Original Notice.

     Preproposal statement of inquiry was filed as WSR 07-10-081.

     Title of Rule and Other Identifying Information: Chapter 16-160 WAC, Registration of materials for organic food production.

     Hearing Location(s): Natural Resources Building, 2nd Floor, Room 259, 1111 Washington Street S.E., Olympia, WA 98504-2560, on July 26, 2007, at 1 - 3 p.m.

     Date of Intended Adoption: August 6, 2007.

     Submit Written Comments to: Teresa Norman, P.O. Box 42560, Olympia, WA 98504-2560, e-mail WSDARulesComments@agr.wa.gov, fax (360) 902-2092, by 5:00 p.m., July 26, 2007.

     Assistance for Persons with Disabilities: Contact Julie Carlson by July 19, 2007, TTY (360) 902-1996 or (360) 902-1880.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The Washington state department of agriculture (WSDA) organic food program is proposing changes to chapter 16-160 WAC, Registration of brand name materials for organic food production. The program is proposing to establish some new fees and increase material registration fees. The new fees and fee increases are needed to recover the cost of providing these services and to provide adequate funding for the WSDA organic food program. The program is also proposing to change the logo that registered materials may use upon approval of their product. This change is needed to ensure that we maintain compliance with accreditation requirements. The proposal would increase renewal fees, new application fees and late fees. It will also establish new fees for reviewing materials in compliance with foreign organic standards and an expedite fee for new applicants that request and [an] expedited review of their application. Foreign standard review fees are set at $100.00 per product; expedited fees will be billed at a rate of $40.00 per hour.

     The brand name registration program has grown significantly since 2003 when 323 products were registered with the program, to 2007 with a current number of 582 products. The program has grown 33% from 2006 to 2007, from 437 products to 582 products. RCW 15.86.070(1) requires that the rule include a fee schedule that will provide for the recovery of the full cost of the program. This increase in fees will allow for additional staff required to maintain the program.

     Statutory Authority for Adoption: Chapters 15.86 and 34.05 RCW.

     Statute Being Implemented: Chapter 15.86 RCW.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: WSDA organic food program, governmental.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Miles McEvoy, Olympia, (360) 902-1924.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     The WSDA OFP worked with the WSDA organic advisory board (OAB) over the last year to develop the current proposal. In May 2007, a preproposal was sent to one hundred eighty-eight material registrants to solicit comments on the proposal. Based on the thirty-three comments received on the preproposal, the final proposal was modified to mitigate the increase in registration fees.

     Key Elements of the Proposal:

•	The material registration program is a voluntary program that is funded by registration fees.
•	The current fee schedule is not providing adequate revenue to cover the program's costs.
•	The fee increase has been decreased based on comments received on the preproposal to help mitigate the impact of the fee increase.
•	Changes to the material registration logo are needed to maintain accreditation.

     Brand Name Material Registration Budget: Current staff expenses for the program include a materials registration coordinator, quality assurance staff and administration support staff. In addition there are costs for office space, equipment, printing, copying and supplies. Annual expenses for the program are $85,000. Revenue received from material registration fees was $62,740 in 2006. Organic certification fees are providing funding for the costs that are exceeding the material registration revenue.

     Additional resources are needed for the program for the following purposes:

•	Provide adequate revenue for existing program expenses.
•	Provide adequate staff to provide thorough evaluations of materials for compliance with organic standards.
•	Provide adequate staff to provide timely responses to material registration applications.
•	Provide adequate resources to provide quality assurance to maintain accreditation with national and international organic standards.
•	Provide adequate revenue to hire a material evaluation specialist to handle the continued growth in this program.

     We estimate that the new fee schedule will bring in $113,650 in revenue, which will be sufficient revenue to cover the costs of the program.

     BACKGROUND INFORMATION: The WSDA OFP is proposing changes to chapter 16-160 WAC, Registration of brand name materials for organic food production. The program is proposing to increase registration fees and establish new fees for new services. The program is also proposing to change the material registration logo that is utilized to identify registered materials. The changes to the registration fees are needed to provide adequate funding for the WSDA brand name registration program and to provide new services for the organic food industry. The logo changes are needed to maintain compliance with accreditation requirements.

