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New USDA Regulations Are Sparking Chaos for Small Organic Wine Importers

Athena Bochanis is the owner and founder of Palinkerie, a small, New York-based import company that showcases boutique winemakers from Hungary in the U.S. Earlier this month, she took to Instagram to seek information on upcoming changes to the U.S. Department of Agriculture’s (USDA) regulations, after learning that importers such as her would soon need to obtain organic certification. She struggled to find instructions from official regulating bodies, so she posted a story inquiring if anyone else was running into the same roadblocks. The plea was echoed by frantic responses from several kindred wine professionals, all unsure of what would happen when the March 19 deadline hit, or how to prepare for it.

In January 2023, the USDA announced that its National Organic Program (NOP) had approved the Strengthening Organic Enforcement (SOE) final rule, a set of directives that were officially implemented this week on March 19. The biggest update to organic regulations since the original Organic Foods Production Act (OFPA) of 1990, the SOE rule aims to protect the integrity of the organic supply chain and build trust in labeling by improving traceability and increasing enforcement. In other words, every business that handles organic goods now needs to be certified as organic, rather than just producers.

While bolstering consumer confidence in organic products is all well and good, many businesses have been left in the dark regarding what’s required of them. With increased red tape around importing organic wine and little clarity around the new certification laws, small wine importers feel lost and ignored — and it’s already impacting their businesses.

So what does the SOE rule mean for organic wine importers? How are companies coping with a myriad of regulation changes? And how will this impact the future of organic wine labeling?

Cracking Down on Fraud

Since the introduction of the OFPA, there’s been a dramatic rise in consumer interest in certified organic products. According to the Organic Trade Association, total U.S. sales of organic goods reached more than $60 billion in 2022. To keep up with demand, the associated businesses that produce, market, and sell organic products have also expanded.

The rapid growth of organic agriculture has undoubtedly left some holes in the system, and the USDA points to several accounts of recent fraud as an impetus for change. In 2017, an investigation found that three shipments of imported corn and soybeans, each weighing from 36 to 46 million pounds, were falsely labeled as organic. In 2019, four people were sentenced for their involvement in an organic fraud ring in Iowa for selling at least $142 million of fraudulently labeled grains. The USDA set out to introduce new controls that would hinder such large-scale schemes, which ultimately became the SOE ruling.

The regulations, which can be found across several different pages on the USDA website, or in a daunting 80-page document, are difficult to navigate, providing convoluted explanations of the amendments without any instruction on how to proceed. Even wine import companies, which  are at least somewhat familiar with official forms and red tape, are clueless about how to interpret the document.

From our own limited understanding, it appears that two major changes apply to the import of organic goods. All organic products entering the U.S. will now require electronic NOP Import Certificates, adding another step of (digital) paperwork for all parties involved in the production, transportation, and sale of organic products — all in the name of traceability. (This includes overseas producers already certified in their own countries.) Organic certification is now also required for all handling operations that sell, process, or package organic agricultural products, including brokers, traders, and importers, though the ruling states that there will be limited exceptions.

Making Sense of the New Rules

The realization that, without certification, importers will no longer be able to tout organic credentials on their products’ labels in the U.S. has been the toughest for small businesses to swallow.

Importers told VinePair they never received directions from the USDA on how to comply with the changes. The lack of clear communication only raised other questions: Since they work in offices and warehouses — and not with soil and seeds — how will the USDA define what “organic” means for them?

When I first spoke with Charlotte Alsaadi on March 12, the marketing associate at the New Jersey-based Vine Street Imports and her team were convinced that the new certification rule wouldn’t apply to importers. At that time, Vine Street was prepared to comply with the additional NOP paperwork.

“We found out about it with a couple of panicked emails from producers.”

On March 15, however, Alsaadi contacted me again. “I heard today that the importer’s facility has to be certified,” she said, adding that, in addition to a first certification inspection, the regulatory bodies could conduct random audits of the importer’s space to enforce compliance without prior warning. With this new information, Vine Street has decided to drop the organic terminology from all its imported wines’ labels this year.

