National Organic Program; Origin of Livestock, 23455-23477 [2015-09851]

Download as PDF 23455 Proposed Rules Federal Register Vol. 80, No. 81 Tuesday, April 28, 2015 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 205 [Document Number AMS–NOP–11–0009; NOP–11–04PR] RIN 0581–AD08 National Organic Program; Origin of Livestock Agricultural Marketing Service, USDA. ACTION: Proposed rule. AGENCY: The U.S. Department of Agriculture’s Agricultural Marketing Service (USDA AMS) proposes to amend the origin of livestock requirements for dairy animals under the USDA organic regulations. This proposed action would specify that a producer can transition dairy animals into organic production once. This proposed action would clarify that, after completion of this one-time transition, any new dairy animals that a producer adds to a dairy farm would need to be managed organically from the last third of gestation or sourced from dairy animals that already completed their transition into organic production. This proposed action would also clarify how breeder stock should be managed on organic livestock farms. DATES: Comments must be received by July 27, 2015. ADDRESSES: Interested parties may submit written comments on this proposed rule using one of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Mail: Scott Updike, Agricultural Marketing Specialist, National Organic Program, USDA–AMS–NOP, Room 2646—So., Ag Stop 0268, 1400 Independence Ave. SW., Washington, DC 20250–0268. Instructions: All submissions received must include the docket number AMS– NOP–11–0009; NOP–11–04PR, and/or asabaliauskas on DSK5VPTVN1PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 Regulatory Information Number (RIN) 0581–AD08 for this rulemaking. Commenters should identify the topic and section of the proposed rule to which their comment refers. All commenters should refer to the GENERAL INFORMATION section for more information on preparing your comments. All comments received will be posted without change to http:// www.regulations.gov. Docket: For access to the docket, including background documents and comments received, go to http:// www.regulations.gov. Comments submitted in response to this proposed rule will also be available for viewing in person at USDA–AMS, National Organic Program, Room 2646—South Building, 1400 Independence Ave. SW., Washington, DC, from 9 a.m. to 12 noon and from 1 p.m. to 4 p.m., Monday through Friday (except official Federal holidays). Persons wanting to visit the USDA South Building to view comments received in response to this proposed rule are requested to make an appointment in advance by calling (202) 720–3252. FOR FURTHER INFORMATION CONTACT: Andrew Perry, Director, Standards Division, Telephone: (202) 720–3252; Fax: (202) 205–7808. SUPPLEMENTARY INFORMATION: Executive Summary A. Purpose of Proposed Rule This proposed rule would create greater consistency in the implementation of a standard for the transition of dairy animals into organic production and for the management of breeder stock. AMS has determined that the current regulations regarding the transition of dairy animals and the management of breeder stock on organic operations need additional specificity and clarity to improve AMS’ ability to efficiently administer the National Organic Program (NOP). A stated purpose of the Organic Foods Production Act of 1990 (OFPA) (7 U.S.C. 6501–6522) is to assure consumers that organically produced products meet a consistent and uniform standard (7 U.S.C. 6501). This action would facilitate and improve compliance with and enforcement of the USDA organic regulations (7 CFR part 205) and maintain consumer trust in the consistency of the Organic seal. PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 B. Summary of Provisions This proposed rule would update the regulation by explicitly requiring that milk or milk products labeled, sold or represented as organic be from dairy animals organically managed since at least the last third of gestation, with a one-time exception for transition. This exception would allow a producer, as defined by the regulations, to transition nonorganic dairy animals to organic milk production one time, under specific conditions. This proposal would specify that a producer (e.g., an individual or corporation starting or operating a dairy farm) could transition nonorganic dairy animals to organic milk production one time over a single twelve-month period. The proposal would require that all transitioning animals end the transition process at the same time. This twelvemonth period is consistent with OFPA’s requirement that there be a minimum period of one year of organic management before milk from dairy animals can be sold as organic (7 U.S.C. 6509(e)(2)). This proposal would specify that, once the transition into organic production is complete, that a producer would not be allowed to conduct any additional transitions. After the transition, the producer would only be able to expand the number of dairy animals or replace culled dairy animals on any dairy farm in two ways: (1) Add dairy animals that had been under continuous organic management since the last third of gestation, or (2) add transitioned dairy animals that had already completed the transition on another dairy farm during that producer’s one-time transition. The proposal would define a dairy farm as a specific premises with a milking parlor where at least one lactating animal is milked. For the purpose of this definition, a milking parlor should be considered a physical structure (e.g., barn, parlor) in which dairy animals are milked. Because the dairy farm definition, in part, drives the eligibility for a producer to transition animals to organic production, this action would mean that producers that only raise heifers for organic dairy farms would not be eligible to transition conventional animals to organic. Such producers do not milk animals and, therefore, would not be considered eligible for the one-time transition E:\FR\FM\28APP1.SGM 28APP1 23456 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules exception. However, such producers could continue raising heifers for organic dairy farms as long as the animals were under continuous organic management from the last third of gestation. This proposed rule reiterates that breeder stock may be brought from a nonorganic operation onto an organic operation at any time. While the regulations prohibit organic livestock from being removed and managed on a nonorganic operation and subsequently returned to an organic operation (i.e., cycling in and out of organic production), this provision does not extend to nonorganic breeder stock that are themselves not certified or eligible for slaughter, sale, and labeling as organic. Further, OFPA specifically allows breeder stock to be purchased from any source if the stock is not in its last third of gestation. Consistent with OFPA and USDA organic regulations, a producer has flexibility in its sourcing and its management of nonorganic breeder stock after its organic calf is weaned and before it begins the last third of gestation for the next offspring. However, a producer must continue to prevent commingling of organic and nonorganic products and prevent contact of any organic production or products with prohibited substances (7 CFR 205.201(a)(5)). AMS is proposing additional provisions for organic management of breeder stock during the time when the breeder stock is directly contributing to the nourishment of organic offspring, from the last third of gestation through the end of the nursing period. C. Costs and Benefits AMS estimates the following costs and benefits of this proposed rule. Costs (range) Benefits $288,000–$935,000 .................................................................................. This range indicates the estimated costs for dairy producers to purchase organic replacement heifers instead of transitioned heifers. (AMS had no data to estimate costs for dairy sheep and goat farms) AMS believes the lower bound is a conservative estimate of the costs and actual costs could be less. The upper limit accounts for an assumed organic premium for organic heifers. The difference between the lower bound and upper limit is believed to be an intra-industry transfer of costs and benefits, not a net cost. Will create a consistent, level playing field for all existing organic dairy producers, regardless of how they transitioned into organic production. Facilitates more consistent enforcement of organic dairy standards. Maintains consumer confidence in the USDA organic seal. A. Does this action apply to me? farm and that plan to seek organic certification for that farm. • Existing dairy farms that are currently certified organic under the USDA organic regulations. • Existing conventional dairy farms that are considering converting their farm to certified organic production. • Businesses engaged in raising heifers for sale to certified organic operations. • Certifying agents accredited under the USDA organic regulations to certify organic livestock operations. • Certifying agents accredited under the USDA organic regulations who may seek to certify transitioned dairy animals or transitional crops. This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this section could also be affected. To determine whether you or your business may be affected by this action, you should carefully examine the proposed regulatory text. If you have questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT. You may be potentially affected by this action if you are engaged in the dairy industry. Potentially affected entities may include, but are not limited to: • Individuals or business entities that are considering starting a new dairy B. What should I consider as I prepare my comments for AMS? Your comments should clearly indicate whether or not they support the action being proposed for any or all of the items in this proposed rule. You should clearly indicate the reason(s) for Table of Contents asabaliauskas on DSK5VPTVN1PROD with PROPOSALS I. General Information A. Does this action apply to me? B. What should I consider as I prepare my comments for AMS? II. Background A. Dairy Transition B. Breeder Stock C. Development of Existing Standards D. Discussion of Past Comments Received III. Overview of Proposed Amendments A. Dairy Transition i. Implementation Considerations B. Breeder Stock C. Additional Clarifications D. Other Amendments Considered IV. Related Documents V. Statutory and Regulatory Authority A. Executive Order 12866 and 13563 i. Need for the Rule ii. Baseline iii. Alternatives Considered iv. Costs of Proposed Rule v. Benefits of Proposed Rule vi. Conclusions B. Executive Order 12988 C. Regulatory Flexibility Act D. Executive Order 13175 E. Paperwork Reduction Act F. Civil Rights Impact Analysis VI. List of Subjects in 7 CFR Part 205 I. General Information VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 the stated position. Your comments should also offer any recommended language changes that would be appropriate for your position. Please include relevant information and data to further support your position (e.g. scientific, environmental, industry impact information, etc.). Specifically, AMS is requesting comments on the following topics: 1. The cost and benefit analysis presented, including assumptions and estimates, of limiting dairy transition to a one-time exception for a given producer; 2. Procedures that certifying agents would use under this proposal to determine whether a producer is eligible for the one-time transition; and 3. The proposed implementation approach for this rule. II. Background A. Dairy Transition AMS’ National Organic Program (NOP) is authorized by OFPA. Through the NOP, AMS oversees national standards for the production and handling of organically produced agricultural products. This action is being taken by AMS to create greater consistency in the implementation of the origin of livestock requirements for organic dairy animals, and to facilitate and improve compliance with and enforcement of the USDA organic regulations. This action is also being taken to satisfy consumer expectations E:\FR\FM\28APP1.SGM 28APP1 asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules that organic livestock meet a consistent and uniform standard. Section 6509 of OFPA authorizes the USDA to implement regulations regarding standards for organic livestock products, including the transition of dairy animals into organic production. OFPA establishes that in general, organic livestock will be managed organically since the last third of gestation (7 U.S.C. 6509(b)). As an exception for dairy animals, OFPA requires a minimum period of one year of organic management before milk from non-organic dairy animals can be sold as organic (7 U.S.C. 6509(e)(2)). OFPA also addresses the use of breeder stock on livestock farms (7 U.S.C. 6509(b)). Furthermore, OFPA authorizes the creation of the National Organic Standards Board (NOSB) to advise USDA about the implementation of standards and practices for organic production (7 U.S.C. 6518). The USDA organic regulations regarding the origin of livestock (7 CFR 205.236(a)) require that all livestock products (e.g., meat, fiber) sold, labeled, or represented as being organic must be from livestock under continuous organic management from the last third of gestation onward. For dairy animals, the USDA organic regulations provide an exception at section 205.236(a)(2) that allows for the transition of a dairy herd into organic production as long as they are under continuous organic management for the one-year period prior to production of organic milk or milk products. During this one-year period, dairy animals may consume crops and forage from land which is in the third year of organic management and included in the organic system plan, but has not yet been certified organic (7 CFR 205.236(a)(2)(i)). Section 205.236(a)(2)(iii) requires that once an entire distinct herd has transitioned to organic production, all dairy animals shall be managed organically from the last third of gestation. While the regulations allow for the transition of a conventional herd to organic milk production after one year of organic management, the regulations do not define a herd. As such, stakeholders have interpreted the term ‘‘herd’’ in a variety of ways. For example, some operations and certifying agents consider a herd to include all of the animals on the farm, whereas others consider a herd to be a group of animals on a farm that are managed together over time. Additionally, organic operations and certifying agents have interpreted the USDA organic regulations differently regarding when the transition of a herd into organic production should be VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 considered complete. Some dairy operations continuously transition conventional dairy animals as new ‘‘distinct’’ herds into organic production. This can be a cost savings to a farmer because he or she does not have to purchase organic dairy animals to either expand their herd or replace their cull animals. Other dairy operations have only used the transition exception once when they initially converted a ‘‘herd’’ to organic production. Current practice also does not always align with the intent of the May 2003 NOSB recommendation and the regulations that dairy herd transition be used only one time, when a producer with a farm initially transitions from conventional to organic production. AMS is updating the transition exception through this proposed rulemaking. In July 2013, the USDA Office of Inspector General (OIG) published an audit report on organic milk operations stating that certifying agents were interpreting the origin of livestock requirements differently.1 According to the OIG report, three of the six certifiers interviewed by OIG allowed producers to continuously transition additional herds to organic milk production, while the other three certifiers did not permit this practice. OIG recommended that a proposed rule be issued to clarify the standard and ensure that all certifiers consistently apply and enforce the origin of livestock requirements. This proposed rule responds to the OIG finding on this issue. B. Breeder Stock OFPA states that breeder stock may be purchased from any source if such stock is not in the last third of gestation (7 U.S.C. 6509(b)). The USDA organic regulations define breeder stock as female livestock whose offspring may be incorporated into an organic operation at the time of their birth (7 CFR 205.2). OFPA and the regulations limit breeder stock to nonorganic females who may produce organic offspring if certain conditions are met. The regulations specify that such breeder stock may be brought from a nonorganic operation onto an organic operation at any time (7 CFR 205.236(a)(3)). If breeder stock is gestating and its offspring are to be raised as organic, the regulations require that the breeder stock be brought onto the facility no later than the last third of gestation and be under continuous organic management until the offspring 1 The July 2013 Office of Inspector General (OIG) audit report on organic milk operations may be accessed at the following Web site: http:// www.usda.gov/oig/webdocs/01601-0002-32.pdf. PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 23457 are weaned from the breeder stock (7 CFR 205.236(a)). Stakeholders, through public comment to the NOSB and comments to NOP have expressed concern that some operations may bring breeder stock onto an organic operation, manage them organically for the last third of gestation so that the breeder stock can produce organic offspring, and then return that breeder stock to nonorganic management. Some stakeholders, including the NOSB, have suggested that such a practice does not align with a regulatory provision that prohibits livestock removed from an organic operation and subsequently managed on a nonorganic operation to be sold, labeled, or represented as organically produced (section 205.236(b)).2 C. Development of Existing Standards Between 1994 and 2006, the NOSB made six recommendations regarding origin of dairy animals; several of which included recommendations on the management of breeder stock.3 Between 1997 and 2000, AMS issued two proposed rules and a final rule regarding national standards for production and handling of organic products, including livestock and their products. 4 5 AMS also issued a proposed rule and final rule implementing congressional amendments to the OFPA regarding feed for transitioning dairy animals.6 The NOSB as well as the public commented on these rulemakings with regard to the origin of livestock and exception for transition. Key points from these actions that led to the development of the existing standards on origin of livestock are summarized below. (1) In June 1994, the NOSB recommended a series of provisions to address the source of livestock on organic farms. Within this recommendation, the NOSB stated that dairy stock be fed certified organic feeds and raised under organic management practices for not less than 12 months prior to the sale of their milk as organic.7 (2) On December 16, 1997, AMS responded to the June 1994 NOSB 2 National Organic Standards Board April 2003 Recommendation on Breeder Stock: Clarification of Rule. Available online at: http:// www.ams.usda.gov/AMSv1.0/ getfile?dDocName=STELDEV3104547. 3 A complete listing of related documents and NOSB recommendations is found in Section III below. 4 62 FR 65850; 65 FR 13512. 5 65 FR 80548. 6 71 FR 32803. 7 NOSB Final Recommendation, 2 June 1994. Available online at: http://www.ams.usda.gov/ AMSv1.0/getfile?dDocName=stelprdc5058940. E:\FR\FM\28APP1.SGM 28APP1 23458 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules asabaliauskas on DSK5VPTVN1PROD with PROPOSALS recommendation through publication of a proposed rule.8 The language contained within that proposed rule echoed the NOSB’s recommendation. The proposal would have required that dairy animals must be on a certified organic facility beginning no later than 12 months prior to the production of milk or milk products sold, labeled, or represented as organic. The 1997 proposed rule also proposed that all feed provided to organic dairy livestock consist of organically produced and handled agricultural products, including pasture and forage. However, the proposed rule included a provision to allow nonorganic feed up to a maximum of 20 percent of the animal’s diet. The 20 percent level was roughly representative of the nutrients provided from supplemental grain feeding, in addition to nutrients provided by pasture and forage. The proposed language also contained a provision that, if necessary, a herd of dairy livestock converting to organic management for the first time could be provided with nonorganic feed until 90 days prior to the production of organic milk or milk products. This proposed rule was never finalized.9 (3) In March 1998, the NOSB provided a second recommendation reaffirming its 1994 recommendation on the source of livestock.10 The March 1998 NOSB recommendation also recommended that livestock comprising part of a mixed crop/livestock operation should qualify to be certified organic at the end of the transition period. (4) On March 13, 2000, AMS published a proposed rule that would establish the USDA organic regulations.11 Within this proposed rule, AMS responded to the NOSB’s March 1998 recommendation on the source of livestock. AMS proposed to require that livestock be under continuous organic management beginning no later than one year prior to the production of organic milk or milk products. Unlike AMS’ 1997 proposal, the 2000 proposed rule did not include a provision for the allowance of nonorganic feed during the 12-month transition period. (5) On June 12, 2000, the NOSB commented on the second proposed 8 62 FR 65850. to the volume and content of public comments submitted in response to the 1997 proposed rule, AMS withdrew the proposal and issued a second proposed rule prior to the final rule that established the National Organic Program (NOP) (published December 21, 2000). 10 NOSB Committee Report and Adopted Recommendations, 16 March 1998. Available online at: http://www.ams.usda.gov/AMSv1.0/ getfile?dDocName=stelprdc5058929. 11 65 FR 13512. 9 Due VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 rule with respect to the origin of dairy livestock. The NOSB stated that livestock should be under organic management for one full year prior to the sale of organic milk with an exception for conversion of an entire, distinct herd into organic production. The NOSB laid out the following three conditions for conversion of a herd into organic production: • For the first nine months of the final twelve-month dairy herd transition period, animals must be fed at least 80 percent feed that is either organic or self-raised transitional feed. The remaining 20 percent could be nonorganic during those nine months. • For the final three months, animals must be fed 100 percent organic feed. • Once a dairy operation has been converted to organic production, all dairy animals shall be under organic management from the last third of gestation, except that transitional feed raised on the farm may be fed to young stock up to 12 months prior to milk production. (6) On December 21, 2000, AMS published a final rule establishing the USDA organic regulations.12 Through this action, AMS finalized the origin of livestock provision, including a requirement that organic milk be produced from animals under organic management beginning no later than one year prior to the production of milk or milk products sold, labeled, or represented as organic. The rule further incorporated the exceptions recommended by the NOSB by allowing 80 percent organic feed and 20 percent nonorganic feed (i.e., the ‘‘80/20’’ rule) for transitioned animals. AMS did not include NOSB’s recommendation allowing young stock to be fed transitional feeds. In the preamble to the final rule, AMS explained that such a provision would allow animals to transition at different times, rather than as a herd, thereby making it incompatible with the notion that the whole herd transition was a distinct one-time event.13 AMS further described that the exception to transition is a one-time opportunity for producers to implement a conversion strategy for an established discrete dairy herd in conjunction with the land resources that sustain it. This rule went into effect on February 20, 2001, and was fully implemented on October 21, 2002. (7) In October 2002, the NOSB recommended that all replacement and expansion dairy animals be raised as organic from the last third of gestation 12 65 13 65 PO 00000 FR 80548. FR 80570. Frm 00004 Fmt 4702 Sfmt 4702 onward. The NOSB believed that this would ensure consistency with the current regulations at section 205.236(a)(2)(iii). Their recommendation also included a provision for breeder stock (7 CFR 205.236(a)(3)) requiring that breeder stock remain under organic management indefinitely after their introduction onto an organic farm; that is to say, the recommendation was to prohibit breeder stock from rotating in and out of organic management. (8) In May 2003, the NOSB recommended that following a transition, all dairy livestock, including replacement stock, remain under organic management from the last third of gestation onward.14 Concurrently, the NOSB made a separate recommendation regarding breeder stock.15 They recommended a requirement for operations to continuously manage all breeder stock as organic if they were brought onto an organic farm to produce organic offspring. The NOSB further advocated that the NOP issue guidance in the form of questions and answers to clarify the management of breeder stock to the industry. (9) In October 2003, a legal challenge was filed against USDA stating that, among other things, the OFPA required organic dairy animals be fed 100 percent organic feeds, and thus, the 80/20 rule for the transition of dairy animals was in violation of the statute.16 (10) On January 26, 2005, the U.S. Court of Appeals for the First Circuit issued a decision in the case.17 The court upheld the USDA organic regulations in general, but remanded the case to the lower court, for, among other things, the entry of a declaratory judgment with respect to the 80/20 dairy transition allowance, then codified in section 205.236(a)(2)(i) of the regulations. The lower court found the 80/20 dairy transition provisions at section 205.236(a)(2)(i) to be contrary to the OFPA and in excess of the Secretary’s rulemaking authority.18 14 National Organic Standards Board May 2003 Recommendation on Origin of Livestock: Recommendation for Rule Change (document dated April 2003). Available online at: http://www.ams. usda.gov/AMSv1.0/getfile?dDocName=STELDEV 3104546. 15 National Organic Standards Board May 2003 Recommendation on Breeder Stock: Clarification of Rule (document dated April 2003). Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDoc Name=STELDEV3104547. 16 Harvey v. Veneman, 297 F.Supp. 2d 334 (D. Maine 2004). 17 Harvey v. Veneman, 396 F.3d 28 (1st Cir. 2005). 18 Harvey v. Johanns. Civil No. 02–216–P–H. Consent Final Judgment and Order, 9 June 2005. Available online at: http://www.ams.usda.gov/ E:\FR\FM\28APP1.SGM 28APP1 asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules (11) On November 10, 2005, Congress amended the OFPA to allow a special provision for transitioning dairy livestock to organic production (7 U.S.C. 6509(e)(2)(B)). This amendment provided a new provision to allow crops and forage from land included in the organic system plan of a farm that was in the third year of organic management to be consumed by the dairy animals on the farm during the 12 month period immediately prior to the sale of organic milk and milk products. (12) On April 27, 2006, AMS published a proposed rule entitled ‘‘Revisions to Livestock Standards Based on Court Order’’ to address the November 2005 amendments to OFPA.19 AMS received nearly 12,400 comments on the issue of dairy animal replacement during the comment period for this proposed rule. Additionally, in response to the April 13, 2006, advanced notice of proposed rulemaking on access to pasture, AMS received over 325 comments on the issue of dairy animal replacement.20 Neither of these actions intended to address the dairy replacement or transition issue as an objective. Accordingly, the comments were not a part of subsequent rulemaking for either action as they were beyond the scope of these rules. They are, however, acknowledged and discussed in this proposed rule. (13) On May 12, 2006, the NOSB commented on the ‘‘Revisions to Livestock Standards Based on Court Order (Harvey v. Johanns) and 2005 Amendment to the Organic Foods Production Act of 1990’’ proposed rule published April 27, 2006.21 The NOSB amended its May 2003 dairy replacement recommendation to read: ‘‘Once a dairy operation has been converted to organic production, all dairy animals, including all young stock whether born on or brought onto the operation, shall be under organic management from the last third of the mother’s gestation.’’ (14) On June 7, 2006, AMS published a final rule entitled ‘‘Revisions to Livestock Standards Based on Court Order’’ to implement the November 2005 statutory change.22 The amendments reflected the new OFPA allowance permitting transitioning dairy animals to be fed feedstuffs from transitioning lands in their last of the three-year period (7 CFR AMSv1.0/getfile?dDocName=STELDEV3013564& acct=noprulemaking. 19 71 FR 24820. 20 71 FR 19131. 21 71 FR 24820. 22 71 FR 32803. VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 205.236(a)(2)(i)), as well as setting a termination date of June 9, 2007, for the existing 80/20 feed conversion rule (7 CFR 205.236(a)(2)(ii)). In the preamble to the 2006 final rule, AMS noted that additional clarity could be provided regarding the transition of dairy animals into organic production. D. Discussion of Past Comments Received The approximately 12,725 combined comments received on the April 2006 proposed rule addressing the court order and the April 2006 advanced notice of proposed rulemaking on access to pasture provided AMS with information needed to develop this proposed action. In general, comments requested greater clarity on the parameters for transitioning dairy animals into organic production, and called for elimination of the ‘‘two-track’’ system. The ‘‘two-track’’ system refers to an April 2003 NOP statement that once an entire, distinct herd transitioned using the 80/20 provision (20% nonorganic feed in the 12 months before milking), all offspring then had to be managed organically and no transitioned replacements could be purchased.23 The NOP also stated that, for those that did not use the 80/20 provision, the dairy animals only needed to be under continuous organic management starting no later than 12 months prior to production (i.e., producers could continue to transition animals into organic over time). The majority of commenters stated that the ‘‘two-track’’ system could be addressed by conveying that, once a dairy operation is certified organic, regardless of how that operation transitioned into organic, all new dairy animals added to that operation should be managed organically from the last third of gestation. Commenters stated that this principle should apply to those animals born on the farm and those purchased as replacement and expansion animals to increase herd size. Commenters stated that only allowing organic dairy operations to add animals who have been managed organically since the last third of gestation supports consumer confidence in the organic milk sector. They reiterated that consumers expect that organic milk is produced without the use of excluded methods and substances prohibited under the regulations (i.e., hormones, antibiotics, and certain animal medications), and believe that greater 23 National Organic Program, Origin of Livestock Statement. April 11, 2003. Available online at www.regulations.gov under ‘‘Related Documents’’ for docket number AMS–NOP–11–0009. PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 23459 clarity on how animals can transition into organic production is needed. Some commenters stressed that organic dairy products were keystone products for consumer confidence and a major stepping-stone to additional purchases in other organic categories. Commenters stated that continued transition of conventional animals increases the supply of animals able to produce organic milk, depresses the value of organic heifers and limits the incentives to produce organic replacement animals. They also stated that the allowance to transition a large number of animals, rather than purchasing or raising animals as organic from last third of gestation, results in surplus organic heifer calves being sold into the conventional market. Some commenters stated that the practice of allowing some operations to transition conventional animals on a regular basis encouraged development of heifer development farms. They based this belief on the position that it is easier and cheaper to purchase transitioned animals from heifer development farms than it is to raise animals that are organic from birth. Commenters claimed that raising organic dairy animals is twice as expensive as raising conventional dairy animals during their first year of life. They contended that producers who sell organic calves and replace them with transitioned conventionally raised heifers, have an economic advantage over those who raise animals organically from birth, due to lower cost of conventional feed and ability to shorten the interval before milk production by purchasing older animals. Commenters believed that for the organic heifer market to develop, and for there to be more organic stock available at an appropriate market value, greater clarity is needed in the regulations to convey that organic heifers are required in every case, except for the one-time initial transition of a dairy operation. At the time of the 2006 proposed rule, commenters stated that at least nine U.S.-based certifying agents were requiring the dairy operations they certified (approximately 1,100 certified and 150 transitioning operations) to manage all replacement dairy animals organically from the last third of gestation. This accounted for roughly 50% of the organic dairy operations at that time. Other certifying agents were allowing the other approximately 50% of dairy operations to transition conventional animals to organic on a continual basis. Commenters stressed that a main purpose of the OFPA was consumer assurance that organically produced products met a consistent E:\FR\FM\28APP1.SGM 28APP1 23460 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules standard and that the current origin of livestock standard needs further specificity to meet that purpose. Since receiving these comments in response to the 2006 proposed rule, diverse stakeholders including trade associations, organic dairy producer groups, consumer organizations, and certifying agents continue to submit letters to NOP requesting greater clarity on the origin of livestock provisions of the regulations. In response to those requests, NOP engaged stakeholders in ongoing discussions over the last two years related to potential changes and any associated costs and benefits of these changes. AMS developed this proposed rule in response to the public comments and feedback we have received regarding the origin of livestock provisions. asabaliauskas on DSK5VPTVN1PROD with PROPOSALS III. Overview of Proposed Amendments A. Dairy Transition AMS is proposing to add five new terms: Organic management, dairy farm, transitioned animal, transitional crop, and third-year transitional crop to those defined at section 205.2. Organic management would be defined as management of an organic production or handling operation in compliance with all applicable production and handling provisions under the regulations. Stakeholders have questioned whether the term ‘‘organic management’’ in the regulations is related to compliance with the regulations or to some other generic use or understanding of the term. Providing a definition for this term would confirm that its use is directly tied to the regulations. For example, the regulations allow crops and forage in their third year of organic management to be fed to livestock transitioning to organic production. In the case of crops and forage in their third year of organic management, this means that the land they are grown on must meet certain requirements of the regulations as it transitions into certified organic production (e.g., per section 205.202(b), no prohibited substances applied to land). Further, during the transition period for dairy animals, they must be under organic management in compliance with the regulations. This means producers need to meet all of the livestock requirements during that transition period (e.g., per section 205.237, provide animals with a specified amount of dry matter from pasture during the farm’s grazing season). Under this proposal, AMS would define a dairy farm as a premises, which must have a milking parlor, where one or more lactating animals raised on that VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 premises are milked. This definition is similar to the definitions of a dairy farm used by the AMS Dairy Grading Program.24 This proposal would define a transitioned animal to clarify which animals are eligible to produce organic milk, but are not eligible for certification as organic slaughter stock or eligible for certification for purpose of organic fiber production. This definition supports the current requirement that meat or fiber come from animals under continuous organic management since the last third of gestation (7 CFR 205.236(a)). The transitioned animal definition and its relevance to this action are discussed in more detail below. This proposal would define a transitional crop as any agricultural crop or forage from land, included in the organic system plan of a producer’s operation, that has had no application of prohibited substances within one year prior to harvest of the crop or forage. Based upon this definition, AMS would add a related definition for third-year transitional crop. A third-year transitional crop would be defined as crops and forage from land, included in the organic system plan of a producer’s operation, that has had no application of prohibited substances within 2 years prior to harvest of the crop or forage. Third-year transitional crops need to meet all other requirements of the regulations (e.g., soil fertility and crop nutrient management practice standard (section 205.203); use of organic seed if commercially available (section 205.204)). OFPA and the regulations currently allow producers to feed these third year transitional crops to dairy animals in transition (7 U.S.C. 6509(e)(2)(b); existing section 205.236(a)(2)(i)). AMS is proposing to amend the introductory text at section 205.236(a)(2) to reflect that the one-time exception to transition to organic dairy production would be limited to a given producer. A producer is defined under the regulations as ‘‘a person who engages in the business of growing or producing food, fiber, feed, and other agricultural-based consumer products’’ (section 205.2). The regulations also define a person as an ‘‘individual, partnership, corporation, association, cooperative or other entity’’ (section 205.2). This definition is based on the definition of person under OFPA (7 U.S.C 6502(15)). A producer must be a person as described in section 205.2 to be eligible for a one-time transition. 24 USDA AMS. July 2011. Milk for Manufacturing Purposes and its Production and Processing. Recommended Requirements. Dairy Programs. PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 Because the one-time transition is tied to the producer (i.e., a farm or business), employees of that producer are not themselves considered a producer utilizing a one-time transition. Under the proposal, such employees would retain their ability to establish a new business entity as a producer that may be eligible for its own one-time transition. In addition, while the definition of person includes cooperatives, cooperatives would not themselves seek a one-time exception to transition animals into organic production. There are business entities, including cooperatives, within the organic dairy sector that are typically certified as organic handlers, not as organic producers, and who would not meet the definition of a dairy farm. Instead, these entities contract with multiple organic producers for their milk supply. Under this proposal, the eligibility for a onetime transition is tied to a producer, as specified on an organic certificate, and they would need to meet the definition of a dairy farm and other proposed requirements. Dairy producers with multiple farms would need to make a decision about how to transition to organic production. Producers with multiple farms have a single twelve month period in which they may transition conventional dairy animals to organic milk production. During this transition period, these producers may transition all animals on all the farms, some of the animals on some of the farms, all the animals on one of the farms, or some of the animals on one of the farms. The producer would initiate the transition to organic milk production at least 12 months prior to completing the transition and obtaining organic certification. However, once the transition period ends, the producers may not themselves transition any additional animals into organic production. Instead, they would need to source animals as organically managed since the last third of gestation or those already transitioned to organic production on a different producer’s dairy farm. The proposed amendments would replace the current text at section 205.236(a)(2) to specify that each producer would be able to conduct one transition. To be eligible for a transition, the proposal language specifies that the producer must start a new organic dairy farm or transition an existing conventional dairy farm to organic certification. This transition would need to occur over a single, continuous 12month period prior to production of milk or milk products that are to be sold, labeled, or represented as organic. E:\FR\FM\28APP1.SGM 28APP1 asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules After completing a transition, that producer would not be able to transition any new animals into organic production. For example, if producer A already completed a transition on dairy farm A, then producer A would not be eligible to transition animals into organic production on dairy farm B. Under this proposal, once a producer completes its transition of dairy animals into organic production, a producer would have two options for bringing any new dairy animals onto a producer’s organic dairy farm(s) (whether for expansion or replacement purposes): (1) Add animals that are under continuous organic management from the last third of gestation; or (2) add transitioned animals sourced from a certified organic dairy producer. Because the dairy farm definition, in part, would drive the eligibility for a producer to transition animals to organic production, producers that only raise heifers for organic dairy farms would not be eligible to transition conventional animals to organic. Such producers do not milk animals and, therefore, would not be eligible for a transition. Such producers could continue raising heifers for organic dairy farms as long as the animals were under continuous organic management from the last third of gestation. AMS considered alternatives to our proposal that would link the transitioned exception to a producer. These alternatives included linking the one-time transition exception to a dairy farm, an operation, persons responsibly connected, and the current unit of regulation, a herd. We did not choose the dairy farm by itself as the criterion for eligibility to transition because it would allow a given producer to transition dairy animals on multiple dairy farms over time. This proposal was drafted to create greater consistency in the implementation of the transition mechanism so that it is not used as a continual means of producing organic milk without purchasing organic stock once a producer has converted to organic production. Furthermore, AMS could not identify how a producer and a certifying agent could verify that a transition had not already occurred on a given dairy farm. This would be especially difficult as time went on and a dairy farm may have changed ownership multiple times. By linking the transition to a given producer, a producer (e.g., an individual or a corporation) can attest to a certifying agent as part of their application for certification that they have not already completed a dairy transition and certifying agents could verify such VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 attestations by checking past certification records associated with that producer. AMS also considered linking the transition exception to the operation. Based on stakeholder feedback and past NOSB recommendations, the term ‘‘operation’’ is used at times, as is the term ‘‘producer’’, to describe how a onetime exception to transition into organic dairy production could be structured. Upon review, AMS is proposing to link the transition to a given producer rather than an operation because both producer and person are already defined under OFPA and the implementing regulations. Other stakeholders suggested limiting the transition such that after an operation completed its one-time transition, any persons responsibly connected to that operation could not transition additional animals into organic production. ‘‘Responsibly connected’’ is defined under the current regulations as ‘‘any person who is a partner, officer, director, holder, manager, or owner of 10 percent or more of the voting stock of an applicant or a recipient of certification or accreditation’’ (7 CFR 205.2). This approach would require a person with an operation to list all persons responsibly connected to that operation to document the relationship various individuals had to the dairy farm. This approach would be difficult to document and difficult for a certifier to verify for the purpose of certification. This approach also would be overly prescriptive. For example, under this approach, new managers on a farm, who had never been part of a transition, would be restricted from starting a new dairy farm on a different location and completing their own transition of dairy animals into organic production. This approach could also restrict the ability for children of organic dairy producers to transition animals into organic production. Children could be ‘‘responsibly connected’’ to their parents’ farm if they served as managers or partners. If their parents had already completed a transition, then these children, who were managers or partners, could not transition any additional animals if they bought that farm because they would be considered ‘‘responsibly connected’’ to the parents’ operation. For these reasons, AMS is not proposing this approach. Rather, under the proposed language that a one-time exception is tied to a given ‘‘producer’’, employees, such as managers or partners, including children, could start up a new business entity with a dairy farm and be eligible for their own onetime transition. PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 23461 AMS also did not choose the current herd standard because a given operation can have a new herd every year, or even multiple per year, allowing farmers to transition new animals annually, if not more often. The intent of our proposal is to provide a clear, consistent standard that when implemented will reflect the NOSB recommendation to allow for a producer to use a one-time transition of animals into organic milk production. Providing a producer with a one-time exception to transition dairy animals to organic milk production best captures the intent of the NOSB’s recommendation. It also supports the concept discussed in the 2000 final rule establishing the USDA organic regulations that transition to organic dairy should be a distinct, one-time event for a producer.25 Under the proposed amendments, any transition would need to meet certain conditions. Proposed section 205.236(a)(2)(i) would specify that dairy animals must be under continuous organic management during the 12month transition period. This aligns with the provision in OFPA which requires that dairy animals be managed as organic for at least 12 months prior to the production of organic milk.26 During the 12-month period, proposed section 205.236(a)(2)(ii) would specify that the producer should describe its transition approach as part of the organic system plan already required at section 205.200. Under existing section 205.401, the producer must submit this organic system plan as part of an application for certification to a certifying agent. We are proposing this provision to ensure that applicants for organic certification can demonstrate their ability to comply early on in the certification process. The intent is to support communication between the applicant and the certifying agent about the transition approach and to minimize situations in which a producer approaches a certifying agent after 12 months of transitioning animals only to realize that they did not complete the transition as specified in the regulations. This proposal would make minor revisions to a provision under the current regulations that allows dairy animals undergoing transition to consume ‘‘third-year’’ crops. The proposed provision would appear at section 205.236(a)(2)(iii) and would specify that, during the 12-month transition, dairy animals may consume third-year transitional crops which this proposal would define at section 205.2. 25 65 26 7 E:\FR\FM\28APP1.SGM FR 80569–80570. U.S.C. 6509(e)(2)(A). 