     Organic agriculture is the fastest growing sector of United States agriculture, growing at a rate of 20% annually (USDA-ERS, 2003). Growth in Washington state's organic sector has mirrored growth in the rest of the country. The value of WSDA certified organic products has increased from $142 million to $438 million between 2000 and 2005.

     Material inputs are a large part of an organic system, and organic producers and handlers must only use materials that comply with the National Organic Standards (7 C.F.R. Part 205). The OFP publishes the brand name material list to assist organic producers and handlers to maintain compliance with the National Organic Standards in regards to materials. The brand name material list consists of brand name materials that have been reviewed and comply with the National Organic Standards and is distributed to all WSDA certified operations and is available on the OFP web site. This list is updated quarterly.

     With the growth in the organic industry comes a parallel growth in the brand name registration program. The brand name registration program has grown significantly since 2003, when 323 products were registered with the program, to 2007 with a current number of 582 products. The program has grown 33% from 2006 to 2007, from 437 products to 582 products. Revenue from material registration fees are not covering the cost of the program. WSDA OFP staff are not able to respond in a timely manner to applications due to inadequate staff resources devoted to material evaluation and registration.

     The WSDA OFP has worked with the WSDA OAB in the development of the proposed fee increases. A preproposal for a fee increase was presented at the OAB meeting on October 28, 2006, and a final proposal presented and accepted on January 7, 2007.

     By statute, the WSDA OFP is required to recover the full cost of the program from organic certification fees. The program does not receive any general fund support and is required by statute to develop a fee schedule to pay for the cost of organic certification. In 2006, the revenue for the brand name registration program was $62,740. This revenue provides funding for a half-time coordinator and some administrative support. The revenue has not been sufficient to cover the full cost of the program. An additional staff position is needed to evaluate materials, respond to material applicants' requests, manage the increased workload, and maintain a high quality material registration program.

     The current proposal is designed to recover the full cost of providing services in specific areas of the program where the current fee structure is not providing adequate revenue for staffing. The fee increase proposal will bring the estimated revenue for 2008 to $113,650, sufficient to fund the additional position. The additional revenue will also be used to ensure the integrity of the brand name registration program by providing better customer service and increasing compliance and enforcement activities.

     Proposed Changes to WSDA Organic Certification Fee Schedule:

     1. Renewal application fees: The proposed amendments to chapter 16-160 WAC include an increase in the annual renewal fees submitted by applicants. With the significant growth in the program, there have also been increases in work associated with maintaining the files and the brand name material list. Examples of this work include label changes, reviewing revised formulations, compliance issues, and surveillance projects to ensure the integrity of the label. In addition, the brand name material list is currently updated on a quarterly basis. Increased staff will allow for more frequent updates, thereby decreasing the lag time between product registration and when the product appears on the updated list.

     Fees for the following products will increase from $200 to $300: Pesticides, spray adjuvants, processing aids, and post harvest materials. Fees for fertilizers, soil amendments, organic waste derived materials, compost, animal manure and crop production aids will increase from $100 to $200 and fees for livestock production aids will increase from $100 to $300.

     2. New application fees: The proposed amendments include an increase to the fees required for a new application. There are a number of unique costs associated with evaluating new applications for compliance with National Organic Standards. New database files and office files must be created. The time involved in the initial review of a material is more extensive for new applicants than for renewal applicants. The cost of providing registration services to new applicants exceeds the current fees. The proposed increase to the new applicant fee more accurately reflects the cost of providing the service.

     The proposal will increase new application fees for pesticides, spray adjuvants, processing aids, and post harvest materials from $300 to $500 and will increase new application fees for fertilizers, soil amendments, organic waste derived materials, compost, animal manure and crop production aids from $200 to $400. New application fees for livestock production aids will increase from $200 to $500 due to the complexity and time involved with these particular reviews.

