Part 4 - Industry regulation, integrity and standards

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From the late 1980s until 2009, the Australian Government supported the application of the National Standard for both exports and the domestic market and played an active role in the regulation of organic produce.

The original National Standard (1992) had as its first objective “to protect consumers against deception and fraud in the market place and unsubstantiated product claims”.

There are now two main standards for organics currently operating in Australia—the National Standard (the export standard) and AS 6000 (the domestic standard)— but there are also permutations and nuances around these standards, which further complicate the regulatory environment.

Only a small proportion of certified operators are certified to the AS 6000—most certifiers adopt the National Standard, even for domestic certification purposes.

Strong concerns were expressed during consultations that, without these outcomes, there is an erosion of trust in organic products and pressure on prices from non‑certified products.

Consumers of organic produce are particularly vulnerable, in that they must rely on product labelling for information pertaining to the nature and composition of the product. Suppliers can easily take advantage of the financial benefits associated with such organic claims without due substantiation.

There is a lack of understanding amongst Australian organic consumers about the organic industry and organic certification processes.

There is clearly an opportunity for the industry to form an alliance with consumer peak bodies to pursue better labelling of organic products and improved market integrity.

Organic standards

It is not well understood that the industry’s regulatory arrangements act to reinforce the status quo. Worse, the regulatory arrangements are confused and confusing, are tightly controlled by a small group of industry regulators, and do not promote domestic market integrity for organic products—in fact, current regulatory arrangements may even contribute to poor market integrity.

There are two main standards for organics currently operating in Australia:

the National Standard for Organic and Biodynamic Produce, which is the mandatory export standard under the Export Control Act 1982

the Australian Standard for Organic and Biodynamic Products (AS 6000), which is a voluntary standard in the domestic market

but there are also permutations and nuances around these standards, which further complicate the regulatory environment.

The National Standard did act as a de facto standard until 2009. Due to an increase in unsubstantiated organic claims and a lack of clear definition of the term ‘organic’, the AS 6000-2009 was created and implemented as the domestic standard for organic produce, which was also extended to include organic produce imported into Australia. The AS 6000-2009 was modelled on the National Standard and, as a result, the two standards are similar.^[1]

Until 2009, the Australian Government supported the application of the national standard for both exports and the domestic market. In fact, the original National Standard (1992) had as its first objective “to protect consumers against deception and fraud in the market place and unsubstantiated product claims”.

The impending review of arrangements under the Export Control Act provides an opportunity for the industry to partner with the Commonwealth to develop better and simpler regulations that act in the interests of organic operators—regulations that could underpin domestic market integrity, reduce red tape, and support a more prosperous and future‑oriented organic industry.

Regulation of organic products

The Australian organic sector originally developed without state involvement over several decades. Governments largely ignored the organic sector as a fringe activity, although organic producers could take advantage of some mainstream government support, through research, development and extension programs.

Export regulations

Australian Government recognition of the industry ﬁrst came with a 1989 discussion paper within the Australian Quarantine Inspection Service (AQIS) calling for a national approach to certiﬁcation. This was considered necessary for Australia to gain access to export markets that existing private organic certiﬁcation alone would not easily permit. The Australian Government became more fully involved in 1990, when it helped establish the Organic Produce Advisory Committee, a body formed to develop a national export standard under the Export Control Act.

A National Standard for Organic and Bio-dynamic Produce was compiled by a joint government and industry committee (Organic Industry Export Consultative Committee) under the auspices of AQIS, and was first implemented in 1992. It provided guidance for private certiﬁers who enforced private standards that needed to exceed the National Standard in order that they could be recognised certiﬁers by AQIS—in essence, the state regulated certiﬁers who, in turn, certify farm-level producers and supply chain operators.