This same confusion prompted Bochanis of Palinkerie to reach out to her fellow industry members on social media. As a small operation without a formal office, she wondered exactly what the regulators would come to inspect, who would be responsible for issuing the certification — generally, third-party companies and not the USDA conduct assessments — and what it would cost.

Reaching out to the USDA proved unhelpful for Bochanis. Similarly, when I asked the USDA to clarify some of the points, the answers received prompted more confusion. In response to questions about the certification process and cost, a spokesperson sent a document dated June 2012, with outdated information.

“At the end of January we were running around like chickens with our heads cut off,” says Ashley Cohen of New York-based natural wine importer Jenny & François Selections. Cohen says the team rushed several shipments to reach the U.S. ahead of the deadline to buy themselves more time.

“It’s the government’s responsibility to make sure those involved are attuned to any changes. You can’t just expect the market to stop.”

Beyond the confusing nature of the regulations, many importers found out about the impending changes in a roundabout way. Several reported hearing the news from colleagues, logistics companies, or wineries rather than from the USDA.

“We found out about it with a couple of panicked emails from producers,” Alsaadi says, one of whom was a winemaker new to the Vine Street portfolio, Paso a Paso, in Mendoza, Argentina. Although the winery worked to achieve organic certification in Argentina, when the wines make their debut in the U.S. this year, they can’t feature this distinction on their labels.

The overall confusion could stem from the fact that wine professionals are used to the increased level of communication they experience when dealing with the TTB. Sean O’Leary, president of O’Leary Law and Policy Group, LLC, who specializes in liquor law, has been following the TTB’s changes to nutrition labels. He says that the TTB hosted several seminars and announcements on that unrelated issue, taking feedback from industry professionals on how to proceed and providing extreme clarity in the process.

“If people are going to stop doing business as usual because of a lack of clarity from the government, that’s an issue,” he says of the USDA organic saga. “It’s the government’s responsibility to make sure those involved are attuned to any changes. You can’t just expect the market to stop.”

Adjusting to a New Reality

Now that the deadline has passed, industry professionals predict major disruptions in the wake of the new regulations.

“The USDA estimated 4,000 to 5,000 companies would need new certification,” Nate Ensrud, vice president of U.S. technical services, certification, and food safety solutions for FoodChain ID, a tech company that consults with food-related regulations, told Food Business News. “Many organizations think they are exempt when they are not.” Ensrud went on to mention that over the past three months, the net change in certified organic operations in the U.S. was essentially zero. “Based on the USDA NOP data, I believe non-compliance is going to happen and be disruptive.”

“The main delay we’re coming into is getting the small producers to do more admin work and make sure they’re on the organic integrity database.”

For importers like Vine Street, time has already run out to meet the requirements for this year’s imports. But even if importers gain a better understanding of the rules over time, the increased enforcement might deter businesses from pursuing organic labels in the future at all. “It’s unrealistic and risky,” Alsaadi says. “What if someone comes and does an audit unannounced then we need to pay a fine or dump the products? It’s just too risky for our business.”

Jenny & François plans to continue importing organic wine, and has spent much of the past three months trying to get its ducks in a row, but its certification remains pending. Cohen mentioned that beyond the certification itself, she worries about the additional NOP paperwork for winemakers. “Eighty percent of our book is small producers,” she says. “The main delay we’re coming into is getting the small producers to do more admin work and make sure they’re on the organic integrity database.”

Why does this all matter? After all, these producers are still practicing organic farming, especially to meet the standards of their own countries and other export markets. And the same wines will continue to enter the U.S., just without organic labeling.

But importers and wholesalers such as Jenny & François have built their brands on importing sustainably farmed and organic-certified wines. This reputation became a calling card, and in turn allowed them to place products in national chains, exposing new markets to the category. And now consumers across the country are accustomed to seeking out organic labels.

“When it’s outside of the New York market, the labeling is more important for sharing that information,” Cohen says. “And it’s key to getting placements at places like Whole Foods. That’s a big reason we have to figure this out.”

The article New USDA Regulations Are Sparking Chaos for Small Organic Wine Importers appeared first on VinePair.

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