28APP1 23462 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules During the development of this proposed rule, the exception for transitioning dairy animals raised the question about the eligibility of those animals and their offspring for certification as organic slaughter stock or for the purpose of organic fiber. Third-year crops and forages are allowed by OFPA as feed for transitioned animals that will produce organic milk.27 However, these crops are not yet certified organic and should be treated as nonorganic feeds when determining if an animal has been raised organically since the last third of gestation. Therefore, to clarify the status of offspring born during and just after the transition period and whether they would be eligible for certification as organic slaughter stock or for organic fiber, AMS is proposing to add a definition for a transitioned animal at section 205.2. Transitioned animal would be defined as: (1) Any dairy animal that transitioned during the onetime transition exception to organic milk production after 12 months of continuous organic management; (2) any offspring born during or after the 12month transition period to a transitioned animal that, during its last third of gestation, consumes crops and forages in the third year of organic management; or (3) any offspring born during the one-time transition exception that themselves consume crops and forages in the third year of organic management. The proposed definition specifies that such animals must not be sold, labeled, or represented as organic slaughter stock or for the purpose of organic fiber.28 The current regulations already require that slaughter stock and livestock, with the exception of poultry and certain dairy animals, be under continuous organic management since the last third of gestation (7 CFR 205.236(a)). This proposed rule does not change, but rather reiterates how that requirement applies to animals that were part of a dairy transition. This term is used in proposed section 205.236(a)(2)(iv) which specifies that offspring must be considered transitioned animals if they were born during or after the 12-month dairy herd transition period and not fed certified organic feed from the last third of gestation onward. For a producer and certifying agent to determine whether offspring is eligible for organic dairy, meat and/or fiber, the length of gestation for different dairy animals (e.g., cows, goats, sheep) and feed source must be considered. For offspring to be certified organic for meat and fiber, it must be under continuous organic management, including receiving certified organic feed, from the last third of gestation (7 CFR 205.236(a)). This requirement is reiterated through proposed section 205.236(a)(2)(v). A practical summary of how certifying agents and producers would apply the proposed amendments about the status of offspring at sections 205.236(a)(2)(iv)–(v) is shown in Table 1. TABLE 1—STATUS OF OFFSPRING PART OF A DAIRY TRANSITION Is it considered a transitioned animal? Could it be certified to produce organic milk? Could it be certified to produce organic meat or fiber? Third year transitional crops ........................................................................... Certified organic crops ................................................................................... asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Type of feed consumed by offspring during transition or during its last third of gestation Yes .............................. No ............................... Yes ........................ Yes ........................ No. Yes. 27 7 U.S.C. 6509(e)(2)(B). VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 one-time transition period, then the producer could (1) source organic dairy animals, or (2) source nonorganic animals and extend the transition period for all animals undergoing transition such that they end their transition together after 12-months of organic management. Proposed section 205.236(a)(2)(vii) would specify that dairy animals that completed the 12-month transition are transitioned animals as defined under section 205.2. In practical terms, this would mean that these dairy animals can produce organic milk, but are not eligible for certification as organic slaughter stock or for the purpose of organic fiber. This is consistent with the existing requirement at section 205.236(a) that, with the exception of poultry and dairy, livestock products must be from animals that are under continuous organic management since the last third of gestation. Proposed section 205.236(a)(2)(viii) would specify that, after the 12 month transition period, transitioned animals may produce organic milk on any organic dairy farm as long as the animal is under continuous organic management at all times on a certified organic dairy farm. Movement of transitioned animals to other certified organic dairies would not affect the status of the animals to produce organic milk. Based on some stakeholder comments, AMS considered limiting transitioned animals to produce organic milk only on the dairy farm upon which they were transitioned. However, AMS believes that some movement or interfarm sales of transitioned animals is reasonable and expected. For example, if an existing organic dairy producer purchased an adjoining organic farm, it may be necessary for that farmer’s transitioned animals to leave their original premises of transition to take advantage of the new adjoining pastureland. Similarly, if an organic dairy producer wanted to move his/her operation to an updated organic facility on another property, it would create an excessive burden if transitioned animals were not permitted to move to the new facility. This provision will also allow 28 Organic slaughter stock is defined in the regulations as any animal intended to be Proposed section 205.236(a)(2)(vi) would require that all dairy animals for a given producer end the transition at the same time. AMS considered allowing dairy animals to have staggered transition periods, but chose not to allow that option as it could complicate the transition process. As a practical matter, a staggered transition would create more difficulty in animal management for the producer since animal transitions would start and end at different times. Furthermore, it would require more advanced records management creating a greater burden on the producer, more difficulty in overseeing the process, and increased room for error or potential violation. If a producer wants to bring in additional animals after the producer completes its transition, then the producer may use breeder stock or source organic dairy animals (either last third gestation animals or transitioned animals from a certified organic dairy farm that already completed its transition). If a producer decides to increase the number of animals undergoing transition during a slaughtered for consumption by humans or other animals (7 CFR 205.2). PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules asabaliauskas on DSK5VPTVN1PROD with PROPOSALS the transitioned dairy animals to continue producing organic milk if there is a change in ownership to a different producer, provided the dairy animals are under continuous organic management throughout this time. AMS is also proposing new section 205.236(ix) to specify that, after the 12month period ends, any new dairy animal brought onto a producer’s dairy farm(s) must be an animal under continuous organic management from the last third of gestation or a transitioned animal sourced from a certified organic dairy farm. This provision would ensure that, after a producer completes one transition on a dairy farm, that producer would not be allowed to themselves transition additional dairy animals into organic production on any dairy farm. This requirement supports the NOSB’s intent that transition should be a one-time event for producers to transition to organic dairy and is intended to create one standard that would be equally applied to all dairy operations once they have transitioned to certified organic production. Implementation Considerations Certifying agents would have certain responsibilities under this proposed rule. Certifying agents would need to: • Establish and maintain procedures for determining whether or not a producer (e.g. a new applicant for certification) is eligible to transition dairy animals into organic production and for determining whether offspring that are part of a transition are eligible to produce organic milk, meat or fiber; • Ensure that certified organic dairy producers maintain sufficient records (7 CFR 205.103) to identify all organically managed animals, including whether they are transitioned animals and, thus, not eligible for certification as organic slaughter stock (7 CFR 205.236(b)(2) and 205.236(c)); • Hire and/or train sufficient, qualified staff (7 CFR 205.501(a)(4)) to examine production and certification history of certified organic dairy producers or applicants for certification which involve the transition of dairy animals from conventional to organic production; and • Maintain records of applications for certification or certified operations, including records pertaining to the origin of all livestock, for at least 10 years from the date of their creation, pursuant to section 205.510(b)(2). Certifying agents already address many of these responsibilities through the current regulations. For example, certifying agents should have procedures in place to ensure that VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 operations identify whether dairy animals are organically managed from the last third of gestation and, thus, potentially eligible for certification as organic slaughter stock, or transitioned into organic production, and, thus, not eligible as organic slaughter stock (section 205.236(b)(2) and (c)). The primary new responsibility for certifying agents will be establishing and implementing a procedure for determining whether a producer is eligible for a one-time transition. AMS is seeking comments from certifying agents on how these responsibilities are best implemented given the proposed action. In addition, organic livestock producers are already required to maintain records that fully disclose all activities and transactions of the certified operation in sufficient detail as to be readily understood and audited (7 CFR 205.103(b)(2)). Under existing regulation, section 205.236(c), organic producers must already maintain records sufficient to preserve the identity of all organically managed animals. Examples of records to verify compliance with the origin of livestock requirements include livestock purchase records, organic certificates for livestock purchased as organic, animal reproduction: breeding, birth and/or hatch records, and herd conversion/ organic management records.29 Under this proposed rule, organic dairy producers would need to maintain the same records. There are no new records that would be required under this proposal. In accordance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) that implement the Paperwork Reduction Act (44 U.S.C. 3501–3520) (PRA), the information collection requirements associated with the NOP, including the recordkeeping and reporting requirements related to origin of livestock, have been previously approved by OMB and assigned OMB control number 0581–0191. AMS also recognizes that some producers and certifying agents will need time to implement any regulatory changes. Over the last several years, the NOSB and stakeholders have been engaged in extensive discussion about how organic dairies would need to change their practices as a result of any modification to the current USDA organic regulations. AMS is considering and seeking public comment on the following implementation proposal: 29 National Organic Program. March 2011. Organic Livestock Plan Template, Origin of Livestock: L2-page 1. Available online at: http:// www.ams.usda.gov/AMSv1.0/ getfile?dDocName=STELPRDC5091032. PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 23463 Producers who are certified as of the effective date for any final action would be allowed to complete any transition that was already approved under their organic system plan by a certifying agent. However, as of the effective date, producers who are certified would be required to source or raise any new animals from last third of gestation or source animals already transitioned under another producer’s one-time exception. As of the effective date, producers who are new applicants for organic certification (i.e., startup organic dairies or nonorganic dairies transitioning to organic production) would be allowed to use the transition exception once when first applying for organic certification. Under the current regulations at section 205.672, organic dairy animals can return to organic milk production if a Federal or state emergency pest or disease treatment program requires use of a prohibited substance. This allowance for re-transition is independent of the transition exception being proposed here. A dairy farm, that had not used its one-time exception to transition based on section 205.236, would retain that one-time exception to transition even if the farm used the section 205.672 allowance to retransition after an emergency pest or disease treatment. Under the current regulations at section 205.290, organic producers, through their certifying agent, can request a temporary variance from the livestock practice standards for reasons such as natural disasters, severe weather and other business interruptions. The NOP Instruction on Processing Requests for Temporary Variances (NOP 2606) 30 clarifies the policy that variances will not be granted for feeding non-organic feed to livestock. B. Breeder Stock Under this proposal, AMS would restructure section 205.236(a)(3) to reiterate that breeder stock may be brought from a nonorganic operation onto an organic operation at any time and to further clarify how breeder stock should be managed for the purpose of producing organic offspring. Consistent with an April 2003 NOSB recommendation on breeder stock, AMS considered amending the regulations at existing section 205.236(a)(3) to require that breeder stock that was brought onto an organic farm, but subsequently was removed from organic management, be prohibited from returning as breeder 30 NOP 2606. July 22, 2011. Available online at: http://www.ams.usda.gov/AMSv1.0/ getfile?dDocName=STELPRDC5087115. E:\FR\FM\28APP1.SGM 28APP1 23464 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules stock for the purpose of organic production. The NOSB recommendation suggests that allowing breeder stock to return to organic management after a period of nonorganic management does not align with a regulatory provision that prohibits livestock removed from an organic operation and subsequently managed on a nonorganic operation to be sold, labeled, or represented as organically produced (7 CFR 205.236(b)).31 However, OFPA states that breeder stock may be purchased from any source (7 U.S.C. 6509(b)); there is no requirement in OFPA that the source be organic. Further, while the current regulations at section 205.236(b)(1) prohibit livestock from being removed and subsequently managed on a nonorganic operation (i.e., cycling in and out of organic production), this provision does not extend to nonorganic breeder stock that are themselves not certified organic or eligible for slaughter, sale, and labeling as organic (7 CFR 205.236(b)(2)). Therefore, AMS does not believe that restrictions on how nonorganic breeder stock are managed outside of the last third of gestation through weaning of organic offspring are warranted. At proposed sections 205.236(a)(3) and 205.236(a)(3)(i), AMS is reiterating that breeder stock may be brought from a nonorganic operation onto an organic operation at any time as long as such breeder stock are on the organic operation no later than the last third of gestation. In practical terms, this means that between the end of nursing its organic offspring and the beginning of the last third of gestation for the next organic offspring, nonorganic breeder stock may be managed as the producer chooses. If a producer is managing nonorganic breeder stock on its organic operation, the current regulations already require that they implement practices to prevent contact of organic animals with prohibited substances (e.g., from certain fly tags that might be used with nonorganic breeder stock) (7 CFR 205.201(a)(5)). AMS is proposing a provision related to organic management of breeder stock only when the breeder stock is directly contributing to the nourishment of organic offspring, from the last third of gestation through the end of the nursing period. Under proposed section 205.236(a)(3)(ii), such breeder stock would need to be managed organically throughout the last third of gestation and the lactation period during which time they may nurse their own offspring. Allowing organic calves to nurse on nonorganic breeder stock as long as they are all under organic management supports the natural behavior of the animals (7 CFR 205.239(a)). Breeder stock may not be used as nurse cows on dairy farms to be a source of milk for other organic calves, though inadvertent suckling by nonoffspring would not cause loss of organic status to the calves. C. Additional Clarifications In conjunction with the proposed amendments discussed above, AMS is proposing additional amendments to provide greater clarity on the restrictions at sections 205.236(b)(1) and 205.236(b)(2). Section 205.236(b)(1) states that livestock or edible livestock products that are removed from an organic operation and subsequently managed on a nonorganic operation may not be sold, labeled, or represented as organically produced. We are proposing the addition of ‘‘non-edible’’ to this provision to specify that non-edible animal products, such as animal fiber, are also subject to this provision. Section 205.236(b)(2) is proposed to be amended to specify that transitioned animals must not be sold, labeled, or represented as organic slaughter stock. This change is needed for consistency with the proposed definition for transitioned animal and the proposed provisions for dairy transition. We are also proposing a change to section 205.236(c) to reiterate that producers are responsible for maintaining records that show whether a dairy animal is a transitioned animal and, therefore, not eligible for certification as organic slaughter stock or for the purpose of organic fiber. Producers should already be tracking whether an animal is eligible for organic slaughter or fiber given the last third of gestation requirement. Table 2 provides an overview of all the proposed amendments. D. Other Amendments Considered AMS recently received requests from stakeholders to consider providing an exception to transition fiber producing animals to organic fiber production, just as dairy animals can be transitioned to organic milk production. OFPA authorizes a transition for dairy animals entering organic milk production. As such, AMS is not proposing a transition for fiber under this proposed rule. In practical terms, this means that producers can transition sheep from conventional milk production to organic milk production, but would need to source animals organically managed since the last third of gestation in order to produce organic wool. TABLE 2—PROPOSED ACTION—ORIGIN OF LIVESTOCK Current wording Type of action Proposed action 205.2 ....................................................... N/A ................................................ New terms added ................ 205.236(a) .............................................. asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Section title Livestock products that are to be sold, labeled, or represented as organic must be from livestock under continuous organic management from the last third of gestation or hatching: Except, That: Poultry. Poultry or edible poultry products must be from poultry that has been under continuous organic management beginning no later than the second day of life; No Change .......................... Dairy Farm, Organic Management, Third-Year Transitional Crop, Transitional Crop, Transitioned animal. N/A—Included for Completeness. No Change .......................... N/A—Included for Completeness. 205.236(a)(1) .......................................... 31 National Organic Standards Board Recommendation May 2003 on Breeder Stock: VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 Clarification of Rule. Available online at: http:// PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 www.ams.usda.gov/AMSv1.0/ getfile?dDocName=STELDEV3104547. E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules 23465 TABLE 2—PROPOSED ACTION—ORIGIN OF LIVESTOCK—Continued Section title Current wording Type of action Proposed action 205.236(a)(2) .......................................... Dairy animals. Milk or milk products must be from animals that have been under continuous organic management beginning no later than 1 year prior to the production of the milk or milk products that are to be sold, labeled, or represented as organic, Except, Revision ............................... 205.236(a)(2)(i) ....................................... Revision ............................... 205.236(a)(2)(iv) ..................................... That, crops and forage from land, included in the organic system plan of a dairy farm, that is in the third year of organic management may be consumed by the dairy animals of the farm during the 12-month period immediately prior to the sale of organic milk and milk products; and That, when an entire, distinct herd is converted to organic production, the producer may, provided no milk produced under this subparagraph enters the stream of commerce labeled as organic after June 9, 2007: (a) For the first 9 months of the year, provide a minimum of 80percent feed that is either organic or raised from the land included in the organic system plan and managed in compliance with organic crop requirements; and (b) Provide feed in compliance with § 205.237 for the final 3 months. Once an entire, distinct herd has been converted to organic production, all dairy animals shall be under organic management from the last third of gestation. N/A ................................................ Dairy animals. A producer as defined in § 205.2 may transition dairy animals into organic production only once. A producer is eligible for this transition only if the producer starts a new organic dairy farm or converts an existing nonorganic dairy farm to organic production. A producer must not transition any new animals into organic production after completion of this one-time transition. This transition must occur over a continuous 12-month period prior to production of milk or milk products that are to be sold, labeled, or represented as organic, and meet the following conditions: During the 12-month period, dairy animals must be under continuous organic management; 205.236(a)(2)(v) ...................................... N/A ................................................ New section added .............. 205.236(a)(2)(vi) ..................................... N/A ................................................ New section added .............. 205.236(a)(2)(ii) ...................................... asabaliauskas on DSK5VPTVN1PROD with PROPOSALS 205.236(a)(2)(iii) ..................................... VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00011 Fmt 4702 Revision ............................... During the 12-month period, the producer should describe the transition as part of its organic system plan and submit this as part of an application for certification to a certifying agent, as required in § 205.401; Revision ............................... During the 12-month period, dairy animals and their offspring may consume third year transitional crops; New section added .............. Offspring born during or after the 12-month period are transitioned animals if they consume third-year transitional crops during the transition or if the mother consumes third year transitional crops during the offspring’s last third of gestation; Offspring born from transitioning dairy animals are organic if they are under continuous organic management and if only certified organic crops and forages are used from their last third of gestation; All dairy animals must end the transition at the same time; Sfmt 4702 E:\FR\FM\28APP1.SGM 28APP1 23466 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules TABLE 2—PROPOSED ACTION—ORIGIN OF LIVESTOCK—Continued Current wording Type of action Proposed action 205.236(a)(2)(vii) .................................... N/A ................................................ New section added .............. 205.236(a)(2)(viii) ................................... N/A ................................................ New section added .............. 205.236(a)(2)(ix) ..................................... N/A ................................................ New section added .............. 205.236(a)(3) .......................................... Breeder stock. Livestock used as breeder stock may be brought from a nonorganic operations onto an organic operation at any time: Provided, that, if such livestock are gestating and the offspring are to be raised as organic livestock, the breeder stock must be brought onto the facility no later than the last third of gestation. N/A ................................................ Revision ............................... Dairy animals that complete the transition are transitioned animals and must not be used for organic livestock products other than organic milk; After the 12-month period ends, transitioned animals may produce organic milk on any organic dairy farm as long as the animal is under continuous organic management at all times on a certified organic operation; and After the 12-month period ends, any new dairy animal brought onto a producer’s dairy farm(s) for organic milk production must be an animal under continuous organic management from the last third of gestation or a transitioned animal sourced from another certified organic dairy farm. Breeder stock. Livestock used as breeder stock may be brought from a nonorganic operation onto an organic operation at any time, Provided, That the following conditions are met: 205.236(a)(3)(i) ....................................... New section added .............. 205.236(a)(3)(ii) ...................................... N/A ................................................ New section added .............. 205.236(b) .............................................. 205.236(b)(1) .......................................... The following are prohibited: Livestock or edible livestock products that are removed from an organic operation and subsequently managed on a nonorganic operation may not be sold, labeled or represented as organically produced. No Change .......................... Revision ............................... 205.236(b)(2) .......................................... asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Section title Breeder or dairy stock that has not been under continuous organic management since the last third of gestation may not be sold, labeled, or represented as organic slaughter stock. Revision ............................... 205.236(c) .............................................. The producer of an organic livestock operation must maintain records sufficient to preserve the identity of all organically managed animals and edible and nonedible animal products produced on the operation. Revision ............................... VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 E:\FR\FM\28APP1.SGM Such breeder stock must be brought onto the operation no later than the last third of gestation if its offspring are to be raised as organic livestock; and Such breeder stock must be managed organically throughout the last third of gestation and the lactation period during which time they may nurse their own offspring. N/A—Included for Completeness. Livestock, edible livestock products, or nonedible livestock products such as animal fiber that are removed from an organic operation and subsequently managed on a nonorganic operation may not be sold, labeled, or represented as organically produced. Breeder stock, dairy stock, or transitioned animals that have not been under continuous organic management since the last third of gestation may not be sold, labeled, or represented as organic slaughter stock. The producer of an organic livestock operation must maintain records sufficient to preserve the identity of all organically managed animals, including whether they are transitioned animals, and edible and nonedible animal products produced on the operation. 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules IV. Related Documents Documents related to this proposed rule include the Organic Foods Production Act of 1990, as amended, (7 U.S.C. 6501–6522) and its implementing regulations (7 CFR part 205). The NOSB deliberated and made the recommendations described in this proposal at public meetings announced in the following Federal Register Notices: (1) 67 FR 19375, (May 7, 2002); (2) 67 FR 54784, (September 17, 2002); (3) 67 FR 62949, (October 19, 2002); and (4) 68 FR 23277, (May 13, 2003). AMS also considered NOSB recommendations from June 2, 1994, and March 20, 1998, in the development of this proposed rule. NOSB meetings are open to the public and allow for public participation. AMS published a series of proposed rules that addressed, in part, the origin of livestock provisions at: (1) 62 FR 65850, (December 16, 1997); (2) 65 FR 13512, (March 13, 2000); and (3) 71 FR 24820, (April 27, 2006). Past final rules relevant to this topic were published at: (1) 65 FR 80548, (December 21, 2000); and 71 FR 32803, (June 7, 2006). V. Statutory and Regulatory Authority The Organic Foods Production Act of 1990, as amended, authorizes AMS to administer the NOP (7 U.S.C. 6501– 6502). Under the NOP, AMS oversees national standards for the production and handling of organically produced agricultural products. One of the purposes of OFPA is to assure consumers that organically produced products meet a consistent standard (7 U.S.C. 6501(2)). Section 6509 of the OFPA also requires that livestock to be slaughtered, sold or labeled as organic be managed in accordance with the Act, allows for the use of breeder stock, and provides for an exception to transition dairy stock to organic milk production. asabaliauskas on DSK5VPTVN1PROD with PROPOSALS A. Executive Orders 12866 and 13563 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives, and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated as a ‘‘significant regulatory action’’ under section 3(f) of Executive Order 12866, and, therefore, VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 has been reviewed by the Office of Management and Budget (OMB). Need for the Rule This action is necessary to create greater consistency in the implementation of a standard for the transition of dairy animals into organic production and for the management of breeder stock. AMS has determined that the current regulations regarding the transition of dairy animals and the management of breeder stock on organic operations need additional specificity and clarity to improve AMS’ ability to efficiently administer the NOP. A stated purpose of the OFPA is to assure consumers that organically produced products meet a consistent and uniform standard (7 U.S.C. 6501). This action is being taken to facilitate and improve compliance and enforcement and to satisfy consumer expectations that organic livestock meet a consistent and uniform standard, regardless of how a producer transitioned into organic production. In a 2006 final rule related to this issue, AMS acknowledged that the regulations provide different allowances for replacing organic dairy animals dependent on how a producer transitioned to organic production.32 AMS further stated that, given the almost 13,000 comments on the 2006 proposed rule, the issue remained a significant concern of the organic community, including organic dairy producers, certifying agents, trade organizations, and consumers. AMS developed this proposal in response to this stakeholder feedback. Further, as cited in the July 2013 OIG audit of organic milk operations,33 implementation of the origin of livestock requirements continues to differ across producers and certifying agents. As part of this audit, some certifying agents conveyed that the current regulations create challenges in implementation such that some organic dairy producers may have a competitive advantage over others. Similarly, certifying agents and organic operations have recommended more detail in the regulations on the management of breeder stock to support implementation across the organic sector. This action is also necessary to address the persistent requests to AMS for further developed origin of livestock standards that meet the expectations of the NOSB and the majority of 32 71 FR 32804. July 2013 Office of Inspector General (OIG) audit report on organic milk operations may be accessed at the following Web site: http:// www.usda.gov/oig/webdocs/01601-0002-32.pdf. 33 The PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 23467 stakeholders. Setting an enforceable practice standard would ensure consistency across the industry. Because organic products cannot be distinguished from nonorganic products based on sight inspection, consumers rely on process verification methods such as certification to a uniform standard to ensure that organic claims are true. For this reason, organic products have been described as ‘‘credence goods’’ in the economics literature.34 35 Credence goods have properties that are difficult to verify, both before and after purchase. Organic dairy products are an example of a ‘‘credence good’’ for which consistent implementation of a common production standard across the sector supports continued consumer confidence. This action would help maintain consumer trust in the organic seal. ‘‘Customers’’ includes both consumers purchasing organic milk, yogurt, butter, ice-cream, and cheese at retail markets and organic livestock producers purchasing organic dairy animals for their own operations. While a dairy transition is permitted by the OFPA, this proposed rule would limit dairy animal transition. As discussed, AMS received extensive comments in 2006 on the issue of dairy transition. Commenters stated that consumers expect that organic milk is produced without the use of excluded methods and substances prohibited under the regulations such as hormones, antibiotics, and certain pesticides. Market research suggests that these comments are indicative of a customer base who expects ‘‘organic’’ to be produced without the use of such substances. In 2013, a report assessing trends in the organic market stated that consumers identified ‘‘absence of pesticides’’, ‘‘absence of growth hormones’’, and ‘‘absence of antibiotics’’ as properties they associate with the term ‘‘organic’’ in 64%, 59%, and 55% of the responses respectively.36 Over 34 Caswell, Julie A. and Eliza M. Mojduszka. 1996. ‘‘Using Informational Labeling to Influence the Market for Quality in Food Products.’’ American Journal of Agricultural Economics. Vol. 78, No. 5: 1248–1253. 35 Zorn, Alexander, Christian Lippert, and Stephan Dabbert. 2009. ‘‘Economic Concepts of Organic Certification.’’ Deliverable 5 for Project CERTCOST: Economic Analysis of Certification Systems in Organic Food and Farming. http:// www.certcost.org/Lib/CERTCOST/Deliverable/D11_ D5.pdf. 36 The Hartman Group, Inc., The Organic and Natural Consumer 2013: Traits and Trends. The Cultural Context Around Behavior. Of 1,569 respondents responding in 2012 to the question, ‘‘From the following list, what properties do you think are implied or suggested by the term ‘‘organic’’? E:\FR\FM\28APP1.SGM 28APP1 23468 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules thirty percent of those surveyed for this report indicated that avoidance of prohibited substances motivated them to buy organic products.37 Based on past comments, stakeholders argue that sourcing or raising animals as organic from last third of gestation is better aligned with the expectation that animals producing organic milk have never received prohibited substances such as antibiotics or growth hormones. Baseline This baseline focuses on the current market and production of heifers and cows as the predominant portion of the industry that would be affected and for which data is available. The baseline and subsequent calculations do not include quantitative estimates for dairy production related to sheep or goats. AMS used multiple data sources to describe the baseline and build quantitative estimates for this proposed rule. The first source is the NOP list of all certified operations. In January of each calendar year, every certifying agent is required to submit an annual list of their certified operations to the NOP (7 CFR 205.501(a)(15)(ii)). The NOP consolidates this information once per year into a public, searchable database.38 Another source of data is the Organic Trade Association’s (OTA) 2014 Organic Industry Survey. The Nutrition Business Journal conducts this survey on behalf of OTA to summarize market information and trends within the organic industry across food and nonfood sectors.39 AMS also utilized information from the National Agricultural Statistics Service (NASS) 2011 Organic Production Survey.40 The NASS data includes acreage, production and sales data for organic crops and livestock. USDA’s Economic Research Service (ERS) also conducts the Agricultural Resource Management Survey (ARMS), which includes questions about organic production practices.41 In 2010, ERS conducted a supplemental ARMS that focused on organic dairy operations. AMS worked with ERS to analyze recent ARMS data and develop an estimation of organic dairy production practices and costs for this proposed rule. Finally, AMS used summary information from a 2013 ERS report on organic production.42 The ERS report was based on data from state and private certifying agents. The Organic Dairy Market According to the 2013 Organic Trade Association (OTA) Industry Survey, U.S. organic food, fiber, and agricultural product sales were over $32 billion in 2013, up 11.4 percent from 2012.43 Organic dairy is the second largest sector in organic retail sales (15.2%), after fruits and vegetables (36%). Sales of organic dairy products, including milk, cream, yogurt, cheese, butter, cottage cheese, sour cream, and icecream, reached almost $4.2 billion in 2012. Table 3 shows the organic dairy market characteristics by subcategory. TABLE 3—ORGANIC DAIRY MARKET—RETAIL SALES BY SUBCATEGORY Subcategory 2013 Sales Milk/Cream ................................................................................................................................... Yogurt .......................................................................................................................................... Cheese ......................................................................................................................................... Butter/Cottage Cheese/Sour Cream ............................................................................................ Ice-Cream .................................................................................................................................... 2,813 1,021 331 261 60 2013 Growth (percent) 7.3 ¥0.2 18.9 17.9 19.1 Percentage of organic dairy sales a 62.7 22.8 7.4 5.8 1.3 a While Organic Trade Association’s 2014 Organic Industry Survey included eggs as a subcategory for its summary on organic dairy sales, we have excluded the data on eggs from this table. asabaliauskas on DSK5VPTVN1PROD with PROPOSALS While the majority of organic dairy products are marketed under regional or national brands, sales of products under private label arrangements accounted for between 30–40% of the organic dairy market in 2013.44 Both OTA’s 2013 and 2014 Organic Industry Surveys cite drought and feed costs as the key constraints on market growth. However, constraints to market growth vary regionally and across different size operations. According to a 2009 ERS report that analyzed 2005 ARMS data, 55% of farms in the West reported sourcing inputs as the most difficult aspect of organic milk production versus only 24% of farms in the Upper Midwest region and 19% of farms in the Northeast.45 This is likely correlated with size of operation since organic dairies in the West tend to be larger in size and, therefore, have increased feed demand. Certification and compliance were cited as the most difficult aspect of organic milk production for farms in the Upper Midwest and Northeast (51% and 32% respectively). Overview of Organic Dairy Production 37 Ibid. Of 1,036 respondents responding in 2012 to the question about the reasons why they continue to purchase organic products, 38% stated to avoid products that rely on pesticides or other chemicals, 34% stated to avoid genetically modified products, 34% stated to avoid products that rely on growth hormones, and 29% stated to avoid products that rely on antibiotics. 38 The most recent list of certified operations may be found at the following link: http:// apps.ams.usda.gov/nop/. 39 Organic Trade Association (OTA)/Nutrition Business Journal, 2014 Organic Industry Survey. Nutrition Business Journal conducted a survey between Jan 27, 2014 and April 5, 2014 to obtain information for their estimates. Over 200 organic firms responded to the survey. NBJ used secondary data from SPINS, Nielsen, and IRI to supplement the survey and build market statistics. 40 The NASS survey may be found at the following link: http://usda.mannlib.cornell.edu/ MannUsda/ viewDocumentInfo.do?documentID=1859. 41 The ERS ARMS survey information may be found at the following link: http:// www.ers.usda.gov/data-products/arms-farmfinancial-and-crop-production-practices.aspx. 42 The ERS 2013 Summary of Organic Production may be found at the following link: http:// www.ers.usda.gov/data-products/organicproduction.aspx. 43 OTA 2014 Organic Industry Survey. 44 Organic Trade Association (OTA)/Nutrition Business Journal, 2013 Organic Industry Survey. Private label arrangements allow businesses to offer or sell their products under another company’s brand name, often a store brand. 45 Economic Research Service. 2009. Characteristics, Costs, and Issues for Organic Dairy Farming (pg. 33). Report by William McBride and Catherine Greene. Statistics based on 2005 ARMS data. Report available online at: http:// www.ers.usda.gov/publications/err-economicresearch-report/err82.aspx. VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 Current dairy production and husbandry practices provide important context for the baseline and cost analysis. This section describes nonorganic and organic heifer development and highlights how they differ. Principles of management for other species would be similar, but the timing will be different. For example, a goat begins its first lactation at 1 year of age while a cow begins its first lactation at 2 years of age. E:\FR\FM\28APP1.SGM 28APP1 asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules When a heifer calf is born on a dairy farm, the producer ensures that the calf receives colostrum, either from a bottle or nursing her dam. The heifer calf is then separated from the dam and placed in group, pair, or single housing. Some larger dairy producers contract with heifer development farms to raise replacement heifers. These heifer development farms pick up the heifer calves and raise them at another location until they are within a month or two of their first lactation. Heifer calves are raised on a diet of milk replacer or liquid milk with free choice roughages and grains. Once the calves have learned how to eat grains and roughages, the calves are weaned from the milk. After weaning, the heifers are developed to grow at a moderate pace until they are ready to be bred. During this time, the heifers may be raised on pasture, fed a complete ration or a mixture of both. Once the heifers are about 14 or 15 months of age, they are bred, gestate for about 9 months, and calve around 2 years of age. Usually once the heifers are bred or ‘‘settled,’’ they will be fed a diet which allows them to slowly grow in terms of frame size and body weight. As the heifer approaches her due date, she is termed a ‘‘springer’’ or is described as ‘‘freshening.’’ After she calves, she begins lactating, is moved to the milking herd and called a ‘‘first calf heifer.’’ Organic producers follow similar timelines, but use some different practices. Organic producers must provide a feed ration comprised of certified organic agricultural feedstuffs. At this point in time, AMS is not aware of any certified organic milk replacer produced in the US. As a result, organically raised dairy calves must be fed organic milk. This makes the practice of sending young calves to heifer development farms less feasible for organic producers as these heifer development farms may not have access to certified organic milk. In addition, organic regulations require that all organically managed ruminants receive 30% of their dry matter intake from pasture during the grazing season, though dairy calves under 6 months of age are excluded from this provision. By the age of 6 months, dairy calves must be on pasture during the grazing season. Nonorganic calves do not have a pasture requirement. Organic producers must also follow certain health care practices. For VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 example, organic producers may not use antibiotics to prevent disease. Instead, organic producers must prevent the animals from getting sick using other management practices such as vaccinations. However, if an animal does get sick, organic producers are required to use medication to restore the animal to health even if the animal loses organic status. Once the animal loses organic status, the animal could return to organic milk production only as part of a one-time transition with another producer. Organic producers also may not use hormonal methods to synchronize estrus. Nonorganic producers may use hormonal products to both initiate estrus and synchronize estrus among the heifers to aid in conception. Certain synchronization protocols allow for a timed breeding method that does not require observation of a standing heat to identify estrus. Dairy farms and heifer development farms which produce transitioned dairy animals are able to raise the heifer calves nonorganically until 12 months before organic milk production begins. The pre-weaning phase of life is the time in which heifer calf mortality is the highest and the diet is the most expensive on a per calorie basis. Nonorganic practices to reduce mortality and expense during this preweaning phase include the use of milk replacer and, at times, antibiotics. By the time the dairy heifer reaches one year of age, most health threats are past and the animal is consuming a less expensive diet. AMS is not aware of any national survey that compares the culling rate of organic dairy animals with nonorganic dairy animals. In 2007, the USDA Animal and Plant Health Inspection Service (APHIS) conducted the National Animal Health Monitoring System (NAHMS) survey for dairy animals; a follow-up is planned for 2014.46 In this survey of dairy animals, the national rate of permanently removing a dairy animal from a farm was 23.6 percent. However, this included animals that were sold as replacement females to 46 USDA APHIS. NAHMS Dairy 2007 Part I: Reference of Dairy Cattle Health and Management Practices in the United States, 2007. This survey included both nonorganic and organic dairy animals. Available online at: http:// www.aphis.usda.gov/wps/portal/banner/ help?1dmy&urile=wcm%3apath%3a%2Faphis_ content_library%2Fsa_our_focus%2Fsa_animal_ health%2Fsa_monitoring_and_surveillance%2Fsa_ nahms%2Fct_nahms_dairy_studies#dairy2014. PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 23469 other dairies. This also excluded the percentage of animals which died. The percentage of cows culled did not vary depending upon the size of the producer nor did it vary depending upon the region of the U.S. in which the dairy was located. Most dairy cows were removed for udder problems or reproductive problems, followed by lameness or poor milking ability. Overall, mortality rates were 7.8% for un-weaned heifers, 1.8% for weaned heifers, and 5.7% for cows. From this information, an average dairy farm would sell 23.6% of its milking cattle and would lose 5.7% of its milking cattle to death. This would require that the average dairy farm in the U.S. be able to raise or purchase females that represent about 30% of the farm’s herd size just to maintain current size. Based on this average national need for replacements, the overall U.S. dairy herd (both nonorganic and organic) would have excess replacement females available for development. At this rate, the organic milking herd should be able to be maintained by last third gestation replacement females. In addition, the organic milking herd should also provide a sufficient quantity of females if market conditions lead to an expansion of the number of organic dairy animals. Specific to organic production, the U.S. had approximately 1,850 organic dairy farms that milked 200,000 cows in 2011.47 Of these farms, 1,823 farms were producing organic milk from dairy cows and 19 farms were producing organic milk from goats. The number of certified organic sheep, buffalo, and bison dairy operations for that period is not known. This proposed action would apply to any animals (e.g., heifers/cows, goats, sheep) that produce milk for an organic operation. The baseline discussion and the following cost analysis focus on heifers and cows as the predominant portion of the industry affected by this proposed action and due to the limited data available on other types of dairy animals. Based on the NASS survey, Table 4 shows that the highest concentration of organic dairy farms is in the Northeast and Upper Midwest. 47 USDA NASS. 2011. Census of Agriculture— Organic Production Survey. Available online at: http://usda.mannlib.cornell.edu/MannUsda/ viewDocumentInfo.do?documentID=1859. E:\FR\FM\28APP1.SGM 28APP1 23470 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules TABLE 4—TOP STATES WITH ORGANIC DAIRY FARMS COMPARED TO PRODUCTION Number of organic dairy farms asabaliauskas on DSK5VPTVN1PROD with PROPOSALS United States ........................................................................................... Wisconsin ................................................................................................. Pennsylvania ............................................................................................ New York ................................................................................................. Vermont ................................................................................................... Texas ....................................................................................................... California .................................................................................................. The four states with the largest number of certified organic dairy farms (Wisconsin, Pennsylvania, New York, and Vermont) account for 57 percent of the total farms. However, those states represent less than 30 percent of national organic milk production. By contrast, the West and Southwest account for the highest milk production per farm. The two highest-producing states (California and Texas) represented only 4.3 percent of total certified organic dairy farms, while producing 31.9 percent of the total organic milk nationally. According to 2010 ARMS data, the mean size of an organic dairy farm nationally was 77 cows. In the Northeast and the Upper Midwest, the mean number of organic cows per farm was 64. In the West, the mean number of organic cows per farm was 288. Both ARMS and NASS surveys demonstrate similar distributions of both farms and milk production. The 2010 ARMS data also shows that organic dairies averaged about 13,900 pounds of milk annually per cow, or a daily average of 46 pounds of milk per cow (assuming a 300-day lactation period). According to 2010 ARMS data, nearly 99 percent of the dairies responding to the organic dairy survey reported using replacement heifers that were born on the farm, with 96.5 percent reporting that the heifers were both born and raised on their operation. For the only 3.5 percent of dairies that did not raise their replacement heifers on their operation, they presumably hired heifer development farms to raise the heifers prior to rejoining the herd. Of the farms reporting using replacement heifers born on the farm, the average number of replacement heifers sourced by this method was 31 head per farm. These heifers, born in 2010, would have been added to the milking herd in 2012. Some dairy operations also bought replacement heifers. It is unknown whether these replacement heifers were certified organic when purchased or were nonorganic animals then transitioned into organic production. We would expect a mixture of certified VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 1,823 397 236 235 180 8 72 Percent of U.S. of organic dairy farms ........................ 