

If the Program Manager determines that the noncompliance cannot be immediately or easily corrected, the Program Manager may combine the notification of noncompliance and the proposed suspension or revocation in one notification. 292 The notification of proposed suspension or revocation of accreditation will state the reasons and effective date for the proposed suspension or revocation. Such notification will also state the impact of a suspension or revocation on future eligibility for accreditation and the certifying agent's right to file an appeal.

If the Program Manager has reason to believe that a certifying agent has willfully violated the Act or regulations, the Program Manager will issue a notification of proposed suspension or revocation of accreditation. The proposed suspension or revocation may be for the certifying agent's entire accreditation, that portion of the accreditation applicable to a particular field office,

or a specified area of accreditation. This notification, because it involves a willful violation, will be sent without first issuing a notification of noncompliance.

The certifying agent may file an appeal of the Program Manager's determination pursuant to section 205.681. If the certifying agent fails to file an appeal of the proposed suspension or revocation, the Program Manager will suspend or revoke the certifying agent's accreditation. The certifying agent will be notified of the suspension or revocation by written notification.

A certifying agent whose accreditation is suspended or revoked must cease all certification activities in each area of accreditation and in each State for which its accreditation is suspended or revoked. Any certifying agent whose accreditation has been suspended or revoked must transfer to the Secretary all records concerning its certification activities that were suspended or revoked.

The certifying agent must also make such records available to any applicable SOP's governing State official. The records will be used to determine whether operations certified by the certifying agent may retain their organic certification.

A certifying agent whose accreditation is suspended by the Secretary may at any time, 293 unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its accreditation. Such request must be accompanied by evidence demonstrating correction of each noncompliance and actions taken to comply with and remain in compliance with the Act and regulations. A certifying agent whose accreditation is revoked by the Secretary will be ineligible to be accredited as a certifying agent under the Act and regulations for a period of not less than 3 years following the date of revocation.

State Organic Programs' Compliance Procedures An SOP's governing State official may initiate noncompliance proceedings against certified organic operations operating in the State. Such proceedings may be initiated for failure of a certified operation to meet the production or handling requirements of this part or the State's more restrictive requirements, as approved by the Secretary.

The SOP's governing State official must promptly notify the Program Manager of commencement of noncompliance proceedings initiated against certified operations and forward to the Program Manager a copy of each notice issued. A noncompliance proceeding, brought by an SOP's governing State official against a certified operation may be appealed in accordance with the appeal procedures of the SOP. There will be no subsequent rights of appeal to the Secretary. Final decisions of a State may be appealed to the United States District Court for the district in which such certified operation is located.

An SOP's governing State official may review and investigate complaints of noncompliance with the Act or regulations concerning accreditation of certifying agents operating in the State. When such review or investigation reveals any noncompliance, the SOP's governing State official must send a written report of noncompliance to the Program Manager. The SOP's 294 governing State official's report must provide a description of each noncompliance and the facts upon which the noncompliance is based.

Compliance  Changes Based On Comments This portion of subpart G differs from the proposal in several respects as follows:

( 1) Written Notifications. We have added a new paragraph ( d) to section 205.660. The preamble to the proposed rule stated that all written notifications sent by certifying agents and SOP's governing State officials, as well as rebuttals, requests for mediation, and notices of correction of noncompliances sent by certified operations, will be sent to the addressee's place of business by a delivery service which provides dated return receipts. The assurance of completed communications and timely compliance procedures was given as the reason for delivery by a service which provides dated return receipts. The addition of paragraph ( d) at section 205.660 is one of the actions that we have taken in response to requests from commenters that we further clarify the compliance process. Paragraph ( d) requires that each notification of noncompliance,

rejection of mediation, noncompliance resolution, proposed suspension or revocation, and suspension or revocation issued in accordance with sections 205.662, 205.663, and 205.665 and each response to such notification must be sent to the recipient's place of business via a delivery service which provides return receipts. This action will facilitate the effective administration of the compliance process by assuring a verifiable time line on the issuance and receipt of compliance documents and the response given to each such document.

( 2) Determination of Willful. The preamble statement that " only the Program Manager or governing State official may make the final determination that a violation is willful" was incorrect and inconsistent with the regulatory language in section 205.662( d). Section 205.662( d) provides 295 that, " if a certifying agent or State organic program's governing State official has reason to believe that a certified operation has willfully violated the Act or regulations in this part, the certifying agent or State organic program's governing State official shall send the certified operation a notification of proposed suspension or revocation of certification of the entire operation or a portion of the operation, as applicable to the noncompliance." Accordingly, as recommended by a commenter, the incorrect statement has been deleted from the preamble to this final rule.

( 3) Proposed Suspension or Revocation. We have amended sections 205.662( c) and 205.665( c) by removing the redundant phrase " or is not adequate to demonstrate that each noncompliance has been corrected" from the first sentence of each section.

( 4) Suspension or Revocation. We have amended section 205.662( e)( 2) by adding " while final resolution of either is pending" to the end thereof. The language of section 205.662( e)( 2)

now reads: " A certifying agent or State organic program's governing State official must not send a notification of suspension or revocation to a certified operation that has requested mediation pursuant to section 205.663 or filed an appeal pursuant to section 205.681 while final resolution of either is pending." We have made this change because we agree with those commenters who expressed the belief that section 205.662( e)( 2) needed to be amended to clarify the duration of the stay on the issuance of a notification of suspension or revocation when mediation is requested or an appeal is filed. Several commenters stated that section 205.662( e)( 2) needed to be amended to clarify that requesting mediation or filing an appeal does not indefinitely stop the suspension or revocation process.

( 5) Eligibility After Suspension or Revocation of Certification. We have amended section 296 205.662( f) such that it now parallels section 205.665( g) which addresses suspension and revocation of certifying agents. We have also changed the title of section 205.662( f) from " Ineligibility" to " Eligibility" to parallel section 205.665( g). A few commenters referred to the provisions in section 205.665( g), which addresses eligibility after suspension or revocation of accreditation, and requested clarification of the difference between suspension and revocation of certification. Upon reviewing section 205.662( f), we decided that amendment was needed to clarify the difference between suspension and revocation of certification relative to eligibility for certification. Accordingly, we added a new paragraph ( 1) which provides that a certified operation whose certification has been suspended under this section may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its certification. The paragraph also provides that the request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. We also amended what is now paragraph ( 2) of section 205.662( f) to clarify that the period of ineligibility following revocation of certification is 5 years unless reduced or eliminated by the Secretary.

Further, we have amended section 205.665( g)( 1) to clarify that a certifying agent that has had its accreditation suspended may request reinstatement of its accreditation rather than submit a new request for accreditation. The amendment also clarifies that the reinstatement may be requested at any time unless otherwise stated in the notification of suspension. This amendment makes section 205.665( g)( 1) similar to new paragraph ( 1) of section 205.662( f). This amendment is also consistent with commenter desires that the noncompliance procedures for certified 297 operations and accredited certifying agents be similar.

