April 12, 2012

National Organic Program: Sunset Review for Nutrient Vitamins and Minerals (NOP-10-0083)

United States Department of Agriculture
Summary

Score: 22 / 60

Additional details
Agency
Department of Agriculture
Regulatory Identification Number
0581-AD17
Agency Name
United States Department of Agriculture
Rule Publication Date
01/12/2012
Comment Closing Date
03/12/2012
Dollar Year
2010
Time Horizon (Years)
1 (sales of year 2010)

RULE SUMMARY

This proposed rule would address a recommendation submitted to the Secretary of Agriculture (Secretary) by the National Organic Standards Board (NOSB) on April 29, 2011. The recommendation pertains to the 2012 Sunset Review of the listing for nutrient vitamins and minerals on the U.S. Department of Agriculture's (USDA) National List of Allowed and Prohibited Substances (National List). As recommended by the NOSB, the proposed rule would continue the exemption (use) for nutrient vitamins and minerals for 5 years after the October 21, 2012 sunset date. In addition, the proposed rule would amend the annotation to correct an inaccurate cross reference to U.S. Food and Drug Administration regulations (FDA). The proposed amendment to the annotation would clarify what synthetic substances are allowed as nutrient vitamins and minerals in organic products labeled as ``organic'' or ``made with organic (specified ingredients or food group(s)).''

COMMENTARY

The rule simply seeks to close a loophole that previously allowed producers to include additional ingredients in food and infant formula labeled organic. This new rule grants the National Organic Standards Board greater control over what can be labeled as organic. The rule assumes that private parties are unable to determine what ingredients should be included in products listed as organic. The net effect might actually reduce the consumption of certain organic food if ingredients that have been found to be beneficial, such as DHA (docosahexaenoic acid—an essential amino acid for brain development and function), are no longer allowed in food labeled organic. The proposed rulemaking reflects to some extent a sensible process of review and adjustment, but it also reveals (i) the organic food industry encounters difficulties in attaining nutritional standards, in particular for infant foods; (ii) USDA encounters difficulty in monitoring, interpreting, and enforcing elements of the National List; and (iii) considerable interest-group activity surrounds this particular regulatory process. It is not clear why consumers should not be free to reach their own conclusions over “organicness” based on enhanced information flow, and the reason given against such a guidance approach (1988)—that the current list has inaccuracies—is unconvincing.

MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)

Dollar Year
2010
 
Time Horizon (Years)
1 (sales of year 2010)
 
Discount Rates
Not Reported by Agency
Not Reported by Agency
Expected Costs (Annualized)
500 million - 4.2 billion
Not Reported by Agency
Expected Benefits (Annualized)
Not Reported by Agency
Not Reported by Agency
Expected Costs (Total)
Not Reported by Agency
Not Reported by Agency
Expected Benefits (Total)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Annualized)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Total)
Not Reported by Agency
Not Reported by Agency