     3. Late fees: Applications are due by October 31 of each year. Once the applications are received, the data entry that occurs to produce the brand name material list must be completed in time to be included in the December certification renewal mail out. There are less than two months to process the applications, complete the data entry, print the list and include it with certification renewal applications. Late applications are an inefficient use of the program's resources and can cause delays in the publication of the document.

     The proposed amendments increase late fees to cover the additional costs associated with the late renewal of an application. The later the application, the higher the late fee will be. We hope that the higher late fees will increase the timeliness of receiving applications and improve the efficiency of the program. Proposed late fee increases are as follows:

Application received	Late fee
Postmarked after October 31, but before:
December 1	$100
January 1	$200
February 1	$300

     4. Expedited inspections and evaluations: The program frequently receives requests to conduct expedited evaluations to facilitate material registration and market access. Expedited evaluations result in increased costs from inefficient use of staff time. We are proposing to establish a $40 per hour fee for expedited inspections and evaluations. Expedited evaluations will be conducted only when adequate staff is available to conduct the evaluation and when the expedited review will not negatively affect the work of the program as a whole. Upon receipt of a request for an expedited evaluation, the program will assess the ability to conduct the work. If the request is accepted, the evaluation will be completed within two weeks of the request. Travel costs associated with expedited evaluations will be paid by the applicant.

     5. Foreign organic standards: As international markets open for organic products from Washington and other states, there is a growing need for a materials list that is specific to the material requirements for a specific country. For instance, Washington exports a significant amount of organic apples to the European Union (EU). EU organic standards for materials are different from USDA standards, and organic apple producers in Washington must only use materials approved under EU organic standards. Producers and handlers exporting products under foreign standards need a brand name material list specific to the applicable standard. An additional $100 fee will be charged for evaluating materials to each foreign organic standard. This fee will provide for the adequate staff necessary for this additional evaluation.

     Businesses Affected by the Rule Amendment: Chapter 16-160 WAC affects all individuals and businesses that have products registered with the WSDA brand name material registration program.

     Compliance Requirements: The proposed changes do not affect compliance requirements.

     Professional Services: The reporting, record-keeping and compliance requirements in chapter 16-160 WAC do not require the use of professional services by any business regulated by the chapter. No professional service expenses would be incurred by the small businesses affected by chapter 16-160 WAC.

     Industries Impacted by the Rule Amendment: Chapter 16-160 WAC applies to all businesses that provide materials to the organic food industry for production or handling within the following SIC codes:

SIC Code	Industry Description
1479	Chemical & Fertilizer Mineral Mining - Not elsewhere classified
2819	Industrial Inorganic Chemicals - Not elsewhere classified
2873	Nitrogenous Fertilizer
2874	Phosphate Fertilizer
2875	Fertilizers – Mixing only
5191	Farm Suppliers
2879	Pesticide & Ag Chemicals - Not elsewhere classified

     Cost of Compliance:

Fee	Cost of Compliance		Rationale
Late renewal application fee (WAC 16-160-070)	Application received	Late fee	Increase is necessary to cover the cost of processing late application. Fee can be avoided by filing a timely application for renewal.
	Postmarked after October 31, but before:
	December 1	$100
	January 1	$200
	February 1	$300

