AMS Final Rule Exempts Certain Organic Products from Research and Promotion Fees

(AMS has previously explained that Section 10607 of the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) amended the Federal Agriculture Improvement and Reform Act of 1996 (FAIR Act) to exempt any person that produces and markets solely 100% organic products, and that does not produce any conventional or nonorganic products, from paying assessments under a commodity promotion law with respect to any agricultural commodity that is produced on a certified organic farm as defined in Section 2103 of the Organic Foods Production Act of 1990 (7 USC 6502).

Highlights of AMS' Eligibility Criteria for Organic Exemption

To be eligible for an exemption, the person (meaning an individual, group of individuals, corporation, association, cooperative, or other business entity) must be subject to an assessment under a research and promotion program administered by AMS.

According to AMS, organic exemption eligibility is based on a three-prong test consisting of the following requirements:

(1) Certified organic producer or operator. AMS states that the person must be a certified organic producer or operator. To be exempt all persons must possess certification from a USDA-accredited certifying agent and certify that the farm or handling operation meets the requirements of 100% organic as defined in 7 CFR Part 205 and other specified criteria.

(2) Eligible to label all products as 100% organic. AMS states that the person must also be eligible to label all products as 100% organic as described in 7 CFR Part 205. However, AMS notes that a person who produces and markets agricultural commodities under an approved organic system plan and is not a split operation as described under the National Organic Program (NOP) will not be disqualified from exemption when the agricultural commodities produced and marketed under the plan are not sold, labeled, or represented as organic.

(3) Organic labeling eligibility applies to all commodities. AMS states that the third criterion is that the 100% organic labeling eligibility applies to every commodity the person produces and markets.

The preamble of AMS' final rule contains additional guidance on who is eligible for the organic exemption and how they should go about applying.

Guidelines for Importers Requesting an Organic Exemption

With respect to the cotton, mango, potato, mushroom, watermelon, blueberry, Hass avocado, pork, honey, and beef research and promotion programs, AMS has set forth the following instructions for importers applying for the organic exemption (see final rule for additional regulations on applying for organic exemptions):

An importer who imports only products that are eligible to be labeled as 100% organic under the NOP (7 CFR part 205) and who is not a split operation shall be exempt from the payment of assessments.

That importer may submit documentation to the applicable Board or Council and request an exemption from assessment on applicable products that are 100% organic - on a form provided by the Board or Council - at any time initially and at program-specific designated periods of times* thereafter as long as the importer continues to be eligible for the exemption. This documentation shall include the same information required of producers described in the regulations for each program.

If the importer complies with the requirements of this section, the Board or Council will grant the exemption and issue a Certificate of Exemption to the importer. The Board or Council will also issue the importer a 9-digit alphanumeric Harmonized Tariff Schedule (HTS) classification valid for 1 year from the date of issue. This HTS classification should be entered by the importer on the Customs entry documentation. Any line item entry of 100% organic products bearing this HTS classification assigned by the Board or Council will not be subject to assessments.

*see program-specific regulations contained in the final rule for applicable dates or intervals of time.

AMS Examples Illustrate Which Operations Qualify for Organic Exemptions

In its final rule, AMS provides certain examples of operations that would qualify for the organic exemption. It also provides examples of certain operations that would not qualify for this exemption.

Examples of operations that qualify include (partial list):

An importer who imports only 100% organic boxed beef. The importer is eligible for exemption under the beef promotion and research program.

A farmer grows 100% organic soybeans and 100% organic corn. The farmer is eligible for exemption under the soybean promotion, research, and consumer information program.

Examples of operations that does not qualify include (partial list):

A farmer grows 100% organic soybeans and conventional corn. While the farmer's soybean land may be certified as operating under an organic system plan, the farmer is a split operation and is therefore not eligible for exemption under the soybean promotion, research, and consumer information program because the farmer's production is not solely 100% organic.

AMS Issues Final Rule Exempting Organic Handlers from Marketing Order Assessments

AMS has also issued a final rule exempting organic handlers from assessments for market promotion activities under marketing order programs. This final rule is also effective February 14, 2005.

(See ITT's Online Archives or 04/27/04 news, 04042710, for BP summary of the proposed rule.)

AMS Contact - Angela Snyder (202) 720-4476 (producers and marketers final rule)

George Kelhart (202) 720-2491 (handlers final rule)

AMS Producer/Assessment Final Rule (D/N PY-02-006, FR Pub 01/14/05) available at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-573.pdf

AMS Handler/Marketing Order Final Rule (D/N FV03-900-1, FR Pub 01/14/05) available athttp://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-572.pdf