The OIECC was disbanded in 2009, following a decision of the Australian Government to reduce its active involvement in industry regulation. In its place, the Organic Industry Standards and Certification Council (OISCC) formed to take responsibility for the National Standard and the National Standard Sub-Committee (which was previously administered by the Department). OISCC members include the six certification bodies, the OFA, the Australia National Retailers Association (represented by Woolworths) and the National Farmers Federation. The Department of Agriculture and Water Resources acts as observer at OISCC meetings.

There are currently six certification bodies accredited for organic certification under the National Standard, administered by the Department of Agriculture and Water Resources (previously AQIS). The Department conducts annual audits to verify that all organic certification issued by these bodies is in accordance with the requirements of the National Standard. Each of the six certifiers must also meet strict criteria with regards to certification procedures, and provide transparent information regarding fee structures and service provision, in accordance with the International Standard (ISO 17065) and various administrative requirements under the Export Control Act.

The certifiers must also meet the requirements of the international organic regulations of the European Union, Taiwan and Japan, if they want to accredit product for export to these regions, under equivalency arrangements. Several of these Australian organic certification bodies also hold direct accreditation with overseas governments, such as the United States Department of Agriculture National Organic Program, to certify products for export into the individual country. To be directly accredited, these Australian organic certifiers must meet that country’s legislative requirements and be audited by that Government.

The provision of organic certification in Australia gives market access for Australian producers, processors, wholesalers and retailers to export into those countries who possess organic regulation, and strong labelling laws.

Domestic regulations

There is no mandatory requirement for certification of organic product sold domestically in Australia. In the absence of specific domestic regulation for organic production, the export regulation of organics became the de facto domestic regulation of the sector, through private certification standards aligned to the National Standard. Many organic businesses choose to be certified by an organic certification body to underpin truth in labelling requirements and promote consumer confidence.

Domestic organic standards used in Australia are generally owned and managed by private organisations. Domestically marketed organic products are commonly certified by one of Australia’s six private certifiers who base their certification standards on the national export standard.

The voluntary Australian Standard for Organic and Biodynamic Products (AS 6000) was released on 9 October 2009 and updated in 2015. Standards Australia developed AS 6000 through a representative committee comprising organic stakeholders, including certifiers, retailers, manufacturers, consumer groups and government agencies. Only a small proportion of certified operators are certified to the AS 6000—most certifiers adopt the National Standard, even for domestic certification purposes.

Import regulation

There is an extensive regulatory system in place which provides guarantees in food chain integrity. For example, the current arrangements for importing food products labelled as organic or bio-dynamic into Australia allow trade to occur freely, provided that:

all quarantine requirements are met (Biosecurity Act 2015); and

all imported food safety requirements are met (Imported Food Control Act 1992); and

the goods are truthfully labelled (Australian Competition and Consumer Act 2010).

More detail is available in Australian Legal Framework for the Import and Export of Organic Products.^[2]

Imported organic products may be certified by overseas certifiers (who may apply standards consistent with those applying in the case of Australia’s certified exports), may not be certified at all (as long as they are still truthfully labelled), or may even be certified by an Australian certifier against their private domestic standards (which may align with the National Standard or AS 6000). However, these standards are not mandatory or necessarily consistent—and they are definitely confusing for consumers.

Review of export regulations

The Export Control (Organic Produce Certification) Orders are subject to a sunset clause, such that it will expire after 30 June 2020. The Government is about to commence a review of the arrangements to determine what action it should take (if any). The review is expected to report by no later than 30 June 2018.

The review will take the form of a regulation impact assessment, as set out in the Australian Government Guide to Regulation, which prescribes methods for measuring the benefits and costs of the regulation and sets questions which need to be answered to justify a regulation.

What is the policy problem you are trying to solve?

Why is government action needed?

What policy options are you considering?

What is the likely net benefit of each option?

Who will you consult and how will you consult them?

What is the best option from those you have considered?

How will you implement and evaluate your chosen option?

They key period for influencing the review will likely be over before April 2018. The Government expects that the organic industry will lodge a submission and participate in consultation sessions. In addition, it would be prudent for the industry to start to plan for two possible scenarios:

the organic export controls are removed

the review provides an opportunity to reform the regulations

Any planning for restructuring or reformulation of organic industry arrangements should be undertaken with this changing context in mind.

