OANZ Submission for the Organic Products Bill
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Read the Organic Products Bill here.
OANZ Submission
Organics Aotearoa New Zealand Incorporated (OANZ) is the national umbrella body for the organic sector in New Zealand. Membership of OANZ encompasses a wide range of organisations and companies and a full list of members is set out in the schedule to this submission.
The proposal to regulate the organic sector is welcomed by OANZ. We support the overall intent of the Bill including the creation of a National Standard and a National Logo as a unique identifier of New Zealand organic products. We also support the role of MPI as the custodian of a National Standard and the ultimate manager of the certification system.
However, the regulatory framework set out in the Bill has some significant differences from what the sector had expected following consultation. There are also significant omissions. OANZ cannot support the Bill in its current form. We will detail our concerns and a preferred approach in this submission.
This Bill represents a major opportunity for New Zealand to build on the strong base that the private organic certification system has already developed in a high value and rapidly expanding food and beverage market both domestically and internationally. We consider that the potential benefit for New Zealand is such that it is important to get this legislation right and accordingly we would like to work with the Select Committee to formulate legislation that delivers a regulatory regime that is credible and robust for our sector, consumers and our trading partners. We wish to be heard on this submission.
Context and overarching comments on the Bill
It is, as the Committee will understand, a challenging time for a sector to engage in fundamental redesign of its governance, operating systems and standards. The organic value chain, like other sectors, is focussed on day-to-day navigation of Covid-19 and trying to anticipate and adapt to meet the longer-term changes to production and market. Covid has also affected the process: regulations that will be central to the operation of the new legislative regime were to be consulted on at the same time as the Bill, but have been held back. And, although the discussion document has been released to assist in formulating these submissions there is still significant uncertainty for the sector about the future shape of the regulation that will redefine our sector well into the future. The organic sector supported the proposal for this legislation, not because the existing voluntary system was not working, but to protect its integrity through a mandatory legislative regime which would prevent the situation where any producer could call their product organic without having to meet the standards of a recognized certifying body. That together with the potential to facilitate export trade and reduce compliance costs were the drivers for change.
OANZ, with the wider organic sector, was consulted by MPI on the shape and form of proposed legislation against a background of a private certification system that was delivering effective outcomes but that could be enhanced as indicated above.
The sector has been concerned at the material change in direction of the legislation from what was mooted in consultation and favoured by the sector. As The Treasury Review of the Bill “Treasury Review Organic Production and Processes” at P.5 correctly notes:
“In particular, the preferred implementation option is different to current practice and could be a surprise to stakeholders.”
We must get this right. Our sector has built considerable value for the New Zealand food and fibre economy, and is capable of delivering much more with robust legislation that recognises and supports the value of organic production systems.
Summary of key submissions:
Certain key aspects of the administrative structure proposed by the Bill do not reflect the sector consultation undertaken by MPI nor is it what the sector wanted
The Title of the Bill should be changed to the Organic Production and Products Bill to properly reflect what is being regulated and the purposes of the Bill should be expanded.
A definition of “organic” and statement of organic principles is essential.
The language used to describe organic producers and their status in the Bill is a departure from the internationally recognised terms.
An Organic Governance Group to set and monitor national organic standards is needed to build an inclusive, high-trust model.
The cost recovery provisions in the Bill will add an additional layer of cost on producers.
The possibility of levies under the Commodities Levies Act is a further potential cost.
The Bill does little to foster the domestic organic market and the increased cost structure is likely to drive smaller growers out of the market.
1. The Administrative Structure
OANZ supports the concept of regulation of the organic sector primarily to ensure the integrity of organic product and to further facilitate international trade.
Currently we have a system of organic certification by private certifiers to standards that are broadly similar. The major certifiers AsureQuality and BioGro have developed and own their standards for the domestic market. Demeter has a standard based on biodynamic principles and Organic Farm New Zealand operate a system for smaller producers using the BioGro standard. Assurance is provided in the domestic market by external audit of both BioGro and AsureQuality to relevant ISO standards and by OFNZ’s use of the BioGro standard.
For the export market the major certifiers are accredited to audit to a variety of standards or technical rules including in the EU, USA, Japan, Canada and others. They are subject to annual or bi-annual audit including by MPI under the Official Organic Assurance Program (OOAP).
