Organic industry taking steps to crack down on fraudulent imports

Published: July 26, 2017
Issue:
Industry leaders say increasing domestic organic grain production is key to minimizing fraudulent imports

In the wake of growing concerns over fraudulent imports of organic grains, organic industry representatives say that regulators and all segments of the trade need to “step up their game” to address the problem. The Organic Trade Association has created the Global Organic Supply Chain Integrity Task Force, organic farming leaders are urging Congress to address the problem, and two organic certifiers are tightening their requirements to help prevent fraud.

Exposed “weak spot”

Organic industry leaders have been concerned about the possibility of fraudulent organic grain imports for the past few years, but the problem was confirmed by a Washington Post article in May that detailed fraudulent shipments of organic corn and soybeans from Turkey and Ukraine.

Then in June, the U.S. Department of Agriculture revoked the organic certification of Beyaz Agro, a Turkish exporter of organic grains and oilseeds, for violating the organic rules. Last November, Beyaz Agro sold 16,250 metric tons of soybeans as organic when they had been fumigated with aluminum phosphide, a prohibited substance under the USDA organic regulations. At the end of July, the USDA suspended the organic certification of another Turkish organic grain exporter Aram Foods Tarim Gida Insaat Petrol Nakliyat Sanayi Ve Tic. Ltd. Sti., which had exported 11 million pounds of organic corn to the U.S. last March.

“Extremely high number of imports”

Cheap organic imports drive down organic grain prices, which hurt U.S. organic farmers’ income and reduce incentives for farmers to transition to organic. Imported grains are used as feed to meet the growing demand for organic poultry and meat.

According to John Bobbe, executive director of the Organic Farmers’ Agency for Relationship Marketing, 40 to 50 percent of organic corn and 70 to 90 percent of organic soybeans used in the U.S. are now imported. “That’s an extremely high number,” he says.

U.S. organic corn and soybean farmers have lost $250 million from 2015 to this year due to lower grain prices caused by cheaper imports, says Bobbe. Clarkson Grain, an organic grain supplier, estimates the losses to be higher at $410 million.

Organic consumers also lose when the integrity of organic food is in doubt.

“What does this do to consumer confidence?” asks Bobbe.

The damaged party is ultimately the consumer, and the entire good faith industry that relies on its integrity to maintain its agreement with consumers,” says Lynn Clarkson, CEO of Clarkson Grain.

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“Action needs to be taken”

Confirmation of fraudulent shipments has given organic leaders greater urgency to address the problem.

“The Washington Post did the industry a favor in exposing a weak spot where work needs to be done,” says Greg Lickteig, director at Scoular, an organic grain supplier. “It is an opportunity for all of us to step up our game and make this industry what we want it to be.”

“The results of the investigation (of Beyaz Agro) and the Washington Post article made it perfectly crystal clear that action needs to be taken,” says Gwendolyn Wyard, vice president of regulatory and technical affairs at the Organic Trade Association (OTA).

OTA has established a Global Organic Supply Chain Integrity Task Force, which will develop a best practices guide to manage and verify global supply chain integrity and to mitigate the risk of organic fraud. The guide will have three sections that include risk assessment, mitigation measures, and a fraud alert and reporting system.

According to Wyard, the task force, which has 50 members, is the largest ever assembled by OTA. It includes representatives from all ends of the organic supply chain from farmers and food manufacturers to traders and retailers and more.

The task force’s focus will encompass more than organic corn and soybeans to include other organic commodities such as spices, fruits, vegetables, eggs, and rice. “Fraud could happen anytime (and with any commodity),” Wyard says.

“We all need to consider who we are doing business with”

Organic certifiers are also taking action. CCOF (California Certified Organic Farmers) recently announced new requirements for all imported grain shipments received directly by CCOF-certified operations. Certified operators receiving imported grain directly from a ship must demonstrate full traceability back to growers, and demonstrate lack of prohibited materials used in shipping to establish that the products meet organic standards.

“We are encouraging all certifiers to adopt similar processes as CCOF,” Wyard says.

Oregon Tilth, another organic certifier, also plans to establish a similar policy for certain at-risk commodities.

Lickteig says grain buyers also need to take action. We all need to consider who we are doing business with and do our own vetting of the supply chain.”

Scoular doesn’t just rely on certification documents when buying organic grain from international buyers.

“When we buy product from overseas, we want to know where that supply is coming from, and to vet that supplier. Vetting the supply chain is a responsibility of companies like ours,” he says.

Wyard and Clarkson both say that organic grain importers and brokers, who are now exempt from organic certification, should be subject to certification.

“When you think of all the transactions (between buyers and sellers), and when there are entities in the middle that aren’t certified, that’s a major gap,” Wyard says.

Increasing domestic production is main solution

Bobbe and Clarkson Grain have taken their concerns about fraud to Capitol Hill. Bobbe recently met with congressional representatives Chellie Pingree (D-ME), who is a supporter of organic foods, and Mike Conaway (R-TX), chair of the House Agriculture Committee. Clarkson Grain president Ken Dallmier testified at a Senate hearing on agriculture and recommended a five-point program to reduce fraud. The program includes measures to increase traceability and transparency, designating certain international ports for organic exports and putting USDA inspectors at those ports, and implementing an electronic system, not paper documents, for tracking organic certificates to ensure traceability back to the farm.

But the key solution proposed by Clarkson, Bobbe, and others is to increase domestic production of organic grains and make it easier for farmers to transition to organic practices.

“If we don’t produce more domestic supply, we are putting more pressure on an international system that is wide open to fraud,” Clarkson says.

“We can solve this problem by producing grain in the U.S.,” Lickteig says. “We need to promote and encourage domestic production, and the government needs to ‘prime the pump’ to assist in (helping farmers) transition. That is a goal we can achieve.”

© Copyright The Organic & Non-GMO Report, 2017