( 6) Penalties for Violations of the Act. We have amended section 205.662 by adding a new paragraph ( g) which incorporates therein the provisions of paragraphs ( a) and ( b) of section 2120, 7 U. S. C. 6519, Violations of Title, of the Act. Specifically, paragraph ( g) provides that, in addition to suspension or revocation, any certified operation that knowingly sells or labels a product as organic, except in accordance with the Act, shall be subject to a civil penalty of not more than $ 10,000 per violation. This paragraph also provides that any certified operation that makes a false statement under the Act to the Secretary, an SOP's governing State official, or a certifying agent shall be subject to the provisions of section 1001 of title 18, United States Code.

Commenters requested regulatory language citing section 2120, 7 USC 6519, Violations of Title,

of the Act. Commenters also requested a clearer description of enforcement. Specifically, they want provisions describing how USDA will deal with operations that make false claims or do not meet the NOP requirements. Further, numerous commenters expressed concern that there are no penalties in the regulations other than suspension and revocation. The European Community stated that it did not find, in the proposal, requirements for penalties to be applied by certifying agents when irregularities or infringements are found. The European Community went on to say that the European Union requires such penalties.

The Act provides for suspension and revocation of certification and the civil and criminal penalties addressed in 7 U. S. C. 6519. Certified operations are also required through the compliance program set forth in these regulations, to correct all noncompliances with the Act or regulations as a condition of retaining their certification. Furthermore, to get a suspended certification reinstated, an operation must submit a request to the Secretary. The request must be 298 accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. An operation or a person responsibly connected with an operation whose certification has been revoked will be ineligible to receive certification for a period of not more than 5 years.

We believe adding paragraph ( g) will help clarify that there are penalties which may be imposed on certified operations that violate the Act and these regulations in addition to suspension or revocation.

The provisions of the Act and these regulations apply to all persons who sell, label, or represent their agricultural product as organic. Accordingly, persons who falsely sell, label, or represent their product as organic, are subject to the provisions of paragraphs ( a) and ( b) of section 2120, 7 USC 6519, of the Act. To clarify this, we have added a new paragraph ( c) to section 205.100 of the Applicability subpart.

Certifying agents, SOP's governing State officials, and USDA will receive complaints alleging violations of the Act or these regulations. Certifying agents will review all complaints that they receive to determine if the complaint involves one of their clients. If the complaint involves a client of the certifying agent, the agent will handle the complaint in accordance with its procedures for reviewing and investigating certified operation compliance. If the complaint involves a person who is not a client of the certifying agent, the certifying agent will refer the complaint to the SOP's governing State official, when applicable, or, in the absence of an applicable SOP's governing State official, the Administrator. SOP's governing State officials will review all complaints that they receive in accordance with their procedures for reviewing and investigating alleged violations of the NOP and SOP. The SOP's governing State official's 299 review of the complaint could result in referral of the complaint to a certifying agent when the complaint involves a client of the certifying agent, dismissal, or investigation by the SOP's governing State official. SOP's governing State officials will, as appropriate, investigate allegations of violations of the Act by noncertified operations operating within their State. USDA will review all complaints that it receives in accordance with its procedures for reviewing and investigating alleged violations of the NOP. USDA will refer complaints alleging violations of the NOP/ SOP to the applicable SOP's governing State official, who may, in turn, refer the complaint to the applicable certifying agent. In States without an approved SOP, USDA will refer complaints to the applicable certifying agent. USDA will, as appropriate, investigate allegations of violations of the Act by noncertified operations operating in States where there is no approved SOP.

( 7) Mediation. We have amended section 205.663 by providing that a dispute with respect to proposed suspension or revocation of certification may, rather than shall, be mediated.

We have also provided that mediation must be requested in writing to the applicable certifying agent. The certifying agent will have the option of accepting or rejecting the request for mediation. If the certifying agent rejects the request for mediation, the certifying agent must provide written notification to the applicant for certification or certified operation. The written notification must advise the applicant for certification or certified operation of the right to request an appeal within 30 days of the date of the written notification of rejection of the request for mediation. If mediation is accepted by the certifying agent, such mediation must be conducted by a qualified mediator mutually agreed upon by the parties to the mediation.

Several commenters wanted section 205.663 amended to provide that disputes " may," 300 rather than " shall," be mediated. The commenters advocated allowing the certifying agent to determine when mediation is a productive option. Several State commenters wanted to amend the second sentence to read as follows: " If a State organic program is in effect, the mediation procedures established in the State orgnic program, as approved by the Secretary, will be followed for cases involving the State organic program and its applicants or certified parties."

Another commenter wanted to retain the requirement that disputes " shall" be mediated but wanted disputes mediated in accordance with 7 CFR Part 11 and section 205.681 of these regulations.

We concur that certifying agents should be authorized to reject a request for mediation,

especially when they believe that the noncompliance issue is not conducive to mediation.

Accordingly, we amended section 205.663 as noted above. We disagree, however, with the State commenters who want to amend the second sentence. We believe that the recommended change would exclude the clients of private sector certifying agents operating within the State. USDA approval of an SOP will require that all certified operations operating within the State have the same opportunities for mediation, regardless of whether they are certified by a private or State certifying agent. If an approved SOP provides for mediation, such mediation must be available to all certified operations operating within the State. We also disagree with the commenter who requested that disputes be mediated in accordance with 7 CFR Part 11 and section 205.681 of these regulations. First, we believe that States with an approved SOP must be allowed to establish their own mediation program and procedures. Second, the Act and its implementing regulations are subject to the APA for adjudication. The provisions of the APA generally applicable to agency adjudication are not applicable to proceedings under 7 CFR Part 11, National 301 Appeals Division Rules of Procedure. Even if 7 CFR Part 11 were applicable, it does not address mediation procedures. Mediation is merely addressed in 7 CFR Part 11 as an available dispute resolution method along with its impact on the filing of an appeal.

( 8) Noncompliance Procedure for Certifying Agents. We have amended section 205.665( a)( 3) to clarify that, like certified operations, certifying agents must submit supporting documentation of each correction of a noncompliance identified in a notification of noncompliance. This amendment to section 205.665( a)( 3) was made in response to commenter concerns that the noncompliance procedures for certified operations and certifying agents be similar. It had been our intent that certifying agents would have to document their correction of noncompliances and that the noncompliance procedures for certified operations and certifying agents would be similar.

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

( 1) Funding for Enforcement. Several commenters stated that USDA should provide funding to the States for the cost of performing enforcement activities. Others asked who should fund investigations and enforcement actions if certifying agents ( State and private) are enforcing compliance with a Federal law. Numerous commenters requested information on how enforcement will be funded. The National Organic Standards Board ( NOSB) recommended that the NOP examine existing models for capturing enforcement fees such as the State of California's registration program for all growers, handlers, and processors who use the word, " organic," in marketing their products. 302 We disagree with the commenters who stated that USDA should fund enforcement activities ( State and private). Costs for compliance under the NOP will be borne by USDA,

States with approved SOP's, and accredited certifying agents. Each of the entities will bear the cost of their own enforcement activities under the NOP. AMS anticipates that States will consider the cost of enforcing their SOP's prior to seeking USDA approval of such programs.

