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How Organic Came Full Circle

By William J. Friedman


In response to all of the controversy surrounding the Harvey v. Veneman lawsuit and the recent congressional amendments to the Organic Foods Production Act, we thought it was time to set the record straight on what really happened, and how it will impact processors across the organic community.

For many in the organic industry, the Jan. 26, 2005 ruling by the U.S. Court of Appeals for the First Circuit in Boston in the Harvey v. Veneman case that invalidated the existing rules regarding the allowed use of certain synthetic materials in products bearing the “organic” label, it was the first they’d heard about the court case. It was also the first time many in the industry had learned anything about the 12 years of program development work that it partially undid.

But in fact, most of the issues raised in that lawsuit were a continuation of arguments that began in the early days of the organic industry, back when the National Organic Program (NOP) was being crafted in the mid-1990s, and the powerhouse organic industry that we know today was still just a dream.

The Early Years, 1990-2001
In 1992, shortly after Congress created the National Organic Standards Board (NOSB), the Secretary of the U.S. Department of Agriculture (USDA) appointed the first members to this 15-member citizen advisory board. The primary goal of the board is to provide guidance to the Secretary on organic matters.

Although they dealt with many open policy questions regarding the regulation of the organic marketplace, no issue captured the attention of the industry and the board members more than the proper role of synthetic materials in the production and processing of organic food products.

The Organic Foods Production Act (OFPA) did two things quite plainly: it contained a general prohibition on the use of synthetic materials in organic systems, and it created an unambiguous exception for certain synthetics used in organic crop and livestock production. Less clear, however, was how Congress intended its new organic program to handle synthetic materials in processed food.

The definition of a “synthetic” material or ingredient was set by Congress in the OFPA. It is not a scientific definition but one that turns on the difference Congress perceived to exist between natural and synthetic processes. The statute says: “The term ‘synthetic’ means a substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal, or mineral sources, except that such term shall not apply to substances created by naturally occurring biological processes.”

At the outset it is important to understand that under the law passed by Congress no synthetic material may appear on the National List of acceptable organic materials, unless the NOSB recommends the material for placement on the List.

When the first Board convened, there was one overriding issue regarding “synthetic” materials in processed foods that required the Board’s attention: Whether Congress had allowed for the addition of any “synthetic” materials to agricultural products during processing that would ultimately be called “organic” products.

On this issue–which is a purely legal question that probably should not have been placed before the NOSB–there was great disagreement. Its resolution was not merely a question of picking between competing, but equally meritful readings of the OFPA. On one hand, if Congress had not authorized the use of synthetics, no amount of voting by the NOSB, nor acquiescence by the USDA, could trump the general prohibition of synthetics in organic foods. On the other, if the statute was ambiguous, then the USDA could use its, and the Board’s, expertise to fill in a gap left by Congress and make explicit what Congress had not.

Early on, board members with knowledge of the food processing industry rightfully noted that the definition of a “synthetic” material appearing in the OFPA was broad and inclusive. If the statute required strict application of this definition, most of the processed foods with which even the nascent organic consumer was familiar would contain some material that would violate the ban. Although the debates were extensive, two things were clear. The statute, while not a model of clarity, tilted against the use of synthetics in processed foods, and second, no one believed that Congress intended to prohibit the use of materials like baking powder and pectin.

This conundrum was exacerbated because the effect of excluding all synthetic materials meant that there would be few processed organic food products and in all likelihood no scalable processed organic products industry. This created significant motivation to find a way to create a limited list of allowed synthetics for processors. Ultimately, the NOSB voted, and only a handful voted against the allowance of synthetic materials.

It should be noted that I was among those board members who voted against the inclusion of synthetics in processed food because I thought the opponents of synthetic materials had the better argument under the terms of the statute. Though much has been made of that vote, in light of my support of the recent Congressional amendments to the OFPA to unambiguously allow the limited use of synthetic materials approved by the NOSB, there is no contradiction. I have no quarrel with the First Circuit’s construction of the OFPA in the lawsuit and believe its conclusion, while debatable, to be easily defended as the correct one.

Equally clear is the fact that Congress was aware of the interpretation given the OFPA by the NOSB and the USDA and it had never rejected the inclusion of the synthetic materials on the National List. Perhaps more importantly, the industry had exploded since the final rule was promulgated in 2000 and there was little benefit to turning the clock back a decade.

In the meantime, the NOSB was put in charge of reviewing and approving or denying the addition of materials to the list of approved synthetics. Based on rigorous selection criteria in the OFPA and additional criteria appearing in the federal organic rules, and after much debate by the NOSB, after 12 years only 38 synthetic materials have been approved for use by organic processors. Although allowed, these materials may not exceed 5% in an “organic” product and may not exceed 30% of a product labeled as “made with organic ingredients.”

Final Rule and the Lawsuit
When the federal organic rules were promulgated in 2000, two interesting things happened. First, an industry that had asked the federal government to regulate it received its wish–and it proceeded to grow by leaps and bounds based on the stability provided by the rules and consumer recognition of the USDA seal. Second, a single citizen challenged the rules in federal court without an attorney.