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
Proposed rule was easy to find using a keyword search ("Sunset Review") and RIN search using regulation.gov as well as traditional search engines. Some cited investigations (e.g., representations by the industry) are not fully documented.
4/5
2. How verifiable are the data used in the analysis?
Sources for all data are provided but no full accounting and data not necessarily linked. All proprietary/confidential data is identified and evidence is given that those data are valid. Much of the data on market effects come from ERS estimates utilizing data from the Gladson UPC (Universal Product Code) database which contains 160,000 food UPC codes and detailed nutritional information.
3/5
3. How verifiable are the models and assumptions used in the analysis?
No model as such. If the assumption is that private parties are unable to determine what to include in organic food and infant formula, there is no discussion of a model or the implicit assumption. If the assumption is that a larger number of ingredients are included in organic food and infant formula because of how the rule was previously written, there is reasonable evidence that producers currently are including ingredients in organic food in violation of the original intent of the rule.
2/5
4. Was the analysis comprehensible to an informed layperson?
The analysis lacks detail but is well organized and easy to follow
4/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Proposed rulemaking does not identify outcomes clearly. At best, defines finite list of essential and required vitamins and minerals for use in organic food and infant formula. It also provides an upper limit for sales of product categories that would be impacted by this action. It also only briefly mentions the potential negative effects of excluding certain ingredients in organic food and infant formula that have been shown to be beneficial.
2/5
Does the analysis identify how these outcomes are to be measured?
The rule assumes that the clarification will reduce confusion. Although not explicit, the rule does expect producers of organic food and infant formula to change their list of ingredients to meet the new guidelines.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The new rule will reduce the number of ingredients that can be added to food or infant formula and still be considered “organic” and the Department of Agriculture believes this to have (unspecified) benefits for consumers.
3/5
Does the analysis present credible empirical support for the theory?
Not in conventional sense, but note the claim that current producers have interpreted the rule broadly and are using ingredients that may no longer meet the organic guidelines.
1/5
Does the analysis adequately assess uncertainty about the outcomes?
The proposal presents the annual sales for a number of food products and infant formula. In some areas, the agency does mention that certain ingredients that have in the past been included in products labeled as organic may no longer be allowed under this rule. However, petitions may be submitted to the NOSB. Without knowing the outcome of these petitions, the agency recognizes that the outcomes of the rule are highly uncertain. However, the rule does not analyze how the various responses to the petitions may affect the outcome realized by stakeholders. There is just a great deal of faith in the agency's estimates.
1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
Implicit in the rule is the idea that consumers and producers are unable to determine what ingredients or additives should be allowed in organic food and infant formula, and may—in consumer-law terms—be vulnerable to “passing off.” There is no reason given for why these parties are unable to determine what should be labeled organic. Moreover, the editing of the rule and petitions suggests that the government may have no comparative advantage at determining what should be labeled organic.
1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
Weak case in general terms. The analysis does not outline a testable theory that shows why the government needs to determine what is and is not organic. The analysis does reveal how the previous rule, attempting to determine what is organic, allowed a broad set of ingredients over and above the small set for fortification of ingredients listed by the FDA. The previous rule was interpreted to also include nutrients for which there is Generally Regarded as Safe (GRAS) notification or the manufacturer’s self-determination of GRAS.
2/5
Does the analysis present credible empirical support for the theory?
There is no theory and thus no empirical support. There is empirical support that previous rules were interpreted more broadly than intended, because current organic products include ingredients not included in the FDA's list of fortification ingredients.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
There is no discussion of the size of the problem. The proposed rule does report the fraction of food that is organic for certain food products (dairy, cereal, baby food, baby formula, and pet food) and the fraction of which has DHA added. DHA would not be allowed under the new rule, though various petitions have been submitted to allow some types of DHA.
1/5
7. How well does the analysis assess the effectiveness of alternative approaches?
2/5
Does the analysis enumerate other alternatives to address the problem?
Alternatives to this proposed rulemaking include: (1) renewing the existing listing for nutrient vitamins and minerals; or (2) in lieu of a rule, issuing guidance stating NOP’s intent to interpret the current listing for nutrient vitamins and minerals as proposed in this action. These were variations on the proposal and not exhaustive of potential alternatives.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The alternatives were narrow.
1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
"Under the first alternative, ingredients could be added to organic food and infant formula without going through the NOSB's petition process. The agency believes the second alternative, issuing a letter clarifying the intent, would not adequately address the issue of correcting the incomplete and inaccurate FDA references in the regulatory annotations as well as the resultant overly broad NOP interpretations. "
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The baseline is still based on regulation. The rulemaking proposal does a reasonable job of addressing what would continue to happen if no federal action is taken today—the current list of ingredients that can be added to organic food and infant formula would continue to include a larger list that can be added and bypass NOSB's authority. The rule does not address what might happen if the government simply stopped determining what could be labeled as organic.
2/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
There is no quantification of how each alternative might affect the costs to producers or consumers.
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Does identify costs but does not quantify. According to the proposal, there is insufficient data to estimate these costs. Is therefore seeking public comment to further analyze the costs of the final rule. OTA provided a conservative estimate that the economic impact of fortified organic product sales is in the range of $500 million annually. However, it is not possible for AMS (Agricultural Marketing Service) to evaluate the accuracy of this estimate due to the use of proprietary data and lack of information of what assumptions were used to determine this economic impact.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Analysis is hazy but suggests that prices for some goods may increase in order to seek alternative ingredients for the organic food and infant formula. However, it also mentions that customers may switch to non-organic.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
No, but the proposal does mention that consumers might switch to non-organic food and infant formula if customers value an ingredient no longer allowed under this rule. For instance, those interested in milk that includes DHA algal oil (which under the new rule will no longer be considered a viable organic ingredient), may switch to non-organic under the new rule in order to consume a vegetarian DHA option.
1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
A wide range, but no real analysis.
1/5
Does the analysis identify the alternative that maximizes net benefits?
Qualitative assessment only. There are no costs or benefits reported for the alternatives listed.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Identification but no quantitification.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Some identification. The rule does look at a number of individual industries (dairy, cereal, infant formula, baby food, and pet food) as well as shippers and handlers.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Identification of producers and consumers but no incidence assessed. The only clear benefit is to the NOSB, which will now have more direct control over what is labeled as organic.
1/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
Little evidentiary discussion.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
There is no benefit-cost analysis of alternatives.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The rule contains a five-year sunset clause which requires the agency to at least review the list of ingredients every five years. However, the rulemaking does not establish how to measure results.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
None listed.
0/5
 
Total 22 / 60