We also anticipate that certifying agents will factor the cost of compliance into their certification fee schedules.

We agree that there may be alternatives, such as the State of California's registration program, available to raise funds for enforcing the NOP. We will help identify existing models and potential options that may be available in the future at the Federal, State, or certifying agent level. In the interim, we believe that SOP's should explore funding options at their level and that certifying agents should factor the cost of enforcement into their certification fees structure.

( 2) Stop Sale. A number of commenters requested that the regulations include the ability to stop sales or recall misbranded or fraudulently produced products. The Act does not authorize the NOP to stop sales or recall misbranded or fraudulently produced product. Accordingly,

USDA cannot authorize stop sales or the recall of product. We also believe that the certified operation's right to due process precludes a stop sale or recall prior to full adjudication of the alleged noncompliance. However, the Food and Drug Administration ( FDA) and the USDA's Food Safety Inspection Service ( FSIS) have stop sale authority that may be used in certain organic noncompliance cases. Further, States may, at their discretion, be able to provide for stop sale or recall of misbranded or fraudulently produced products produced within their State. While the Act does not provide for stop sale or recall, it does provide at 7 U. S. C. 6519 that any person 303 who: ( 1) knowingly sells or labels a product as organic, except in accordance with the Act, shall be subject to a civil penalty of not more than $ 10,000 and ( 2) makes a false statement under the Act to the Secretary, an SOP's governing State official, or a certifying agent shall be subject to the provisions of section 1001 of title 18, United States Code.

( 3) Notification of Proposed Suspension or Revocation. A commenter recommended replacing " notification of proposed suspension or revocation" in section 205.662( d) with " notification of suspension or revocation." Certification cannot be suspended or revoked without due process. Accordingly, the issuance of a written notification of proposed suspension or revocation is necessary to provide the certified operation with information regarding the alleged noncompliance( s) and its right to answer the allegations. For this reason we have not accepted the commenter's recommendation.

( 4) Mediation for Certifying Agents. Several commenters recommended amending section 205.665( c)( 4) to provide for mediation between a certifying agent and the Program Manager when a proposed suspension or revocation is disputed by the certifying agent. We have not accepted the recommendation. USDA uses 7 CFR Part 1, Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes, for adjudicatory proceedings involving the denial, suspension, and revocation of accreditation.

( 5) Revocation of Accreditation. A commenter stated that revocation of accreditation for 3 years is excessive. The commenter stated that a period of 6 to 12 months might be reasonable.

We have not amended section 205.665( g)( 2) because the Act requires that the period of revocation for certifying agents, who violate the Act and these regulations, be for not less than 3 years. Suspension is available to the Secretary to address less egregious noncompliances. A 304 certifying agent whose accreditation is suspended may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its accreditation.

The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and these regulations.

( 6) Appeals Under SOP's. Several commenters recommended amending 205.668( b) by adding at the end thereof: " unless the State program's appeals procedures include judicial review through the State District Court." Another commenter wanted 205.668( b) amended by removing " of the State organic certification program. There shall be no subsequent rights of appeal to the Secretary. Final decisions of a State may be appealed to the United States District Court for the district in which such certified operation is located," and inserting in its place " at 7 CFR part 11 and 205.681 of this chapter." We have not accepted the recommendations because the Act at 7 U. S. C. 6520 provides that a final decision of the Secretary may be appealed to the United States District Court for the district in which the person is located. We consider an approved SOP to be the NOP for that State. As such, we consider the SOP's governing State official of such approved SOP to be the equivalent of a representative of the Secretary for the purposes of the appeals procedures under the NOP. Accordingly, the final decision of the SOP's governing State official of an approved SOP is considered the final decision of the Secretary and, as such, is appealable to the United States District Court for the district in which the person is located, not a State's District Court.

We also disagree with the commenter who wanted all appeals to be made to the National Appeals Division under the provisions at 7 CFR Part 11 and section 205.681 of these regulations. 305 First, we believe that States with an approved SOP must be allowed to establish their own appeal procedures. Such procedures would have to comply with the Act, be equivalent to the procedures of USDA, and be approved by the Secretary. Second, as noted elsewhere in this preamble, the Act and its implementing regulations are subject to the APA for adjudication. The provisions of the APA generally applicable to agency adjudication are not applicable to proceedings under 7 CFR Part 11.

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

( 1) Complaints, Investigations, Stop Sales, and Penalties. Many commenters wanted USDA to spell out the responsibilities and authorities of States, State and private certifying agents, Federal agencies, and citizens to make complaints, investigate violations, halt the sale of products, and impose penalties. Anyone may file a complaint, with USDA, an SOP's governing State official, or certifying agent, alleging violation of the Act or these regulations. Certifying agents, SOP's governing State officials, and USDA will receive, review, and investigate complaints alleging violations of the Act or these regulations as described in item 6 above under Changes Based on Comments. Citizens have no authority under the NOP to investigate complaints alleging violation of the Act or these regulations.

As noted elsewhere in this preamble, the Act does not authorize USDA to stop the sale of product. Accordingly, USDA cannot authorize stop sales by accredited certifying agents. We also believe that the certified operation's right to due process precludes a stop sale prior to full adjudication of the alleged noncompliance. However, FDA and FSIS have stop sale authority that may be used in the event of food safety concerns. Further, States may, at their discretion, be able 306 to provide for stop sale of product produced within their State. Citizens have no authority under the NOP to stop the sale of a product.

The Act and these regulations provide for suspension or revocation of certification by certifying agents, SOP's governing State officials, and the Secretary. Only USDA may suspend or revoke a certifying agent's accreditation. All proposals to suspend or revoke a certification or accreditation are subject to appeal as provided in section 205.681. The Act provides at 7 U. S. C.

6519 that any person who: ( 1) knowingly sells or labels a product as organic, except in accordance with the Act, shall be subject to a civil penalty of not more than $ 10,000 and ( 2)

makes a false statement under the Act to the Secretary, an SOP's governing State official, or a certifying agent shall be subject to the provisions of section 1001 of title 18, United States Code.

Only USDA may bring an action under 7 U. S. C. 6519.

( 2) Certifying Agent's Identifying Mark. The NOSB reaffirmed its recommendation which would allow private certifying agents to prevent the use of their service mark ( seal) upon written notification that: ( 1) certification by the private certifying agent has been terminated, and ( 2) the certifying agent has 30 days to appeal the certifying agent's decision to the Secretary of Agriculture. We will neither prohibit nor approve a certifying agent's actions to withdraw a certified operation's authority to use the certifying agent's identifying mark for alleged violations of the Act or regulations. We stand fast in our position that all certified operations are to be given due process prior to the suspension or revocation of their certification. The reader is also reminded that the certifying agent cannot terminate, suspend, or revoke a certification if the certified operation files an appeal with an SOP's governing State official, when applicable, or the Administrator as provided for in the notification of proposed suspension or revocation. The 307 certifying agent accepts full liability for any action brought as a result of the withdrawal of a certified operation's authority to use the certifying agent's identifying mark.