21.7 12.9 12.9 9.9 0.4 3.9 organic heifers and transitioning heifers entering organic production that is dependent on the producer’s current transition approach. Of the farms responding to the ARMS, 7.3 percent reported purchasing dairy cows and 5.3 percent reported buying replacement heifers. Farms that purchased milk cows purchased an average of 8 cows per farm and those that purchased heifers bought an average of 15 head. Overall, in 2010, organic dairy farms added 58,500 cows and heifers to their operations, with 95.7 percent of those born on the operation. The remainder of animals came from off farm sources and included milk cows, 1,100 head (1.8 percent), and heifers, 1,425 head (2.5 percent). Most organic dairies (91 percent) reported selling cull cows. Some dairy farms also reported selling milk cows and replacement heifers. Of the farms responding to the ARMS, 17.0 percent reported selling milk cows and 17.0 percent reported selling replacement heifers. Farms that sold milk cows sold an average of 14 cows per farm and those that sold replacement heifers sold an average of 11 head. Overall, dairies sold 4,400 milk cows and 3,500 replacement heifers. Farms could have sold these animals into the nonorganic or organic market. Information on how many of replacement heifers bought were transitioned heifers and how many were managed organically from the last third of gestation is not available, and, therefore, AMS is not able to quantify the baseline. Certifying agents do not maintain aggregated data on what transition approach producers are currently implementing. Therefore, we do not have data on how many producers are bringing heifers into organic production as nonorganic animals and transitioning them into organic versus sourcing and managing animals as organic from the last third of gestation. However, the two largest producers of branded organic fluid milk both require their supplying dairies to supply milk from organic cows, as PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 Milk production (pounds) 2,797,845,926 313,991,661 148,704,869 218,597,110 149,649,913 423,558,952 469,148,296 Percent of U.S. milk production ........................ 11.2 5.3 7.8 5.3 15.1 16.8 opposed to transitioning new nonorganic animals into organic production. Based on discussions with the industry, AMS assumes that, qualitatively, the vast majority of replacement heifers purchased is managed organically from the last third of gestation and, therefore, would not need to change practices due to this proposed action. We seek comment on this assumption and data on current industry practice to help refine our estimates. As discussed in the BACKGROUND section, under the current baseline, we know that producers differ in their transition strategies dependent on how the term ‘‘herd’’ in the regulations is interpreted and applied. The difference in transition approach across producers is, as previously discussed, due to both a lack of definition for what a ‘‘herd’’ is and different interpretations of when the transition of a herd into organic production should be considered completed. Within the existing industry, there are some organic producers who transitioned a single ‘‘herd’’ of animals into organic production, consider their transition complete, and only source animals that are managed organically from the last third of gestation. There are other organic producers who transitioned their operation to organic, but continue to expand their operation by bringing nonorganic animals into organic production as additional ‘‘herds’’. In some cases, these operations have multiple fields on a given location or multiple locations under their business and, therefore, consider the herd in a given field or location as distinct for the purpose of their transition approach. For producers using this kind of multi-herd approach for their operation, the proposed action would require them to source organic animals or previously transitioned animals across all of their herds, regardless of location or multi-herd management strategy. This will, in turn, increase their costs as discussed in the cost analysis that follows. E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules Alternatives Considered As required by E.O. 12866, various alternatives were considered to achieve the objectives of this rule. The alternatives considered include: (Option A) revising the standard to allow producers to transition dairy animals into organic production over a 12-month period on a continuous basis; and (Option B) revising the standard to clearly convey that a producer with a 23471 dairy farm has a one-time exception over a 12-month period to transition dairy animals into organic production. These options are shown in Table 5 below. TABLE 5—ALTERNATIVES CONSIDERED Alternative Description Option A—Continuous Transition .............. Revise standard to allow a producer to transition dairy animals into organic production over a 12month period on a continuous basis. Revise standard to tie the one-time transition exception to a given dairy farm (premises) over a 12month period. Revise standard to tie the one-time transition exception to a given producer with a dairy farm over a 12-month period. Option B—Use ‘‘Dairy Farm’’ as Unit of Regulation. Option C—Proposed Rule ......................... suggested this approach. Further, in assessing the baseline, this approach would increase the number of nonorganic animals transitioned into organic production. If the demand shifts to nonorganic animals for transition into organic production, this would reduce the current demand, and, thus, value of organic heifers. Further, because consumers expect milk to be produced without the use of certain inputs that can be used in nonorganic animals (e.g., antibiotics), this approach could have unknown, but likely negative, impacts on consumer confidence in the growing organic dairy sector. the BACKGROUND section, this proposal was drafted to create greater consistency in the implementation of the transition mechanism so that it is not used as a continual means of producing organic milk without purchasing organic stock once a producer has converted to organic production. Furthermore, AMS could not identify how a producer and a certifying agent could verify that a transition had not already occurred on a given dairy farm. This would be especially difficult as time went on and a dairy farm may have changed ownership multiple times. Option B Option C Option A asabaliauskas on DSK5VPTVN1PROD with PROPOSALS As discussed, maintaining the status quo (i.e., the baseline unit of regulation as a ‘‘herd’’) does not further our objective to provide additional guidance to the organic dairy industry and, therefore, was not considered as a viable alternative. Since 2006, vast stakeholder comments have requested that AMS engage in rulemaking to support greater consistency in the application of the origin of livestock requirements across certifying agents and operations. In addition to stakeholder comments, the OIG identified this issue in its July 2013 audit of organic milk operations and recommended that AMS undertaking rulemaking. The second alternative considered (Option B) would amend the regulations to specify that a dairy farm, as defined by the regulation, could transition dairy animals into organic production onetime over a 12-month period. This would mean that a transition could occur only once on a given premises. Under this alternative, a producer could transition dairy animals on multiple dairy farms over time as long as animals had not been previously transitioned on a given premises. For example, if dairy farm location X, Y, and Z had never had animals transitioned to organic on their respective premises, then producer A could conduct transition on each location (X, Y, and Z) once. If producer B then purchased these dairy farms from producer A, producer B could not complete a transition on these premises because the location had already experienced a one-time transition to organic. We did not choose this alternative because it would only meet the intent of this regulatory action in a limited way. While it would reduce the number of transitions over time, it would allow a given producer, with a single organic certificate, to transition dairy animals on multiple dairy farms. As discussed in The third alternative considered, and selected for this proposed action, would provide a limited exception (i.e., a onetime opportunity for producers) to transition dairy animals into organic production that aligns with both OFPA and the NOSB recommendations. While the NOSB recommendations do not provide the level of specificity needed to implement this approach, the intent of the NOSB is to require that, once an operation is certified organic, any new animals added to that operation should be organically managed since last third of gestation. This proposed rule would address the NOSB recommendation, adding specificity to ensure successful implementation of a uniform and consistent standard. AMS considered many options for how to best operationalize a one-time exception to transition dairy animals into organic production. These options include linking the one-time exception to a dairy farm, an operation, persons responsibly connected, and the current unit of regulation, a herd. For the reasons previously discussed in the OVERVIEW OF PROPOSED AMENDMENTS section, AMS is proposing to link the transition exception to a producer. The first alternative considered (Option A) would amend the regulations to specify that a producer could transition dairy animals into organic production over a 12-month period on a continuous basis. Under OFPA, a dairy animal from which milk or milk products will be sold or labeled as organically produced must be raised in accordance with OFPA for not less than the 12-month period immediately prior to the sale of such milk and milk products (7 U.S.C. 6509(e)(2)(A)). AMS could allow transition of any dairy animal into organic production, without further limitation, as long as it is organically managed for a 12-month period prior to the sale of organic milk or milk products. In effect, this would mean that a producer could continuously transition conventional dairy animals into organic production on an ongoing basis, as opposed to allowing a producer to transition animals into organic production once. While this alternative could achieve the regulatory objective by setting a consistent and uniform standard across the organic dairy industry, numerous NOSB recommendations and stakeholder comments have not VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 E:\FR\FM\28APP1.SGM 28APP1 23472 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Based on NOSB recommendations and almost 13,000 stakeholder comments, this approach would retain the opportunity for new producers to transition into organic dairy production and ensure that organic products meet a consistent standard to support consumer confidence. This approach would require a small number of dairy farms to change their current practices for sourcing dairy animals and, as a result, would impose some limited costs. This approach is also the more pragmatic to implement through the certification and verification process as compared to linking the one-time transition to a dairy farm (Option B). By linking the transition to a given producer (Option C), a producer (e.g., an individual or a corporation) can attest to a certifying agent as part of their application for certification that they have not already completed a dairy transition and certifying agents could verify such attestations by checking past certification records associated with that producer. The costs and benefits of this approach are discussed in more detail below. Costs of Proposed Rule The proposed rule has the potential to increase production costs on dairy producers who currently purchase transitioned dairy animals as replacements, assuming that transitioned animals are currently being sold at a discount to organic replacement animals. Organic dairy farmers who regularly purchase transitioned dairy animals as replacements and organic operations in the process of expansion are likely to face higher costs of production if this rule were finalized as proposed. The cost of implementing the proposed rule will fall primarily on organic dairies that currently purchase transitioned heifers, although dairies currently purchasing organic heifers would be expected to pay higher prices in the short-term due to increased competition for these animals. Farms that sell their excess organic replacement heifers may see an increase in demand for their heifers while farms that exclusively raise their own organic replacement heifers would not be affected by the proposed rule. Overall, this cost analysis uses existing data on the number of replacement animals purchased on organic operations to estimate costs. VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 Using data by organic operation differs from the proposed unit of regulation, which is by producer (i.e., a business entity). We do not have data explicitly available by producer. However, we believe that this analysis using data by organic operation would be similar to any analysis by producer because, in many cases, the operation and producer are functionally one in the same. Further, while we do not have data on multi-herd producers, this analysis assumes that costs will be equivalent on a per cow basis. We are seeking comment on these assumptions and any data relevant to sheep and goat dairy production. Estimated Costs for Dairies The ARMS included the total amount spent on replacement heifers, but the survey did not distinguish between organic and transitioned heifers. For purposes of this analysis, we will assume that 25% to 50 percent of all purchased heifers are transitioned heifers, or between 360 and 720 head. This is a broad estimate though we believe that the proportion is likely smaller than 50% based on discussions with organic dairy producers. The survey results indicated that the average replacement heifer cost approximately $898. The University of Minnesota Farm Financial Database (FINBIN) includes the average replacement cost for organic heifers; between 2006 and 2012 the cost per head ranged between $1,200 and $1,900. Extension officials at the University of Vermont estimated that organic replacement heifers typically cost between $1,600 and $2,000.48 Data on the cost of transitioned heifers is not available. Using the upper end of these ranges ($2,000), the cost of purchasing organic replacement heifers of all weights would be $7.6 million per year. This is the total cost, not the additional cost of purchasing organic heifers instead of transitioned heifers, so the incremental costs will be considerably less. These costs only reflect dairy cattle. Costs for purchasing dairy sheep and goats are not included in this analysis. AMS previously contacted several state extension dairy experts who explained that supplies of organic replacement heifers and milk cows were in excess supply creating a soft 48 Conversation with Dr. Bob Parsons, Extension Associate Professor at University of Vermont, June 4, 2013. PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 demand.49 In addition, the ARMS shows that organic dairy farms retained 56,000 replacement heifers while selling 32,000 head as cull cattle, milk cows, or replacement heifers, indicating that there are ample supplies of replacement heifers available. Therefore, the additional demand for organic replacement heifers is not expected to lead to an increase in the price of replacement heifers. However, to be conservative in estimating the additional costs of the proposed rule, the analysis will assume that the increased demand will increase the cost of an organic replacement heifer by 25 percent, or $500. Because the price of transitioned heifers is not available, the analysis will use the cost of conventional springers 50 as a substitute. Since the cost of a transitioned heifer is likely to be more than the cost of a conventional heifer, using the conventional springer price will generally overstate the cost of compliance with the proposed rule and so provide an upper bound of costs incurred. AMS Livestock, Poultry, and Grain Market News reports on five dairy auction markets 51 in the U.S. Using the reports from the period May 6, 2013 to June 5, 2013, the average auction price for Approved 52 springers was $1,200 per head. The difference in cost between organic heifers and conventional heifers is $800 per head. As discussed, we assume that the cost of transitioned heifer is, at a minimum, equivalent to a conventional heifer. With the assumed $500 increase in cost of organic heifers, the total difference will be $1,300. The difference in cost between a transitioned heifer and an organic heifer is summarized in Table 6. 49 Conversations with Dr. Bob Parsons, Extension Associate Professor at University of Vermont, June 4, 2013; Bradley J. Heins, Assistant Professor of Organic Dairy Production at University of Minnesota, June 5, 2013; and A. Fay Benson, Small Dairy Support, Cornell University SCNY Regional Team, June 6, 2013. 50 A springer is a heifer that is 7–9 months pregnant and will begin producing milk within 2 months. 51 The markets are the Mammoth Cave Dairy Auction, Smiths Grove, KY; Springfield Livestock Marketing Center, Springfield, MO; Producers Auction Yards, Norwood, MO; New Holland Sales Stables, New Holland, PA; and Toppenish Monthly Dairy Replacement Sale, Toppenish, WA. 52 Dairy cattle are classified into four categories: Supreme, Approved, Medium, and Common. The most common category of springers sold is Approved. E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules 23473 TABLE 6—DIFFERENCE IN COST BETWEEN A TRANSITIONED HEIFER AND AN ORGANIC HEIFER Low end of range High end of range Cost of organic replacement heifer ............................................................................................. Increased premium for organic heifer due to increased demand (assumed) ............................. Total cost of organic replacement heifer .............................................................................. $1,200 ........................ ........................ $2,000 ........................ ........................ $2,000 500 2,500 Cost of conventional heifer (used as lower bound for cost of transitioned heifer) ..................... 1,000 1,435 1,200 Cost difference per heifer ..................................................................................................... ........................ ........................ 1,300 According to the NASS 2011 Certified Organic Production Survey, the U.S. had approximately 1,850 organic dairy farms that milked 200,000 cows. Based on the NASS survey results for the total number of organic dairy operations and ARMS data on the number of replacement heifers purchased, we estimate the total increase in cost of purchasing organic heifers instead of transitioned heifers at a maximum of $935,000 per year with the assumption that 50% of replacement animals purchased are transitioned dairy animals and $468,000 per year with the assumption that 25% of replacement animals purchased are transitioned dairy animals. If the cost of organic Value used replacement heifers does not increase due to current market conditions, the estimate of the total increase in cost is significantly less at $576,000 for the 50% assumption and $288,000 for the 25% assumption. The additional cost of purchasing organic heifers for replacement purposes is summarized in Table 7. TABLE 7—ADDITIONAL COST INCURRED TO PURCHASE ORGANIC HEIFERS Total additional cost for dairy producers Price difference used 25% Assumption Low Estimate ................ asabaliauskas on DSK5VPTVN1PROD with PROPOSALS High Estimate ............... Uses $800 difference between conventional and organic heifers. Uses $1,300 difference ($800 above plus $500 in assumed organic premium). 50% Assumption $288,000 ..................................... $576,000. $468,000 ($180,000 of which is an intra-industry transfer). $935,000 ($359,000 of which is an intra-industry transfer. The cost difference between the low and high estimate ($359,000 or $180,000) should not be considered a net cost, but rather an intra-industry transfer. While some producers who need to purchase organic heifers will have additional costs if there is a $500 premium for these animals, this premium will stay within the organic dairy sector as a benefit to those producers supplying organic heifers. Any intra-industry transfer is expected to benefit small operations as such operations tend to have more flexibility in capacity (e.g., available pasture) to accommodate raising organic replacement heifers for the organic market. This flexibility is less apparent for large operations. Furthermore, the actual costs of this action may be considerably less than the low estimate. This analysis is based on a conservative assumption that 50 percent of all purchased heifers are transitioned heifers. Based on discussions with organic dairy producers, we believe that this proportion is likely smaller which would decrease the low cost estimate.53 The costs of the proposed action will vary by size of operation because the proportion of dairies that source at least some of their replacement heifers from their own calves also varies by size of operation. Of the largest operations in the ARMS data, those with 200 or more cows, 96 percent reported that at least some of their replacement heifers were born on their operations. All operations with between 100 and 199 cows reported that at least some of their replacement heifers were born on their operations, and 99 percent of operations with fewer than 50 cows and those with between 50 and 99 cows reported that at least some of their replacement heifers were born on their operations. Purchases of milk cows and replacement heifers also vary by size. Ten percent of operations with fewer than 50 cows reported purchasing milk cows, and the average number purchased was 6 head. Five percent of operations with between 50 and 99 cows reported purchasing milk cows, and the average number purchased was 14 head. Three percent of operations with between 100 and 199 cows reported purchasing milk cows, and the average number purchased was 10 head. No operations with 200 or more cows reported purchasing milk cows. 53 Between April 2012 and December 2013, AMS staff contacted 8 organic dairy producers of various sizes to determine the extent to which heifers are raised or purchased on their farms. VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 The pattern is different for purchasing heifers. Four percent of operations with fewer than 50 cows reported purchasing heifers, and the average number purchased was 10 head. Seven percent of operations with between 50 and 99 cows reported purchasing heifers, and the average number purchased was 10 head. Three percent of operations with between 100 and 199 cows reported purchasing heifers, and the average number purchased was 5 head. Eight percent of operations with 200 or more cows reported purchasing heifers, and the average number purchased was 76 head. Based on a cost difference of $1,300 per head between transitioned replacement heifers and organic replacement heifers, and assuming that half of replacement heifers currently purchased are transitioned, dairies with fewer than 50 cows would pay an additional $270,000, dairies with between 50 and 99 cows would pay an additional $280,000, dairies with between 100 and 199 cows would pay an additional $30,000 and dairies with 200 or more cows would pay an additional $355,000. The costs by size of operation are summarized in Table 8. E:\FR\FM\28APP1.SGM 28APP1 23474 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules TABLE 8—COSTS BY SIZE OF OPERATION FOR PURCHASING ORGANIC HEIFERS Fewer than 50 cows 50–99 cows 100–199 cows 200 or more cows 4% ......................... 10 head ................. $270,000 ............... 7% ......................... 10 head ................. $280,000 ............... 3% ......................... 5 head ................... $30,000 ................. 8%. 76 head. $355,000. $3,250–$6,500 ...... $3,250–$6,500 ...... $1,600–$3,250 ...... $29,700–$49,400. Size of Operation Percent of operations that purchased replacement heifers Average number of replacement heifers purchased ......... Total cost for purchase of replacement heifers across size class. Cost per operation (25% to 50% transitioned heifers) ...... asabaliauskas on DSK5VPTVN1PROD with PROPOSALS Effects on Heifer Development Operations Heifer development operations raise heifers either from wet calves or weaned calves and generally sell them as springers at about 24 months of age. To raise organic or transitioned heifers, these operations must have organic pasture available for the heifers to graze. Operations that raise transitioned heifers may have to increase their ownership or leasing of organic pasture to continue to operate at their current capacity since organic heifer calves will need access to organic pasture for a longer period than transitioned heifers will need access to pasture. Since the locations, numbers, and sizes of heifer development operations are not known, it is not possible to estimate the increased costs this will entail. However, it is possible that, to the extent that organic heifers sell at a premium to transitioned heifers, the increased costs may be at least partially offset by increases in revenues from selling organic replacement heifers. We are seeking data related to the likely impacts on heifer development operations and those for sheep and goats. Effects on Consumers Nearly 99 percent of all dairies report that they source at least some of their replacement cows from their own calves, and only 4.3 percent of all dairies purchase replacement heifers. The 95.7 percent of producers that do not purchase replacement heifers would not see an increase in costs. To replace purchased transitioned heifers, dairies would have to either raise their own replacements or buy them from an operation that sells organic replacement heifers. Since the current market for replacement heifers is soft and there are ample supplies, as detailed above, it is unlikely that the proposed rule would significantly increase producer, and therefore, milk costs to the consumer. relating to the origin of dairy livestock and the management of breeder stock. Greater clarity and specificity will create uniform application of the practice standards applied in organic production and in turn will help maintain consumer confidence in purchasing organic products. The Organic Trade Association’s (OTA) 2013 U.S. Families’ Organic Attitudes and Beliefs tracking study identified that 13 percent of organic buyers surveyed who saw or heard a negative news story about organic chose to buy less organic foods. Further, nearly half of non-buyers of organic products surveyed displayed a decrease in their average level of trust in organic products’ authenticity from 5.3 on a 10point scale in 2012 to 4.4 in 2013.54 Conclusions A clear and consistent standard for transition of dairy animals into organic production is needed and anticipated by dairy producers, consumers, trade associations, certifying agents, and the OIG. This proposed rule would provide a foundation for compliance and enforcement in support of fair competition among dairy producers through a single, well-defined standard. AMS is pursing the regulatory option that retains the opportunity for new producers to transition into organic dairy production once. In the event of emergencies, producers, through their certifiers could apply for a temporary variance provided for in section 205.290(a). AMS is seeking comments on the actual economic impacts, both costs and benefits, of this action on the industry. We are specifically interested in validating the accuracy of the number of farms impacted, validating the accuracy of the estimated number of replacement animals, and understanding the number and size of heifer development operations that may be affected by this action. The costs and benefits are summarized in the Executive Summary Benefits of the Proposed Rule This proposed rule would bring specificity and clarity to the regulations VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 54 Organic Trade Association. 2013. U.S. Families’ Organic Attitudes and Beliefs: 2013 Tracking Study. www.ota.com. PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 and were described in detail in this section. In addition, and in support of our validation efforts, we also are requesting comments on or submissions of applicable farm or industry data, data sources, reports, research and other relevant information that would help us better understand the full range of impacts of the rule on farm income and profitability. B. Executive Order 12988 Executive Order 12988 instructs each executive agency to adhere to certain requirements in the development of new and revised regulations in order to avoid unduly burdening the court system. This proposed rule is not intended to have a retroactive effect. States and local jurisdictions are preempted under the OFPA from creating programs of accreditation for private persons or State officials who want to become certifying agents of organic farms or handling operations. A governing State official would have to apply to USDA to be accredited as a certifying agent, as described in section 6514(b) of the OFPA. States are also preempted under sections 6503 and 6507 of the OFPA from creating certification programs to certify organic farms or handling operations unless the State programs have been submitted to, and approved by, the Secretary as meeting the requirements of the OFPA. Pursuant to section 6507(b)(2) of the OFPA, a State organic certification program may contain additional requirements for the production and handling of organically produced agricultural products that are produced in the State and for the certification of organic farm and handling operations located within the State under certain circumstances. Such additional requirements must: (a) Further the purposes of the OFPA, (b) not be inconsistent with the OFPA, (c) not be discriminatory toward agricultural commodities organically produced in other States, and (d) not be effective until approved by the Secretary. Pursuant to section 6519(f) of the OFPA, this proposed rule would not E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules alter the authority of the Secretary under the Federal Meat Inspection Act (21 U.S.C. 601–624), the Poultry Products Inspection Act (21 U.S.C. 451– 471), or the Egg Products Inspection Act (21 U.S.C. 1031–1056), concerning meat, poultry, and egg products, nor any of the authorities of the Secretary of Health and Human Services under the Federal Food, Drug and Cosmetic Act (21 U.S.C. 301–399), nor the authority of the Administrator of the EPA under the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136–136(y)). Section 6520 of the OFPA provides for the Secretary to establish an expedited administrative appeals procedure under which persons may appeal an action of the Secretary, the applicable governing State official, or a certifying agent under this title that adversely affects such person or is inconsistent with the organic certification program established under this title. The OFPA also provides that the U.S. District Court for the district in which a person is located has jurisdiction to review the Secretary’s decision. asabaliauskas on DSK5VPTVN1PROD with PROPOSALS C. Regulatory Flexibility Analysis The Regulatory Flexibility Act (RFA) (5 U.S.C. 601–612) requires agencies to consider the economic impact of each rule on small entities and evaluate alternatives that would accomplish the objectives of the rule without unduly burdening small entities or erecting barriers that would restrict their ability to compete in the market. The purpose is to fit regulatory actions to the scale of businesses subject to the action. The RFA permits agencies to prepare the initial RFA in conjunction with other analyses required by law, such as the Regulatory Impact Analysis (RIA). AMS notes that several requirements to complete the RFA overlap with the RIA. For example, the RFA requires a description of the reasons why action by the agency is being considered and an analysis of the proposed rule’s costs to small entities. The RIA describes the need for this proposed rule, the alternatives considered and the potential costs and benefits of this proposed rule. In order to avoid duplication, we combine some analyses as allowed in section 605(b) of the RFA. As explained below, AMS expects that the entities that could be impacted by this proposed rule would qualify as small businesses. In the RIA, the discussion of alternatives and the potential costs and benefits pertain to impacts upon all entities, including small entities. Therefore, the scope of those analyses is applicable to the RFA. VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 The RIA should be referred to for more detail. AMS has considered the economic impact of this proposed action on small entities. Small entities include producers transitioning into organic dairy production, existing organic dairy producers, and producers that raise replacement animals for organic dairies. AMS believes that the cost of implementing the proposed rule will fall primarily on organic dairies that currently purchase transitioned heifers, although dairies currently purchasing organic heifers would be expected to pay higher prices in the short-term due to increased competition for these animals. Farms that sell their excess organic replacement heifers may see an increase in demand for their heifers while farms that raise their own organic replacement heifers would not be affected by the proposed rule. AMS believes there may be a limited number of heifer development operations who could be impacted by this action. However, since the locations, numbers, and sizes of heifer development operations are not known, it is not possible to estimate the number of such entities and any increased costs for those entities. This proposed rule would also affect certifying agents that certify organic dairy operations. The Small Business Administration (SBA) defines small agricultural service firms, which includes certifying agents, as those having annual receipts of less than $7,000,000 (North American Industry Classification System Subsector 115— Support Activities for Agriculture and Forestry). There are currently 84 USDAaccredited certifying agents; based on a query of the NOP certified organic operations database, there are approximately 53 certifying agents who are currently involved in the certification of organic dairies. AMS believes that these certifying agents would meet the criterion for a small business. While certifying agents are small entities that will be affected by this proposed rule, we do not expect these certifying agents to incur significant costs as a result of this action. Certifying agents already must comply with the current regulations, e.g., maintaining certification records for organic dairy operations. Their primary new responsibility under this proposal will be to determine, through the existing application process for organic certification, a producer’s eligibility for a one-time transition into organic production. For the RFA analysis, AMS focused on estimating how different size organic dairy operations (small versus large) PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 23475 would be impacted as a result of purchasing all organic dairy replacement animals. As discussed above, we do not have data on heifer development operations that raise dairy replacement heifers and are unable to estimate the impacts on these entities. As defined by the SBA (13 CFR 121.201), small agricultural producers are defined as those having annual receipts of less than $750,000. AMS used this SBA criterion to identify large organic dairy operations, those with cash receipts of more than $750,000, and small operations, those with cash receipts of $750,000 or less. The ARMS dataset estimates that 95 percent had cash receipts below $750,000 and 5 percent had cash receipts above $750,000. Using the NASS estimate for the total number of organic dairy operations, AMS estimates that, in 2011, there were 91 large operations and 1,756 operations that would be considered small under the SBA criterion. AMS notes that there is little variation in the proportion of organic dairies that source at least some of their replacement heifers from their own calves. Of the large operations, 96 percent reported that at least some of their replacement heifers were born on their operations. About 99 percent of small operations reported sourcing at least some of their replacement heifers from calves born on their operations. While the frequency of purchases of replacement heifers varied little by size, our analysis shows that the mean number of replacement heifers purchased was significantly different across size categories. Small operations were slightly less likely to buy replacement heifers (5.3 percent versus 5.5 percent). Of the small operations that purchased replacement heifers, the average number purchased was 10 head, compared with an average purchase of 107 head for large operations. For this cost analysis, we assumed a cost difference of $1,300 per head between transitioned replacement heifers and organic replacement heifers and assumed that half of replacement heifers currently purchased are transitioned.55 Based on our analysis, AMS estimates that, under the proposed rule, small operations would collectively spend an additional $588,000 for heifers. Large operations would collectively pay an additional $347,000 for heifers. Of the operations that purchased heifers, the average additional cost per operation would be $6,300 for small operations 55 The determination of a cost difference of $1,300 per head and the assumption about the proportion of replacement heifers that are transitioned is discussed in the RIA. See section on EO 12866 and 13563. E:\FR\FM\28APP1.SGM 28APP1 23476 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules and $70,000 for large operations. AMS notes that this analysis assumed that there is no difference in the cost per head paid by large and small operations for purchases of replacement heifers. Table 9 summarizes the cost analysis using the SBA criterion for small businesses (i.e., producers with less than $750,000 in cash receipts). TABLE 9—COST OF ORGANIC REPLACEMENT HEIFERS BY SBA CRITERION FOR SMALL BUSINESSES Small operations (<$750,000) Total cost (all operations) ............................................................................................................................ Per operation purchasing replacement heifers (25% to 50% transitioned replacements) ......................... asabaliauskas on DSK5VPTVN1PROD with PROPOSALS To understand the potential costs in context, we used the higher average cost estimate per operation from Table 9 for the purchase of organic replacement heifers (i.e., $6,300 for small; $70,000 for large) and compared it to the average gross cash farm income for each size category. In 2011, the average gross farm cash income for small operations was $211,375, and $2,348,345 for large operations. For both small and large operations, the average additional costs imposed by the requirement to purchase organic replacement heifers accounts for approximately 2.9 percent of an operation’s average gross cash farm income. AMS believes that any costs incurred by producers in complying with this proposed action would be offset by a stronger marketplace for organic dairy products. If implemented, this action would, as discussed in the benefits portion of the RIA, ensure that consumer expectations are met and support the growing market for these organic products. AMS believes that, over the long run, the economic impact on producers of not implementing this proposed rule would be greater than the economic impact of this proposed rule due to the need for greater consistency in applying the origin of livestock standard across the organic dairy sector. In addition, AMS has not identified any relevant Federal rules that are currently in effect that duplicate, overlap, or conflict with this proposed rule. This action provides additional clarity on the origin of livestock requirements that are specific and limited to the USDA organic regulations. D. Executive Order 13175 This proposed rule has been reviewed in accordance with the requirements of Executive Order 13175, ‘‘Consultation and Coordination with Indian Tribal Governments.’’ Executive Order 13175 requires Federal agencies to consult and coordinate with tribes on a governmentto-government basis on policies that have tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes or on the distribution of power and responsibilities between the Federal Government and Indian tribes. AMS has assessed the impact of this rule on Indian tribes and determined that this rule may have tribal implications that require tribal consultation under EO 13175. If a Tribe requests consultation, AMS will work with the Office of Tribal Relations to ensure meaningful consultation is provided where changes, additions and modifications identified herein are not expressly mandated by Congress. E. Paperwork Reduction Act No additional collection or recordkeeping requirements are imposed on the public by this proposed rule. Accordingly, OMB clearance is not required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, Chapter 35. F. Civil Rights Impact Analysis AMS has reviewed this proposed rule in accordance with the Department Regulation 4300–4, Civil Rights Impact Analysis (CRIA), to address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. After a careful review of the rule’s intent and provisions, AMS has determined that this rule would only impact the organic practices of organic producers and that this rule has no potential for affecting producers in protected groups differently than the general population of producers. This rulemaking was initiated to clarify a regulatory requirement and enable consistent implementation and enforcement. Protected individuals have the same opportunity to participate in the NOP as non-protected individuals. The USDA organic regulations prohibit discrimination by certifying agents. Specifically, section 205.501(d) of the current regulations for accreditation of certifying agents provides that ‘‘No private or governmental entity accredited as a certifying agent under this subpart shall exclude from PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 $588,000 3,150–6,300 Large operations (>=$750,000) $347,000 35,000–70,000 participation in or deny the benefits of the NOP to any person due to discrimination because of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family status.’’ Paragraph 205.501(a)(2) requires ‘‘certifying agents to demonstrate the ability to fully comply with the requirements for accreditation set forth in this subpart’’ including the prohibition on discrimination. The granting of accreditation to certifying agents under section 205.506 requires the review of information submitted by the certifying agent and an on-site review of the certifying agent’s operation. Further, if certification is denied, section 205.405(d) requires that the certifying agent notify the applicant of their right to file an appeal to the AMS Administrator in accordance with section 205.681. These regulations provide protections against discrimination, thereby permitting all producers, regardless of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family status, who voluntarily choose to adhere to the rule and qualify, to be certified as meeting NOP requirements by an accredited certifying agent. This proposed rule in no way changes any of these protections against discrimination. List of Subjects in 7 CFR Part 205 Administrative practice and procedure, Agriculture, Animals, Archives and records, Imports, Labeling, Organically produced products, Plants, Reporting and recordkeeping requirements, Seals and insignia, Soil conservation. For the reasons set forth in the preamble, 7 CFR part 205 is proposed to be amended as follows: PART 205—NATIONAL ORGANIC PROGRAM 1. The authority citation for 7 CFR part 205 continues to read: ■ Authority: 7 U.S.C. 6501–6522. 2. Section 205.2 is amended by adding in alphabetical order definitions for ■ E:\FR\FM\28APP1.SGM 28APP1 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Proposed Rules ‘‘dairy farm,’’ ‘‘organic management,’’ third-year transitional crop,’’ ‘‘transitional crop,’’ and ‘‘transitioned animal’’ to read as follows: § 205.2 Terms defined. * * * * * Dairy farm. A premises with a milking parlor where at least one lactating animal is milked. * * * * * Organic management. Management of a production or handling operation in compliance with all applicable production and handling provisions under this part. * * * * * Third-year transitional crop. Crops and forage from land, included in the organic system plan of a producer’s operation, that has had no application of prohibited substances within 2 years prior to harvest of the crop or forage. * * * * * Transitional crop. Any agricultural crop or forage from land, included in the organic system plan of a producer’s operation, that has had no application of prohibited substances within one year prior to harvest of the crop or forage. Transitioned animal. A dairy animal that was converted to organic milk production in accordance with § 205.236(a)(2); offspring borne to a transitioned animal that, during its last third of gestation, consumes third year transitional crops; or offspring borne during the one-time transition exception that themselves consume third year transitional crops. Such animals must not be sold, labeled, or represented as organic slaughter stock or for the purpose of organic fiber. * * * * * ■ 3. Section 205.236 is revised to read as follows: asabaliauskas on DSK5VPTVN1PROD with PROPOSALS § 205.236 Origin of livestock. (a) Livestock products that are to be sold, labeled, or represented as organic must be from livestock under continuous organic management from the last third of gestation or hatching: Except, That: (1) Poultry. Poultry or edible poultry products must be from poultry that has been under continuous organic management beginning no later than the second day of life; (2) Dairy animals. A producer as defined in § 205.2 may transition dairy animals into organic production only once. A producer is eligible for this transition only if the producer starts a new organic dairy farm or converts an existing nonorganic dairy farm to organic production. A producer must not transition any new animals into VerDate Sep<11>2014 20:51 Apr 27, 2015 Jkt 235001 organic production after completion of this one-time transition. This transition must occur over a continuous 12-month period prior to production of milk or milk products that are to be sold, labeled, or represented as organic, and meet the following conditions: (i) During the 12-month period, dairy animals must be under continuous organic management; (ii) During the 12-month period, the producer should describe the transition as part of its organic system plan and submit this as part of an application for certification to a certifying agent, as required in § 205.401; (iii) During the 12-month period, dairy animals and their offspring may consume third-year transitional crops; (iv) Offspring born during or after the 12-month period are transitioned animals if they consume third-year transitional crops during the transition or if the mother consumes third year transitional crops during the offspring’s last third of gestation; (v) Offspring born from transitioning dairy animals are organic if they are under continuous organic management and if only certified organic crops and forages are used from their last third of gestation; (vi) All dairy animals must end the transition at the same time; (vii) Dairy animals that complete the transition are transitioned animals and must not be used for organic livestock products other than organic milk; (viii) After the 12-month period ends, transitioned animals may produce organic milk on any organic dairy farm as long as the animal is under continuous organic management at all times on a certified organic operation; and (ix) After the 12-month period ends, any new dairy animal brought onto a producer’s dairy farm(s) for organic milk production must be an animal under continuous organic management from the last third of gestation or a transitioned animal sourced from another certified organic dairy farm. (3) Breeder stock. Livestock used as breeder stock may be brought from a nonorganic operation onto an organic operation at any time, Provided, That the following conditions are met: (i) Such breeder stock must be brought onto the operation no later than the last third of gestation if its offspring are to be raised as organic livestock; and (ii) Such breeder stock must be managed organically throughout the last third of gestation and the lactation period during which time they may nurse their own offspring. (b) The following are prohibited: PO 00000 Frm 00023 Fmt 4702 Sfmt 9990 23477 (1) Livestock, edible livestock products, or nonedible livestock products such as animal fiber that are removed from an organic operation and subsequently managed on a nonorganic operation may not be sold, labeled, or represented as organically produced. (2) Breeder stock, dairy stock, or transitioned animals that have not been under continuous organic management since the last third of gestation may not be sold, labeled, or represented as organic slaughter stock. (c) The producer of an organic livestock operation must maintain records sufficient to preserve the identity of all organically managed animals, including whether they are transitioned animals, and edible and nonedible animal products produced on the operation. ■ 4. Section 205.237 is amended by revising paragraph (a) to read as follows: § 205.237 Livestock feed. (a) The producer of an organic livestock operation must provide livestock with a total feed ration composed of agricultural products, including pasture and forage, that are organically produced and handled by operations certified to the NOP, except as provided in § 205.236(a)(2)(iii), except, that, synthetic substances allowed under § 205.603 and nonsynthetic substances not prohibited under § 205.604 may be used as feed additives and feed supplements, Provided, That, all agricultural ingredients included in the ingredients list, for such additives and supplements, shall have been produced and handled organically. * * * * * ■ 5. Section 205.239 is amended by revising paragraph (a)(3) to read as follows: § 205.239 Livestock living conditions. (a) * * * (3) Appropriate clean, dry bedding. When roughages are used as bedding, they shall have been organically produced in accordance with this part by an operation certified under this part, except as provided in § 205.236(a)(2)(iii), and, if applicable, organically handled by operations certified to the NOP. * * * * * Dated: April 23, 2015. Rex A. Barnes, Associate Administrator, Agricultural Marketing Service. [FR Doc. 2015–09851 Filed 4–27–15; 8:45 am] BILLING CODE P E:\FR\FM\28APP1.SGM 28APP1

