Problem Description / Risk Analysis / Benefits, Costs, and Regulatory Burden

Regulatory Proposals Assessment

Problem Description

The starting point of any regulatory proposal is the identification of a problem. Problems can be identified by a number of different sources, but the regulator is ultimately responsible for addressing those problems which only regulation can resolve.

Issue

• To ensure compliance with organic labeling claims, the Canadian government has been asked to establish a position which will ensure a consistent compliance plan for the production, handling and management practices of organic agriculture
• The current national organic standard is voluntary and cannot be enforced by the Canadian government
• Current voluntary standards have created a lack of consistency and uniformity in organic products in Canada

Background

• At the request of the Canadian organic industry, draft regulations were developed to govern organic agriculture in 1995, but consensus was never reached
• In 1996, the House of Commons Standing Committee on Agriculture recommended that the organic industry develop a set of voluntary guidelines
• In 1997, the CFIA contracted the Canadian Organic Advisory Board to develop a national standard and an accreditation mechanism
• In June 1999, the Standards Council of Canada published a voluntary national standard for organic agriculture which established minimum criteria for agricultural practices, management practices and requirements for making organic claims on foods
• Currently, the national standard is being revised by the industry through the Canadian General Standards Board.

Current Situation

• There are no national regulations specific to the labeling of products of organic agriculture.
• Quebec has implemented a mandatory regulatory system for organic products produced, sold, imported and exported.
• In 2005, the European Union (EU) will only accept imported organic product from countries that have an equivalent inspection system. Canadian products that are now reaching the EU market with great difficulty will lose this already limited market access.
• AAFC wishes to initiate negotiations for recognition of an equivalency agreement between Canada's national inspection regime and the EU.
• USDA has already implemented the NOP: while Canadian products can still flow through to US markets, Canadian certification system compliance must be recognized individually by USDA.

Considerations

• Enforcement of label claims is seen as the critical factor for recognizing the equivalency of the Canadian voluntary standard
• Although there was a strong support for a regulatory approach by representatives of those organizations that deal with international markets, it is not clear if that support extends to organic farmers who sell their products locally or to national organizations that may have limited involvement in organic agriculture. However, this is not the case in Quebec where all sectors of the industry have clearly come out in support of a regulatory control.

During initial consultations, Stakeholders identified 6 specific problems :

1) Consumers are confused

• Two independent marketing surveys were conducted. One was made in BC by IMPACS Communication Center and the other was made in Ontario by ENVIRONICS Research Group for Option Consommateurs. The Environics Research report provides an insight into the views and attitudes Canadians have toward organic food products with respect to how they are labeled and the use of the term "organic". A series of four focus group were conducted in September of 2003. Two were held in Toronto and two in Ottawa. Organic products are widely available in both of these markets and awareness of organics is expected to be high relative to many other parts of Canada. The results (Impacs 2002; Environics 2003) show that organic product consumers are confused by the current voluntary regime. When given the choice, most participants would prefer to have a consistent, nationally recognized logos to tell them that a product is organic. The issue of reliability is bit confusing to participants since, for the most part, they accept just about any claim of a product being organic at face value. Therefore, a consistent system is needed. Consumers have difficulty differentiating between organic and natural products.
• There are over 25 different logos used on organic product in Canada. The Environics' survey suggests that consumers are confused by the multitude of organizations that certify organic foods and the use of many different logos. In general, it is believed that the federal government ought to develop a universal symbol for organic foods - similar to the three arrows that are now universally recognized as "recyclable". With a regulation, it will be possible to create a Canadian approach to the identification of organic products. This approach will help consumers feel confident in what they are buying.
• There is no clear national organic definition
• In addition, consumers tend not to associate organic products with environmental issues but view them solely as a healthy choice. Therefore, there is confusion on health and safety aspect (the regulation will not resolve this)
• Consumers are not aware of how or where to lodge complaints