( 3) Loss of Certification. A commenter posed several questions regarding the loss of certification. The commenter's questions and our responses are as follows.

How will consumers and affected regulatory agencies know if a grower or handler loses its certification? We will provide public notification of suspensions and revocations of certified operations through means such as the NOP website.

What will the effect of a lost certification be? Suspension or revocation of a producer's or handler's certification will require that the producer or handler immediately cease its sale, labeling,

and representation of agricultural products as organically produced or handled as provided in the suspension or revocation order. A production or handling operation or a person responsibly connected with an operation whose certification has been suspended may at any time, unless otherwise stated in the notification of suspension, submit a new request for certification in accordance with section 205.401. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. An operation or a person responsibly connected with an operation whose certification has been revoked will be ineligible to receive certification for a period of not more than 5 years following the date of such revocation, as determined by the Secretary. Any producer or handler who sells, labels, or represents its product as organic contrary to the provisions of the suspension or revocation order would be subject to prosecution under 7 U. S. C. 6519 of the Act.

Will the certifying agent give a future effective date for loss of certification, or could the 308 loss of certification be immediate or even retroactive? Suspension or revocation will become effective as specified in the suspension or revocation order once it becomes final and effective.

The operation, upon suspension or revocation, will be prohibited from selling, labeling, and representing its product as organic per the provisions of the suspension or revocation order.

If organic products already on the market were grown or handled by someone whose certification is revoked or suspended, would USDA require that the products be recalled and relabeled? USDA will not, unless the noncompliance involves a food safety issue under FSIS,

require the recall or relabeling of product in the channels of commerce prior to the issuance of a suspension or revocation order. First, at the time the product was produced, it may have been produced in compliance with the Act and these regulations. Second, USDA does not have the authority, under the Act, to issue a stop sale order for product sold, labeled, or represented as organic and placed in the channels of commerce prior to suspension or revocation of a certified operation's certification. The Act, however, provides at 7 U. S. C. 6519( a) for the prosecution of any person who knowingly sells or labels a product as organic, except in accordance with the Act.

Such persons shall be subject to a civil penalty of not more than $ 10,000 per violation.

( 4) Investigations. A commenter suggested that we amend section 205.661( a) to require that all complaints must be investigated in accordance with the certifying agent's complaints policy. The commenter also stated that the Administrator should know which complaints were not investigated. We disagree that all complaints must be investigated since, upon review of the alleged noncompliance, some complaints may lack grounds for investigation. For example, a concerned citizen could allege that an organic producer was seen applying a pesticide to a specific field. Upon review of the allegation, the certifying agent could determine that the producer in 309 question was a split operation and that the field in question was part of the conventional side of the production operation. Accordingly, there would be no need for an investigation. However,

the certifying agent will be expected to: ( 1) take each allegation seriously, ( 2) review each complaint received, ( 3) make a determination as to whether there may be a basis for conducting an investigation, ( 4) investigate all allegations when it is believed that there may be a basis for conducting the investigation, and ( 5) maintain a detailed log of all complaints received and their disposition. The actions taken by the certifying agent must be in conformance with the certifying agent's procedures for reviewing and investigating certified operation compliance.

( 5) Deadline for the Correction of a Noncompliance. Several commenters requested that 205.662( a)( 3) be amended by adding: " The deadline for correction of the noncompliance may be extended at the discretion of the certifier if substantial progress has been made to correct the noncompliance." We believe that the requested amendment is unnecessary. Section 205.662( a)( 3) requires that the notification of noncompliance include a date by which the certified operation must rebut or correct each noncompliance and submit supporting documentation of each correction when correction is possible. There is no prohibition preventing the certifying agent from extending the deadline specified when the certifying agent believes that the certified operation has made a good faith effort at correcting each noncompliance.

( 6) Compliance with SOP. Several States requested that section 205.665 be amended to clarify how States may handle a private certifying agent found to be in noncompliance with SOP's approved by the Secretary. A majority of these commenters also asked if NOP intends to suspend or revoke the accreditation of certifying agents on a State by State basis. Section 205.668( c)

authorizes an SOP's governing State official to review and investigate complaints of 310 noncompliance with the Act or regulations concerning accreditation of certifying agents operating in the State. When such review or investigation reveals any noncompliance, the SOP's governing State official shall send a written report of noncompliance to the NOP Program Manager. The report shall provide a description of each noncompliance and the facts upon which the noncompliance is based. The NOP Program Manager will then employ the noncompliance procedures for certifying agents as found in section 205.665. This may include additional investigative work by AMS. Only USDA may suspend or revoke a certifying agent's accreditation.

SOP's must meet the general requirements for organic programs specified in the Act and be at least equivalent to these regulations. Accordingly, noncompliances worthy of suspension or revocation would in all probability be worthy of national suspension or revocation of accreditation for one or more areas of accreditation. Therefore, USDA does not anticipate suspending or revoking accreditations, or areas of accreditation, on a State by State basis. It is possible,

however, that the Secretary may decide to only suspend or revoke a certifying agent's accreditation or an area of accreditation to certify producers or handlers within a given State.

Such a decision would in all probability be tied to a State's more restrictive requirements.

Inspection and Testing, Reporting, and Exclusion from Sale This portion of subpart G sets forth the inspection and testing requirements for agricultural products that have been produced on organic production operations or handled through organic handling operations.

Residue testing plays an important role in organic certification by providing a means for monitoring compliance with the National Organic Program ( NOP) and by discouraging the 311 mislabeling of agricultural products. This testing program provides State organic programs'

( SOP) governing State officials and certifying agents with a tool for ensuring compliance with three areas for testing: ( 1) preharvest residue testing, ( 2) postharvest residue testing, and ( 3)

testing for unavoidable residual environmental contamination levels.

Description of Regulations General Requirements Under the residue testing requirements of the NOP, all agricultural products sold, labeled,

or represented as organically produced must be available for inspection by the Administrator,

SOP's governing State official, or certifying agent. Organic farms and handling operations must be made available for inspection under subpart E, Certification. In addition, products from the aforementioned organic operations may be required by the SOP's governing State official or certifying agent to undergo preharvest or postharvest testing when there is reason to believe that agricultural inputs used in organic agriculture production or agricultural products to be sold or labeled as organically produced have come into contact with prohibited substances or have been produced using excluded methods. The cost of such testing will be borne by the applicable certifying agent and is considered a cost of doing business. Accordingly, certifying agents should make provisions for the cost of preharvest or postharvest residue testing when structuring certification fees.

Preharvest and Postharvest Residue Testing The main objectives of the residue testing program are to: ( 1) ensure that certified organic production and handling operations are in compliance with the requirements set forth in this final rule and ( 2) serve as a means for monitoring drift and unavoidable residue contamination of 312 agricultural products to be sold or labeled as organically produced. Any detectable residues of a prohibited substance or a product produced using excluded methods found in or on samples during analysis will serve as a warning indicator to the certifying agent.