Standards and integrity

Many stakeholders identified issues around the integrity of Australian organic standards as being critically important to the future of the industry and wanted these matters to be given consideration in the process of consulting on a peak body.

Central to the success of Australia’s organic industry, is the need to maintain trust in a credible system of standards—including standards development, enforcement, compliance and education—and the ways to ensure that there is a system with high levels of integrity—high compliance, minimal fraud, strong consumer recognition. Concerns were expressed that, without these outcomes, there is an erosion of trust in organic products and pressure on prices from non‑certified products.

Regulations pertaining to the production, import, export and sale of products claiming “organic or bio-dynamic” status are present in all three levels of Australia’s governments, as well as in case law.

The treatment of organic products under Australia’s federal legislation is different depending on whether the organic products are destined for export or the domestic market. While the export of organic products is captured directly under Australia’s export legislation, organic goods produced for the domestic market and imported organic goods are captured indirectly through overarching legislation and regulation for foodstuffs.

Numerous attempts to have organic products recognised under food labelling laws or other forms of domestic regulation have been denied. However, the industry has not had a common view on the appropriate regulatory approach to improving domestic market integrity, and governments who have been reluctant to intervene in markets have easily dismissed such approaches.

Poor domestic market integrity is a direct result of:

confused standards for organic certification, which do little to promote integrity and may even undermine it

poor advocacy skills and disunity in respect of industry leadership

Protecting consumers

Consumers of organic produce are particularly vulnerable, in that they must rely on product labelling for information pertaining to the nature and composition of the product.

Such claims cannot be easily verified by the consumer independently.

In addition, organic produce is commonly sold at a premium price, due to the perceived health and environmental benefits.

These two factors place Australian organic consumers in a vulnerable position, as suppliers can easily take advantage of the financial benefits associated with such organic claims without due substantiation. This is particularly true with the labelling of organic products intended for the Australian domestic market, as such products can claim to be ‘organic’ without meeting the relevant standards, namely the AS 6000.^[3]

A survey in 2014 of how consumers determine whether a product is organic was published in that year’s Australian Organic Market Report. Of 1001 Australian consumers that were surveyed, 64 per cent believed that an item was organic if the term ‘organic’ appeared on the produce label, whereas 34 per cent of consumers surveyed believed the item was organic if an organic certification symbol appeared on the produce label. The variation in results demonstrates that there is a lack of understanding among Australian organic consumers about the organic industry and organic certification processes.^[4]

Despite the stringent food labelling requirements enforced by Food Standards Australia and New Zealand, the inconsistent organic labelling requirements undermine the rationale for the strict code in labelling requirements—FSANZ’s goals of ensuring consumer confidence, protection, informed decision making and the facilitation of an efficiently regulated food market.

The ACCC stipulates that consumers purchasing organic products should be able to feel confident that the ingredients are in fact organic. While truth in advertising is consistently on the ACCC’s Compliance and Enforcement Policy priority list, given the vulnerability of consumers of premium and credence produce (including but not limited to organic produce), it is questionable whether the current organic co‑regulatory framework within Australia adequately protects consumers.^[5]

There is clearly an opportunity for the industry to form an alliance with consumer peak bodies to pursue better labelling of organic products and improved market integrity.

Taking a strategic approach to regulation and market integrity

The degree to which a peak industry body would get involved in issues of standards and their integrity remains an open debate. Many proposals were floated during the consultations which deserve serious consideration, including:

a peak body should continue lobbying for domestic regulations and communicate the ways in which integrity is maintained

the peak body should become an arbiter on disputes about standards and their application, for example by requesting certifiers show cause if there are consistent breaches of standards by operators

the Organic Industry Standards and Certification Council should be accountable to the peak body

a service charter should be developed that specifies expected levels of service between certifiers and certified operators

professional development standards and training for inspectors should be coordinated nationally and/or a national system of accrediting inspectors and auditors should be established

there should be an industry program to educate consumers of organic products about steps they can take to promote market integrity

At a minimum, it would be prudent for the industry to plan for a future where exports are not regulated under the Export Control Act. The current review of the arrangements must demonstrate that there is a clear net national benefit in the regulations; otherwise, the review may recommend that the arrangements be allowed to lapse.