Agencies

[Federal Register Volume 80, Number 81 (Tuesday, April 28, 2015)]
[Proposed Rules]
[Pages 23455-23477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09851]

========================================================================
Proposed Rules
Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 /
Proposed Rules

[[Page 23455]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 205

[Document Number AMS-NOP-11-0009; NOP-11-04PR]
RIN 0581-AD08

National Organic Program; Origin of Livestock

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Department of Agriculture's Agricultural Marketing
Service (USDA AMS) proposes to amend the origin of livestock
requirements for dairy animals under the USDA organic regulations. This
proposed action would specify that a producer can transition dairy
animals into organic production once. This proposed action would
clarify that, after completion of this one-time transition, any new
dairy animals that a producer adds to a dairy farm would need to be
managed organically from the last third of gestation or sourced from
dairy animals that already completed their transition into organic
production. This proposed action would also clarify how breeder stock
should be managed on organic livestock farms.

DATES: Comments must be received by July 27, 2015.

ADDRESSES: Interested parties may submit written comments on this
proposed rule using one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Scott Updike, Agricultural Marketing Specialist,
National Organic Program, USDA-AMS-NOP, Room 2646--So., Ag Stop 0268,
1400 Independence Ave. SW., Washington, DC 20250-0268.
Instructions: All submissions received must include the docket
number AMS-NOP-11-0009; NOP-11-04PR, and/or Regulatory Information
Number (RIN) 0581-AD08 for this rulemaking. Commenters should identify
the topic and section of the proposed rule to which their comment
refers. All commenters should refer to the GENERAL INFORMATION section
for more information on preparing your comments. All comments received
will be posted without change to http://www.regulations.gov.
Docket: For access to the docket, including background documents
and comments received, go to http://www.regulations.gov. Comments
submitted in response to this proposed rule will also be available for
viewing in person at USDA-AMS, National Organic Program, Room 2646--
South Building, 1400 Independence Ave. SW., Washington, DC, from 9 a.m.
to 12 noon and from 1 p.m. to 4 p.m., Monday through Friday (except
official Federal holidays). Persons wanting to visit the USDA South
Building to view comments received in response to this proposed rule
are requested to make an appointment in advance by calling (202) 720-
3252.

FOR FURTHER INFORMATION CONTACT: Andrew Perry, Director, Standards
Division, Telephone: (202) 720-3252; Fax: (202) 205-7808.