The Administrator, SOP's governing State official, or certifying agent may require preharvest or postharvest testing of any agricultural input used in organic agricultural production or any agricultural product to be sold or labeled as " 100 percent organic," " organic," or " made with organic ( specified ingredients or food group( s))." It is based on the Administrator's, SOP's governing State official's, or certifying agent's belief that an agricultural product or agricultural input has come into contact with one or more prohibited substances or has been produced using excluded methods. Certifying agents do not have to conduct residue tests if they do not have reason to believe that there is a need for testing. Certifying agents must ensure, however, that certified organic operations are operating in accordance with the Act and the regulations set forth in this part.

The " reason to believe" could be triggered by various situations, for example: ( 1) the applicable authority receiving a formal, written complaint regarding the practices of a certified organic operation; ( 2) an open container of a prohibited substance found on the premises of a certified organic operation; ( 3) the proximity of a certified organic operation to a potential source of drift; ( 4) suspected soil contamination by historically persistent substances; or ( 5) the product from a certified organic operation being unaffected when neighboring fields or crops are infested with pests. These situations do not represent all of the possible occurrences that would trigger an investigation. Preharvest or postharvest residue testing will occur on a case by case basis.

In each case, an inspector representing the Administrator, SOP's governing State official, 313 or certifying agent or will conduct sampling. According to subpart F, Accreditation, private or State entities accredited as certifying agents under the NOP must ensure that its responsibly connected persons, employees, and contractors with inspection, analysis, and decision making responsibilities have sufficient expertise to successfully perform the duties assigned. Therefore, all inspectors employed by certifying agents to conduct sampling must have sufficient expertise in methods of chain of custody sampling. Moreover, testing for chemical residues must be performed in an accredited laboratory. When conducting chemical analyses, the laboratory must incorporate the analytical methods described in the most current edition of the Official Methods of Analysis of the AOAC International or other current applicable validated methodology for determining the presence of contaminants in agricultural products. Results of all analyses and tests performed under section 205.670 must be promptly provided to the Administrator, except,

that, where an SOP exists, all test results and analyses should be provided to the SOP's governing State official by the applicable certifying party that requested testing. Residue test results and analyses must also be, according to section 205.403( e)( 2), provided to the owner of the certified organic operation whose product was tested. All other parities desiring to obtain such information must request it from the applicable certifying agent.

OFPA requires certifying agents, to the extent of their awareness, to report violations of applicable laws relating to food safety to appropriate health agencies such as EPA and FDA.

When residue testing indicates that an agricultural product contains pesticide residues or environmental contaminants that exceed either the EPA tolerance level or FDA action level, as applicable, the certifying agent must promptly report data revealing such information to the Federal agency whose regulatory tolerance or action level has been exceeded. 314 Residue Testing and Monitoring Tools When testing indicates that an agricultural product to be sold or labeled as organically produced contains residues of prohibited substances, certifying agents will compare the level of detected residues with 5 percent of the Environmental Protection Agency ( EPA) tolerance for the specific residue detected on the agricultural product intended to be sold as organically produced.

This compliance measure, 5 percent of EPA tolerance for the detected prohibited residue, will serve as a standard for the Administrator, SOP's governing State officials, and certifying agents to assist in monitoring for illegal use violations.

In addition, we intend to establish levels of unavoidable residual environmental contamination ( UREC) for crop and site specific agricultural commodities to be sold, labeled, or represented as " 100 percent organic," " organic," or " made with..." These levels will represent limits at which USDA may take compliance action to suspend the use of a contaminated area for organic agricultural production. Currently, USDA is seeking scientifically sound principles and measures by which it can establish UREC levels to most effectively address issues of unavoidable residual environmental contamination with respect to this rule. However, in the interim, UREC will be defined as the Food and Drug Administration's ( FDA) action levels for poisonous or deleterious substances in human food or animal feed. UREC levels will be initially set for persistent prohibited substances ( aldrin, dieldrin, chlordane, DDE, etc.) in the environment. They may become more inclusive of prohibited residues as additional information becomes available.

Unavoidable residual environmental contamination levels will be based on the unavoidability of the chemical substances and do not represent permissible levels of contamination where it is avoidable. 315 Analyses and test results will be available for public access unless the residue testing is part of an ongoing compliance investigation. Information relative to an ongoing compliance investigation will be confidential and restricted to the public.

Detection of Prohibited Substances or Products Derived from Excluded Methods In the case of residue testing and the detection of prohibited substances in or on agricultural products to be sold, labeled, or represented as " 100 percent organic," " organic," or " made with...," products with detectable residues of prohibited substances that exceed 5 percent of the EPA tolerance for the specific residue or UREC cannot be sold or labeled as organically produced. When such an agricultural crop is in violation of these requirements, the certification of that crop will be suspended for the period that the crop is in production. Certifying agents must follow the requirements specified in sections 205.662 and 205.663 of subpart G,

Compliance.

The " 5 percent of EPA tolerance" standard is considered a level above which an agricultural product cannot be sold as organic, regardless of how the product may have come into contact with a potential prohibited substance. This standard has been established to: ( 1) satisfy consumer expectations that organic agricultural products will contain minimal chemical residues and ( 2) respond to the organic industry's request to implement a standard comparable to current industry practices. However, the " 5 percent of EPA tolerance" standard cannot be used to automatically qualify agricultural products as organically produced, even if the level of chemical residues detected on an agricultural product is below 5 percent of the EPA tolerance for the respective prohibited substance. This final rule is a comprehensive set of standards and regulations that determines whether a product can or cannot be considered to carry the specified 316 organic labeling terms in subpart D, Labeling. Therefore, in addition to this section of subpart G,

Administrative, all other requirements of this part must be met by certified organic operations to have an agricultural product considered " organically produced."

When residue testing detects the presence of any prohibited substance, whether above or below 5 percent of the EPA tolerance for the specific pesticide or UREC, the SOP's governing State official or certifying agent may conduct an investigation of the certified organic operation to determine the cause of the prohibited substance or product in or on the agricultural product to be sold or labeled as organically produced. The same shall occur if testing detects a product produced using excluded methods. If the investigation reveals that the presence of the prohibited substance or product produced using excluded methods in or on an agricultural product intended to be sold as organically produced is the result of an intentional application of a prohibited substance or use of excluded methods, the certified organic operation shall be subject to suspension or revocation of its organic certification. In addition, any person who knowingly sells,

labels, or represents an agricultural product as organically produced in violation of the Act or these regulations shall be subject to a civil penalty of not more than $ 10,000 per violation.