The plaintiff, an organic blueberry farmer from Maine named Arthur Harvey, sued the USDA, raising a thicket of issues and arguing that in key places the regulations were far more lax than the original organic legislation intended. The original lawsuit was dismissed at the federal district court level. However, Harvey obtained counsel to prosecute an appeal after several not-for-profit groups, including the Center for Food Safety and the Rural Advancement Fund International (RAFI), threw their support to him. In January 2005, Harvey won a few important issues on appeal.

The Jan. 26, 2005 decision of the U.S. Court of Appeals for the First Circuit on the Harvey v. Veneman case invalidated two sections of the NOP rules because their adoption exceeded the Secretary’s rulemaking authority under the OFPA. The First Circuit determined that the OFPA did not authorize the use of synthetic materials/ingredients in or on processed foods for any product certified as organic or 100% organic. The court determined Congress unambiguously authorized synthetic materials/ingredients to be used in production–growing and harvesting–of organic agricultural commodities. It determined Congress unambiguously authorized the addition or use of synthetic materials/ingredients by processors making products labeled “made with organic ingredients.” But it also determined Congress failed to authorize the addition of synthetic materials during processing of products in the first two organic classes–those containing 100% and 95% organic content. Accordingly, the federal rules that had allowed a processed product containing 95% organic content to be labeled “organic,” would eventually need to be vacated.

As a result, the Court barred organic processors from utilizing any of the so-called “allowed synthetics” (a list of common processing aids and necessary ingredients that are not organic agricultural products that appear on an approved list in the federal organic rules) if the final processed product would be labeled “organic.”

The case was sent back to the lower court in April 2005, and on June 9, 2005 the district court signed an order under which the USDA agreed to complete rulemaking to bring the federal rules into compliance with the ruling. The USDA agreed to issue the new rule within 12 months and to implement the rule within a second 12 month period for a total timeline of 24 months. All organic products would have been required to conform to the new rules by June 9, 2007. The existing rules were not vacated.

The second adverse ruling addressed the use of organic feed during the transition of dairy cows, however, this article only examining the synthetic materials aspect of the case. The ruling on synthetics stunned the org-anic business community. One independent analysis estimated the potential organic product sales losses in the first year alone at nearly $1 billion.

The impact on the organic product industry was so extreme because the vast majority of organic processed products utilize one or more of the 38 materials on the National List and are in the affected “organic” product class.

The ruling did not require the products with the USDA seal to be reformulated, it instead created a labeling limitation that would remove the USDA seal but continue to allow them to be marketed under the ”made with organic ingredients” label. As a result, it would have downgraded most “organic” products into labeling categories not as successful as the “organic” product class and most companies would be forced to sell their products without calling them “organic” and without the USDA seal.

The ruling effected row after row of multi-ingredient “organic” products on the shelves today and threatened to down-classify them to “made with organic ingredients” because of their use of synthetic materials/ingredients. The processed organic product industry estimated that about 90 percent of the products bearing the USDA organic seal would have to be relabeled or removed from the shelves. By eliminating just three materials on the list–baking powder, pectin, and vitamin D used for nutrient profile fortification– it is nearly impossible to make organic bread, organic yogurt or most organic low fat milk products, with the flavor and texture profiles expected by consumers. Similarly, most crackers, cereals, bread, cheese, even bananas and lettuce, and any products containing organic sugar would also not be able to bear the “organic” label because substances used to make them would be prohibited by the Harvey ruling.

While all of these products could continue to be made, they would have to use the “made with organic ingredients label,” which is not USDA certified and doesn’t carry the consumer clout that the “organic” label carries.

The vast majority of the manufacturers and purveyors of organic products believed that downgrading the existing products would have been a step backwards for the organic community because the potential loss of products and product lines would harm consumers and America’s organic farmers. The U.S. District Court agreed and decided to delay implementation of its ruling because it found that immediate change in the program would likely result in consumer confusion, market disruption, and unnecessary litigation.

The USDA was given one year to bring the rule into compliance. However, with new product development cycles taking at least a year, contracts for organic crops typically being made a year in advance, and companies needing to change product packaging, action was needed to ensure continued availability to consumers. In addition, when implemented, the outcome would have likely created significant pressure on the best organic companies to reduce their organic content to compete with companies striving to meet only the minimal organic content requirements.

Most organic processors know that the high cost of an organic product frequently comes from its minor ingredients, such as the organic blueberries and raspberries in yogurts, or the spices in salad dressings and marinades. For many of these products the minor ingredients may constitute the majority of the cost. If processors are unable to recoup the underlying ingredient costs because their competitors are not using them and charge less–and there is no USDA seal to differentiate the two products– organic companies would have been forced to cut the organic minor ingredients from the product formulas to ensure a more attractive price. Not only does that lower the organic value and integrity of the product, it puts many farmers who grow minor ingredients in jeopardy.