New applicant fee for pesticides, spray adjuvants, processing aids, and post harvest materials (WAC 16-160-070(1))	Increased fee from $300 to $500	Increase is necessary to cover the cost of processing and evaluating first-time applications.
New applicant fee for fertilizers, soil amendments, organic waste derived materials, compost, animal manure and crop production aids (WAC 16-160-070(1))	Increased fee from $200 to $400	Increase is necessary to cover the cost of processing and evaluating first-time applications.
New applicant fee for livestock production aids (WAC 16-160-070(1))	Increased fee from $200 to $500	Increase is necessary to cover the cost of processing and evaluating first-time applications in this input category.
Renewal applicant fee for pesticides, spray adjuvants, processing aids, and post harvest materials (WAC 16-160-070(2))	Increased fee from $200 to $300	Increase is necessary to cover evaluation of the material, maintenance of the Brand Name List, publications of updates and compliance issues.
Renewal applicant fee for fertilizers, soil amendments, organic waste derived materials, compost, animal manure and crop production aids (WAC 16-160-070(2))	Increased fee from $100 to $200	Increase is necessary to cover evaluation of the material, maintenance of the Brand Name List, publications of updates and compliance issues.
Renewal applicant fee for livestock production aids (WAC 16-160-070(2))	Increased fee from $100 to $300	Increase is necessary to cover evaluation of the material, maintenance of the Brand Name List, and publications of updates.
Foreign Standard Review	New fee of $100 per product	Fee is necessary to cover the cost of evaluating materials for compliance with foreign organic standards.
Expedited Inspection fees (WAC 16-157-250(3))	New fee of $40/hour plus transportation costs	Fee is necessary to cover the cost of providing expedited inspections. Fee can be avoided by filing timely applications.

     Impact on Small Businesses: It is clear that the proposed fee amendments will increase the cost of doing business for registered applicants. However, RCW 15.86.070 mandates that the department fully recover, from fees charged, the full cost of operating the program. Therefore, the department has concluded that the proposed new fees are necessary. In addition, the material registration program is a voluntary program that the department provides as a service to the organic input industry. Organic material suppliers may avoid the registration fees by providing a full disclosure of their ingredients to organic producers and handlers. Organic input suppliers are not required to obtain registration under the WSDA material registration program. The WSDA material registration program is a voluntary program that provides a service to organic input supply companies so that they can identify their products as compliant with organic standards.

     RCW 19.85.030 requires that the department determine if its proposed rule will impose more than minor costs on businesses in an industry. The OFP does not collect data specific to the number of employees, labor or sales information on the registrants in the material registration program. Instead, we counted the number of products that one company registers to assess what the economic impact on each registrant would be. As illustrated in the table below, almost half of our registrants would experience an increase of $100 in their 2008 renewal fees. Over two thirds of our registrants would experience increases of $300 or less.

Number of Products Registered	Number of Businesses	Percentage of Total	Total Increase in Renewal Fees per Company
1	92	48.9%	$100
2	35	18.6%	$200
3	16	8.5%	$300
4	12	6.3%	$400
5	11	5.8%	$500
6	5	2.6%	$600
7	4	2.1%	$700
8	2	1%	$800
9	2	1%	$900
10	1	0.5%	$1000
More than 10	8	4.2%	Over $1000

     Actions Taken to Reduce Costs: The WSDA OFP has taken several actions to reduce the cost of this rule change to current and future registrants. A revision of the renewal application packets has led to decreased paperwork and increased efficiencies for each renewal registrant. Previously, companies with multiple products would submit up to thirty separate applications for each individual product. However, rather than send in a renewal application for each individual product, this process has been revised so that one company could renew multiple products with one application.

     In addition, the program is working to obtain a new database that will facilitate more frequent updating of the brand name material list. The [This] will result in less lag time between approval and appearing on the updated list on the web site, current lag time can be up to four months. The database will allow the program to update the list more frequently, thereby give new listing maximum exposure on our web site as an "approved material." Within a few years the new database will also allow material registrants to apply on-line and avoid the cost and delay of mailing in their applications.

     Presolicitation and Research Efforts: The WSDA OFP has worked with the WSDA OAB in the development of the proposed fee increases. A preproposal for a fee increase was presented at the OAB meeting on October 28, 2006, and a final proposal presented and accepted on January 7, 2007.

     Mitigation Based on Preproposal Comments: In response to these comments, the program decreased the fee increase to mitigate the impact of the fee increase. In addition the logo was modified based on the comments received. The final proposal, including the reduced fee increase, was approved at the June 6, 2007, WSDA OAB meeting. The updated logo will appear as follows:

     The final proposal has taken the comments on the fees into account by decreasing the amount of the original fee increase proposal. WSDA has determined that the reduced fee increase will provide adequate revenue to recover the cost of the program.