Emergency Pest or Disease Treatment Programs When a prohibited substance is applied to an organic production or handling operation due to a Federal or State emergency pest or disease treatment program and the organic handling or production operation otherwise meets the requirements of this final rule, the certification status of the operation shall not be affected as a result of the application of the prohibited substance, except that: ( 1) any harvested crop or plant part to be harvested that has contact with a prohibited substance applied as the result of a Federal or State emergency pest or disease treatment program 317 cannot be sold, labeled, or represented as " 100 percent organic," " organic," or " made with..." and ( 2) any livestock that are treated with a prohibited substance applied as the result of a Federal or State emergency pest or disease treatment program or product derived from such treated livestock cannot be sold, labeled, or represented as " 100 percent organic," " organic," or " made with..."

However, milk or milk products may be labeled or sold as organically produced beginning 12 months following the last date that the dairy animal was treated with the prohibited substance.

Additionally, the offspring of gestating mammalian breeder stock treated with a prohibited substance may be considered organic if the breeder stock was not in the last third of gestation on the date that the breeder stock was treated with the prohibited substance.

Residue Testing  Changes Based on Comments This portion of subpart G differs from our proposal in several respects as follows:

( 1) Reporting Requirements. Commenters were not satisfied with the language in section 205.670( d)( 1) that required results of all analyses and tests performed under section 205.670 to be provided to the Administrator promptly upon receipt. They asked that the paragraph be amended to include that: ( 1) results of all analyses and tests performed under section 205.670 be provided by the Administrator to the appropriate SOP's governing State official and ( 2) test results be made immediately available to the owner of the material sampled. They stated that since State organic certification programs are responsible for enforcement within their State,

results of residue tests conducted by certifying agents must be provided to the SOP's governing State official for routine monitoring and for investigating possible violations of the Act.

We agree with the commenters and have responded to their concerns accordingly. To 318 ensure that SOP's receive results of all tests and analyses conducted under the inspection and testing requirements of subpart G, section 205.670( d) has been amended to include that the results of all analyses and residue tests must be provided to the Administrator promptly upon receipt; Except: That where an SOP exists, all test results and analyses should be provided to the SOP's governing State official.

In regard to the commenters' request that certified organic operations be provided with a copy of test results from samples taken by an inspector, an additional paragraph, section 205.403( e)( 2), has been added to subpart E, Certification, that assures that such information is provided to the owners of certified organic operations by the certifying agents.

( 2) Integrity Of Organic Samples. We have modified language in section 205.670( c) to clarify our intent regarding the maintenance of sample integrity. The proposed rule stated that " sample integrity must be maintained in transit, and residue testing must be performed in an accredited laboratory." During the final rulemaking process, we did not believe that our intent was clear on this subject. Our intent is to ensure that sample integrity is maintained throughout the entire chain of custody during the residue testing process. Proposed language only suggests that sample integrity be maintained in transit. Therefore, the we have changed the second sentence in section 205.670( c) to state that " sample integrity must be maintained throughout the chain of custody, and residue testing must be performed in an accredited laboratory."

( 3) Reporting Residue and Other Food Safety Violations to Appropriate Health Agencies.

In the proposed rule, section 205.671( b) under Exclusion from Organic Sale states, " If test results indicate a specific agricultural product contains pesticide residues or environmental contaminants that exceed the FDA's or the EPA's regulatory tolerances, the data must be reported promptly to 319 the appropriate public health agencies." During the final rulemaking process, a group of commenters suggested that we move section 205.671( b) into section 205.670 as paragraph ( e).

They recommended that we move section 205.671( b) because it does not specifically address the sale of organically produced products, as indicated by the section heading. They recommended that section 205.671( b) be placed under section 205.670 as paragraph ( e) because it dealt with the reporting of residues that exceed Federal regulatory tolerances. The commenters further stated that, while section 205.671( b) creates a duty to report, it is not specific as to who must report.

We have accepted the suggestions of the commenters and have responded accordingly.

We have removed section 205.671( b) and relocated it under section 205.670 as paragraph ( e).

We have also modified the regulatory text of paragraph ( e) to include language that instructs certifying agents to report, when residue testing indicates that an agricultural product contains pesticide residues or environmental contaminants that exceed either the EPA tolerance level or FDA action level, as applicable, data reveling such information to the Federal agency whose regulatory tolerance or action level has been exceeded.

( 4) Exclusion from Organic Sale. We have reviewed section 205.671( a), removed the requirement to implement the Pesticide Data Program ( pdp) estimated national mean as a compliance tool in monitoring for the presence of unacceptable levels of prohibited substances in agricultural products intended to be sold as organic, and added the " 5 percent of EPA tolerance"

standard.

Commenters voiced the opinion that the estimated national mean would be a difficult standard in organic agricultural production for several reasons. Some stated that the estimated national mean was a new concept that would confuse producers and handlers because they would 320 not know the exact definition of " estimated national mean" and how it would be determined.

Others stated that the PDP was too limited in scope to employ an estimated national mean for all commodity/ pesticide combinations. Commenters reasoned that PDP data were limited in terms of the agricultural commodities that are sampled and tested.

Another group of commenters stated that PDP data would be unfair to use in the NOP's residue testing plan. They argued PDP data should not be used to set maximum residue levels for organic agricultural products because PDP samples its products as close to the point of consumption as possible. As a result, commenters believe that PDP data may not be totally reflective of residue levels of agricultural products at the farmgate level. Since most residue testing in organic agricultural production takes place at the farmgate, these commenters argued that it would be an inappropriate standard for organic agricultural production.

As a result, a large number of commenters suggested that we reconsider using the estimated national mean as a standard for the maximum allowable residues on organically produced products. Instead, commenters recommended that the NOP incorporate the National Organic Standards Board's ( NOSB) recommendation and current industry practice of using 5 percent of the EPA tolerance as a maximum level of pesticide residue on organic agricultural products. Commenters argued that using 5 percent of the EPA tolerance provides a sense of confidence to the consumers of organic agricultural products.

In many respects, we agree with the commenters. We have revisited using PDP data to establish an estimated national mean for commodity/ pesticide combinations and for setting a maximum level of pesticide residue that could exclude agricultural products from being sold,

labeled, or represented as organic. As a result, we have concluded that such an approach may be 321 somewhat underdeveloped to incorporate into the NOP. We have reached this conclusion based on many of the same arguments presented by commenters ( i. e., limited scope of agricultural products tested under PDP, product sampling based upon market availability, testing near the point of consumption, etc.). Also, we estimated that there would be a considerable time lag between the implementation of the NOP and defining a comprehensive list of estimated national means for all commodity/ pesticide combinations. Thus, we have decided not to use the estimated national mean as a tool for monitoring organic agricultural products for the presence of prohibited substances and as a standard to exclude agricultural products from being sold, labeled, or represented as organically produced.

Instead, we have decided to follow the recommendation of the commenters by replacing the estimated national mean for specific commodity/ pesticide pairs with 5 percent of the EPA tolerance for the specific pesticide. Therefore, when residue testing detects prohibited substances at levels that are greater than 5 percent of the EPA tolerance for the specific pesticide detected on the particular product samples, the agricultural product must not be sold or labeled as organically produced.