SUPPLEMENTARY INFORMATION:

Executive Summary

A. Purpose of Proposed Rule

This proposed rule would create greater consistency in the
implementation of a standard for the transition of dairy animals into
organic production and for the management of breeder stock. AMS has
determined that the current regulations regarding the transition of
dairy animals and the management of breeder stock on organic operations
need additional specificity and clarity to improve AMS' ability to
efficiently administer the National Organic Program (NOP). A stated
purpose of the Organic Foods Production Act of 1990 (OFPA) (7 U.S.C.
6501-6522) is to assure consumers that organically produced products
meet a consistent and uniform standard (7 U.S.C. 6501). This action
would facilitate and improve compliance with and enforcement of the
USDA organic regulations (7 CFR part 205) and maintain consumer trust
in the consistency of the Organic seal.

B. Summary of Provisions

This proposed rule would update the regulation by explicitly
requiring that milk or milk products labeled, sold or represented as
organic be from dairy animals organically managed since at least the
last third of gestation, with a one-time exception for transition. This
exception would allow a producer, as defined by the regulations, to
transition nonorganic dairy animals to organic milk production one
time, under specific conditions.
This proposal would specify that a producer (e.g., an individual or
corporation starting or operating a dairy farm) could transition
nonorganic dairy animals to organic milk production one time over a
single twelve-month period. The proposal would require that all
transitioning animals end the transition process at the same time. This
twelve-month period is consistent with OFPA's requirement that there be
a minimum period of one year of organic management before milk from
dairy animals can be sold as organic (7 U.S.C. 6509(e)(2)).
This proposal would specify that, once the transition into organic
production is complete, that a producer would not be allowed to conduct
any additional transitions. After the transition, the producer would
only be able to expand the number of dairy animals or replace culled
dairy animals on any dairy farm in two ways: (1) Add dairy animals that
had been under continuous organic management since the last third of
gestation, or (2) add transitioned dairy animals that had already
completed the transition on another dairy farm during that producer's
one-time transition.
The proposal would define a dairy farm as a specific premises with
a milking parlor where at least one lactating animal is milked. For the
purpose of this definition, a milking parlor should be considered a
physical structure (e.g., barn, parlor) in which dairy animals are
milked. Because the dairy farm definition, in part, drives the
eligibility for a producer to transition animals to organic production,
this action would mean that producers that only raise heifers for
organic dairy farms would not be eligible to transition conventional
animals to organic. Such producers do not milk animals and, therefore,
would not be considered eligible for the one-time transition

[[Page 23456]]

exception. However, such producers could continue raising heifers for
organic dairy farms as long as the animals were under continuous
organic management from the last third of gestation.
This proposed rule reiterates that breeder stock may be brought
from a nonorganic operation onto an organic operation at any time.
While the regulations prohibit organic livestock from being removed and
managed on a nonorganic operation and subsequently returned to an
organic operation (i.e., cycling in and out of organic production),
this provision does not extend to nonorganic breeder stock that are
themselves not certified or eligible for slaughter, sale, and labeling
as organic. Further, OFPA specifically allows breeder stock to be
purchased from any source if the stock is not in its last third of
gestation. Consistent with OFPA and USDA organic regulations, a
producer has flexibility in its sourcing and its management of
nonorganic breeder stock after its organic calf is weaned and before it
begins the last third of gestation for the next offspring. However, a
producer must continue to prevent commingling of organic and nonorganic
products and prevent contact of any organic production or products with
prohibited substances (7 CFR 205.201(a)(5)). AMS is proposing
additional provisions for organic management of breeder stock during
the time when the breeder stock is directly contributing to the
nourishment of organic offspring, from the last third of gestation
through the end of the nursing period.

C. Costs and Benefits

AMS estimates the following costs and benefits of this proposed
rule.

------------------------------------------------------------------------
Costs (range) Benefits
------------------------------------------------------------------------
$288,000-$935,000...................... Will create a consistent, level
This range indicates the estimated playing field for all existing
costs for dairy producers to purchase organic dairy producers,
organic replacement heifers instead of regardless of how they
transitioned heifers. (AMS had no data transitioned into organic
to estimate costs for dairy sheep and production.
goat farms) AMS believes the lower Facilitates more consistent
bound is a conservative estimate of enforcement of organic dairy
the costs and actual costs could be standards.
less. The upper limit accounts for an Maintains consumer confidence
assumed organic premium for organic in the USDA organic seal.
heifers. The difference between the
lower bound and upper limit is
believed to be an intra-industry
transfer of costs and benefits, not a
net cost.
------------------------------------------------------------------------

Table of Contents

I. General Information
A. Does this action apply to me?
B. What should I consider as I prepare my comments for AMS?
II. Background
A. Dairy Transition
B. Breeder Stock
C. Development of Existing Standards
D. Discussion of Past Comments Received
III. Overview of Proposed Amendments
A. Dairy Transition
i. Implementation Considerations
B. Breeder Stock
C. Additional Clarifications
D. Other Amendments Considered
IV. Related Documents
V. Statutory and Regulatory Authority
A. Executive Order 12866 and 13563
i. Need for the Rule
ii. Baseline
iii. Alternatives Considered
iv. Costs of Proposed Rule
v. Benefits of Proposed Rule
vi. Conclusions
B. Executive Order 12988
C. Regulatory Flexibility Act
D. Executive Order 13175
E. Paperwork Reduction Act
F. Civil Rights Impact Analysis
VI. List of Subjects in 7 CFR Part 205

I. General Information

A. Does this action apply to me?

You may be potentially affected by this action if you are engaged
in the dairy industry. Potentially affected entities may include, but
are not limited to:
Individuals or business entities that are considering
starting a new dairy farm and that plan to seek organic certification
for that farm.
Existing dairy farms that are currently certified organic
under the USDA organic regulations.
Existing conventional dairy farms that are considering
converting their farm to certified organic production.
Businesses engaged in raising heifers for sale to
certified organic operations.
Certifying agents accredited under the USDA organic
regulations to certify organic livestock operations.
Certifying agents accredited under the USDA organic
regulations who may seek to certify transitioned dairy animals or
transitional crops.
This listing is not intended to be exhaustive, but rather provides
a guide for readers regarding entities likely to be affected by this
action. Other types of entities not listed in this section could also
be affected. To determine whether you or your business may be affected
by this action, you should carefully examine the proposed regulatory
text. If you have questions regarding the applicability of this action
to a particular entity, consult the person listed under FOR FURTHER
INFORMATION CONTACT.

B. What should I consider as I prepare my comments for AMS?

Your comments should clearly indicate whether or not they support
the action being proposed for any or all of the items in this proposed
rule. You should clearly indicate the reason(s) for the stated
position. Your comments should also offer any recommended language
changes that would be appropriate for your position. Please include
relevant information and data to further support your position (e.g.
scientific, environmental, industry impact information, etc.).
Specifically, AMS is requesting comments on the following topics:
1. The cost and benefit analysis presented, including assumptions
and estimates, of limiting dairy transition to a one-time exception for
a given producer;
2. Procedures that certifying agents would use under this proposal
to determine whether a producer is eligible for the one-time
transition; and
3. The proposed implementation approach for this rule.

II. Background

A. Dairy Transition

AMS' National Organic Program (NOP) is authorized by OFPA. Through
the NOP, AMS oversees national standards for the production and
handling of organically produced agricultural products. This action is
being taken by AMS to create greater consistency in the implementation
of the origin of livestock requirements for organic dairy animals, and
to facilitate and improve compliance with and enforcement of the USDA
organic regulations. This action is also being taken to satisfy
consumer expectations

[[Page 23457]]

that organic livestock meet a consistent and uniform standard.
Section 6509 of OFPA authorizes the USDA to implement regulations
regarding standards for organic livestock products, including the
transition of dairy animals into organic production. OFPA establishes
that in general, organic livestock will be managed organically since
the last third of gestation (7 U.S.C. 6509(b)). As an exception for
dairy animals, OFPA requires a minimum period of one year of organic
management before milk from non-organic dairy animals can be sold as
organic (7 U.S.C. 6509(e)(2)). OFPA also addresses the use of breeder
stock on livestock farms (7 U.S.C. 6509(b)). Furthermore, OFPA
authorizes the creation of the National Organic Standards Board (NOSB)
to advise USDA about the implementation of standards and practices for
organic production (7 U.S.C. 6518).
The USDA organic regulations regarding the origin of livestock (7
CFR 205.236(a)) require that all livestock products (e.g., meat, fiber)
sold, labeled, or represented as being organic must be from livestock
under continuous organic management from the last third of gestation
onward. For dairy animals, the USDA organic regulations provide an
exception at section 205.236(a)(2) that allows for the transition of a
dairy herd into organic production as long as they are under continuous
organic management for the one-year period prior to production of
organic milk or milk products. During this one-year period, dairy
animals may consume crops and forage from land which is in the third
year of organic management and included in the organic system plan, but
has not yet been certified organic (7 CFR 205.236(a)(2)(i)). Section
205.236(a)(2)(iii) requires that once an entire distinct herd has
transitioned to organic production, all dairy animals shall be managed
organically from the last third of gestation.
While the regulations allow for the transition of a conventional
herd to organic milk production after one year of organic management,
the regulations do not define a herd. As such, stakeholders have
interpreted the term ``herd'' in a variety of ways. For example, some
operations and certifying agents consider a herd to include all of the
animals on the farm, whereas others consider a herd to be a group of
animals on a farm that are managed together over time.
Additionally, organic operations and certifying agents have
interpreted the USDA organic regulations differently regarding when the
transition of a herd into organic production should be considered
complete. Some dairy operations continuously transition conventional
dairy animals as new ``distinct'' herds into organic production. This
can be a cost savings to a farmer because he or she does not have to
purchase organic dairy animals to either expand their herd or replace
their cull animals. Other dairy operations have only used the
transition exception once when they initially converted a ``herd'' to
organic production. Current practice also does not always align with
the intent of the May 2003 NOSB recommendation and the regulations that
dairy herd transition be used only one time, when a producer with a
farm initially transitions from conventional to organic production. AMS
is updating the transition exception through this proposed rulemaking.
In July 2013, the USDA Office of Inspector General (OIG) published
an audit report on organic milk operations stating that certifying
agents were interpreting the origin of livestock requirements
differently.\1\ According to the OIG report, three of the six
certifiers interviewed by OIG allowed producers to continuously
transition additional herds to organic milk production, while the other
three certifiers did not permit this practice. OIG recommended that a
proposed rule be issued to clarify the standard and ensure that all
certifiers consistently apply and enforce the origin of livestock
requirements. This proposed rule responds to the OIG finding on this
issue.
---------------------------------------------------------------------------

\1\ The July 2013 Office of Inspector General (OIG) audit report
on organic milk operations may be accessed at the following Web
site: http://www.usda.gov/oig/webdocs/01601-0002-32.pdf.
---------------------------------------------------------------------------

B. Breeder Stock

OFPA states that breeder stock may be purchased from any source if
such stock is not in the last third of gestation (7 U.S.C. 6509(b)).
The USDA organic regulations define breeder stock as female livestock
whose offspring may be incorporated into an organic operation at the
time of their birth (7 CFR 205.2). OFPA and the regulations limit
breeder stock to nonorganic females who may produce organic offspring
if certain conditions are met. The regulations specify that such
breeder stock may be brought from a nonorganic operation onto an
organic operation at any time (7 CFR 205.236(a)(3)). If breeder stock
is gestating and its offspring are to be raised as organic, the
regulations require that the breeder stock be brought onto the facility
no later than the last third of gestation and be under continuous
organic management until the offspring are weaned from the breeder
stock (7 CFR 205.236(a)).
Stakeholders, through public comment to the NOSB and comments to
NOP have expressed concern that some operations may bring breeder stock
onto an organic operation, manage them organically for the last third
of gestation so that the breeder stock can produce organic offspring,
and then return that breeder stock to nonorganic management. Some
stakeholders, including the NOSB, have suggested that such a practice
does not align with a regulatory provision that prohibits livestock
removed from an organic operation and subsequently managed on a
nonorganic operation to be sold, labeled, or represented as organically
produced (section 205.236(b)).\2\
---------------------------------------------------------------------------

\2\ National Organic Standards Board April 2003 Recommendation
on Breeder Stock: Clarification of Rule. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
---------------------------------------------------------------------------

C. Development of Existing Standards

Between 1994 and 2006, the NOSB made six recommendations regarding
origin of dairy animals; several of which included recommendations on
the management of breeder stock.\3\ Between 1997 and 2000, AMS issued
two proposed rules and a final rule regarding national standards for
production and handling of organic products, including livestock and
their products. ^{4 5} AMS also issued a proposed rule and
final rule implementing congressional amendments to the OFPA regarding
feed for transitioning dairy animals.\6\ The NOSB as well as the public
commented on these rulemakings with regard to the origin of livestock
and exception for transition. Key points from these actions that led to
the development of the existing standards on origin of livestock are
summarized below.
---------------------------------------------------------------------------

\3\ A complete listing of related documents and NOSB
recommendations is found in Section III below.
\4\ 62 FR 65850; 65 FR 13512.
\5\ 65 FR 80548.
\6\ 71 FR 32803.
---------------------------------------------------------------------------

(1) In June 1994, the NOSB recommended a series of provisions to
address the source of livestock on organic farms. Within this
recommendation, the NOSB stated that dairy stock be fed certified
organic feeds and raised under organic management practices for not
less than 12 months prior to the sale of their milk as organic.\7\
---------------------------------------------------------------------------

\7\ NOSB Final Recommendation, 2 June 1994. Available online at:
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=stelprdc5058940.
---------------------------------------------------------------------------

(2) On December 16, 1997, AMS responded to the June 1994 NOSB

[[Page 23458]]

recommendation through publication of a proposed rule.\8\ The language
contained within that proposed rule echoed the NOSB's recommendation.
The proposal would have required that dairy animals must be on a
certified organic facility beginning no later than 12 months prior to
the production of milk or milk products sold, labeled, or represented
as organic. The 1997 proposed rule also proposed that all feed provided
to organic dairy livestock consist of organically produced and handled
agricultural products, including pasture and forage. However, the
proposed rule included a provision to allow nonorganic feed up to a
maximum of 20 percent of the animal's diet. The 20 percent level was
roughly representative of the nutrients provided from supplemental
grain feeding, in addition to nutrients provided by pasture and forage.
The proposed language also contained a provision that, if necessary, a
herd of dairy livestock converting to organic management for the first
time could be provided with nonorganic feed until 90 days prior to the
production of organic milk or milk products. This proposed rule was
never finalized.\9\
---------------------------------------------------------------------------

\8\ 62 FR 65850.
\9\ Due to the volume and content of public comments submitted
in response to the 1997 proposed rule, AMS withdrew the proposal and
issued a second proposed rule prior to the final rule that
established the National Organic Program (NOP) (published December
21, 2000).
---------------------------------------------------------------------------

(3) In March 1998, the NOSB provided a second recommendation
reaffirming its 1994 recommendation on the source of livestock.\10\ The
March 1998 NOSB recommendation also recommended that livestock
comprising part of a mixed crop/livestock operation should qualify to
be certified organic at the end of the transition period.
---------------------------------------------------------------------------

\10\ NOSB Committee Report and Adopted Recommendations, 16 March
1998. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=stelprdc5058929.
---------------------------------------------------------------------------

(4) On March 13, 2000, AMS published a proposed rule that would
establish the USDA organic regulations.\11\ Within this proposed rule,
AMS responded to the NOSB's March 1998 recommendation on the source of
livestock. AMS proposed to require that livestock be under continuous
organic management beginning no later than one year prior to the
production of organic milk or milk products. Unlike AMS' 1997 proposal,
the 2000 proposed rule did not include a provision for the allowance of
nonorganic feed during the 12-month transition period.
---------------------------------------------------------------------------

\11\ 65 FR 13512.
---------------------------------------------------------------------------

(5) On June 12, 2000, the NOSB commented on the second proposed
rule with respect to the origin of dairy livestock. The NOSB stated
that livestock should be under organic management for one full year
prior to the sale of organic milk with an exception for conversion of
an entire, distinct herd into organic production. The NOSB laid out the
following three conditions for conversion of a herd into organic
production:
For the first nine months of the final twelve-month dairy
herd transition period, animals must be fed at least 80 percent feed
that is either organic or self-raised transitional feed. The remaining
20 percent could be nonorganic during those nine months.
For the final three months, animals must be fed 100
percent organic feed.
Once a dairy operation has been converted to organic
production, all dairy animals shall be under organic management from
the last third of gestation, except that transitional feed raised on
the farm may be fed to young stock up to 12 months prior to milk
production.
(6) On December 21, 2000, AMS published a final rule establishing
the USDA organic regulations.\12\ Through this action, AMS finalized
the origin of livestock provision, including a requirement that organic
milk be produced from animals under organic management beginning no
later than one year prior to the production of milk or milk products
sold, labeled, or represented as organic. The rule further incorporated
the exceptions recommended by the NOSB by allowing 80 percent organic
feed and 20 percent nonorganic feed (i.e., the ``80/20'' rule) for
transitioned animals. AMS did not include NOSB's recommendation
allowing young stock to be fed transitional feeds. In the preamble to
the final rule, AMS explained that such a provision would allow animals
to transition at different times, rather than as a herd, thereby making
it incompatible with the notion that the whole herd transition was a
distinct one-time event.\13\ AMS further described that the exception
to transition is a one-time opportunity for producers to implement a
conversion strategy for an established discrete dairy herd in
conjunction with the land resources that sustain it. This rule went
into effect on February 20, 2001, and was fully implemented on October
21, 2002.
---------------------------------------------------------------------------

\12\ 65 FR 80548.
\13\ 65 FR 80570.
---------------------------------------------------------------------------

(7) In October 2002, the NOSB recommended that all replacement and
expansion dairy animals be raised as organic from the last third of
gestation onward. The NOSB believed that this would ensure consistency
with the current regulations at section 205.236(a)(2)(iii). Their
recommendation also included a provision for breeder stock (7 CFR
205.236(a)(3)) requiring that breeder stock remain under organic
management indefinitely after their introduction onto an organic farm;
that is to say, the recommendation was to prohibit breeder stock from
rotating in and out of organic management.
(8) In May 2003, the NOSB recommended that following a transition,
all dairy livestock, including replacement stock, remain under organic
management from the last third of gestation onward.\14\ Concurrently,
the NOSB made a separate recommendation regarding breeder stock.\15\
They recommended a requirement for operations to continuously manage
all breeder stock as organic if they were brought onto an organic farm
to produce organic offspring. The NOSB further advocated that the NOP
issue guidance in the form of questions and answers to clarify the
management of breeder stock to the industry.
---------------------------------------------------------------------------

\14\ National Organic Standards Board May 2003 Recommendation on
Origin of Livestock: Recommendation for Rule Change (document dated
April 2003). Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104546.
\15\ National Organic Standards Board May 2003 Recommendation on
Breeder Stock: Clarification of Rule (document dated April 2003).
Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
---------------------------------------------------------------------------

(9) In October 2003, a legal challenge was filed against USDA
stating that, among other things, the OFPA required organic dairy
animals be fed 100 percent organic feeds, and thus, the 80/20 rule for
the transition of dairy animals was in violation of the statute.\16\
---------------------------------------------------------------------------

\16\ Harvey v. Veneman, 297 F.Supp. 2d 334 (D. Maine 2004).
---------------------------------------------------------------------------

(10) On January 26, 2005, the U.S. Court of Appeals for the First
Circuit issued a decision in the case.\17\ The court upheld the USDA
organic regulations in general, but remanded the case to the lower
court, for, among other things, the entry of a declaratory judgment
with respect to the 80/20 dairy transition allowance, then codified in
section 205.236(a)(2)(i) of the regulations. The lower court found the
80/20 dairy transition provisions at section 205.236(a)(2)(i) to be
contrary to the OFPA and in excess of the Secretary's rulemaking
authority.\18\
---------------------------------------------------------------------------

\17\ Harvey v. Veneman, 396 F.3d 28 (1st Cir. 2005).
\18\ Harvey v. Johanns. Civil No. 02-216-P-H. Consent Final
Judgment and Order, 9 June 2005. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3013564&acct=noprulemaking.

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[[Page 23459]]

(11) On November 10, 2005, Congress amended the OFPA to allow a
special provision for transitioning dairy livestock to organic
production (7 U.S.C. 6509(e)(2)(B)). This amendment provided a new
provision to allow crops and forage from land included in the organic
system plan of a farm that was in the third year of organic management
to be consumed by the dairy animals on the farm during the 12 month
period immediately prior to the sale of organic milk and milk products.
(12) On April 27, 2006, AMS published a proposed rule entitled
``Revisions to Livestock Standards Based on Court Order'' to address
the November 2005 amendments to OFPA.\19\ AMS received nearly 12,400
comments on the issue of dairy animal replacement during the comment
period for this proposed rule. Additionally, in response to the April
13, 2006, advanced notice of proposed rulemaking on access to pasture,
AMS received over 325 comments on the issue of dairy animal
replacement.\20\ Neither of these actions intended to address the dairy
replacement or transition issue as an objective. Accordingly, the
comments were not a part of subsequent rulemaking for either action as
they were beyond the scope of these rules. They are, however,
acknowledged and discussed in this proposed rule.
---------------------------------------------------------------------------

\19\ 71 FR 24820.
\20\ 71 FR 19131.
---------------------------------------------------------------------------

(13) On May 12, 2006, the NOSB commented on the ``Revisions to
Livestock Standards Based on Court Order (Harvey v. Johanns) and 2005
Amendment to the Organic Foods Production Act of 1990'' proposed rule
published April 27, 2006.\21\ The NOSB amended its May 2003 dairy
replacement recommendation to read: ``Once a dairy operation has been
converted to organic production, all dairy animals, including all young
stock whether born on or brought onto the operation, shall be under
organic management from the last third of the mother's gestation.''
---------------------------------------------------------------------------

\21\ 71 FR 24820.
---------------------------------------------------------------------------

(14) On June 7, 2006, AMS published a final rule entitled
``Revisions to Livestock Standards Based on Court Order'' to implement
the November 2005 statutory change.\22\ The amendments reflected the
new OFPA allowance permitting transitioning dairy animals to be fed
feedstuffs from transitioning lands in their last of the three-year
period (7 CFR 205.236(a)(2)(i)), as well as setting a termination date
of June 9, 2007, for the existing 80/20 feed conversion rule (7 CFR
205.236(a)(2)(ii)). In the preamble to the 2006 final rule, AMS noted
that additional clarity could be provided regarding the transition of
dairy animals into organic production.
---------------------------------------------------------------------------

\22\ 71 FR 32803.
---------------------------------------------------------------------------

D. Discussion of Past Comments Received

The approximately 12,725 combined comments received on the April
2006 proposed rule addressing the court order and the April 2006
advanced notice of proposed rulemaking on access to pasture provided
AMS with information needed to develop this proposed action. In
general, comments requested greater clarity on the parameters for
transitioning dairy animals into organic production, and called for
elimination of the ``two-track'' system. The ``two-track'' system
refers to an April 2003 NOP statement that once an entire, distinct
herd transitioned using the 80/20 provision (20% nonorganic feed in the
12 months before milking), all offspring then had to be managed
organically and no transitioned replacements could be purchased.\23\
The NOP also stated that, for those that did not use the 80/20
provision, the dairy animals only needed to be under continuous organic
management starting no later than 12 months prior to production (i.e.,
producers could continue to transition animals into organic over time).
---------------------------------------------------------------------------

\23\ National Organic Program, Origin of Livestock Statement.
April 11, 2003. Available online at www.regulations.gov under
``Related Documents'' for docket number AMS-NOP-11-0009.
---------------------------------------------------------------------------

The majority of commenters stated that the ``two-track'' system
could be addressed by conveying that, once a dairy operation is
certified organic, regardless of how that operation transitioned into
organic, all new dairy animals added to that operation should be
managed organically from the last third of gestation. Commenters stated
that this principle should apply to those animals born on the farm and
those purchased as replacement and expansion animals to increase herd
size.
Commenters stated that only allowing organic dairy operations to
add animals who have been managed organically since the last third of
gestation supports consumer confidence in the organic milk sector. They
reiterated that consumers expect that organic milk is produced without
the use of excluded methods and substances prohibited under the
regulations (i.e., hormones, antibiotics, and certain animal
medications), and believe that greater clarity on how animals can
transition into organic production is needed. Some commenters stressed
that organic dairy products were keystone products for consumer
confidence and a major stepping-stone to additional purchases in other
organic categories.
Commenters stated that continued transition of conventional animals
increases the supply of animals able to produce organic milk, depresses
the value of organic heifers and limits the incentives to produce
organic replacement animals. They also stated that the allowance to
transition a large number of animals, rather than purchasing or raising
animals as organic from last third of gestation, results in surplus
organic heifer calves being sold into the conventional market. Some
commenters stated that the practice of allowing some operations to
transition conventional animals on a regular basis encouraged
development of heifer development farms. They based this belief on the
position that it is easier and cheaper to purchase transitioned animals
from heifer development farms than it is to raise animals that are
organic from birth. Commenters claimed that raising organic dairy
animals is twice as expensive as raising conventional dairy animals
during their first year of life. They contended that producers who sell
organic calves and replace them with transitioned conventionally raised
heifers, have an economic advantage over those who raise animals
organically from birth, due to lower cost of conventional feed and
ability to shorten the interval before milk production by purchasing
older animals. Commenters believed that for the organic heifer market
to develop, and for there to be more organic stock available at an
appropriate market value, greater clarity is needed in the regulations
to convey that organic heifers are required in every case, except for
the one-time initial transition of a dairy operation.
At the time of the 2006 proposed rule, commenters stated that at
least nine U.S.-based certifying agents were requiring the dairy
operations they certified (approximately 1,100 certified and 150
transitioning operations) to manage all replacement dairy animals
organically from the last third of gestation. This accounted for
roughly 50% of the organic dairy operations at that time. Other
certifying agents were allowing the other approximately 50% of dairy
operations to transition conventional animals to organic on a continual
basis. Commenters stressed that a main purpose of the OFPA was consumer
assurance that organically produced products met a consistent

[[Page 23460]]

standard and that the current origin of livestock standard needs
further specificity to meet that purpose.
Since receiving these comments in response to the 2006 proposed
rule, diverse stakeholders including trade associations, organic dairy
producer groups, consumer organizations, and certifying agents continue
to submit letters to NOP requesting greater clarity on the origin of
livestock provisions of the regulations. In response to those requests,
NOP engaged stakeholders in ongoing discussions over the last two years
related to potential changes and any associated costs and benefits of
these changes. AMS developed this proposed rule in response to the
public comments and feedback we have received regarding the origin of
livestock provisions.

III. Overview of Proposed Amendments

A. Dairy Transition

AMS is proposing to add five new terms: Organic management, dairy
farm, transitioned animal, transitional crop, and third-year
transitional crop to those defined at section 205.2. Organic management
would be defined as management of an organic production or handling
operation in compliance with all applicable production and handling
provisions under the regulations. Stakeholders have questioned whether
the term ``organic management'' in the regulations is related to
compliance with the regulations or to some other generic use or
understanding of the term. Providing a definition for this term would
confirm that its use is directly tied to the regulations. For example,
the regulations allow crops and forage in their third year of organic
management to be fed to livestock transitioning to organic production.
In the case of crops and forage in their third year of organic
management, this means that the land they are grown on must meet
certain requirements of the regulations as it transitions into
certified organic production (e.g., per section 205.202(b), no
prohibited substances applied to land). Further, during the transition
period for dairy animals, they must be under organic management in
compliance with the regulations. This means producers need to meet all
of the livestock requirements during that transition period (e.g., per
section 205.237, provide animals with a specified amount of dry matter
from pasture during the farm's grazing season).
Under this proposal, AMS would define a dairy farm as a premises,
which must have a milking parlor, where one or more lactating animals
raised on that premises are milked. This definition is similar to the
definitions of a dairy farm used by the AMS Dairy Grading Program.\24\
---------------------------------------------------------------------------

\24\ USDA AMS. July 2011. Milk for Manufacturing Purposes and
its Production and Processing. Recommended Requirements. Dairy
Programs.
---------------------------------------------------------------------------

This proposal would define a transitioned animal to clarify which
animals are eligible to produce organic milk, but are not eligible for
certification as organic slaughter stock or eligible for certification
for purpose of organic fiber production. This definition supports the
current requirement that meat or fiber come from animals under
continuous organic management since the last third of gestation (7 CFR
205.236(a)). The transitioned animal definition and its relevance to
this action are discussed in more detail below.
This proposal would define a transitional crop as any agricultural
crop or forage from land, included in the organic system plan of a
producer's operation, that has had no application of prohibited
substances within one year prior to harvest of the crop or forage.
Based upon this definition, AMS would add a related definition for
third-year transitional crop. A third-year transitional crop would be
defined as crops and forage from land, included in the organic system
plan of a producer's operation, that has had no application of
prohibited substances within 2 years prior to harvest of the crop or
forage. Third-year transitional crops need to meet all other
requirements of the regulations (e.g., soil fertility and crop nutrient
management practice standard (section 205.203); use of organic seed if
commercially available (section 205.204)). OFPA and the regulations
currently allow producers to feed these third year transitional crops
to dairy animals in transition (7 U.S.C. 6509(e)(2)(b); existing
section 205.236(a)(2)(i)).
AMS is proposing to amend the introductory text at section
205.236(a)(2) to reflect that the one-time exception to transition to
organic dairy production would be limited to a given producer. A
producer is defined under the regulations as ``a person who engages in
the business of growing or producing food, fiber, feed, and other
agricultural-based consumer products'' (section 205.2). The regulations
also define a person as an ``individual, partnership, corporation,
association, cooperative or other entity'' (section 205.2). This
definition is based on the definition of person under OFPA (7 U.S.C
6502(15)). A producer must be a person as described in section 205.2 to
be eligible for a one-time transition. Because the one-time transition
is tied to the producer (i.e., a farm or business), employees of that
producer are not themselves considered a producer utilizing a one-time
transition. Under the proposal, such employees would retain their
ability to establish a new business entity as a producer that may be
eligible for its own one-time transition.
In addition, while the definition of person includes cooperatives,
cooperatives would not themselves seek a one-time exception to
transition animals into organic production. There are business
entities, including cooperatives, within the organic dairy sector that
are typically certified as organic handlers, not as organic producers,
and who would not meet the definition of a dairy farm. Instead, these
entities contract with multiple organic producers for their milk
supply. Under this proposal, the eligibility for a one-time transition
is tied to a producer, as specified on an organic certificate, and they
would need to meet the definition of a dairy farm and other proposed
requirements.
Dairy producers with multiple farms would need to make a decision
about how to transition to organic production. Producers with multiple
farms have a single twelve month period in which they may transition
conventional dairy animals to organic milk production. During this
transition period, these producers may transition all animals on all
the farms, some of the animals on some of the farms, all the animals on
one of the farms, or some of the animals on one of the farms. The
producer would initiate the transition to organic milk production at
least 12 months prior to completing the transition and obtaining
organic certification. However, once the transition period ends, the
producers may not themselves transition any additional animals into
organic production. Instead, they would need to source animals as
organically managed since the last third of gestation or those already
transitioned to organic production on a different producer's dairy
farm.
The proposed amendments would replace the current text at section
205.236(a)(2) to specify that each producer would be able to conduct
one transition. To be eligible for a transition, the proposal language
specifies that the producer must start a new organic dairy farm or
transition an existing conventional dairy farm to organic
certification. This transition would need to occur over a single,
continuous 12-month period prior to production of milk or milk products
that are to be sold, labeled, or represented as organic.