Congress Takes Action
Following a lobbying effort undertaken by the Organic Trade Association (OTA) and supported by leading U.S. organic companies and other trade associations, a bipartisan majority of the House and Senate Agriculture Appropriations Subcommittees agreed to restore the existing organic rules by adopting amendments to the OFPA that reversed the First Circuit. The amendments first appeared in the Conference Report (H.Rept. 109-255) to HR 2744. The bill passed the House on Oct. 28, 2005, the Senate on Nov. 3, 2005, and was signed by President Bush on Nov. 10, 2005.

This was not a backdoor, behind-the-scenes decision, as it has been portrayed by some people. There are valid reasons why Congress chose to amend the statute using its appropriations process rather than a free-standing piece of legislation that might take more than a year to pass. First, the appellate court determined that only Congress could fix the problem, so there was no question that the USDA’s hands were tied. Second, the lower Court had expressed concerns about unnecessarily disrupting the marketplace and losing the existing rules, and Congress agreed. Third, the timeline set by the Court left no opportunity to wait until the next Farm Bill, which would be at least one and possibly two years off.

Perhaps more importantly, however, Congress accepted two key arguments as it evaluated whether to either restore the existing program or alter it according to proposals from groups that wanted issues outside the lawsuit addressed. Congress determined that by simply correcting the statute it would only be restoring the existing rules not making new policy, and there was no reason to believe the existing rules were the wrong approach to synthetic materials.

Finally, no one at the USDA or in Congress saw the need to throw out more than a decade of work on synthetic materials by the NOSB when the NOP was such a success.

What the Amendments Did and Impact on the Industry
In the Harvey v. Veneman case the court had found that 7 U.S.C. § 6510(a)(1) and § 6517(c)(B)(iii) forbid the use of synthetic substances during the processing or handling of a product. To reverse the ruling, Congress amended § 6510(a)(1) and struck § 6517(c)(B)(iii) from the statute. Section 6510 provides that no organic food processor may add “any synthetic ingredient during the processing or any post-harvest handling of the product.” The court found the plain meaning of § 6510(a)(1) barred a person on a handling operation from adding any synthetic ingredient during the processing on post-harvest handling of a covered product despite USDA’s approval of the 38 materials on the National List.

To reverse this conclusion Congress added the phrase “not appearing on the National List” after “ingredient,” thereby unambiguously authorizing processors to use synthetic materials that appear on the National List.

The legislation reversed the First Circuit’s decision to ban the use by food processors of the synthetic materials appearing on the National List of allowed synthetics for processed foods labeled “organic,” which means that the amendments to the OFPA adopted by Congress completed the authorization for the existing NOP rules and restored the limited use of synthetics in the “organic” product class.

The second part of the statute relied upon by the court, Section 6517(c), establishes guidelines for placing substances on the National List and, in subsection (B), sets forth specific requirements with regard to the types of substances that may appear on the National List.

Prior to amendment, Subpart (iii) of § 6517(c)(B) restricted the NOP to only those substances “used in handling” and that are “non-synthetic.” This provision, which the court noted “specifically requires the exempted substances be nonsynthetic [sic],” was deleted by the amendment. In other words, the general prohibition against the appearance of “synthetics” on the National List of materials that may be used by processors was removed.

Despite some alarmist rhetoric about a sneak attack on organic food standards that appeared on some websites, Congress accepted that it was simply ratifying the recommendations of the NOSB, which had been adopted by the USDA. Because the changes did not authorize any new synthetic substances, and the controls governing the allowable synthetics list remained as they have been–meaning no synthetic material can be placed on the list without the review and approval of the NOSB–there was no weakening of the standards.

From the immediate reaction of the USDA and others, it appears that the NOP won’t have to change its rules for the “organic” product class and the existing rules will remain intact.

The Aftermath
Although rulemaking will need to be undertaken to clarify aspects of the impacted rules, the overall effect should be return to the status quo and removal of the threat to the current use of permitted synthetic materials in processed organic foods. Does this mean that the NOP is set in stone and the National List will never change? Not by a long shot, and that’s a good thing.

The organic industry is booming, but it’s still in a growth phase. Several provisions in the statute and rules ensure that debate on synthetic materials will be ongoing. Most notably the statute contains a sunset provision that requires the NOSB to review every material that has been on the allowed synthetics list for five years to determine if it can or should be removed. In addition, there is a petition process that allows anyone to ask the NOSB and the USDA to remove any material that is on the National List or to add one if needed. Finally, there is the requirement that all certified organic operations demonstrate movement to continually improve their practices and move away from practices that diminish the organic quality of the final products, whether a farmer or a processor.

Continued improvement to the dynamic organic marketplace is this industry’s touchstone. Every day we learn of new organic alternatives to conventional practices and materials that move us closer to the ultimate goal of more organic agriculture and more organic products.

William J. Friedman is an attorney with Covington and Burling law firm in Washington, DC, where he represents several organic companies. He is also the former vice chair of the first NOSB. He can be reached at wfriedman@cov.com.