The current system works well but is expensive because of the ongoing audit requirements for the certifiers to meet the various markets we export to. Domestically the system is undermined because there is no restriction on the use of the word organic. Producers can claim organic status without any external supervision of their production methods. The Fair Trading Act is ineffective in dealing with fraudulent or misleading claims of “organic” status because there is no legal definition of the term “organic”.
The Bill is necessary therefore, not to fix a broken or ineffective voluntary system but instead, through a mandated legislative system:
provide integrity in the domestic market;
facilitate exports by having a National Standard that is recognized internationally as equivalent to the standards of our trading partners.
In one key respect the Bill overshoots the scope of action required to address these issues. The outcome of the consultation, as understood by the sector, was that the legislation would build on the existing system of private certifiers by adopting what has become known as the Canadian model, which most of our trading partners (Japan, Canada, and the EU) have adopted.
Under this system, the regulator (MPI) sets the standard and outsources verification of that product certification standard, the certifier certifies to that standard and issues a certificate. The role of the regulator is focused on enforcement and oversight of the private certifiers through a regular audit process. In the New Zealand context therefore, the existing certifiers would continue to verify producers and products against the new National Standard and issue a certificate to confirm organic status and to allow use of the National Logo or Mark.
MPI would provide the regulatory assurance behind the system by auditing the private certifiers and overseeing the enforcement of the system. That would allow MPI (and New Zealand Trade and Enterprise) to negotiate equivalency for our National Standard with our trading partners to facilitate trade and avoid the multiplicity of audits from overseas regulators that the certifiers currently have to undergo to maintain access for exporters.
This preferred system would also maintain the currently well understood language used by the international organic community including, in particular, consumers, where producers are “licensed” to produce “certified organic” produce and products.
What has been proposed in this Bill is a system that would be an outlier in the organics regulatory regimes around the world and unfamiliar to our trading partners both in the regulatory structure it proposes and the language it uses.
The central feature of the Bill is an assurance system that puts one party “the Relevant Chief Executive” (but for the purposes of this submission we will refer to “MPI”) not only at the centre of the system but exercising all the functions of the system as well. MPI would:
Set the Standard;
Interpret the standard;
Approve the operators;
Confirm verification
Provide official assurance e.g. to export markets;
Enforce compliance.
In any assurance system there must be points of verification where the integrity of both the product and the system can be checked to ensure it is robust at all levels. Currently that is achieved by the rigorous external audit process that the existing certifiers must go through to ensure the integrity of their processes. In the case of export production that audit process includes an MPI audit under the Official Organic Assurance Program (OOAP) and audits by overseas jurisdictions.
The key change was made to the Bill late in the policy development process. It now requires MPI to approve organic businesses, and excludes recognised third party agencies from this function. This was contrary to Cabinet's earlier decision. OANZ is fundamentally opposed to this change.
The Cabinet paper approving the Bill for introduction set out various reasons for this change,that is it would:
better secure consumer confidence and protect New Zealand's trading reputation;
be suitable for New Zealand's small domestic market and necessary to ensure impartial and consistent decision making.
The Cabinet paper admits that this approach departs from that used by organic regimes internationally and the way organic businesses in New Zealand are currently certified. OANZ's view is that the stated reasons for the change do not add up:
the Bill as a whole will improve consumer confidence and protect New Zealand's trading reputation through, for example, the mandatory regime, the national standard, and MPI approval of recognised agencies. There is no analysis supporting the proposition that introducing the further requirement of MPI approval for each business would provide any noticeable additional benefit;
departing from international practice, whereby recognised agencies approve individual businesses, risks confusion rather than confidence for our trading partners;
the small size of our domestic market is a reason not to add an additional process layer, over and above the recognised agencies, who would be doing the same work in any event through their function to make recommendations to MPI;
finally, the rationale that it would ensure impartial and consistent decision making suggests that decision making by existing recognised agencies is not consistent or impartial. In all of OANZ's interaction with MPI about the Bill, MPI never raised this as a concern. OANZ is not aware of any concerns of this nature.
Therefore, Sub-part 2 of Part 2 of the Bill must be amended.
OANZ acknowledges that government documents recognise that the process for making the change was flawed. As the Panel which reviewed MPI's RIS stated:
"The preferred implementation option is different to current practice and could be a surprise to stakeholders. Not consulting on this implementation option also risks issues with making the regime operational. Additionally, the decision not to create a regime that provides certification will be unfamiliar and unexpected to those impacted as it was not part of formal consultation".