2) Consumer is not protected

• With the present system, adherence to the national standard can not be enforce
• CAQ monitoring found a number of products that do not comply with the Quebec regulation. The situation is likely worth outside Quebec where they are no provincial regulations.
• The Canadian system is too permissive, for example an organic producer can choose a certified body and decide to change for another, showing an obvious conflict of interest or fraud.
• The price of organic food varies throughout Canada, likely influenced by inconsistent certification fees.
• Domestic and foreign consumers are not protected from fraud under the present Acts.
• Participants of the Environics' survey assumed that the use of the term "organic" on food products was, in fact, regulated by a department of the federal government. Some thought that either the Canadian Standards Association, the Canadian Food Inspection Agency (CFIA) or Agriculture and Agri-Food Canada (AAFC) played some role here. There was a universal agreement that this was a good example of an area where there was a clear role for government, and that consumers should not be left totally reliant on the honesty of individual retailers and producers. Ideally, this should be a federal government role and there should be consistent national standards.
• Participants of the Environics' survey felt that the limited role of CFIA to respond to complaints brought by consumers was totally inadequate. They pointed out that they, as consumers, were not in any way equipped to make a formal complaint about a product that was suspected of not really being organic. It seems clear that little is visible to the naked eye that would distinguish whether or not a product was organic. Therefore, consumers are completely dependent on trusting that the system is being adequately policed. The consensus was that the government must take a proactive approach to regulating in this area instead of the current reactive approach.
• The Environics' survey suggests that a national standard should be set and that it be compulsory for certifying used in European countries and try to impose it here. When participants were told that Quebec had a much more rigorous regulatory framework on organic labeling, they suggested that maybe the rest of Canada should look into adopting the system in place in Quebec.

3) Operators are having difficulty exporting

• United States of America Access:

  • Canadian organic product must be certified by Certification Bodies who have been accredited by USDA

• European Community Access:

  • The EU has developed mandatory organic certification and accreditation systems to increase consumer confidence in organic products. The EU has detailed regulations on the production, labelling and inspection of organic products and maintains a list of countries from which imports of organic products are permitted. Canada does not appear on this list at this time.
  • Under Article 11:1 of EC regulation (2092/91), there are two conditions that must be met to gain entry to the EU market. The first is to appear on the third country list (EC Reg(94/92)). The second is to have a recognised, competent authority issue a certificate stating that the EU production and inspection rules were respected.
  • Until December 31, 2005, the EU regulation allows imports of products originating from countries not on the third country list if there is sufficient evidence that the imported products were processed according to standards equivalent to those of the EU, and that its inspection and labelling measures are of equivalent effectiveness as those in the EU. After 2005, imports of organic products must originate in countries appearing on the EU third country list. THERE IS NO INDICATION THAT THE EU WILL POSTPONE THIS ULTIMATE DEADLINE.
  • If Canada misses the EU's December 31, 2005 deadline, it will lose access the EU market for organic agricultural products, as of January 1, 2006.

• Japan Access:

  • Certification Bodies must be accredited by the Japanese Ministry of Agriculture, Forestry and Fisheries.

• International Access in general:

  • There is strong competition among trading partners. The present situation generates a high cost in accreditation for Canadian Certification Bodies. Also the lack of harmonization is creating a non-tariff barrier for exporters.
  • Both, the EU and the US are providing subsidies to the organic sector. There seems to be no choice but to regulate since the Canadian organic community could be lost otherwise. In the UK, for example, some organic producers are moving towards the conventional sector because it is impossible to compete with foreign products.
  • Export markets have not reached their full potential. The plethora of certification requirements and regulations are considered a major obstacle for a continuous and rapid development of the organic sector.

4) Traders need a national symbol

• In the present situation, different Accreditation Agencies are used
• In the present situation, different Certification bodies are used
• In the present situation, different symbols are used
• This situation is creating a lack of consistency in the Canadian Organic regime. The views of the stakeholders regarding a national label is split into two positions. Some stakeholders support the implementation of a national label to market organic products. This group feels that this regulation will boost the market. Using a national seal will help obtain advantage on the national market. At the present time, companies like Nature's Path have a marketing advantage because they are using the USDA label in Canada. This label is seen as a waste of Canadian certification sovereignty. The second group believes that the regulatory approach should focus solely on the organic designation and not the national logo. In the US, like in Quebec, the respect of the organic designation is compulsory but the use of the logo is optional.
• Lack of credibility of the present organic labeling in Canada

5) No regulation on imports

• The lack of control over organic product is creating environment whereby there is not a level playing field. The competition between countries is unfair since some have clear requirements (The EU) while other countries do not.
• There is no protection for the internal market because of a lack of inspection of imported organic products.
• Foreign countries do not know who is responsible for organic products in Canada
• There is a concern that countries, which do not have regulations regarding organic foods, may dump their products.
• As far as imported organic foods are concerned, the solution seemed clear to consumers as reported by the Environics'survey. Canada ought to have reciprocal agreements with other countries whereby we decide to recognize each other's standards. For example, if the regulatory body in Canada deems the regulatory standards in France to be the same or higher than in Canada, we should recognize French organic products as meeting the Canadian standard.

6) No regulation on domestic product

• There is no monitoring program in place
• The voluntary standard cannot enforce a monitoring program
• There is no consistency among Accreditation Agencies, Certification Bodies and logos.
• Potential unfair advantages between interprovincial trade
• Foreign and Canadian countries do not compete within the same requirements
• There is no national authority in place. This situation is creating problems for traders, foreign governments and consumers.