[[Page 23461]]

After completing a transition, that producer would not be able to
transition any new animals into organic production.
For example, if producer A already completed a transition on dairy
farm A, then producer A would not be eligible to transition animals
into organic production on dairy farm B. Under this proposal, once a
producer completes its transition of dairy animals into organic
production, a producer would have two options for bringing any new
dairy animals onto a producer's organic dairy farm(s) (whether for
expansion or replacement purposes): (1) Add animals that are under
continuous organic management from the last third of gestation; or (2)
add transitioned animals sourced from a certified organic dairy
producer.
Because the dairy farm definition, in part, would drive the
eligibility for a producer to transition animals to organic production,
producers that only raise heifers for organic dairy farms would not be
eligible to transition conventional animals to organic. Such producers
do not milk animals and, therefore, would not be eligible for a
transition. Such producers could continue raising heifers for organic
dairy farms as long as the animals were under continuous organic
management from the last third of gestation.
AMS considered alternatives to our proposal that would link the
transitioned exception to a producer. These alternatives included
linking the one-time transition exception to a dairy farm, an
operation, persons responsibly connected, and the current unit of
regulation, a herd. We did not choose the dairy farm by itself as the
criterion for eligibility to transition because it would allow a given
producer to transition dairy animals on multiple dairy farms over time.
This proposal was drafted to create greater consistency in the
implementation of the transition mechanism so that it is not used as a
continual means of producing organic milk without purchasing organic
stock once a producer has converted to organic production. Furthermore,
AMS could not identify how a producer and a certifying agent could
verify that a transition had not already occurred on a given dairy
farm. This would be especially difficult as time went on and a dairy
farm may have changed ownership multiple times. By linking the
transition to a given producer, a producer (e.g., an individual or a
corporation) can attest to a certifying agent as part of their
application for certification that they have not already completed a
dairy transition and certifying agents could verify such attestations
by checking past certification records associated with that producer.
AMS also considered linking the transition exception to the
operation. Based on stakeholder feedback and past NOSB recommendations,
the term ``operation'' is used at times, as is the term ``producer'',
to describe how a one-time exception to transition into organic dairy
production could be structured. Upon review, AMS is proposing to link
the transition to a given producer rather than an operation because
both producer and person are already defined under OFPA and the
implementing regulations.
Other stakeholders suggested limiting the transition such that
after an operation completed its one-time transition, any persons
responsibly connected to that operation could not transition additional
animals into organic production. ``Responsibly connected'' is defined
under the current regulations as ``any person who is a partner,
officer, director, holder, manager, or owner of 10 percent or more of
the voting stock of an applicant or a recipient of certification or
accreditation'' (7 CFR 205.2). This approach would require a person
with an operation to list all persons responsibly connected to that
operation to document the relationship various individuals had to the
dairy farm. This approach would be difficult to document and difficult
for a certifier to verify for the purpose of certification. This
approach also would be overly prescriptive. For example, under this
approach, new managers on a farm, who had never been part of a
transition, would be restricted from starting a new dairy farm on a
different location and completing their own transition of dairy animals
into organic production. This approach could also restrict the ability
for children of organic dairy producers to transition animals into
organic production. Children could be ``responsibly connected'' to
their parents' farm if they served as managers or partners. If their
parents had already completed a transition, then these children, who
were managers or partners, could not transition any additional animals
if they bought that farm because they would be considered ``responsibly
connected'' to the parents' operation. For these reasons, AMS is not
proposing this approach. Rather, under the proposed language that a
one-time exception is tied to a given ``producer'', employees, such as
managers or partners, including children, could start up a new business
entity with a dairy farm and be eligible for their own one-time
transition.
AMS also did not choose the current herd standard because a given
operation can have a new herd every year, or even multiple per year,
allowing farmers to transition new animals annually, if not more often.
The intent of our proposal is to provide a clear, consistent standard
that when implemented will reflect the NOSB recommendation to allow for
a producer to use a one-time transition of animals into organic milk
production. Providing a producer with a one-time exception to
transition dairy animals to organic milk production best captures the
intent of the NOSB's recommendation. It also supports the concept
discussed in the 2000 final rule establishing the USDA organic
regulations that transition to organic dairy should be a distinct, one-
time event for a producer.\25\
---------------------------------------------------------------------------

\25\ 65 FR 80569-80570.
---------------------------------------------------------------------------

Under the proposed amendments, any transition would need to meet
certain conditions. Proposed section 205.236(a)(2)(i) would specify
that dairy animals must be under continuous organic management during
the 12-month transition period. This aligns with the provision in OFPA
which requires that dairy animals be managed as organic for at least 12
months prior to the production of organic milk.\26\ During the 12-month
period, proposed section 205.236(a)(2)(ii) would specify that the
producer should describe its transition approach as part of the organic
system plan already required at section 205.200. Under existing section
205.401, the producer must submit this organic system plan as part of
an application for certification to a certifying agent. We are
proposing this provision to ensure that applicants for organic
certification can demonstrate their ability to comply early on in the
certification process. The intent is to support communication between
the applicant and the certifying agent about the transition approach
and to minimize situations in which a producer approaches a certifying
agent after 12 months of transitioning animals only to realize that
they did not complete the transition as specified in the regulations.
---------------------------------------------------------------------------

\26\ 7 U.S.C. 6509(e)(2)(A).
---------------------------------------------------------------------------

This proposal would make minor revisions to a provision under the
current regulations that allows dairy animals undergoing transition to
consume ``third-year'' crops. The proposed provision would appear at
section 205.236(a)(2)(iii) and would specify that, during the 12-month
transition, dairy animals may consume third-year transitional crops
which this proposal would define at section 205.2.

[[Page 23462]]

During the development of this proposed rule, the exception for
transitioning dairy animals raised the question about the eligibility
of those animals and their offspring for certification as organic
slaughter stock or for the purpose of organic fiber. Third-year crops
and forages are allowed by OFPA as feed for transitioned animals that
will produce organic milk.\27\ However, these crops are not yet
certified organic and should be treated as nonorganic feeds when
determining if an animal has been raised organically since the last
third of gestation.
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\27\ 7 U.S.C. 6509(e)(2)(B).
---------------------------------------------------------------------------

Therefore, to clarify the status of offspring born during and just
after the transition period and whether they would be eligible for
certification as organic slaughter stock or for organic fiber, AMS is
proposing to add a definition for a transitioned animal at section
205.2. Transitioned animal would be defined as: (1) Any dairy animal
that transitioned during the one-time transition exception to organic
milk production after 12 months of continuous organic management; (2)
any offspring born during or after the 12- month transition period to a
transitioned animal that, during its last third of gestation, consumes
crops and forages in the third year of organic management; or (3) any
offspring born during the one-time transition exception that themselves
consume crops and forages in the third year of organic management. The
proposed definition specifies that such animals must not be sold,
labeled, or represented as organic slaughter stock or for the purpose
of organic fiber.\28\ The current regulations already require that
slaughter stock and livestock, with the exception of poultry and
certain dairy animals, be under continuous organic management since the
last third of gestation (7 CFR 205.236(a)). This proposed rule does not
change, but rather reiterates how that requirement applies to animals
that were part of a dairy transition. This term is used in proposed
section 205.236(a)(2)(iv) which specifies that offspring must be
considered transitioned animals if they were born during or after the
12-month dairy herd transition period and not fed certified organic
feed from the last third of gestation onward.
---------------------------------------------------------------------------

\28\ Organic slaughter stock is defined in the regulations as
any animal intended to be slaughtered for consumption by humans or
other animals (7 CFR 205.2).
---------------------------------------------------------------------------

For a producer and certifying agent to determine whether offspring
is eligible for organic dairy, meat and/or fiber, the length of
gestation for different dairy animals (e.g., cows, goats, sheep) and
feed source must be considered. For offspring to be certified organic
for meat and fiber, it must be under continuous organic management,
including receiving certified organic feed, from the last third of
gestation (7 CFR 205.236(a)). This requirement is reiterated through
proposed section 205.236(a)(2)(v). A practical summary of how
certifying agents and producers would apply the proposed amendments
about the status of offspring at sections 205.236(a)(2)(iv)-(v) is
shown in Table 1.

Table 1--Status of Offspring Part of a Dairy Transition
----------------------------------------------------------------------------------------------------------------
Type of feed consumed by offspring Could it be certified Could it be certified
during transition or during its last Is it considered a to produce organic to produce organic meat
third of gestation transitioned animal? milk? or fiber?
----------------------------------------------------------------------------------------------------------------
Third year transitional crops........ Yes.................... Yes.................... No.
Certified organic crops.............. No..................... Yes.................... Yes.
----------------------------------------------------------------------------------------------------------------

Proposed section 205.236(a)(2)(vi) would require that all dairy
animals for a given producer end the transition at the same time. AMS
considered allowing dairy animals to have staggered transition periods,
but chose not to allow that option as it could complicate the
transition process. As a practical matter, a staggered transition would
create more difficulty in animal management for the producer since
animal transitions would start and end at different times. Furthermore,
it would require more advanced records management creating a greater
burden on the producer, more difficulty in overseeing the process, and
increased room for error or potential violation. If a producer wants to
bring in additional animals after the producer completes its
transition, then the producer may use breeder stock or source organic
dairy animals (either last third gestation animals or transitioned
animals from a certified organic dairy farm that already completed its
transition). If a producer decides to increase the number of animals
undergoing transition during a one-time transition period, then the
producer could (1) source organic dairy animals, or (2) source
nonorganic animals and extend the transition period for all animals
undergoing transition such that they end their transition together
after 12-months of organic management.
Proposed section 205.236(a)(2)(vii) would specify that dairy
animals that completed the 12-month transition are transitioned animals
as defined under section 205.2. In practical terms, this would mean
that these dairy animals can produce organic milk, but are not eligible
for certification as organic slaughter stock or for the purpose of
organic fiber. This is consistent with the existing requirement at
section 205.236(a) that, with the exception of poultry and dairy,
livestock products must be from animals that are under continuous
organic management since the last third of gestation.
Proposed section 205.236(a)(2)(viii) would specify that, after the
12 month transition period, transitioned animals may produce organic
milk on any organic dairy farm as long as the animal is under
continuous organic management at all times on a certified organic dairy
farm. Movement of transitioned animals to other certified organic
dairies would not affect the status of the animals to produce organic
milk. Based on some stakeholder comments, AMS considered limiting
transitioned animals to produce organic milk only on the dairy farm
upon which they were transitioned. However, AMS believes that some
movement or inter-farm sales of transitioned animals is reasonable and
expected. For example, if an existing organic dairy producer purchased
an adjoining organic farm, it may be necessary for that farmer's
transitioned animals to leave their original premises of transition to
take advantage of the new adjoining pastureland. Similarly, if an
organic dairy producer wanted to move his/her operation to an updated
organic facility on another property, it would create an excessive
burden if transitioned animals were not permitted to move to the new
facility. This provision will also allow

[[Page 23463]]

the transitioned dairy animals to continue producing organic milk if
there is a change in ownership to a different producer, provided the
dairy animals are under continuous organic management throughout this
time.
AMS is also proposing new section 205.236(ix) to specify that,
after the 12-month period ends, any new dairy animal brought onto a
producer's dairy farm(s) must be an animal under continuous organic
management from the last third of gestation or a transitioned animal
sourced from a certified organic dairy farm. This provision would
ensure that, after a producer completes one transition on a dairy farm,
that producer would not be allowed to themselves transition additional
dairy animals into organic production on any dairy farm. This
requirement supports the NOSB's intent that transition should be a one-
time event for producers to transition to organic dairy and is intended
to create one standard that would be equally applied to all dairy
operations once they have transitioned to certified organic production.
Implementation Considerations
Certifying agents would have certain responsibilities under this
proposed rule. Certifying agents would need to:
Establish and maintain procedures for determining whether
or not a producer (e.g. a new applicant for certification) is eligible
to transition dairy animals into organic production and for determining
whether offspring that are part of a transition are eligible to produce
organic milk, meat or fiber;
Ensure that certified organic dairy producers maintain
sufficient records (7 CFR 205.103) to identify all organically managed
animals, including whether they are transitioned animals and, thus, not
eligible for certification as organic slaughter stock (7 CFR
205.236(b)(2) and 205.236(c));
Hire and/or train sufficient, qualified staff (7 CFR
205.501(a)(4)) to examine production and certification history of
certified organic dairy producers or applicants for certification which
involve the transition of dairy animals from conventional to organic
production; and
Maintain records of applications for certification or
certified operations, including records pertaining to the origin of all
livestock, for at least 10 years from the date of their creation,
pursuant to section 205.510(b)(2).
Certifying agents already address many of these responsibilities
through the current regulations. For example, certifying agents should
have procedures in place to ensure that operations identify whether
dairy animals are organically managed from the last third of gestation
and, thus, potentially eligible for certification as organic slaughter
stock, or transitioned into organic production, and, thus, not eligible
as organic slaughter stock (section 205.236(b)(2) and (c)). The primary
new responsibility for certifying agents will be establishing and
implementing a procedure for determining whether a producer is eligible
for a one-time transition. AMS is seeking comments from certifying
agents on how these responsibilities are best implemented given the
proposed action.
In addition, organic livestock producers are already required to
maintain records that fully disclose all activities and transactions of
the certified operation in sufficient detail as to be readily
understood and audited (7 CFR 205.103(b)(2)). Under existing
regulation, section 205.236(c), organic producers must already maintain
records sufficient to preserve the identity of all organically managed
animals. Examples of records to verify compliance with the origin of
livestock requirements include livestock purchase records, organic
certificates for livestock purchased as organic, animal reproduction:
breeding, birth and/or hatch records, and herd conversion/organic
management records.\29\ Under this proposed rule, organic dairy
producers would need to maintain the same records. There are no new
records that would be required under this proposal. In accordance with
Office of Management and Budget (OMB) regulations (5 CFR part 1320)
that implement the Paperwork Reduction Act (44 U.S.C. 3501-3520) (PRA),
the information collection requirements associated with the NOP,
including the recordkeeping and reporting requirements related to
origin of livestock, have been previously approved by OMB and assigned
OMB control number 0581-0191.
---------------------------------------------------------------------------

\29\ National Organic Program. March 2011. Organic Livestock
Plan Template, Origin of Livestock: L2-page 1. Available online at:
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5091032.
---------------------------------------------------------------------------

AMS also recognizes that some producers and certifying agents will
need time to implement any regulatory changes. Over the last several
years, the NOSB and stakeholders have been engaged in extensive
discussion about how organic dairies would need to change their
practices as a result of any modification to the current USDA organic
regulations. AMS is considering and seeking public comment on the
following implementation proposal: Producers who are certified as of
the effective date for any final action would be allowed to complete
any transition that was already approved under their organic system
plan by a certifying agent. However, as of the effective date,
producers who are certified would be required to source or raise any
new animals from last third of gestation or source animals already
transitioned under another producer's one-time exception. As of the
effective date, producers who are new applicants for organic
certification (i.e., startup organic dairies or nonorganic dairies
transitioning to organic production) would be allowed to use the
transition exception once when first applying for organic
certification.
Under the current regulations at section 205.672, organic dairy
animals can return to organic milk production if a Federal or state
emergency pest or disease treatment program requires use of a
prohibited substance. This allowance for re-transition is independent
of the transition exception being proposed here. A dairy farm, that had
not used its one-time exception to transition based on section 205.236,
would retain that one-time exception to transition even if the farm
used the section 205.672 allowance to re-transition after an emergency
pest or disease treatment.
Under the current regulations at section 205.290, organic
producers, through their certifying agent, can request a temporary
variance from the livestock practice standards for reasons such as
natural disasters, severe weather and other business interruptions. The
NOP Instruction on Processing Requests for Temporary Variances (NOP
2606) \30\ clarifies the policy that variances will not be granted for
feeding non-organic feed to livestock.
---------------------------------------------------------------------------

\30\ NOP 2606. July 22, 2011. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5087115.
---------------------------------------------------------------------------

B. Breeder Stock

Under this proposal, AMS would restructure section 205.236(a)(3) to
reiterate that breeder stock may be brought from a nonorganic operation
onto an organic operation at any time and to further clarify how
breeder stock should be managed for the purpose of producing organic
offspring.
Consistent with an April 2003 NOSB recommendation on breeder stock,
AMS considered amending the regulations at existing section
205.236(a)(3) to require that breeder stock that was brought onto an
organic farm, but subsequently was removed from organic management, be
prohibited from returning as breeder

[[Page 23464]]

stock for the purpose of organic production. The NOSB recommendation
suggests that allowing breeder stock to return to organic management
after a period of nonorganic management does not align with a
regulatory provision that prohibits livestock removed from an organic
operation and subsequently managed on a nonorganic operation to be
sold, labeled, or represented as organically produced (7 CFR
205.236(b)).\31\
---------------------------------------------------------------------------

\31\ National Organic Standards Board Recommendation May 2003 on
Breeder Stock: Clarification of Rule. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
---------------------------------------------------------------------------

However, OFPA states that breeder stock may be purchased from any
source (7 U.S.C. 6509(b)); there is no requirement in OFPA that the
source be organic. Further, while the current regulations at section
205.236(b)(1) prohibit livestock from being removed and subsequently
managed on a nonorganic operation (i.e., cycling in and out of organic
production), this provision does not extend to nonorganic breeder stock
that are themselves not certified organic or eligible for slaughter,
sale, and labeling as organic (7 CFR 205.236(b)(2)). Therefore, AMS
does not believe that restrictions on how nonorganic breeder stock are
managed outside of the last third of gestation through weaning of
organic offspring are warranted.
At proposed sections 205.236(a)(3) and 205.236(a)(3)(i), AMS is
reiterating that breeder stock may be brought from a nonorganic
operation onto an organic operation at any time as long as such breeder
stock are on the organic operation no later than the last third of
gestation. In practical terms, this means that between the end of
nursing its organic offspring and the beginning of the last third of
gestation for the next organic offspring, nonorganic breeder stock may
be managed as the producer chooses. If a producer is managing
nonorganic breeder stock on its organic operation, the current
regulations already require that they implement practices to prevent
contact of organic animals with prohibited substances (e.g., from
certain fly tags that might be used with nonorganic breeder stock) (7
CFR 205.201(a)(5)).
AMS is proposing a provision related to organic management of
breeder stock only when the breeder stock is directly contributing to
the nourishment of organic offspring, from the last third of gestation
through the end of the nursing period. Under proposed section
205.236(a)(3)(ii), such breeder stock would need to be managed
organically throughout the last third of gestation and the lactation
period during which time they may nurse their own offspring. Allowing
organic calves to nurse on nonorganic breeder stock as long as they are
all under organic management supports the natural behavior of the
animals (7 CFR 205.239(a)). Breeder stock may not be used as nurse cows
on dairy farms to be a source of milk for other organic calves, though
inadvertent suckling by non-offspring would not cause loss of organic
status to the calves.

C. Additional Clarifications

In conjunction with the proposed amendments discussed above, AMS is
proposing additional amendments to provide greater clarity on the
restrictions at sections 205.236(b)(1) and 205.236(b)(2). Section
205.236(b)(1) states that livestock or edible livestock products that
are removed from an organic operation and subsequently managed on a
nonorganic operation may not be sold, labeled, or represented as
organically produced. We are proposing the addition of ``non-edible''
to this provision to specify that non-edible animal products, such as
animal fiber, are also subject to this provision. Section 205.236(b)(2)
is proposed to be amended to specify that transitioned animals must not
be sold, labeled, or represented as organic slaughter stock. This
change is needed for consistency with the proposed definition for
transitioned animal and the proposed provisions for dairy transition.
We are also proposing a change to section 205.236(c) to reiterate
that producers are responsible for maintaining records that show
whether a dairy animal is a transitioned animal and, therefore, not
eligible for certification as organic slaughter stock or for the
purpose of organic fiber. Producers should already be tracking whether
an animal is eligible for organic slaughter or fiber given the last
third of gestation requirement. Table 2 provides an overview of all the
proposed amendments.

D. Other Amendments Considered

AMS recently received requests from stakeholders to consider
providing an exception to transition fiber producing animals to organic
fiber production, just as dairy animals can be transitioned to organic
milk production. OFPA authorizes a transition for dairy animals
entering organic milk production. As such, AMS is not proposing a
transition for fiber under this proposed rule. In practical terms, this
means that producers can transition sheep from conventional milk
production to organic milk production, but would need to source animals
organically managed since the last third of gestation in order to
produce organic wool.

Table 2--Proposed Action--Origin of Livestock
----------------------------------------------------------------------------------------------------------------
Section title Current wording Type of action Proposed action
----------------------------------------------------------------------------------------------------------------
205.2................................ N/A.................... New terms added........ Dairy Farm, Organic
Management, Third-Year
Transitional Crop,
Transitional Crop,
Transitioned animal.
205.236(a)........................... Livestock products that No Change.............. N/A--Included for
are to be sold, Completeness.
labeled, or
represented as organic
must be from livestock
under continuous
organic management
from the last third of
gestation or hatching:
Except, That:
205.236(a)(1)........................ Poultry. Poultry or No Change.............. N/A--Included for
edible poultry Completeness.
products must be from
poultry that has been
under continuous
organic management
beginning no later
than the second day of
life;

[[Page 23465]]

205.236(a)(2)........................ Dairy animals. Milk or Revision............... Dairy animals. A
milk products must be producer as defined in
from animals that have Sec. 205.2 may
been under continuous transition dairy
organic management animals into organic
beginning no later production only once.
than 1 year prior to A producer is eligible
the production of the for this transition
milk or milk products only if the producer
that are to be sold, starts a new organic
labeled, or dairy farm or converts
represented as an existing nonorganic
organic, Except, dairy farm to organic
production. A producer
must not transition
any new animals into
organic production
after completion of
this one-time
transition. This
transition must occur
over a continuous 12-
month period prior to
production of milk or
milk products that are
to be sold, labeled,
or represented as
organic, and meet the
following conditions:
205.236(a)(2)(i)..................... That, crops and forage Revision............... During the 12-month
from land, included in period, dairy animals
the organic system must be under
plan of a dairy farm, continuous organic
that is in the third management;
year of organic
management may be
consumed by the dairy
animals of the farm
during the 12-month
period immediately
prior to the sale of
organic milk and milk
products; and
205.236(a)(2)(ii).................... That, when an entire, Revision............... During the 12-month
distinct herd is period, the producer
converted to organic should describe the
production, the transition as part of
producer may, provided its organic system
no milk produced under plan and submit this
this subparagraph as part of an
enters the stream of application for
commerce labeled as certification to a
organic after June 9, certifying agent, as
2007: (a) For the required in Sec.
first 9 months of the 205.401;
year, provide a
minimum of 80-percent
feed that is either
organic or raised from
the land included in
the organic system
plan and managed in
compliance with
organic crop
requirements; and (b)
Provide feed in
compliance with Sec.
205.237 for the final
3 months.
205.236(a)(2)(iii)................... Once an entire, Revision............... During the 12-month
distinct herd has been period, dairy animals
converted to organic and their offspring
production, all dairy may consume third year
animals shall be under transitional crops;
organic management
from the last third of
gestation.
205.236(a)(2)(iv).................... N/A.................... New section added...... Offspring born during
or after the 12-month
period are
transitioned animals
if they consume third-
year transitional
crops during the
transition or if the
mother consumes third
year transitional
crops during the
offspring's last third
of gestation;
205.236(a)(2)(v)..................... N/A.................... New section added...... Offspring born from
transitioning dairy
animals are organic if
they are under
continuous organic
management and if only
certified organic
crops and forages are
used from their last
third of gestation;
205.236(a)(2)(vi).................... N/A.................... New section added...... All dairy animals must
end the transition at
the same time;

[[Page 23466]]

205.236(a)(2)(vii)................... N/A.................... New section added...... Dairy animals that
complete the
transition are
transitioned animals
and must not be used
for organic livestock
products other than
organic milk;
205.236(a)(2)(viii).................. N/A.................... New section added...... After the 12-month
period ends,
transitioned animals
may produce organic
milk on any organic
dairy farm as long as
the animal is under
continuous organic
management at all
times on a certified
organic operation; and
205.236(a)(2)(ix).................... N/A.................... New section added...... After the 12-month
period ends, any new
dairy animal brought
onto a producer's
dairy farm(s) for
organic milk
production must be an
animal under
continuous organic
management from the
last third of
gestation or a
transitioned animal
sourced from another
certified organic
dairy farm.
205.236(a)(3)........................ Breeder stock. Revision............... Breeder stock.
Livestock used as Livestock used as
breeder stock may be breeder stock may be
brought from a brought from a
nonorganic operations nonorganic operation
onto an organic onto an organic
operation at any time: operation at any time,
Provided, that, if Provided, That the
such livestock are following conditions
gestating and the are met:
offspring are to be
raised as organic
livestock, the breeder
stock must be brought
onto the facility no
later than the last
third of gestation.
205.236(a)(3)(i)..................... N/A.................... New section added...... Such breeder stock must
be brought onto the
operation no later
than the last third of
gestation if its
offspring are to be
raised as organic
livestock; and
205.236(a)(3)(ii).................... N/A.................... New section added...... Such breeder stock must
be managed organically
throughout the last
third of gestation and
the lactation period
during which time they
may nurse their own
offspring.
205.236(b)........................... The following are No Change.............. N/A--Included for
prohibited: Completeness.
205.236(b)(1)........................ Livestock or edible Revision............... Livestock, edible
livestock products livestock products, or
that are removed from nonedible livestock
an organic operation products such as
and subsequently animal fiber that are
managed on a removed from an
nonorganic operation organic operation and
may not be sold, subsequently managed
labeled or represented on a nonorganic
as organically operation may not be
produced. sold, labeled, or
represented as
organically produced.
205.236(b)(2)........................ Breeder or dairy stock Revision............... Breeder stock, dairy
that has not been stock, or transitioned
under continuous animals that have not
organic management been under continuous
since the last third organic management
of gestation may not since the last third
be sold, labeled, or of gestation may not
represented as organic be sold, labeled, or
slaughter stock. represented as organic
slaughter stock.
205.236(c)........................... The producer of an Revision............... The producer of an
organic livestock organic livestock
operation must operation must
maintain records maintain records
sufficient to preserve sufficient to preserve
the identity of all the identity of all
organically managed organically managed
animals and edible and animals, including
nonedible animal whether they are
products produced on transitioned animals,
the operation. and edible and
nonedible animal
products produced on
the operation.
----------------------------------------------------------------------------------------------------------------

[[Page 23467]]

IV. Related Documents

Documents related to this proposed rule include the Organic Foods
Production Act of 1990, as amended, (7 U.S.C. 6501-6522) and its
implementing regulations (7 CFR part 205). The NOSB deliberated and
made the recommendations described in this proposal at public meetings
announced in the following Federal Register Notices: (1) 67 FR 19375,
(May 7, 2002); (2) 67 FR 54784, (September 17, 2002); (3) 67 FR 62949,
(October 19, 2002); and (4) 68 FR 23277, (May 13, 2003). AMS also
considered NOSB recommendations from June 2, 1994, and March 20, 1998,
in the development of this proposed rule. NOSB meetings are open to the
public and allow for public participation.
AMS published a series of proposed rules that addressed, in part,
the origin of livestock provisions at: (1) 62 FR 65850, (December 16,
1997); (2) 65 FR 13512, (March 13, 2000); and (3) 71 FR 24820, (April
27, 2006). Past final rules relevant to this topic were published at:
(1) 65 FR 80548, (December 21, 2000); and 71 FR 32803, (June 7, 2006).