We fully understand that the EPA tolerance is defined as the maximum legal level of a pesticide residue in or on a raw or processed agricultural commodity. We also acknowledge that the EPA tolerance is a health based standard. We are not trying to employ the 5 percent standard in a manner similar to that of EPA. As mentioned in our proposal, the national organic standards, including provisions governing prohibited substances, are based on the method of production, not the content of the product. The primary purpose of the residue testing approach described in this final rule, then, is to provide an additional tool for SOP's' governing State 322 officials and certifying agents to use in monitoring and ensuring compliance with the NOP.

( 5) Unavoidable Residual Environmental Contamination. We have defined, as an interim measure, UREC as the FDA action levels for poisonous or deleterious substances in human food or animal feed.

Section 205.671 proposed the use of UREC to serve as a residue testing tool for compliance. Commenters believed UREC levels, as prescribed in section 205.671 of the proposed rule, would be problematic as a standard because they were undefined. Commenters argued that it would be impractical and very expensive to establish UREC levels for every organic crop and region in the United States. They suggested that UREC levels be managed as a practice standard or program manual issue. They also expressed the concern that inconsistent application of UREC levels could create difficulties for certifying agents and certified operations.

We agree that UREC levels should be defined. We are seeking scientifically sound principles and measures by which we can establish UREC levels to most effectively address issues of unavoidable residual contamination with respect to this rule. However, in the interim, the ability to implement an undefined standard would be difficult for certifying agents. Therefore, we have included language in the preamble that temporarily defines UREC as the FDA action levels for poisonous or deleterious substances in human food or animal feed. When residue testing detects the presence of a prohibited substance on an agricultural product greater than such levels mentioned, the agricultural product cannot be sold as organic. We have decided to use FDA action levels for UREC because they encompass many of the toxic, persistent chemicals and heavy metals that are present in the environment and may be found on food and animal feed. As mentioned earlier, the FDA action levels are being employed in this part as temporary measures 323 for compliance. We will continue to seek scientifically sound principles and measures by which to establish UREC levels that more appropriately satisfy the purposes of this part.

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

( 1) Residue Testing Responsibility. Commenters petitioned that we remove the requirement in section 205.670( b) that states residue tests must be conducted by the applicable SOP's governing State official or the certifying agent at the official's or certifying agent's own expense. The commenters expressed the opinion that we were practicing " micromanagement."

They also said that there was no need for the proposal to be so detailed with respect to who pays for residue testing. Based on the commenters' responses, residue analyses are reportedly paid by producers, buyers, brokers, certifiers, and government residue testing programs.

We have not adopted the suggestion of the commenters. In the proposal, we stated that conducting residue tests was considered a cost of doing business for certifying agents. Our position has not changed. Certifying agents can factor residue testing costs into certification fees.

It is not our intention to " micromanage" the way that certifying agents conduct business. Section 2107( a)( 6) of the Act requires that certifying agents conduct residue testing of agricultural products that have been produced on certified organic farms and handled through certified organic handling operations. OFPA also requires, under section 2112( a) through ( c), that certifying agents enforce its provisions by implementing a system of residue testing to test products sold or labeled as organically produced. In addition, subpart E, Certification, authorizes certifying agents to conduct on site inspections, which may include residue testing, of certified 324 organic operations to verify that the operation is complying with the provisions in the Act and the regulations in this part. Certifying agents are responsible for monitoring organic operations for the presence of prohibited substances; we view residue testing as a cost of doing business.

Therefore, we believe that certifying agents should factor monitoring costs associated with implementing the provisions in the Act and Rule into their certification fees.

( 2) Reporting to Federal Regulatory Agencies. Commenters disagree with section 205.671( b) of the proposed rule which states that if test results indicate a specific agricultural product contains pesticide residues or environmental contaminants that exceed the FDA action level or EPA tolerance, the data must be reported promptly to appropriate public health agencies.

Commenters believe that since results of all analyses and tests must be provided to the Administrator, USDA should be responsible for communicating such test results to other Federal agencies such as FDA or EPA if regulatory tolerances or action levels are exceeded. They also suggested that section 205.671( b) be removed from the national regulations. Commenters expressed the view that such a requirement is not related to organic certification.

We do not agree with the commenters. It is not our intent to create additional responsibility for the certifying agent. Section 205.671( b), redesignated as section 205.670( e), is a statutory requirement. Section 2107( a)( 6) of the Organic Food Production Act of 1990 requires certifying agents, to the extent of their awareness, to report violations of applicable laws relating to food safety to appropriate health agencies such as EPA and FDA. Therefore, due to section 2107 of the Act, section 205.670( e) has been included in the national regulations.

( 3) " Threshold" for Genetic Contamination. Many commenters suggested that we establish a " threshold" for the unintended or adventitious presence of products of excluded 325 methods in organic products. Some commenters argued that a threshold is necessary because,

without the mandatory labeling of biotechnology derived products, organic operations and certifying agents could not be assured that products of excluded methods were not being used.

Others argued that, without an established threshold, the regulations would constitute a " zero tolerance" for products of excluded methods, which would be impossible to achieve.

We do not believe there is sufficient consensus upon which to establish such a standard at this time. Much of the basic, baseline information about the prevalence of genetically engineered products in the conventional agricultural marketplace that would be necessary to set such a threshold   e. g., the effects of pollen drift where it may be a factor, the extent of mixing at various points throughout the marketing chain, the adventitious presence of genetically engineered seed in nonengineered seed lots   is still largely unknown. Our understanding of how the use of biotechnology in conventional agricultural production might affect organic crop production is even less well developed.

Also, as was pointed out in some comments, the testing methodology for the presence of products of excluded methods has not yet been fully validated. Testing methods for some biotechnology traits in some commodities are becoming commercially available. Without recognized methods of testing for and quantifying of all traits in a wide range of food products,

however, it would be very difficult to establish a reliable numerical tolerance.

There are publicly and privately funded research projects underway that may provide useful baseline information. Efforts of Federal agencies to clarify the marketing and labeling of biotechnology and nonbiotechnology derived crops may also help address these concerns. FDA,

for example, is developing guidance for food producers who voluntarily chose to label 326 biotechnology and nonbiotechnology derived foods. USDA is also preparing a Federal Register Notice to seek public comment on the appropriate role, if any, that it can play in facilitating the marketing of agricultural products through the development of " quality assurance" type programs that help to preserve the identity of agricultural commodities. USDA, in cooperation with the technology providers, is also working to validate testing procedures and laboratories for some commodities.

All of these efforts may help to provide information on this issue. Practices for preserving product identity, including segregating genetically engineered and nongenetically engineered products, are evolving in some conventional markets. As we discussed in the preamble to the proposed rule, we anticipate that these evolving industry best practices and standards will become the standards for implementing the provisions in this regulation relating to the use of excluded methods. As was also discussed in the proposed rule, these regulations do not establish a " zero tolerance" standard. As with other substances not approve for use in organic production systems,

a positive detection of a product of excluded methods would trigger an investigation by the certifying agent to determine if a violation of organic production or handling standards occurred.

