May 19, 2003

SeedQuest reproduces below the content of a May 9, 2003 letter from Richard Mathews, Program Manager, USDA National Organic Program, to Richard D. Siegel, attorney representing Genesis Seeds Ltd. The letter is followed by a backgrounder provided to SeedQuest by Richard D. Siegel at SeedQuest's request.
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Richard Mathews, Program Manager
National Organic Program
United States Department of Agriculture
Agricultural Marketing Service
STOP 0268 - Room 4008-S
1400 Independence Avenue, SW
Washington DC 20250-0200

May 9, 2003

Mr. Richard D. Siegel
Richard D. Siegel Law Offices
1400 16th Street NW, Suite 400
Washington, DC 20036-2220

Dear Mr. Siegel:

Thank you for your November 26, 2002 e-mail regarding whether an accredited certifying agent (ACA) may consider price as a factor in determining organic seed to be commercially available.

In your correspondence, you conclude that price is prohibited from being used as a determining factor by an ACA since it goes beyond the scope of the commercial availability definition (7 C.F.R. §205.5). Your conclusion is based on the fact that the criteria in the definition are "an appropriate form, quality and quantity,", not price.

The National Organic Program finds your conclusion to be consistent with the commercial availability definition (7 C.F.R. §205.5). Under the definition, an ACA may only consider the terms "an appropriate form", "quality", and "quantity" in making commercial availability determination.

Sincerely,
(signed)
Richard Mathews, Program Manager
National Organic Program

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BACKGROUNDER

1. Legal requirements for the use of organically grown seed in the U.S.

First I want to review briefly the legal requirements. One aim of the USDA National Organic Program is to encourage the production and the use of organically grown seed, and it accomplishes this by making it mandatory for certified organic farmers to use organically grown seed, with certain exceptions. The organic "certifying agents," those organizations that the USDA has accredited to enforce the National Organic Program standards, are the critical link in insuring that farmers use organically grown seed once it is available on the market.

The National Organic Program Final Rule, at 7 CFR Section 205.204, contains the requirement in the U.S. that, in general, certified organic farmers are to use only organically grown seed to produce their crops. They may use nonorganically grown seed only when an equivalent organically produced variety is not "commercially available." The term "commercially available" is defined at 7 CFR Section 205.2. It is "the ability to obtain a production input in an appropriate form, quality, or quantity to fulfill an essential function in a system of organic production or handling, as determined by the certifying agent in the course of reviewing the organic plan."

(The USDA has also defined the term "equivalent variety" for seed, but this will be beyond the scope of this discussion.)

So if an organic farmer has been using a certain seed variety in a non-organically grown version, and there is on the market an equivalent variety of the seed that is organically produced, in an appropriate form, quality, or quantity, then the organization that certifies the farm as organic, the "certifying agent," should require the farmer to switch to the organically grown variety.

2. Certifying Agents May Not Consider the Price of an Organically Grown Seed in Deciding Whether It Should or Should Not Be Used

You will notice that under the definition of "commercially available," the only factors that the certifying agent will consider will be whether the organically grown seed is available in an equivalent variety and whether it is available on the market in an "appropriate form, quality or quantity." There is no mention of reasonable price as a criterion. An organic farmer may not refuse to use an organically grown seed that is in an equivalent variety just because it commands a high price.

This is a well-considered policy in the USDA's regulations. When the USDA published its first Proposed Rule for the National Organic Program on December 16, 1997, its definition of "commercially available" provided that if an organically grown input, such as seed, could not be "feasibly and economically used," it could not be considered "commercially available." This would have allowed organic farmers to be excused from using an equivalent organically grown variety on the basis of price. When the USDA published its second Proposed Rule, on March 13, 2000, it expressly removed the words "to be feasibly and economically used" from the definition of "commercially available." The reason for deleting these words, the USDA explained, was that if this language was retained, it would give organic farmers and processors "an opportunity...to avoid use of preferred inputs," such as organic seed if it was selling at a high price.

3. Why Genesis Seeds Solicited the Letter from Richard Mathews

Manny Shemin, of Genesis Seeds, learned last November from sources in the U.S. seed industry that some organic certification organizations were expressing concern over the potential high price of organically grown seed. These were all certifiers that have been accredited as "certifying agents"
by the USDA to give organic certification to farmers under the National Organic Program. A leading U.S. seed company that was considering marketing organically grown seeds made a random survey among five certifiers in various parts of the U.S. and found that these certifiers were considering
applying "price caps" to organically grown seed. These certifying agents said that if a non-organically grown seed and an organically grown seed of an equivalent variety were both available on the market, but the organically grown seed was 2 to 3 times, or 3 to 5 times, or 8 to 12 times the price of the conventional seed, then, on the basis of these high prices, these certifiers would consider not requiring the farmer to use the organically grown seed.

Since, as I noted above, price is expressly not a criterion in determining whether an organically grown seed is "commercially available," there was no basis in the National Organic Program for these certifying agents to be conjecturing about price comparisons. I explained to Manny that we should
bring this to the attention of the Manager of the National Organic Program, Richard Mathews, so that he could communicate to the certifying agents that there was no basis under the National Organic Program for them to consider price as a barrier to "commercial availability." Manny assigned me to
contact Mr. Mathews.

In an e-mail to Mr. Mathews on November 26, 2002, I reported on what the certifying agents had been saying, and offered the following argument:

"Once price is allowed to dictate whether organic seed is "commercially available," this will limit the availability of organic seed and thus undermine the whole intent of the organic seed requirement in the Final Rule. Organic seed cannot compete with conventional untreated seed on the basis of price. In Europe, where organic seed will become compulsory after December 31 of next year (i.e., after December 31, 2003), the price of organic seed runs 6 to 10 times the price of conventional untreated seed in the U.S. Organic seed will in time reach a lower price level as more suppliers enter and compete in the market, but first there must be incentives for seed companies to be pioneers in this market. If certifying agents are permitted to apply price caps on organic seed at this stage,
there will be no pioneers, the organic seed industry will be stillborn and the organic seed requirement in 7 CFR 205.204 will become a nullity."

Additionally, I pointed out:

"Another problem with what is happening is that in the absence of national guidance on the organic seed price issue, each certifying agent is fashioning its own price cap: 2 to 3 times, 3 to 5 times, or 8 to 12 times. This runs counter to the intent of the National Organic Program to be a uniform code of standards."

4. Along with the Letter of May 9, 2003, the USDA Will be Issuing A "Guidance Document" on "Commercial Availability" Later This Year.

In addition to this letter, the National Organic Program has prepared a more comprehensive discussion of the topic of "commercial availability," and will be releasing it as a "guidance document" later this
year, according to Keith Jones, Director of Program Development for the National Organic Program. The "guidance document" will not change the language of the existing regulations that deal with organic seed and "commercial availability." Instead it will represent the "best current thinking" of the National Organic Program staff on how to interpret these regulations. The "guidance document" will be open for public comment after it is released.