V. Statutory and Regulatory Authority

The Organic Foods Production Act of 1990, as amended, authorizes
AMS to administer the NOP (7 U.S.C. 6501-6502). Under the NOP, AMS
oversees national standards for the production and handling of
organically produced agricultural products. One of the purposes of OFPA
is to assure consumers that organically produced products meet a
consistent standard (7 U.S.C. 6501(2)). Section 6509 of the OFPA also
requires that livestock to be slaughtered, sold or labeled as organic
be managed in accordance with the Act, allows for the use of breeder
stock, and provides for an exception to transition dairy stock to
organic milk production.

A. Executive Orders 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives, and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated as a ``significant
regulatory action'' under section 3(f) of Executive Order 12866, and,
therefore, has been reviewed by the Office of Management and Budget
(OMB).
Need for the Rule
This action is necessary to create greater consistency in the
implementation of a standard for the transition of dairy animals into
organic production and for the management of breeder stock. AMS has
determined that the current regulations regarding the transition of
dairy animals and the management of breeder stock on organic operations
need additional specificity and clarity to improve AMS' ability to
efficiently administer the NOP. A stated purpose of the OFPA is to
assure consumers that organically produced products meet a consistent
and uniform standard (7 U.S.C. 6501). This action is being taken to
facilitate and improve compliance and enforcement and to satisfy
consumer expectations that organic livestock meet a consistent and
uniform standard, regardless of how a producer transitioned into
organic production.
In a 2006 final rule related to this issue, AMS acknowledged that
the regulations provide different allowances for replacing organic
dairy animals dependent on how a producer transitioned to organic
production.\32\ AMS further stated that, given the almost 13,000
comments on the 2006 proposed rule, the issue remained a significant
concern of the organic community, including organic dairy producers,
certifying agents, trade organizations, and consumers. AMS developed
this proposal in response to this stakeholder feedback.
---------------------------------------------------------------------------

\32\ 71 FR 32804.
---------------------------------------------------------------------------

Further, as cited in the July 2013 OIG audit of organic milk
operations,\33\ implementation of the origin of livestock requirements
continues to differ across producers and certifying agents. As part of
this audit, some certifying agents conveyed that the current
regulations create challenges in implementation such that some organic
dairy producers may have a competitive advantage over others.
Similarly, certifying agents and organic operations have recommended
more detail in the regulations on the management of breeder stock to
support implementation across the organic sector.
---------------------------------------------------------------------------

\33\ The July 2013 Office of Inspector General (OIG) audit
report on organic milk operations may be accessed at the following
Web site: http://www.usda.gov/oig/webdocs/01601-0002-32.pdf.
---------------------------------------------------------------------------

This action is also necessary to address the persistent requests to
AMS for further developed origin of livestock standards that meet the
expectations of the NOSB and the majority of stakeholders. Setting an
enforceable practice standard would ensure consistency across the
industry. Because organic products cannot be distinguished from
nonorganic products based on sight inspection, consumers rely on
process verification methods such as certification to a uniform
standard to ensure that organic claims are true. For this reason,
organic products have been described as ``credence goods'' in the
economics literature.^{34 35} Credence goods have properties
that are difficult to verify, both before and after purchase. Organic
dairy products are an example of a ``credence good'' for which
consistent implementation of a common production standard across the
sector supports continued consumer confidence. This action would help
maintain consumer trust in the organic seal. ``Customers'' includes
both consumers purchasing organic milk, yogurt, butter, ice-cream, and
cheese at retail markets and organic livestock producers purchasing
organic dairy animals for their own operations.
---------------------------------------------------------------------------

\34\ Caswell, Julie A. and Eliza M. Mojduszka. 1996. ``Using
Informational Labeling to Influence the Market for Quality in Food
Products.'' American Journal of Agricultural Economics. Vol. 78, No.
5: 1248-1253.
\35\ Zorn, Alexander, Christian Lippert, and Stephan Dabbert.
2009. ``Economic Concepts of Organic Certification.'' Deliverable 5
for Project CERTCOST: Economic Analysis of Certification Systems in
Organic Food and Farming. http://www.certcost.org/Lib/CERTCOST/Deliverable/D11_D5.pdf.
---------------------------------------------------------------------------

While a dairy transition is permitted by the OFPA, this proposed
rule would limit dairy animal transition. As discussed, AMS received
extensive comments in 2006 on the issue of dairy transition. Commenters
stated that consumers expect that organic milk is produced without the
use of excluded methods and substances prohibited under the regulations
such as hormones, antibiotics, and certain pesticides. Market research
suggests that these comments are indicative of a customer base who
expects ``organic'' to be produced without the use of such substances.
In 2013, a report assessing trends in the organic market stated that
consumers identified ``absence of pesticides'', ``absence of growth
hormones'', and ``absence of antibiotics'' as properties they associate
with the term ``organic'' in 64%, 59%, and 55% of the responses
respectively.\36\ Over

[[Page 23468]]

thirty percent of those surveyed for this report indicated that
avoidance of prohibited substances motivated them to buy organic
products.\37\ Based on past comments, stakeholders argue that sourcing
or raising animals as organic from last third of gestation is better
aligned with the expectation that animals producing organic milk have
never received prohibited substances such as antibiotics or growth
hormones.
---------------------------------------------------------------------------

\36\ The Hartman Group, Inc., The Organic and Natural Consumer
2013: Traits and Trends. The Cultural Context Around Behavior. Of
1,569 respondents responding in 2012 to the question, ``From the
following list, what properties do you think are implied or
suggested by the term ``organic''?
\37\ Ibid. Of 1,036 respondents responding in 2012 to the
question about the reasons why they continue to purchase organic
products, 38% stated to avoid products that rely on pesticides or
other chemicals, 34% stated to avoid genetically modified products,
34% stated to avoid products that rely on growth hormones, and 29%
stated to avoid products that rely on antibiotics.
---------------------------------------------------------------------------

Baseline
This baseline focuses on the current market and production of
heifers and cows as the predominant portion of the industry that would
be affected and for which data is available. The baseline and
subsequent calculations do not include quantitative estimates for dairy
production related to sheep or goats. AMS used multiple data sources to
describe the baseline and build quantitative estimates for this
proposed rule. The first source is the NOP list of all certified
operations. In January of each calendar year, every certifying agent is
required to submit an annual list of their certified operations to the
NOP (7 CFR 205.501(a)(15)(ii)). The NOP consolidates this information
once per year into a public, searchable database.\38\ Another source of
data is the Organic Trade Association's (OTA) 2014 Organic Industry
Survey. The Nutrition Business Journal conducts this survey on behalf
of OTA to summarize market information and trends within the organic
industry across food and non-food sectors.\39\ AMS also utilized
information from the National Agricultural Statistics Service (NASS)
2011 Organic Production Survey.\40\ The NASS data includes acreage,
production and sales data for organic crops and livestock. USDA's
Economic Research Service (ERS) also conducts the Agricultural Resource
Management Survey (ARMS), which includes questions about organic
production practices.\41\ In 2010, ERS conducted a supplemental ARMS
that focused on organic dairy operations. AMS worked with ERS to
analyze recent ARMS data and develop an estimation of organic dairy
production practices and costs for this proposed rule. Finally, AMS
used summary information from a 2013 ERS report on organic
production.\42\ The ERS report was based on data from state and private
certifying agents.
---------------------------------------------------------------------------

\38\ The most recent list of certified operations may be found
at the following link: http://apps.ams.usda.gov/nop/.
\39\ Organic Trade Association (OTA)/Nutrition Business Journal,
2014 Organic Industry Survey. Nutrition Business Journal conducted a
survey between Jan 27, 2014 and April 5, 2014 to obtain information
for their estimates. Over 200 organic firms responded to the survey.
NBJ used secondary data from SPINS, Nielsen, and IRI to supplement
the survey and build market statistics.
\40\ The NASS survey may be found at the following link: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1859.
\41\ The ERS ARMS survey information may be found at the
following link: http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices.aspx.
\42\ The ERS 2013 Summary of Organic Production may be found at
the following link: http://www.ers.usda.gov/data-products/organic-production.aspx.
---------------------------------------------------------------------------

The Organic Dairy Market
According to the 2013 Organic Trade Association (OTA) Industry
Survey, U.S. organic food, fiber, and agricultural product sales were
over $32 billion in 2013, up 11.4 percent from 2012.\43\ Organic dairy
is the second largest sector in organic retail sales (15.2%), after
fruits and vegetables (36%). Sales of organic dairy products, including
milk, cream, yogurt, cheese, butter, cottage cheese, sour cream, and
ice-cream, reached almost $4.2 billion in 2012. Table 3 shows the
organic dairy market characteristics by subcategory.
---------------------------------------------------------------------------

\43\ OTA 2014 Organic Industry Survey.

Table 3--Organic Dairy Market--Retail Sales by Subcategory
----------------------------------------------------------------------------------------------------------------
Percentage of
Subcategory 2013 Sales 2013 Growth organic dairy
(percent) sales \a\
----------------------------------------------------------------------------------------------------------------
Milk/Cream...................................................... 2,813 7.3 62.7
Yogurt.......................................................... 1,021 -0.2 22.8
Cheese.......................................................... 331 18.9 7.4
Butter/Cottage Cheese/Sour Cream................................ 261 17.9 5.8
Ice-Cream....................................................... 60 19.1 1.3
----------------------------------------------------------------------------------------------------------------
\a\ While Organic Trade Association's 2014 Organic Industry Survey included eggs as a subcategory for its
summary on organic dairy sales, we have excluded the data on eggs from this table.

While the majority of organic dairy products are marketed under
regional or national brands, sales of products under private label
arrangements accounted for between 30-40% of the organic dairy market
in 2013.\44\ Both OTA's 2013 and 2014 Organic Industry Surveys cite
drought and feed costs as the key constraints on market growth.
However, constraints to market growth vary regionally and across
different size operations. According to a 2009 ERS report that analyzed
2005 ARMS data, 55% of farms in the West reported sourcing inputs as
the most difficult aspect of organic milk production versus only 24% of
farms in the Upper Midwest region and 19% of farms in the
Northeast.\45\ This is likely correlated with size of operation since
organic dairies in the West tend to be larger in size and, therefore,
have increased feed demand. Certification and compliance were cited as
the most difficult aspect of organic milk production for farms in the
Upper Midwest and Northeast (51% and 32% respectively).
---------------------------------------------------------------------------

\44\ Organic Trade Association (OTA)/Nutrition Business Journal,
2013 Organic Industry Survey. Private label arrangements allow
businesses to offer or sell their products under another company's
brand name, often a store brand.
\45\ Economic Research Service. 2009. Characteristics, Costs,
and Issues for Organic Dairy Farming (pg. 33). Report by William
McBride and Catherine Greene. Statistics based on 2005 ARMS data.
Report available online at: http://www.ers.usda.gov/publications/err-economic-research-report/err82.aspx.
---------------------------------------------------------------------------

Overview of Organic Dairy Production
Current dairy production and husbandry practices provide important
context for the baseline and cost analysis. This section describes
nonorganic and organic heifer development and highlights how they
differ. Principles of management for other species would be similar,
but the timing will be different. For example, a goat begins its first
lactation at 1 year of age while a cow begins its first lactation at 2
years of age.

[[Page 23469]]

When a heifer calf is born on a dairy farm, the producer ensures
that the calf receives colostrum, either from a bottle or nursing her
dam. The heifer calf is then separated from the dam and placed in
group, pair, or single housing. Some larger dairy producers contract
with heifer development farms to raise replacement heifers. These
heifer development farms pick up the heifer calves and raise them at
another location until they are within a month or two of their first
lactation. Heifer calves are raised on a diet of milk replacer or
liquid milk with free choice roughages and grains. Once the calves have
learned how to eat grains and roughages, the calves are weaned from the
milk.
After weaning, the heifers are developed to grow at a moderate pace
until they are ready to be bred. During this time, the heifers may be
raised on pasture, fed a complete ration or a mixture of both. Once the
heifers are about 14 or 15 months of age, they are bred, gestate for
about 9 months, and calve around 2 years of age. Usually once the
heifers are bred or ``settled,'' they will be fed a diet which allows
them to slowly grow in terms of frame size and body weight. As the
heifer approaches her due date, she is termed a ``springer'' or is
described as ``freshening.'' After she calves, she begins lactating, is
moved to the milking herd and called a ``first calf heifer.''
Organic producers follow similar timelines, but use some different
practices. Organic producers must provide a feed ration comprised of
certified organic agricultural feedstuffs. At this point in time, AMS
is not aware of any certified organic milk replacer produced in the US.
As a result, organically raised dairy calves must be fed organic milk.
This makes the practice of sending young calves to heifer development
farms less feasible for organic producers as these heifer development
farms may not have access to certified organic milk. In addition,
organic regulations require that all organically managed ruminants
receive 30% of their dry matter intake from pasture during the grazing
season, though dairy calves under 6 months of age are excluded from
this provision. By the age of 6 months, dairy calves must be on pasture
during the grazing season. Nonorganic calves do not have a pasture
requirement.
Organic producers must also follow certain health care practices.
For example, organic producers may not use antibiotics to prevent
disease. Instead, organic producers must prevent the animals from
getting sick using other management practices such as vaccinations.
However, if an animal does get sick, organic producers are required to
use medication to restore the animal to health even if the animal loses
organic status. Once the animal loses organic status, the animal could
return to organic milk production only as part of a one-time transition
with another producer.
Organic producers also may not use hormonal methods to synchronize
estrus. Nonorganic producers may use hormonal products to both initiate
estrus and synchronize estrus among the heifers to aid in conception.
Certain synchronization protocols allow for a timed breeding method
that does not require observation of a standing heat to identify
estrus.
Dairy farms and heifer development farms which produce transitioned
dairy animals are able to raise the heifer calves nonorganically until
12 months before organic milk production begins. The pre-weaning phase
of life is the time in which heifer calf mortality is the highest and
the diet is the most expensive on a per calorie basis. Nonorganic
practices to reduce mortality and expense during this pre-weaning phase
include the use of milk replacer and, at times, antibiotics. By the
time the dairy heifer reaches one year of age, most health threats are
past and the animal is consuming a less expensive diet.
AMS is not aware of any national survey that compares the culling
rate of organic dairy animals with nonorganic dairy animals. In 2007,
the USDA Animal and Plant Health Inspection Service (APHIS) conducted
the National Animal Health Monitoring System (NAHMS) survey for dairy
animals; a follow-up is planned for 2014.\46\ In this survey of dairy
animals, the national rate of permanently removing a dairy animal from
a farm was 23.6 percent. However, this included animals that were sold
as replacement females to other dairies. This also excluded the
percentage of animals which died. The percentage of cows culled did not
vary depending upon the size of the producer nor did it vary depending
upon the region of the U.S. in which the dairy was located. Most dairy
cows were removed for udder problems or reproductive problems, followed
by lameness or poor milking ability. Overall, mortality rates were 7.8%
for un-weaned heifers, 1.8% for weaned heifers, and 5.7% for cows.
---------------------------------------------------------------------------

\46\ USDA APHIS. NAHMS Dairy 2007 Part I: Reference of Dairy
Cattle Health and Management Practices in the United States, 2007.
This survey included both nonorganic and organic dairy animals.
Available online at: http://www.aphis.usda.gov/wps/portal/banner/help?1dmy&urile=wcm%3apath%3a%2Faphis_content_library%2Fsa_our_focus%2Fsa_animal_health%2Fsa_monitoring_and_surveillance%2Fsa_nahms%2Fct_nahms_dairy_studies#dairy2014.
---------------------------------------------------------------------------

From this information, an average dairy farm would sell 23.6% of
its milking cattle and would lose 5.7% of its milking cattle to death.
This would require that the average dairy farm in the U.S. be able to
raise or purchase females that represent about 30% of the farm's herd
size just to maintain current size. Based on this average national need
for replacements, the overall U.S. dairy herd (both nonorganic and
organic) would have excess replacement females available for
development. At this rate, the organic milking herd should be able to
be maintained by last third gestation replacement females. In addition,
the organic milking herd should also provide a sufficient quantity of
females if market conditions lead to an expansion of the number of
organic dairy animals.
Specific to organic production, the U.S. had approximately 1,850
organic dairy farms that milked 200,000 cows in 2011.\47\ Of these
farms, 1,823 farms were producing organic milk from dairy cows and 19
farms were producing organic milk from goats. The number of certified
organic sheep, buffalo, and bison dairy operations for that period is
not known. This proposed action would apply to any animals (e.g.,
heifers/cows, goats, sheep) that produce milk for an organic operation.
The baseline discussion and the following cost analysis focus on
heifers and cows as the predominant portion of the industry affected by
this proposed action and due to the limited data available on other
types of dairy animals.
---------------------------------------------------------------------------

\47\ USDA NASS. 2011. Census of Agriculture--Organic Production
Survey. Available online at: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1859.
---------------------------------------------------------------------------

Based on the NASS survey, Table 4 shows that the highest
concentration of organic dairy farms is in the Northeast and Upper
Midwest.

[[Page 23470]]

Table 4--Top States With Organic Dairy Farms Compared to Production
----------------------------------------------------------------------------------------------------------------
Percent of
Number of U.S. of Milk production Percent of
organic dairy organic dairy (pounds) U.S. milk
farms farms production
----------------------------------------------------------------------------------------------------------------
United States............................... 1,823 .............. 2,797,845,926 ..............
Wisconsin................................... 397 21.7 313,991,661 11.2
Pennsylvania................................ 236 12.9 148,704,869 5.3
New York.................................... 235 12.9 218,597,110 7.8
Vermont..................................... 180 9.9 149,649,913 5.3
Texas....................................... 8 0.4 423,558,952 15.1
California.................................. 72 3.9 469,148,296 16.8
----------------------------------------------------------------------------------------------------------------

The four states with the largest number of certified organic dairy
farms (Wisconsin, Pennsylvania, New York, and Vermont) account for 57
percent of the total farms. However, those states represent less than
30 percent of national organic milk production. By contrast, the West
and Southwest account for the highest milk production per farm. The two
highest-producing states (California and Texas) represented only 4.3
percent of total certified organic dairy farms, while producing 31.9
percent of the total organic milk nationally. According to 2010 ARMS
data, the mean size of an organic dairy farm nationally was 77 cows. In
the Northeast and the Upper Midwest, the mean number of organic cows
per farm was 64. In the West, the mean number of organic cows per farm
was 288. Both ARMS and NASS surveys demonstrate similar distributions
of both farms and milk production. The 2010 ARMS data also shows that
organic dairies averaged about 13,900 pounds of milk annually per cow,
or a daily average of 46 pounds of milk per cow (assuming a 300-day
lactation period).
According to 2010 ARMS data, nearly 99 percent of the dairies
responding to the organic dairy survey reported using replacement
heifers that were born on the farm, with 96.5 percent reporting that
the heifers were both born and raised on their operation. For the only
3.5 percent of dairies that did not raise their replacement heifers on
their operation, they presumably hired heifer development farms to
raise the heifers prior to rejoining the herd. Of the farms reporting
using replacement heifers born on the farm, the average number of
replacement heifers sourced by this method was 31 head per farm. These
heifers, born in 2010, would have been added to the milking herd in
2012.
Some dairy operations also bought replacement heifers. It is
unknown whether these replacement heifers were certified organic when
purchased or were nonorganic animals then transitioned into organic
production. We would expect a mixture of certified organic heifers and
transitioning heifers entering organic production that is dependent on
the producer's current transition approach. Of the farms responding to
the ARMS, 7.3 percent reported purchasing dairy cows and 5.3 percent
reported buying replacement heifers. Farms that purchased milk cows
purchased an average of 8 cows per farm and those that purchased
heifers bought an average of 15 head.
Overall, in 2010, organic dairy farms added 58,500 cows and heifers
to their operations, with 95.7 percent of those born on the operation.
The remainder of animals came from off farm sources and included milk
cows, 1,100 head (1.8 percent), and heifers, 1,425 head (2.5 percent).
Most organic dairies (91 percent) reported selling cull cows. Some
dairy farms also reported selling milk cows and replacement heifers. Of
the farms responding to the ARMS, 17.0 percent reported selling milk
cows and 17.0 percent reported selling replacement heifers. Farms that
sold milk cows sold an average of 14 cows per farm and those that sold
replacement heifers sold an average of 11 head. Overall, dairies sold
4,400 milk cows and 3,500 replacement heifers. Farms could have sold
these animals into the nonorganic or organic market.
Information on how many of replacement heifers bought were
transitioned heifers and how many were managed organically from the
last third of gestation is not available, and, therefore, AMS is not
able to quantify the baseline. Certifying agents do not maintain
aggregated data on what transition approach producers are currently
implementing. Therefore, we do not have data on how many producers are
bringing heifers into organic production as nonorganic animals and
transitioning them into organic versus sourcing and managing animals as
organic from the last third of gestation. However, the two largest
producers of branded organic fluid milk both require their supplying
dairies to supply milk from organic cows, as opposed to transitioning
new nonorganic animals into organic production. Based on discussions
with the industry, AMS assumes that, qualitatively, the vast majority
of replacement heifers purchased is managed organically from the last
third of gestation and, therefore, would not need to change practices
due to this proposed action. We seek comment on this assumption and
data on current industry practice to help refine our estimates.
As discussed in the BACKGROUND section, under the current baseline,
we know that producers differ in their transition strategies dependent
on how the term ``herd'' in the regulations is interpreted and applied.
The difference in transition approach across producers is, as
previously discussed, due to both a lack of definition for what a
``herd'' is and different interpretations of when the transition of a
herd into organic production should be considered completed. Within the
existing industry, there are some organic producers who transitioned a
single ``herd'' of animals into organic production, consider their
transition complete, and only source animals that are managed
organically from the last third of gestation. There are other organic
producers who transitioned their operation to organic, but continue to
expand their operation by bringing nonorganic animals into organic
production as additional ``herds''. In some cases, these operations
have multiple fields on a given location or multiple locations under
their business and, therefore, consider the herd in a given field or
location as distinct for the purpose of their transition approach. For
producers using this kind of multi-herd approach for their operation,
the proposed action would require them to source organic animals or
previously transitioned animals across all of their herds, regardless
of location or multi-herd management strategy. This will, in turn,
increase their costs as discussed in the cost analysis that follows.

[[Page 23471]]

Alternatives Considered
As required by E.O. 12866, various alternatives were considered to
achieve the objectives of this rule. The alternatives considered
include: (Option A) revising the standard to allow producers to
transition dairy animals into organic production over a 12-month period
on a continuous basis; and (Option B) revising the standard to clearly
convey that a producer with a dairy farm has a one-time exception over
a 12-month period to transition dairy animals into organic production.
These options are shown in Table 5 below.

Table 5--Alternatives Considered
------------------------------------------------------------------------
Alternative Description
------------------------------------------------------------------------
Option A--Continuous Transition...... Revise standard to allow a
producer to transition dairy
animals into organic production
over a 12-month period on a
continuous basis.
Option B--Use ``Dairy Farm'' as Unit Revise standard to tie the one-
of Regulation. time transition exception to a
given dairy farm (premises) over
a 12-month period.
Option C--Proposed Rule.............. Revise standard to tie the one-
time transition exception to a
given producer with a dairy farm
over a 12-month period.
------------------------------------------------------------------------

As discussed, maintaining the status quo (i.e., the baseline unit
of regulation as a ``herd'') does not further our objective to provide
additional guidance to the organic dairy industry and, therefore, was
not considered as a viable alternative. Since 2006, vast stakeholder
comments have requested that AMS engage in rulemaking to support
greater consistency in the application of the origin of livestock
requirements across certifying agents and operations. In addition to
stakeholder comments, the OIG identified this issue in its July 2013
audit of organic milk operations and recommended that AMS undertaking
rulemaking.
Option A
The first alternative considered (Option A) would amend the
regulations to specify that a producer could transition dairy animals
into organic production over a 12-month period on a continuous basis.
Under OFPA, a dairy animal from which milk or milk products will be
sold or labeled as organically produced must be raised in accordance
with OFPA for not less than the 12-month period immediately prior to
the sale of such milk and milk products (7 U.S.C. 6509(e)(2)(A)). AMS
could allow transition of any dairy animal into organic production,
without further limitation, as long as it is organically managed for a
12-month period prior to the sale of organic milk or milk products. In
effect, this would mean that a producer could continuously transition
conventional dairy animals into organic production on an ongoing basis,
as opposed to allowing a producer to transition animals into organic
production once.
While this alternative could achieve the regulatory objective by
setting a consistent and uniform standard across the organic dairy
industry, numerous NOSB recommendations and stakeholder comments have
not suggested this approach. Further, in assessing the baseline, this
approach would increase the number of nonorganic animals transitioned
into organic production. If the demand shifts to nonorganic animals for
transition into organic production, this would reduce the current
demand, and, thus, value of organic heifers. Further, because consumers
expect milk to be produced without the use of certain inputs that can
be used in nonorganic animals (e.g., antibiotics), this approach could
have unknown, but likely negative, impacts on consumer confidence in
the growing organic dairy sector.
Option B
The second alternative considered (Option B) would amend the
regulations to specify that a dairy farm, as defined by the regulation,
could transition dairy animals into organic production one-time over a
12-month period. This would mean that a transition could occur only
once on a given premises. Under this alternative, a producer could
transition dairy animals on multiple dairy farms over time as long as
animals had not been previously transitioned on a given premises. For
example, if dairy farm location X, Y, and Z had never had animals
transitioned to organic on their respective premises, then producer A
could conduct transition on each location (X, Y, and Z) once. If
producer B then purchased these dairy farms from producer A, producer B
could not complete a transition on these premises because the location
had already experienced a one-time transition to organic.
We did not choose this alternative because it would only meet the
intent of this regulatory action in a limited way. While it would
reduce the number of transitions over time, it would allow a given
producer, with a single organic certificate, to transition dairy
animals on multiple dairy farms. As discussed in the BACKGROUND
section, this proposal was drafted to create greater consistency in the
implementation of the transition mechanism so that it is not used as a
continual means of producing organic milk without purchasing organic
stock once a producer has converted to organic production. Furthermore,
AMS could not identify how a producer and a certifying agent could
verify that a transition had not already occurred on a given dairy
farm. This would be especially difficult as time went on and a dairy
farm may have changed ownership multiple times.
Option C
The third alternative considered, and selected for this proposed
action, would provide a limited exception (i.e., a one-time opportunity
for producers) to transition dairy animals into organic production that
aligns with both OFPA and the NOSB recommendations. While the NOSB
recommendations do not provide the level of specificity needed to
implement this approach, the intent of the NOSB is to require that,
once an operation is certified organic, any new animals added to that
operation should be organically managed since last third of gestation.
This proposed rule would address the NOSB recommendation, adding
specificity to ensure successful implementation of a uniform and
consistent standard. AMS considered many options for how to best
operationalize a one-time exception to transition dairy animals into
organic production. These options include linking the one-time
exception to a dairy farm, an operation, persons responsibly connected,
and the current unit of regulation, a herd. For the reasons previously
discussed in the OVERVIEW OF PROPOSED AMENDMENTS section, AMS is
proposing to link the transition exception to a producer.

