Organic fraud – it’s not the first thing you think about when delving into the organic market, looking for ways to carve out a niche within the world of private label products. And yet it’s something that has an impact of around $10-$15 billion annually.
That’s a lot of money from a criminal activity that’s been far too easy to get away with up to now. From falsely marketing or labeling non-organic products to selling non-organic raw ingredients as organic, it’s a crime that can take place at both ends of an ingredient’s lifecycle.
Due to the fact that the price premium for organic products is higher, and the fact that organic food may be indistinguishable from conventionally raised versions of those same foods, fraud in the organic food sector is relatively easy to commit.
When you take it a step further and consider the complex supply chain of organic products, you soon realize there’s a lot of gray space where fraud can take place. Organic fraud can occur at any stage of the supply chain, from the production of the raw materials right down to the labeling and marketing of the final product.
But thanks to the Strengthening Organic Enforcement (SOE) rule, the USDA is pulling the entire organic supply chain into the light and exposing the fraud that’s crippling the organic market.
What is the penalty of organic fraud?
Organic food fraud isn’t something to scoff at. The impact of some of the activities reached the millions, with the penalties following suit.
Here are just a couple of recent examples to illustrate the immensity of both the crime and the punishment:
In 2019, charges were brought by the U.S. Attorney’s Office for the Northern District of Iowa against four individuals for their roles in a $142 million organic food fraud scheme. All four defendants were sentenced to prison, with the lead defendant sentenced to more than ten years.
In 2020, an individual was indicted in South Dakota by the federal grand jury for selling $71 million of falsely labeled organic products over a seven-year period. The sentence included not only a 51-month imprisonment but also an order to pay back more than $15 million in restitution. We just hope he put some of those ill-gotten gains away for a rainy day. Sadly, the businesses that formed part of the defendant’s fraud ring simply started new brokerage firms that didn’t require certification after their organic certifications were revoked.
However, with the robust traceability introduced by the SOE rule, these types of fraud can be identified much earlier and even these “new” brokerage firms would need organic certification to trade in the organic market.
How will the SOE rule combat organic fraud?
Saying the Strengthening Organic Enforcement (SOE) rule will battle organic fraud by strengthening oversight and enforcement in the organic supply chain is easy. But how exactly will the SOE achieve this impressive feat?
Here are some of the major ways in which the SOE rule is going to help prevent organic fraud:
Broadening certification requirements
The start of a safer supply chain begins with certification. The SOE rule requires certification of more businesses at critical links in organic supply chains, like bulk suppliers, wholesale importers, brokers, and traders, and requires NOP Import Certificates for all organic imports.
This helps ensure that all parties involved in the production, handling, and sale of organic products are certified and comply with the USDA organic regulations.
Increasing supply chain traceability
The next step is to improve oversight, which is why the SOE rule requires businesses to maintain records that document the entire ingredient journey, from production and handling down to the sale of the final organic products.
This new approach includes the origin of each product and every party involved in the supply chain. Under the new rule, importers and suppliers play a vital role in capturing the full journey of bulk and wholesale ingredient imports. This helps improve the transparency and traceability of organic products and makes it easier to detect and prevent organic fraud.
Creating a fraud prevention plan
At its core, the SOE rule is about taking responsibility. To that effect, it requires certified organic operations to develop and implement a fraud prevention plan that describes the monitoring practices and procedures that will prevent fraud and verify all importers, traders, suppliers, and brokers in the supply chain.
This helps ensure that certified organic operations are taking proactive steps to prevent organic fraud, and taking responsibility for their role within the organic supply chain. And when it comes to bulk ingredient shipments, that’s an extensive chain that needs meticulous documentation.
Empowering the enforcement authority
The SOE rule provides the USDA with additional enforcement authority to investigate and take action against organic fraud, especially at crucial stages in the supply chain where products change hands. This includes the ability to conduct unannounced inspections, issue subpoenas, and impose civil penalties or criminal sanctions for violations of the USDA organic regulations.
This broadened enforcement will put suppliers and importers who work with bulk and wholesale shipments under the spotlight. And for those who take due diligence seriously, it shouldn’t come as an unwelcome change, because this final step is radically changing the way fraud will be unearthed early on before millions are spent on inorganic products.
Welcoming the next stage of an ongoing revolution
The SOE rule is actively going to battle organic fraud by strengthening certification requirements, improving supply chain traceability, requiring fraud prevention plans, and introducing additional enforcement authority to investigate and take action against organic fraud.
And Source86 is here to ensure you continue to get your USDA Organic Logo through a truly organic supply chain.
We’ve never been a company to sit on the sidelines and wash our hands of the responsibility organic ingredient sourcing requires. It’s one of the reasons why our BRCGS certification matters so much to us. Because we know how vital our role is to the safeguarding of organic ingredients and we want the businesses who work with us to know that our due diligence helps to protect the organic nature of your business and its products.
Book a call with us to find out how we can assist you in the preservation of your organic journey. Visit the Source86 Product Catalog to see the diverse organic supply chains we’ve helped to preserve against fraud.
