USDA’s SOE rule brings challenges to Canadian organic sector

The United States Department of Agriculture‘s (USDA) Strengthening Organic Enforcement (SOE) final rule is set to significantly change the country’s National Organic Program (NOP), creating major challenges for Canadian organic food manufacturers and processors.

This regulation, which will be enforced from September 19, 2024, mandates that all entities acting as the “importer of record” for organic products entering the U.S., including those based outside the country, must obtain USDA organic certification annually.

“The Strengthening Organic Enforcement rule is the biggest update to the organic regulations since the original Act in 1990, providing a significant increase in oversight and enforcement authority to reinforce the trust of consumers, farmers, and those transitioning to organic production,” Under Secretary for Marketing and Regulatory Programs Jenny Lester Moffitt said in a press release.

The SOE rule, effective from March 19, 2024, will require Canadian businesses to secure an additional certification under USDA’s NOP. This regulatory change, intended to support the integrity of the organic supply chain and prevent fraud, could disrupt the $461 million Canadian organic export market to the U.S.

Tia Loftsgard, executive director at COTA. Photo © COTA

Tia Loftsgard, executive director at Canada Organic Trade Association (COTA), explained that previously companies could send their organic certificate along with their customs documentation to sell products. However, now companies need to have an NOP import certificate to export organic products to the U.S.

“We have an organic equivalency arrangement with the U.S., and they haven’t ever required import certificates on our products so, it is a gigantic amount of work to get the whole system changed,” she said.

“Along with certification, you must pay the certification body…and then if you’re a Canadian exporter to the U.S., you need to now be paying for an import certificate. These new costs might come into play, and the co-ordination of paperwork takes time as well,” Loftsgard explained.

While the U.S. is working to increase the number of certified entities, the new rule presents challenges, potentially placing Canadian products at a competitive disadvantage. The certification process can take several months, posing a significant burden for small and medium-sized enterprises.

Apart from getting the certification, Loftsgard said some Canadians are realizing there are entities in the U.S. that are not certified such as retailers. “There’s no real requirement for them to be certified as they are going to sell finished products on their store shelf. This is a problem for Canadians because now they don’t have anybody certified to receive the product, which is a part of the new rule that the U.S. has created,” she clarified.

Loftsgard further explained that if the NOP import certificate isn’t uploaded, products could be rejected, leading to potential disruptions. Customs brokers, unsure about the new requirements, may also reject products, causing further issues. Although the NOP has promised some leniency initially, there are already problems at the border, and some Canadian “producers are considering dropping organic certification” to avoid complications.

Once a complete certification application has been received by an approved certification body, it can take about eight to 12 weeks to receive the certification. However, this timeline varies depending on whether an applicant needs more time to complete the forms or if they do not respond quickly to any compliance issues identified.

Roxanne Beavers, senior technical reviewer and organic inspector at QAI. Photo © QAI

Roxanne Beavers, senior technical reviewer and organic inspector at Quality Assurance International (QAI), said some certification bodies, such as QAI, offer rush services to shorten the timeline, depending on inspector availability.

Loftsgard said, “If you’re an American selling to an American, you don’t have to worry about all this. It’s the Canadian companies that are concerned about what it’s going to do to the competitiveness of their products in the U.S. market.”

“From my perspective, we’ve been surprised by the number of non-resident importers. The same thing is happening in the U.S., where folks who are acting as importers for products from overseas, all must get certified. So, there’s been a scramble this year for operations to get certified organic,” Beavers said.

Loftsgard said that COTA had been advocating for a delay in the implementation of the new rule.

“We were asking for a year’s notice to bring the industry into compliance because they never clarified that this would be a requirement. However, as an organic association, we want to make sure that all the bad actors who may be doing something that’s not compliant are caught,” she said.

Adding to Loftsgard’s sentiments, Beavers said, “This regulatory change represents both a challenge and an opportunity for Canadian organic exporters and traders. While the new requirements may seem daunting, they ultimately strengthen the integrity of the organic supply chain, benefiting both consumers and businesses.”

Despite the challenges, there are potential benefits to the new regulation. By increasing the number of certified entities, the supply chain’s transparency will improve, and Canadian companies will gain visibility through the USDA’s organic integrity database, potentially enhancing their credibility with U.S. buyers.

When exporting to the U.S., companies are added to the Organic Integrity Database, which lists certified organic businesses.

“This is a notable benefit, as Canada lacks a similar centralized database and relies on individual certifiers to list their certified operations. Some certified processors appreciate being included in the U.S. database because it increases their visibility to potential customers and allows U.S. clients to access their organic certificates directly from the website,” Beavers said.

While import certificates are common in other equivalency arrangements, the high volume of trade between Canada and the U.S. means that implementing this requirement has been a significant burden for many exporters.