[[Page 23472]]

Based on NOSB recommendations and almost 13,000 stakeholder
comments, this approach would retain the opportunity for new producers
to transition into organic dairy production and ensure that organic
products meet a consistent standard to support consumer confidence.
This approach would require a small number of dairy farms to change
their current practices for sourcing dairy animals and, as a result,
would impose some limited costs. This approach is also the more
pragmatic to implement through the certification and verification
process as compared to linking the one-time transition to a dairy farm
(Option B). By linking the transition to a given producer (Option C), a
producer (e.g., an individual or a corporation) can attest to a
certifying agent as part of their application for certification that
they have not already completed a dairy transition and certifying
agents could verify such attestations by checking past certification
records associated with that producer.
The costs and benefits of this approach are discussed in more
detail below.
Costs of Proposed Rule
The proposed rule has the potential to increase production costs on
dairy producers who currently purchase transitioned dairy animals as
replacements, assuming that transitioned animals are currently being
sold at a discount to organic replacement animals. Organic dairy
farmers who regularly purchase transitioned dairy animals as
replacements and organic operations in the process of expansion are
likely to face higher costs of production if this rule were finalized
as proposed. The cost of implementing the proposed rule will fall
primarily on organic dairies that currently purchase transitioned
heifers, although dairies currently purchasing organic heifers would be
expected to pay higher prices in the short-term due to increased
competition for these animals. Farms that sell their excess organic
replacement heifers may see an increase in demand for their heifers
while farms that exclusively raise their own organic replacement
heifers would not be affected by the proposed rule.
Overall, this cost analysis uses existing data on the number of
replacement animals purchased on organic operations to estimate costs.
Using data by organic operation differs from the proposed unit of
regulation, which is by producer (i.e., a business entity). We do not
have data explicitly available by producer. However, we believe that
this analysis using data by organic operation would be similar to any
analysis by producer because, in many cases, the operation and producer
are functionally one in the same. Further, while we do not have data on
multi-herd producers, this analysis assumes that costs will be
equivalent on a per cow basis. We are seeking comment on these
assumptions and any data relevant to sheep and goat dairy production.
Estimated Costs for Dairies
The ARMS included the total amount spent on replacement heifers,
but the survey did not distinguish between organic and transitioned
heifers. For purposes of this analysis, we will assume that 25% to 50
percent of all purchased heifers are transitioned heifers, or between
360 and 720 head. This is a broad estimate though we believe that the
proportion is likely smaller than 50% based on discussions with organic
dairy producers. The survey results indicated that the average
replacement heifer cost approximately $898. The University of Minnesota
Farm Financial Database (FINBIN) includes the average replacement cost
for organic heifers; between 2006 and 2012 the cost per head ranged
between $1,200 and $1,900. Extension officials at the University of
Vermont estimated that organic replacement heifers typically cost
between $1,600 and $2,000.\48\ Data on the cost of transitioned heifers
is not available. Using the upper end of these ranges ($2,000), the
cost of purchasing organic replacement heifers of all weights would be
$7.6 million per year. This is the total cost, not the additional cost
of purchasing organic heifers instead of transitioned heifers, so the
incremental costs will be considerably less. These costs only reflect
dairy cattle. Costs for purchasing dairy sheep and goats are not
included in this analysis.
---------------------------------------------------------------------------

\48\ Conversation with Dr. Bob Parsons, Extension Associate
Professor at University of Vermont, June 4, 2013.
---------------------------------------------------------------------------

AMS previously contacted several state extension dairy experts who
explained that supplies of organic replacement heifers and milk cows
were in excess supply creating a soft demand.\49\ In addition, the ARMS
shows that organic dairy farms retained 56,000 replacement heifers
while selling 32,000 head as cull cattle, milk cows, or replacement
heifers, indicating that there are ample supplies of replacement
heifers available. Therefore, the additional demand for organic
replacement heifers is not expected to lead to an increase in the price
of replacement heifers. However, to be conservative in estimating the
additional costs of the proposed rule, the analysis will assume that
the increased demand will increase the cost of an organic replacement
heifer by 25 percent, or $500.
---------------------------------------------------------------------------

\49\ Conversations with Dr. Bob Parsons, Extension Associate
Professor at University of Vermont, June 4, 2013; Bradley J. Heins,
Assistant Professor of Organic Dairy Production at University of
Minnesota, June 5, 2013; and A. Fay Benson, Small Dairy Support,
Cornell University SCNY Regional Team, June 6, 2013.
---------------------------------------------------------------------------

Because the price of transitioned heifers is not available, the
analysis will use the cost of conventional springers \50\ as a
substitute. Since the cost of a transitioned heifer is likely to be
more than the cost of a conventional heifer, using the conventional
springer price will generally overstate the cost of compliance with the
proposed rule and so provide an upper bound of costs incurred.
---------------------------------------------------------------------------

\50\ A springer is a heifer that is 7-9 months pregnant and will
begin producing milk within 2 months.
---------------------------------------------------------------------------

AMS Livestock, Poultry, and Grain Market News reports on five dairy
auction markets \51\ in the U.S. Using the reports from the period May
6, 2013 to June 5, 2013, the average auction price for Approved \52\
springers was $1,200 per head. The difference in cost between organic
heifers and conventional heifers is $800 per head. As discussed, we
assume that the cost of transitioned heifer is, at a minimum,
equivalent to a conventional heifer. With the assumed $500 increase in
cost of organic heifers, the total difference will be $1,300. The
difference in cost between a transitioned heifer and an organic heifer
is summarized in Table 6.
---------------------------------------------------------------------------

\51\ The markets are the Mammoth Cave Dairy Auction, Smiths
Grove, KY; Springfield Livestock Marketing Center, Springfield, MO;
Producers Auction Yards, Norwood, MO; New Holland Sales Stables, New
Holland, PA; and Toppenish Monthly Dairy Replacement Sale,
Toppenish, WA.
\52\ Dairy cattle are classified into four categories: Supreme,
Approved, Medium, and Common. The most common category of springers
sold is Approved.

[[Page 23473]]

Table 6--Difference in Cost Between a Transitioned Heifer and an Organic Heifer
----------------------------------------------------------------------------------------------------------------
Low end of High end of
range range Value used
----------------------------------------------------------------------------------------------------------------
Cost of organic replacement heifer.............................. $1,200 $2,000 $2,000
Increased premium for organic heifer due to increased demand .............. .............. 500
(assumed)......................................................
Total cost of organic replacement heifer.................... .............. .............. 2,500
-----------------------------------------------
Cost of conventional heifer (used as lower bound for cost of 1,000 1,435 1,200
transitioned heifer)...........................................
-----------------------------------------------
Cost difference per heifer.................................. .............. .............. 1,300
----------------------------------------------------------------------------------------------------------------

According to the NASS 2011 Certified Organic Production Survey, the
U.S. had approximately 1,850 organic dairy farms that milked 200,000
cows. Based on the NASS survey results for the total number of organic
dairy operations and ARMS data on the number of replacement heifers
purchased, we estimate the total increase in cost of purchasing organic
heifers instead of transitioned heifers at a maximum of $935,000 per
year with the assumption that 50% of replacement animals purchased are
transitioned dairy animals and $468,000 per year with the assumption
that 25% of replacement animals purchased are transitioned dairy
animals. If the cost of organic replacement heifers does not increase
due to current market conditions, the estimate of the total increase in
cost is significantly less at $576,000 for the 50% assumption and
$288,000 for the 25% assumption. The additional cost of purchasing
organic heifers for replacement purposes is summarized in Table 7.

Table 7--Additional Cost Incurred To Purchase Organic Heifers
----------------------------------------------------------------------------------------------------------------
Total additional cost for dairy producers
Price difference used -------------------------------------------------
25% Assumption 50% Assumption
----------------------------------------------------------------------------------------------------------------
Low Estimate......................... Uses $800 difference $288,000............... $576,000.
between conventional
and organic heifers.
High Estimate........................ Uses $1,300 difference $468,000 ($180,000 of $935,000 ($359,000 of
($800 above plus $500 which is an intra- which is an intra-
in assumed organic industry transfer). industry transfer.
premium).
----------------------------------------------------------------------------------------------------------------

The cost difference between the low and high estimate ($359,000 or
$180,000) should not be considered a net cost, but rather an intra-
industry transfer. While some producers who need to purchase organic
heifers will have additional costs if there is a $500 premium for these
animals, this premium will stay within the organic dairy sector as a
benefit to those producers supplying organic heifers. Any intra-
industry transfer is expected to benefit small operations as such
operations tend to have more flexibility in capacity (e.g., available
pasture) to accommodate raising organic replacement heifers for the
organic market. This flexibility is less apparent for large operations.
Furthermore, the actual costs of this action may be considerably less
than the low estimate. This analysis is based on a conservative
assumption that 50 percent of all purchased heifers are transitioned
heifers. Based on discussions with organic dairy producers, we believe
that this proportion is likely smaller which would decrease the low
cost estimate.\53\ The costs of the proposed action will vary by size
of operation because the proportion of dairies that source at least
some of their replacement heifers from their own calves also varies by
size of operation. Of the largest operations in the ARMS data, those
with 200 or more cows, 96 percent reported that at least some of their
replacement heifers were born on their operations. All operations with
between 100 and 199 cows reported that at least some of their
replacement heifers were born on their operations, and 99 percent of
operations with fewer than 50 cows and those with between 50 and 99
cows reported that at least some of their replacement heifers were born
on their operations.
---------------------------------------------------------------------------

\53\ Between April 2012 and December 2013, AMS staff contacted 8
organic dairy producers of various sizes to determine the extent to
which heifers are raised or purchased on their farms.
---------------------------------------------------------------------------

Purchases of milk cows and replacement heifers also vary by size.
Ten percent of operations with fewer than 50 cows reported purchasing
milk cows, and the average number purchased was 6 head. Five percent of
operations with between 50 and 99 cows reported purchasing milk cows,
and the average number purchased was 14 head. Three percent of
operations with between 100 and 199 cows reported purchasing milk cows,
and the average number purchased was 10 head. No operations with 200 or
more cows reported purchasing milk cows.
The pattern is different for purchasing heifers. Four percent of
operations with fewer than 50 cows reported purchasing heifers, and the
average number purchased was 10 head. Seven percent of operations with
between 50 and 99 cows reported purchasing heifers, and the average
number purchased was 10 head. Three percent of operations with between
100 and 199 cows reported purchasing heifers, and the average number
purchased was 5 head. Eight percent of operations with 200 or more cows
reported purchasing heifers, and the average number purchased was 76
head. Based on a cost difference of $1,300 per head between
transitioned replacement heifers and organic replacement heifers, and
assuming that half of replacement heifers currently purchased are
transitioned, dairies with fewer than 50 cows would pay an additional
$270,000, dairies with between 50 and 99 cows would pay an additional
$280,000, dairies with between 100 and 199 cows would pay an additional
$30,000 and dairies with 200 or more cows would pay an additional
$355,000. The costs by size of operation are summarized in Table 8.

[[Page 23474]]

Table 8--Costs by Size of Operation for Purchasing Organic Heifers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fewer than 50 cows 50-99 cows 100-199 cows 200 or more cows
--------------------------------------------------------------------------------------------------------------------------------------------------------
Size of Operation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of operations that 4%.......................... 7%.......................... 3%.......................... 8%.
purchased replacement heifers.
Average number of replacement 10 head..................... 10 head..................... 5 head...................... 76 head.
heifers purchased.
Total cost for purchase of $270,000.................... $280,000.................... $30,000..................... $355,000.
replacement heifers across size
class.
Cost per operation (25% to 50% $3,250-$6,500............... $3,250-$6,500............... $1,600-$3,250............... $29,700-$49,400.
transitioned heifers).
--------------------------------------------------------------------------------------------------------------------------------------------------------

Effects on Heifer Development Operations
Heifer development operations raise heifers either from wet calves
or weaned calves and generally sell them as springers at about 24
months of age. To raise organic or transitioned heifers, these
operations must have organic pasture available for the heifers to
graze. Operations that raise transitioned heifers may have to increase
their ownership or leasing of organic pasture to continue to operate at
their current capacity since organic heifer calves will need access to
organic pasture for a longer period than transitioned heifers will need
access to pasture.
Since the locations, numbers, and sizes of heifer development
operations are not known, it is not possible to estimate the increased
costs this will entail. However, it is possible that, to the extent
that organic heifers sell at a premium to transitioned heifers, the
increased costs may be at least partially offset by increases in
revenues from selling organic replacement heifers. We are seeking data
related to the likely impacts on heifer development operations and
those for sheep and goats.
Effects on Consumers
Nearly 99 percent of all dairies report that they source at least
some of their replacement cows from their own calves, and only 4.3
percent of all dairies purchase replacement heifers. The 95.7 percent
of producers that do not purchase replacement heifers would not see an
increase in costs. To replace purchased transitioned heifers, dairies
would have to either raise their own replacements or buy them from an
operation that sells organic replacement heifers. Since the current
market for replacement heifers is soft and there are ample supplies, as
detailed above, it is unlikely that the proposed rule would
significantly increase producer, and therefore, milk costs to the
consumer.
Benefits of the Proposed Rule
This proposed rule would bring specificity and clarity to the
regulations relating to the origin of dairy livestock and the
management of breeder stock. Greater clarity and specificity will
create uniform application of the practice standards applied in organic
production and in turn will help maintain consumer confidence in
purchasing organic products.
The Organic Trade Association's (OTA) 2013 U.S. Families' Organic
Attitudes and Beliefs tracking study identified that 13 percent of
organic buyers surveyed who saw or heard a negative news story about
organic chose to buy less organic foods. Further, nearly half of non-
buyers of organic products surveyed displayed a decrease in their
average level of trust in organic products' authenticity from 5.3 on a
10-point scale in 2012 to 4.4 in 2013.\54\
---------------------------------------------------------------------------

\54\ Organic Trade Association. 2013. U.S. Families' Organic
Attitudes and Beliefs: 2013 Tracking Study. www.ota.com.
---------------------------------------------------------------------------

Conclusions
A clear and consistent standard for transition of dairy animals
into organic production is needed and anticipated by dairy producers,
consumers, trade associations, certifying agents, and the OIG. This
proposed rule would provide a foundation for compliance and enforcement
in support of fair competition among dairy producers through a single,
well-defined standard. AMS is pursing the regulatory option that
retains the opportunity for new producers to transition into organic
dairy production once. In the event of emergencies, producers, through
their certifiers could apply for a temporary variance provided for in
section 205.290(a).
AMS is seeking comments on the actual economic impacts, both costs
and benefits, of this action on the industry. We are specifically
interested in validating the accuracy of the number of farms impacted,
validating the accuracy of the estimated number of replacement animals,
and understanding the number and size of heifer development operations
that may be affected by this action. The costs and benefits are
summarized in the Executive Summary and were described in detail in
this section.
In addition, and in support of our validation efforts, we also are
requesting comments on or submissions of applicable farm or industry
data, data sources, reports, research and other relevant information
that would help us better understand the full range of impacts of the
rule on farm income and profitability.

B. Executive Order 12988

Executive Order 12988 instructs each executive agency to adhere to
certain requirements in the development of new and revised regulations
in order to avoid unduly burdening the court system. This proposed rule
is not intended to have a retroactive effect.
States and local jurisdictions are preempted under the OFPA from
creating programs of accreditation for private persons or State
officials who want to become certifying agents of organic farms or
handling operations. A governing State official would have to apply to
USDA to be accredited as a certifying agent, as described in section
6514(b) of the OFPA. States are also preempted under sections 6503 and
6507 of the OFPA from creating certification programs to certify
organic farms or handling operations unless the State programs have
been submitted to, and approved by, the Secretary as meeting the
requirements of the OFPA.
Pursuant to section 6507(b)(2) of the OFPA, a State organic
certification program may contain additional requirements for the
production and handling of organically produced agricultural products
that are produced in the State and for the certification of organic
farm and handling operations located within the State under certain
circumstances. Such additional requirements must: (a) Further the
purposes of the OFPA, (b) not be inconsistent with the OFPA, (c) not be
discriminatory toward agricultural commodities organically produced in
other States, and (d) not be effective until approved by the Secretary.
Pursuant to section 6519(f) of the OFPA, this proposed rule would
not

[[Page 23475]]

alter the authority of the Secretary under the Federal Meat Inspection
Act (21 U.S.C. 601-624), the Poultry Products Inspection Act (21 U.S.C.
451-471), or the Egg Products Inspection Act (21 U.S.C. 1031-1056),
concerning meat, poultry, and egg products, nor any of the authorities
of the Secretary of Health and Human Services under the Federal Food,
Drug and Cosmetic Act (21 U.S.C. 301-399), nor the authority of the
Administrator of the EPA under the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. 136-136(y)).
Section 6520 of the OFPA provides for the Secretary to establish an
expedited administrative appeals procedure under which persons may
appeal an action of the Secretary, the applicable governing State
official, or a certifying agent under this title that adversely affects
such person or is inconsistent with the organic certification program
established under this title. The OFPA also provides that the U.S.
District Court for the district in which a person is located has
jurisdiction to review the Secretary's decision.

C. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) requires
agencies to consider the economic impact of each rule on small entities
and evaluate alternatives that would accomplish the objectives of the
rule without unduly burdening small entities or erecting barriers that
would restrict their ability to compete in the market. The purpose is
to fit regulatory actions to the scale of businesses subject to the
action.
The RFA permits agencies to prepare the initial RFA in conjunction
with other analyses required by law, such as the Regulatory Impact
Analysis (RIA). AMS notes that several requirements to complete the RFA
overlap with the RIA. For example, the RFA requires a description of
the reasons why action by the agency is being considered and an
analysis of the proposed rule's costs to small entities. The RIA
describes the need for this proposed rule, the alternatives considered
and the potential costs and benefits of this proposed rule. In order to
avoid duplication, we combine some analyses as allowed in section
605(b) of the RFA. As explained below, AMS expects that the entities
that could be impacted by this proposed rule would qualify as small
businesses. In the RIA, the discussion of alternatives and the
potential costs and benefits pertain to impacts upon all entities,
including small entities. Therefore, the scope of those analyses is
applicable to the RFA. The RIA should be referred to for more detail.
AMS has considered the economic impact of this proposed action on
small entities. Small entities include producers transitioning into
organic dairy production, existing organic dairy producers, and
producers that raise replacement animals for organic dairies. AMS
believes that the cost of implementing the proposed rule will fall
primarily on organic dairies that currently purchase transitioned
heifers, although dairies currently purchasing organic heifers would be
expected to pay higher prices in the short-term due to increased
competition for these animals. Farms that sell their excess organic
replacement heifers may see an increase in demand for their heifers
while farms that raise their own organic replacement heifers would not
be affected by the proposed rule. AMS believes there may be a limited
number of heifer development operations who could be impacted by this
action. However, since the locations, numbers, and sizes of heifer
development operations are not known, it is not possible to estimate
the number of such entities and any increased costs for those entities.
This proposed rule would also affect certifying agents that certify
organic dairy operations. The Small Business Administration (SBA)
defines small agricultural service firms, which includes certifying
agents, as those having annual receipts of less than $7,000,000 (North
American Industry Classification System Subsector 115--Support
Activities for Agriculture and Forestry). There are currently 84 USDA-
accredited certifying agents; based on a query of the NOP certified
organic operations database, there are approximately 53 certifying
agents who are currently involved in the certification of organic
dairies. AMS believes that these certifying agents would meet the
criterion for a small business. While certifying agents are small
entities that will be affected by this proposed rule, we do not expect
these certifying agents to incur significant costs as a result of this
action. Certifying agents already must comply with the current
regulations, e.g., maintaining certification records for organic dairy
operations. Their primary new responsibility under this proposal will
be to determine, through the existing application process for organic
certification, a producer's eligibility for a one-time transition into
organic production.
For the RFA analysis, AMS focused on estimating how different size
organic dairy operations (small versus large) would be impacted as a
result of purchasing all organic dairy replacement animals. As
discussed above, we do not have data on heifer development operations
that raise dairy replacement heifers and are unable to estimate the
impacts on these entities. As defined by the SBA (13 CFR 121.201),
small agricultural producers are defined as those having annual
receipts of less than $750,000. AMS used this SBA criterion to identify
large organic dairy operations, those with cash receipts of more than
$750,000, and small operations, those with cash receipts of $750,000 or
less. The ARMS dataset estimates that 95 percent had cash receipts
below $750,000 and 5 percent had cash receipts above $750,000. Using
the NASS estimate for the total number of organic dairy operations, AMS
estimates that, in 2011, there were 91 large operations and 1,756
operations that would be considered small under the SBA criterion.
AMS notes that there is little variation in the proportion of
organic dairies that source at least some of their replacement heifers
from their own calves. Of the large operations, 96 percent reported
that at least some of their replacement heifers were born on their
operations. About 99 percent of small operations reported sourcing at
least some of their replacement heifers from calves born on their
operations.
While the frequency of purchases of replacement heifers varied
little by size, our analysis shows that the mean number of replacement
heifers purchased was significantly different across size categories.
Small operations were slightly less likely to buy replacement heifers
(5.3 percent versus 5.5 percent). Of the small operations that
purchased replacement heifers, the average number purchased was 10
head, compared with an average purchase of 107 head for large
operations. For this cost analysis, we assumed a cost difference of
$1,300 per head between transitioned replacement heifers and organic
replacement heifers and assumed that half of replacement heifers
currently purchased are transitioned.\55\ Based on our analysis, AMS
estimates that, under the proposed rule, small operations would
collectively spend an additional $588,000 for heifers. Large operations
would collectively pay an additional $347,000 for heifers. Of the
operations that purchased heifers, the average additional cost per
operation would be $6,300 for small operations

[[Page 23476]]

and $70,000 for large operations. AMS notes that this analysis assumed
that there is no difference in the cost per head paid by large and
small operations for purchases of replacement heifers. Table 9
summarizes the cost analysis using the SBA criterion for small
businesses (i.e., producers with less than $750,000 in cash receipts).
---------------------------------------------------------------------------

\55\ The determination of a cost difference of $1,300 per head
and the assumption about the proportion of replacement heifers that
are transitioned is discussed in the RIA. See section on EO 12866
and 13563.

Table 9--Cost of Organic Replacement Heifers by SBA Criterion for Small
Businesses
------------------------------------------------------------------------
Small operations Large operations
(<$750,000) (>=$750,000)
------------------------------------------------------------------------
Total cost (all operations)....... $588,000 $347,000
Per operation purchasing 3,150-6,300 35,000-70,000
replacement heifers (25% to 50%
transitioned replacements).......
------------------------------------------------------------------------

To understand the potential costs in context, we used the higher
average cost estimate per operation from Table 9 for the purchase of
organic replacement heifers (i.e., $6,300 for small; $70,000 for large)
and compared it to the average gross cash farm income for each size
category. In 2011, the average gross farm cash income for small
operations was $211,375, and $2,348,345 for large operations. For both
small and large operations, the average additional costs imposed by the
requirement to purchase organic replacement heifers accounts for
approximately 2.9 percent of an operation's average gross cash farm
income. AMS believes that any costs incurred by producers in complying
with this proposed action would be offset by a stronger marketplace for
organic dairy products. If implemented, this action would, as discussed
in the benefits portion of the RIA, ensure that consumer expectations
are met and support the growing market for these organic products. AMS
believes that, over the long run, the economic impact on producers of
not implementing this proposed rule would be greater than the economic
impact of this proposed rule due to the need for greater consistency in
applying the origin of livestock standard across the organic dairy
sector.
In addition, AMS has not identified any relevant Federal rules that
are currently in effect that duplicate, overlap, or conflict with this
proposed rule. This action provides additional clarity on the origin of
livestock requirements that are specific and limited to the USDA
organic regulations.

D. Executive Order 13175

This proposed rule has been reviewed in accordance with the
requirements of Executive Order 13175, ``Consultation and Coordination
with Indian Tribal Governments.'' Executive Order 13175 requires
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications,
including regulations, legislative comments or proposed legislation,
and other policy statements or actions that have substantial direct
effects on one or more Indian tribes, on the relationship between the
Federal Government and Indian tribes or on the distribution of power
and responsibilities between the Federal Government and Indian tribes.
AMS has assessed the impact of this rule on Indian tribes and
determined that this rule may have tribal implications that require
tribal consultation under EO 13175. If a Tribe requests consultation,
AMS will work with the Office of Tribal Relations to ensure meaningful
consultation is provided where changes, additions and modifications
identified herein are not expressly mandated by Congress.

E. Paperwork Reduction Act

No additional collection or recordkeeping requirements are imposed
on the public by this proposed rule. Accordingly, OMB clearance is not
required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501,
Chapter 35.

F. Civil Rights Impact Analysis

AMS has reviewed this proposed rule in accordance with the
Department Regulation 4300-4, Civil Rights Impact Analysis (CRIA), to
address any major civil rights impacts the rule might have on
minorities, women, and persons with disabilities. After a careful
review of the rule's intent and provisions, AMS has determined that
this rule would only impact the organic practices of organic producers
and that this rule has no potential for affecting producers in
protected groups differently than the general population of producers.
This rulemaking was initiated to clarify a regulatory requirement and
enable consistent implementation and enforcement.
Protected individuals have the same opportunity to participate in
the NOP as non-protected individuals. The USDA organic regulations
prohibit discrimination by certifying agents. Specifically, section
205.501(d) of the current regulations for accreditation of certifying
agents provides that ``No private or governmental entity accredited as
a certifying agent under this subpart shall exclude from participation
in or deny the benefits of the NOP to any person due to discrimination
because of race, color, national origin, gender, religion, age,
disability, political beliefs, sexual orientation, or marital or family
status.'' Paragraph 205.501(a)(2) requires ``certifying agents to
demonstrate the ability to fully comply with the requirements for
accreditation set forth in this subpart'' including the prohibition on
discrimination. The granting of accreditation to certifying agents
under section 205.506 requires the review of information submitted by
the certifying agent and an on-site review of the certifying agent's
operation. Further, if certification is denied, section 205.405(d)
requires that the certifying agent notify the applicant of their right
to file an appeal to the AMS Administrator in accordance with section
205.681. These regulations provide protections against discrimination,
thereby permitting all producers, regardless of race, color, national
origin, gender, religion, age, disability, political beliefs, sexual
orientation, or marital or family status, who voluntarily choose to
adhere to the rule and qualify, to be certified as meeting NOP
requirements by an accredited certifying agent. This proposed rule in
no way changes any of these protections against discrimination.

List of Subjects in 7 CFR Part 205

Administrative practice and procedure, Agriculture, Animals,
Archives and records, Imports, Labeling, Organically produced products,
Plants, Reporting and recordkeeping requirements, Seals and insignia,
Soil conservation.

For the reasons set forth in the preamble, 7 CFR part 205 is
proposed to be amended as follows:

PART 205--NATIONAL ORGANIC PROGRAM

0
1. The authority citation for 7 CFR part 205 continues to read:

Authority: 7 U.S.C. 6501-6522.

0
2. Section 205.2 is amended by adding in alphabetical order definitions
for

[[Page 23477]]

``dairy farm,'' ``organic management,'' third-year transitional crop,''
``transitional crop,'' and ``transitioned animal'' to read as follows:

Sec. 205.2 Terms defined.

* * * * *
Dairy farm. A premises with a milking parlor where at least one
lactating animal is milked.
* * * * *
Organic management. Management of a production or handling
operation in compliance with all applicable production and handling
provisions under this part.
* * * * *
Third-year transitional crop. Crops and forage from land, included
in the organic system plan of a producer's operation, that has had no
application of prohibited substances within 2 years prior to harvest of
the crop or forage.
* * * * *
Transitional crop. Any agricultural crop or forage from land,
included in the organic system plan of a producer's operation, that has
had no application of prohibited substances within one year prior to
harvest of the crop or forage.
Transitioned animal. A dairy animal that was converted to organic
milk production in accordance with Sec. 205.236(a)(2); offspring borne
to a transitioned animal that, during its last third of gestation,
consumes third year transitional crops; or offspring borne during the
one-time transition exception that themselves consume third year
transitional crops. Such animals must not be sold, labeled, or
represented as organic slaughter stock or for the purpose of organic
fiber.
* * * * *
0
3. Section 205.236 is revised to read as follows:

Sec. 205.236 Origin of livestock.

(a) Livestock products that are to be sold, labeled, or represented
as organic must be from livestock under continuous organic management
from the last third of gestation or hatching: Except, That:
(1) Poultry. Poultry or edible poultry products must be from
poultry that has been under continuous organic management beginning no
later than the second day of life;
(2) Dairy animals. A producer as defined in Sec. 205.2 may
transition dairy animals into organic production only once. A producer
is eligible for this transition only if the producer starts a new
organic dairy farm or converts an existing nonorganic dairy farm to
organic production. A producer must not transition any new animals into
organic production after completion of this one-time transition. This
transition must occur over a continuous 12-month period prior to
production of milk or milk products that are to be sold, labeled, or
represented as organic, and meet the following conditions:
(i) During the 12-month period, dairy animals must be under
continuous organic management;
(ii) During the 12-month period, the producer should describe the
transition as part of its organic system plan and submit this as part
of an application for certification to a certifying agent, as required
in Sec. 205.401;
(iii) During the 12-month period, dairy animals and their offspring
may consume third-year transitional crops;
(iv) Offspring born during or after the 12-month period are
transitioned animals if they consume third-year transitional crops
during the transition or if the mother consumes third year transitional
crops during the offspring's last third of gestation;
(v) Offspring born from transitioning dairy animals are organic if
they are under continuous organic management and if only certified
organic crops and forages are used from their last third of gestation;
(vi) All dairy animals must end the transition at the same time;
(vii) Dairy animals that complete the transition are transitioned
animals and must not be used for organic livestock products other than
organic milk;
(viii) After the 12-month period ends, transitioned animals may
produce organic milk on any organic dairy farm as long as the animal is
under continuous organic management at all times on a certified organic
operation; and
(ix) After the 12-month period ends, any new dairy animal brought
onto a producer's dairy farm(s) for organic milk production must be an
animal under continuous organic management from the last third of
gestation or a transitioned animal sourced from another certified
organic dairy farm.
(3) Breeder stock. Livestock used as breeder stock may be brought
from a nonorganic operation onto an organic operation at any time,
Provided, That the following conditions are met:
(i) Such breeder stock must be brought onto the operation no later
than the last third of gestation if its offspring are to be raised as
organic livestock; and
(ii) Such breeder stock must be managed organically throughout the
last third of gestation and the lactation period during which time they
may nurse their own offspring.
(b) The following are prohibited:
(1) Livestock, edible livestock products, or nonedible livestock
products such as animal fiber that are removed from an organic
operation and subsequently managed on a nonorganic operation may not be
sold, labeled, or represented as organically produced.
(2) Breeder stock, dairy stock, or transitioned animals that have
not been under continuous organic management since the last third of
gestation may not be sold, labeled, or represented as organic slaughter
stock.
(c) The producer of an organic livestock operation must maintain
records sufficient to preserve the identity of all organically managed
animals, including whether they are transitioned animals, and edible
and nonedible animal products produced on the operation.
0
4. Section 205.237 is amended by revising paragraph (a) to read as
follows:

Sec. 205.237 Livestock feed.

(a) The producer of an organic livestock operation must provide
livestock with a total feed ration composed of agricultural products,
including pasture and forage, that are organically produced and handled
by operations certified to the NOP, except as provided in Sec.
205.236(a)(2)(iii), except, that, synthetic substances allowed under
Sec. 205.603 and nonsynthetic substances not prohibited under Sec.
205.604 may be used as feed additives and feed supplements, Provided,
That, all agricultural ingredients included in the ingredients list,
for such additives and supplements, shall have been produced and
handled organically.
* * * * *
0
5. Section 205.239 is amended by revising paragraph (a)(3) to read as
follows:

Sec. 205.239 Livestock living conditions.

(a) * * *
(3) Appropriate clean, dry bedding. When roughages are used as
bedding, they shall have been organically produced in accordance with
this part by an operation certified under this part, except as provided
in Sec. 205.236(a)(2)(iii), and, if applicable, organically handled by
operations certified to the NOP.
* * * * *

Dated: April 23, 2015.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2015-09851 Filed 4-27-15; 8:45 am]
BILLING CODE P