OANZ appreciates the invitation to address the issue through the Select Committee process.
OANZ Proposes:
That we build on the decades of knowledge and expertise built up within the existing system by the current certifiers by:
Developing a National Standard and National Mark that would be held by MPI;
Designating MPI as the competent authority to oversee, and provide assurance to support the certification system.
Outsourcing the verification and certification of producers against the Standard to certifiers approved by MPI (the current certifiers would be recognised in regulations as being approved and a process developed for how new certifiers might be added);
Providing for periodic audit of certifiers by MPI.
Authorising MPI to negotiate equivalence arrangements with trading partners for mutual recognition of respective organic standards.
2. Title and Purpose of the Bill:
OANZ considers that the title of the Bill does not accurately reflect the purpose of the reform. It suggests that the law is narrowly focussed on products. However that misunderstands the nature of organic products. All organic products (including aquaculture products) are derived from crops, animals or shellfish that have been grown and manufactured according to an organic production standard.
The Bill is intended to regulate that method of production as well as claims made about products produced by that method of production. A title that is more relevant to the sector and the standards that are to be developed under it would be: “The Organic Production and Products Bill”
Similarly the purposes of the Bill (clause 3) should reflect the production aspect by the addition of a new purpose to:
“(a) regulate organic production methods and products”
“(c) facilitate international and domestic trade in organic products”.
3. Definition of Organic is essential & 4. Language Used
It is vital to define the term organic to ensure that the intent of the legislation is clearly signalled and to provide a benchmark for the development and interpretation of the National Standard. In the absence of a definition, the new regime would start free-wheeling and generate considerable uncertainty in what the standards developed under the Act could look like. That uncertainty is unnecessary.
The definition developed by the International Federation of Organic Movements (IFOAM) has been widely accepted around the world and we submit it would be appropriate: “Organic Agriculture is a production system that sustains the health of soils, ecosystems and people. It relies on ecological processes, biodiversity and cycles adapted
to local conditions, rather than the use of inputs with adverse effects. Organic Agriculture combines tradition, innovation and science to benefit the shared environment and promote fair relationships and a good quality of life for all involved."[1] Working from the IFOAM definition, OANZ proposes the following definition:
"organic production means a system of production that:
(a) sustains the health of soils, ecosystems and people; and
(b) relies on ecological processes, biodiversity and cycles adapted to local conditions, and not the use of inputs with adverse effects."
To support and give effect to this definition, OANZ submits that the Bill also requires that: Organic standards must give effect to this definition; and
All persons exercising functions and powers under the Act must recognise and promote organic production
OANZ further submits that the Bill should contain a set of principles to support organic production. The principles set out below have been developed from the statement of applicable principles adopted by IFOAM and widely used, including by The Soil Association of UK: “The Principle of Health - Organic production should sustain and enhance the health of soil, plant, animal and human as one and indivisible.
The Principle of Ecology - Organic production should be based on living ecological systems and cycles, work with them, emulate them and help sustain them.
The Principle of Fairness - Organic production should build on relationships that ensure fairness with regard to the common environment and life opportunities.
The Principle of Care - Organic production should be managed in a precautionary and responsible manner to protect the health and well-being of current and future generations and the environment.[2]
OANZ submits that the Bill require that all persons exercising functions and powers under the Act shall have particular regard to these principles.
5. An Organic Governance Group must set organic standards
Under the Bill, the relevant chief executive would be primarily responsible for the development and promulgation of the standard (clause 106), subject only to the requirement in clause 106(d) that there is consultation with persons and organisations “that the Minister considers appropriate”.
This is not acceptable to the sector because:
The standards will not be set by those with the greatest expertise
It makes organic standards vulnerable to the political agendas of the government of the day.
Further, this process is, again, a significant departure from international practice. Countries such as Canada and the USA have established organic governance groups within the administrative structure to exercise a level of control over the content of the standard and the ongoing monitoring and interpretation of it.
Amendment sought:
OANZ submits that an Organic Governance Group be established by the Bill. Its role would be to develop the organic standard(s) provide ongoing interpretation and monitoring. Typically in other jurisdictions the members of such a group are drawn from a cross- section of the sector including crop and livestock producers, processors, importers and exporters, traders, certification bodies and representatives from key groups such as consumers and Maori.
Members of the Group would be appointed by the Minister for Primary Industries on nomination by the sector through OANZ, or, in the case of the consumer and Maori representatives by The Soil and Health Association and an appropriate Maori representative body respectively.