     A copy of the statement may be obtained by contacting Miles McEvoy, Washington State Department of Agriculture, P.O. Box 42560, Olympia, WA 98504-2560, phone (360) 902-1924, fax (360) 902-2087, e-mail mmcevoy@agr.wa.gov.

     A cost-benefit analysis is not required under RCW 34.05.328. WSDA is not a listed agency under RCW 34.05.328 (5)(a)(i). RCW 34.05.328 regulates "significant legislative rules" and RCW 34.05.328 (5)(a)(i) lists the specific state agencies that are considered "significant legislative rule agencies." WSDA is not listed; therefore, we do not consider ourselves to be a "significant legislative rule agency." In addition, section 309 (for the department of agriculture) of chapter 372, Laws of 2006, provide that: (2) Fees and assessments approved by the department in the 2005-2007 biennium are authorized to exceed the fiscal growth factor under RCW 43.135.055.

June 15, 2006 [2007]

Bob Gore

Deputy Director

OTS-9786.2

AMENDATORY SECTION(Amending WSR 99-16-054, filed 7/30/99, effective 8/30/99)

WAC 16-160-030   Do I need to register my brand name material with the organic food program?   ((Every material which is manufactured within this state and/or distributed within this state for use)) Materials used in organic food production, processing or handling may ((be registered)) submit an application for registration with the department. Registration is not required, but is necessary for a product to appear on the brand name materials list or to label or advertise itself as approved for use in organic food production, processing or handling.

[Statutory Authority: Chapter 15.86 RCW. 99-16-054, § 16-160-030, filed 7/30/99, effective 8/30/99; 91-05-007, § 16-160-030, filed 2/7/91, effective 3/10/91.]

[Statutory Authority: Chapter 15.86 RCW. 03-03-045, § 16-160-035, filed 1/10/03, effective 2/10/03; 99-16-054, § 16-160-035, filed 7/30/99, effective 8/30/99.]

     (1) The name and address of the applicant and the name and address of the person whose name will appear on the label, if other than the applicants;

     (2) The name of the material;

     (3) A copy of the labeling accompanying the material and a statement of all claims to be made for it, including the directions and precautions for use;

     (4) The complete formula of the material including the active and inert ingredients;

     (5) A description of the manufacturing process including all materials used for the extraction and synthesis of the material, if appropriate;

     (6) The intended uses of the product;

     (7) The source or supplier of all ingredients; and

     (8) Any additional information deemed necessary.

     Changes to the information above must be submitted to the department for review.

     The director may require a full description of the tests made and the results thereof upon which the claims are based. The director may require production records that demonstrate adequate input materials to reconcile the registrant's production of the final product. Trade secrets are confidential and exempt from public disclosure under the Uniform Trade Secrets Act, chapter 19.108 RCW((. RCW 42.17.260(1))) and RCW 42.56.070(1). Applicants should mark the information in the application they consider to be confidential under the Trade Secrets Act or other law. The department will treat this information in accordance with chapter 42.56 RCW.

[Statutory Authority: Chapter 15.86 RCW. 99-16-054, § 16-160-040, filed 7/30/99, effective 8/30/99; 91-05-007, § 16-160-040, filed 2/7/91, effective 3/10/91.]

     The director reviews the information provided under WAC 16-160-040. A brand name material that meets the requirements under the ((2001)) National Organic Program final rule, section 205.105 and sections 205.600 through 205.606 will be registered.

     (2) Foreign or additional organic standards.

     The director may review materials approved under the USDA National Organic Program for compliance with foreign or additional organic standards. The director reviews the information provided under WAC 16-160-040. A brand name material that complies with a specific foreign or additional organic standard may be registered as approved under that specific organic standard.

[Statutory Authority: Chapter 15.86 RCW. 03-03-045, § 16-160-060, filed 1/10/03, effective 2/10/03; 99-16-054, § 16-160-060, filed 7/30/99, effective 8/30/99; 91-20-013, § 16-160-060, filed 9/20/91, effective 10/21/91; 91-05-007, § 16-160-060, filed 2/7/91, effective 3/10/91.]