But the industry should also engage fully with the review and seek to negotiate with the Australian Government to improve the overall regulatory arrangements for organic products.

Labelling and the National Organic Mark

A logo is a strategic business tool that may allow a company/brand/industry to be identified quickly by consumers and, through that identification, remind them of important consumer information—for example, about product safety, quality, status, region of origin, or nutrition. Instantaneous identification of a logo by a consumer and its link to the underlying information is critical; otherwise, a logo does not meet its full potential.

Each certifier currently has their own company logo that may be applied to products certified by them. They may also charge a licencing fee for this use.

Until 2005, the Department of Agriculture had a regulatory Mark that was available for industry use. Due to legal problems over its regulatory status, the Mark was discontinued and the OISCC led the development of a replacement. The National Organic Mark is registered as a certified trade mark and, as such, the ACCC has regulatory powers under the Australian Competition and Consumer Act.

The National Organic Mark was a condition imposed by the South Korean government for gaining improved market access and, since then, has developed further to be used in other equivalency negotiations, including with the USA and China.

The inability to conclude an equivalency agreement with the USA, first lodged in 2002 by the Department, is estimated to have cost Australian organic producers over $2 million in additional certification fees and $1 billion in lost trade opportunities.^[6]

The implementation of equivalency with China has the potential to create over $2 billion in additional exports by 2025, which would effectively double the current organic production in Australia.^[7]

The inability to conclude an equivalency agreement with the Korean Government, lodged in 2008, has been estimated to have cost Australian organic producers approximately $1 million in additional certification costs and at least $0.5 million in lost sales.^[8]

Our consultations revealed a wide range of views about logos and the organic industry.

Logos typically work with packaged products, but a significant proportion of organic product is not packaged. For producers of these unpackaged products, the logo issues are less relevant.

Some operators identified strongly with Australian Organic’s bud logo; however, most operators, including some clients of Australian organic, were ambivalent about it. Nevertheless, the bud logo does seem to be the most recognised logo for the industry.

There was a low level of recognition of the national marque; but, in fairness, it is only about a year old and only used for some exports.

Certifiers indicated that, even if there was an industry wide logo, they would continue to use their own company branding and logo, but may also choose to adopt the industry logo.

If the demerger of Australian Organic occurs and AOL retains ownership of the bud logo (rather than ACO) and AOL emerges as the preferred legal structure for the peak body, then it seems possible that the bud logo could emerge as an industry logo—at least for the domestic market.

A key issue in adoption of an industry logo will be the extent of licencing fees involved in the use of the logo. A nominal licencing fee is much more likely to lead to wide adoption of the logo.

Our view is that “which logo” is a second order issue. It’s much more important that the industry:

adopt one standard logo

ensure that all certified organic products display the logo (if any logo is displayed)

allow other logos, provided they don’t detract from the industry logo

most importantly, invest in educating consumers so that they firstly recognise the industry logo and recall that the logo provides a level of assurance about organic quality

[1] Christina Do (2015), Organic Food Labelling in Australia, University of Queensland Law Journal, Vol 34(1).
[2] Authored by MA Will for OISCC in conjunction with the Department of Agriculture and Water Resources (2016).
[3] Christina Do (2015), Organic Food Labelling in Australia, University of Queensland Law Journal, Vol 34(1).
[4] Ibid.
[5] Ibid.
[6] MA Will (2016), Market Opportunities for Australian Organic Produce, Organic Systems and Solutions Pty Ltd.
[7] Ibid.
[8] Ibid.