6. Cost
Clause 51 provides for all the direct and indirect costs of administering the Bill to be recovered by way of fees, charges or levies.
The Bill and the outline of the Regulations make it clear that private certifiers will continue to do the on-the-ground inspection of producers against the National Standard before recommending them to MPI for “approval” as “operators”. Producers will continue to pay the costs of their certifiers (“agents”) Assure Quality, BioGro, OFNZ and Demeter.
Requiring MPI to approve producers will therefore add another layer of significant cost for producers. As submitted above, this requirement should be removed. That would then remove this additional cost.
Currently for the export certifiers, MPI and JAS-ANZ accreditation costs are 5 times higher than in the Japanese, Canadian, and EU systems because those countries each mutually recognize their respective National Standards as being acceptable in their jurisdictions.
Not only do the current additional costs make New Zealand’s verification system far more expensive than our trading partners for exporters but in the domestic market the extra cost is likely to drive medium sized and smaller producers out of the market as well as put up the price of organic products for consumers. We welcome and encourage MPI and NZTE to give high priority to gaining equivalence with trading partners. The costs then faced by the private certifiers for audits by multiple overseas regimes should reduce as MPI assumes that function.
7. Commodity Levies Act (Clause 115)
OANZ does not necessarily oppose the possibility that the sector may seek to raise funds for research, development and marketing for the benefit of the whole organic sector. However most organic primary producers already pay levies to sector bodies such as Beef and Lamb NZ, Hort NZ and Dairy NZ.
It has been a longstanding concern for organic producers that no part of the levies they currently pay is available to support an organic sector body such as OANZ where it could be used for specifically organic research and promotion. Previously OANZ has unsuccessfully sought to persuade Government that a portion of the levies paid by organic producers should be distributed to the sector in this way and this is still OANZ’s preferred position.
If organic producers were to seek a levy specifically for the organic sector (which would require amendment of the Commodity Levies Act) OANZ believes that organic producers should have some relief from the specific commodity levies they currently pay.
8. The Domestic Market
The organic sector in New Zealand encompasses producers at all levels from backyard gardeners selling surplus produce at local markets to those supplying dairy, meat or horticultural products to exporters such as Fonterra and Zespri and the various meat companies.
OANZ strongly supports the idea that there needs to be a place in the sector for the full range of growers. At the small-scale end, OANZ recognizes that there are differing views regarding the need for an exemption, based on turnover, for formal certification to the national standard, providing the grower is able to satisfy MPI, if required, that they are producing to the requirements of the standard. The level of that exemption is a matter that still needs to be settled within the sector.
OANZ also supports the current system of certification (subject to periodic external audit) for smaller growers known as a participatory guarantee system (PGS) such as the program run by Organic Farm New Zealand (OFNZ). Neither the Bill nor the outline of the regulations makes provision for such a system. Further, the additional layer of cost for MPI approval will be prohibitive for many smaller and even medium sized producers, focused on the domestic market. Typically organic producers start out as small scale operations. The Bill, as currently structured will actually represent a barrier to organic production rather than a stimulus. What we actually need is to reduce cost for small growers and encourage participation
Schedule
Current OANZ members:
AgriSea New Zealand
Kokako
Biodynamics NZ
Lawson's Organic Farms Ltd.
Bostock NZ
Natural Sugar NZ Ltd.
Ceres Organics
Nature Baby Ltd.
Chantal Organics
Open Country Dairy Ltd.
Commonsense Organics
Organic Exporters Assoc of NZ
Earthstar Holistic Business Ltd.
Organic Farm NZ
Foodstuffs NZ
Frest Direct/ Pure Fresh
Helix Organics
Horticulture NZ
IncaFe/Peru Cafe
Karma Cola
Kawerau Dairy Co
Organic Traders Association of NZ
Organic Winegrowers NZ
Soil & Health Association
Woolworths NZ Group Ltd.
Zealong Teas Estate Ltd.
Zespri International Ltd.
Zest Biotech
Additional Organisations Consulted with for the Submission
OANZ Submission Technical Working Committee: AssureQuality, BioGro, Biodynamics NZ, Soil & Health
Others: Dairy NZ, Wakatu Incorporation, Organic Dairy Hub, Lewis Rd Dairy, ODPG, Buy Pure NZ
Signed on Behalf of Organics Aotearoa New Zealand
Chris Morrison
Chairman