     The application fee for initial registration of a pesticide, spray adjuvant, processing aid, livestock production aid or post-harvest material is ((three)) five hundred dollars per material. The application fee for initial registration of a fertilizer, soil amendment, organic waste derived material, compost, animal manure((,)) or crop production aid((, or livestock production aid)) is ((two)) four hundred dollars per material.

     (2) Renewal registration.

     The application fee for renewing a registration for a pesticide, spray adjuvant, processing aid, livestock production aid or post-harvest material is ((two)) three hundred dollars per material. The application fee for renewing a registration for a fertilizer, soil amendment, organic waste derived material, compost, animal manure((,)) or crop production aid((, or livestock production aid)) is ((one)) two hundred dollars per material.

     ((Renewal registrations postmarked after October 31 pay a late fee of thirty dollars.)) (3) Late fees:

     Renewal applications postmarked after October 31 must include a late fee in addition to the renewal fee.

If your application is postmarked after October 31 but before:		Then the late fee is:
	December 1		$100.00
	January 1		$200.00
	February 1		$300.00

     (4) Inspections.

     Inspections, if required, will be billed at forty dollars per hour plus travel costs and mileage which shall be charged at the rate established by the state office of financial management.

     (5) Samples.

     Samples, if required for registration, or requested by the applicant, will be charged to the applicant at a rate established by the laboratory services division of the department of agriculture. If an additional visit must be arranged, it shall be at forty dollars per hour plus travel costs and mileage which shall be charged at the rate established by the state office of financial management.

     (6) Expedited evaluation fees.

     Requests for expedited reviews may be submitted and, if approved, are billed at a rate of $40.00 per hour.

     (7) Foreign or additional standards.

     Upon request, the department may assess compliance with foreign or additional organic standards beyond the National Organic Program. Requests for additional assessments of materials approved under the USDA National Organic Program are billed at a rate of $100.00 per product for each standard.

[Statutory Authority: Chapter 15.86 RCW. 03-03-045, § 16-160-070, filed 1/10/03, effective 2/10/03; 99-16-054, § 16-160-070, filed 7/30/99, effective 8/30/99; 91-05-007, § 16-160-070, filed 2/7/91, effective 3/10/91.]

[]

     (1) If it does not appear to the director that the brand name material is such as to warrant the proposed claims for it or if the brand name material and its labeling do not comply with the provisions of this chapter, the director shall notify the registrant of the manner in which the brand name material and its labeling fails to comply with the provisions of this chapter so as to afford the applicant an opportunity to make the necessary corrections. If, upon receipt of such notice, the applicant does not make corrections, the director shall deny registration of the material in accordance with chapter 34.05 RCW.

     Renewal registration.

     (2) When the director determines that a material or its labeling does not comply with the provisions of this chapter, or that false or inaccurate information was provided by the registrant, the director shall cancel the registration of a material in accordance with chapter 34.05 RCW.

     Revoking registration.

     (3) When the director determines that a material or its labeling does not comply with the provisions of this chapter, or if false or inaccurate information was provided by the registrant, the director shall cancel the registration of such material in accordance with chapter 34.05 RCW.

[Statutory Authority: Chapter 15.86 RCW. 99-16-054, § 16-160-090, filed 7/30/99, effective 8/30/99; 91-05-007, § 16-160-090, filed 2/7/91, effective 3/10/91.]

[Statutory Authority: Chapter 15.86 RCW. 99-16-054, § 16-160-100, filed 7/30/99, effective 8/30/99; 91-05-007, § 16-160-100, filed 2/7/91, effective 3/10/91.]

((STRICKEN GRAPHIC

STRICKEN GRAPHIC))

[Statutory Authority: Chapter 15.86 RCW. 99-16-054, § 16-160-110, filed 7/30/99, effective 8/30/99.]

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