The presence of a detectable residue alone does not necessarily indicate use of a product of excluded methods that would constitute a violation of the standards.

( 4) Certification Status After Emergency Pest or Disease Treatment. We have not modified language in section 205.672 that would affect the certification status of a certified organic operation if the operation had been subjected to a Federal or State emergency pest or disease treatment program.

Section 205.672 states that when a prohibited substance is applied to a certified operation 327 due to a Federal or State emergency pest or disease treatment program and the certified operation otherwise meets the requirements of this part, the certification status of the operation shall not be affected as a result of the application of the prohibited substance: Provided, That, the certified operation adheres to certain requirements prescribed by the NOP. One group of commenters informed us that they did not support maintaining the organic status of an operation that has been directly treated with prohibited substances, regardless of the reason for treatment. They believe that Federal and State emergency pest or disease treatment programs should provide alternatives for organic operations whenever feasible. If no alternative measure is feasible, the organic operation should choose between voluntary surrender of their organic status on targeted parts of the operation or destruction of the crop to eliminate pest habitat. The commenters also suggested that compensation should be provided to organic producers whose crops must be destroyed to eliminate habitat. They feel that allowing the application of prohibited materials to certified organic land without affecting the certification status violates the trust consumers place in organic certification.

We disagree with the position of the commenters. Historically, residues from emergency pest or disease treatment programs have been treated as drift cases by certifiers. In these cases,

the specific crop may not be sold as organic, but the organic status of future crop years are not affected. We intend to handle such cases in a similar manner. We understand that commenters would like us to remove the certification of an organic operation that has been treated with a prohibited substance, but organic certification is a production claim, not a content claim. We,

along with the commenters, are concerned with consumers trusting organic certification. At the same time, we are concerned with the welfare of certified organic operations. We have tried to 328 include language in section 205.672 that would address both issues. We believe that, if a certified organic grower has been a good steward of his/ her land and has managed the production of his/ her product( s) in accordance with all regulations in the Act and other requirements in this part,

the certification status of the operation should not be affected. The application of a prohibited substance as part of a Federal or State emergency pest or disease treatment program is outside the control of the certified operation. We also believe that maintaining consumer trust is important.

Thus, section 205.672 states that any harvested crop or plant part to be harvested that has been treated with a prohibited substance as part of a Federal or State emergency pest or disease treatment program cannot be sold as organically produced. Therefore, the certified organic operation can retain its certification status, and the consumer can be assured that a product from a certified organic operation that has been in contact with a prohibited substance as the result of a Federal or State pest or disease treatment program will not enter the organic marketplace.

Accordingly, we have not made the change to section 205.672 as proposed by the commenters.

( 5) Emergency Pest or Disease Treatment Programs. Commenters suggested that the Department add a new paragraph to section 205.672 that states " the certifying agent must monitor production operations that have been subjected to a Federal or State emergency pest or disease treatment program, and may require testing of following crops, or an extended transition period for affected production sites, if residue test results indicate the presence of a prohibited substance." Commenters said the language in the proposed rule did not clearly establish that a transition period could be needed after contamination of a certified organic operation by a government mandated spray program. They felt that there may be a need for a case by case determination by the certifying agent as to when it would be best for a certified organic operation 329 to begin selling its products as organically produced after it has been subject to a government mandated spray program.

We understand that commenters would like USDA to mandate certifying agents to monitor operations that have been subject to Federal or State emergency pest or disease treatment programs; however, we do not see a need to prescribe such a provision. Based on the responsibilities of being a USDA accredited certifier, it is our belief that certifying agents would monitor a certified organic operation that has been subjected to a Federal or State emergency pest or disease treatment program to make sure that product being produced for organic sale is actually being produced in accordance with the Act and the regulations in this part. Certifying agents have been granted the authority to conduct additional on site inspections of certified organic operations to determine compliance with the Act and national standards under subpart E,

section 205.403. Commenters requested that we include language that would allow certifying agents to recommend an extended transition period for affected production sites if residue tests indicate the presence of a prohibited substance. Again, we understand the commenters' concern,

but we are not aware of comprehensive soil residue data that could guide certifying agents in determining appropriate withdrawal intervals for operations that have been subjected to emergency pest or disease treatment programs.

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

( 1) Sampling and Testing. Commenters stated that the purpose of residue testing under the Act is to assure that organically produced agricultural products that are sold as organic do not contain pesticide residues or residues of other prohibited substances that exceed levels as specified 330 by the NOP. Based on language in section 205.670( b) of the proposed rule, commenters expressed the opinion that the Agricultural Marketing Service ( AMS) was, not only requiring residue testing of organic agricultural products, but also of " any" agricultural input used or agricultural product intended to be sold as " 100 percent organic," " organic," or " made with..."

when there is reason to believe that the agricultural input or product has come into contact with a prohibited substance. Commenters believe that organic certifying agents may be required to test many nonorganic agricultural inputs ( such as seeds, compost, straw, sawdust, and plastic) and nonorganic agricultural products and ingredients used in products labeled as " made with...".

They also argued that such testing would be unnecessary, burdensome, and expensive because such materials are more likely to have come into contact with a prohibited substance. Therefore,

commenters suggested that we amend section 205.670( b) by deleting " agricultural inputs" and replacing " agricultural product" with " organically produced agricultural product." They also recommended that we replace the second occurrence of " product" with " organic product." Thus section 205.670( b) would suggest that only organic agricultural products could be required to be tested by the certifying agent.

We understand the concerns of the commenters but believe that the commenters have misinterpreted the intent of section 205.670( b). It is not our intent to mandate residue testing of all inputs and ingredients used in the production of organic agricultural products. Neither is it our intent for certifying agents to abuse residue testing responsibility by conducting residue tests of certified organic operations without reason to believe that the agricultural input or product intended to be sold as organic has come into contact with prohibited substances. Our intent is to make it clear that certifying agents have the authority to test any agricultural input used or 331 agricultural product intended to be sold as organically produced when there is reason to believe that the agricultural input or product has come into contact with a prohibited substance. Section 205.670( b) allows for testing of inputs and agricultural products, but it does not require that all inputs of a product intended to be sold as organically produced must be tested. However,

certifying agents must be able to ensure that certified organic operations are operating in accordance with the Act and the regulations set forth in this part. To assure that certifying agents have established fair and effective procedures for enforcing residue testing requirements, section 205.504( b)( 6) provides that they must submit to USDA a copy of the procedures to be used for sampling and residue testing pursuant to section 205.670.

( 2) Chain Of Custody Training. A commenter suggested that section 205.670( c) address chain of custody training for inspectors that will be performing preharvest or postharvest tissue test sample collection on behalf of the Administrator, SOP's governing State official, or certifying agent. The commenter proposed that all inspectors should be trained to handle chain of custody samples in order to maintain the integrity of the samples.

We agree that inspectors should be appropriately trained to handle chain of custody samples in order to maintain the integrity of the samples taken from a certified organic operation.