An Oregon hazelnut farm lacks standing to challenge USDA’s regulation for certifying overseas producers as organic, a federal judge has ruled.

U.S. District Judge Ann Aiken has determined a lawsuit filed last year by Pratum Farm of Salem, Ore., didn’t sufficiently demonstrate harm caused by USDA’s rules.

The judge has dismissed the complaint without prejudice, which means a revised version could again be submitted, but the plaintiff plans to appeal the decision.

Regulatory loophole?

Pratum Farm alleged that USDA created a regulatory loophole that allowed Turkish hazelnut growers to sell their crop as organic in the U.S. while sidestepping the inspection required of domestic farmers.

According to the judge, those accusations don’t contain adequate evidence the Oregon farm “incurred loss” or otherwise experienced a “legally cognizable injury” from the USDA’s regulation.

“Plaintiff’s theory of injury appears to rest on the assumption that the Turkish hazelnut producers’ decision to sell their hazelnuts at a lower price point injures plaintiff, but plaintiff produces no evidence that it has, in fact, suffered such an injury,” Aiken said.

Though an investigation by U.S. trade authorities concluded the Turkish hazelnut industry engaged in “fraud and noncompliant practices” regarding organic certification, that alleged harm isn’t directly caused by the rule itself, she said.

“Thus, to the extent plaintiff alleges that it is being placed at a competitive disadvantage, plaintiff attributes that disadvantage not to the challenged regulation, but to a failure on the part of its competitors to follow the law or a failure of USDA to adequately enforce it,” the judge said.

Farm alleges harm

Pratum Farm also claims to have suffered harm from the regulation’s damage to the organic seal, but the judge called this allegation “speculative” because consumers “highly value” the federal label and are “willing to pay higher premiums as a result,” she said.

Despite dismissing the case, the judge rejected USDA’s argument that Pratum Farm was required to object to the regulation during the official comment before it was implemented last year.

The USDA cannot foreclose the litigation on those grounds because other commenters raised similar complaints about “conflicts of interest and competence issues,” Aiken said.

The dispute relates to the ability of foreign farmers to obtain USDA organic certification for exports to the U.S., a practice that’s raised fraud concerns due to lax overseas controls and price premiums associated with organics.

Historically, groups of small foreign farmers banded together to obtain organic certification because they couldn’t each afford to comply with inspection requirements on their own.

Due to the organic market’s growth in size and complexity, the USDA implemented regulations in 2023 under which roughly 2% of the growers in each producer group must be officially inspected for compliance with organic standards.

Pratum Farm alleged the rules have still allowed foreign agribusinesses to exploit the organic seal, effectively letting most producers avoid inspections despite the requirements of federal organic law.

ITC lacked jurisdiction

The farm initially took its concerns to the U.S. International Trade Commission, which confirmed certain Turkish hazelnut companies submitted fraudulent farmer information and other documentation to the USDA.

However, the ITC determined it lacks jurisdiction over the enforcement of organic standards, prompting the farm to file a federal complaint against the USDA’s regulation last year.

The lawsuit alleged that Turkish exporters charged a lower premium for organic hazelnuts, driving down prices for Pratum Farm and other U.S. growers who legitimately follow organic standards.

The judge found the complaint didn’t sufficiently allege legal harm, but Pratum Farm’s owner, Bruce Kaser, plans to challenge that conclusion before the 9th U.S. Circuit of Appeals.

Case proven divisive

The case has proven divisive within the organic industry, pitting those who say USDA’s regulation is a practical necessity against those who say it weakens organic standards.

The lawsuit’s supporters argue the USDA’s loophole can be exploited by foreign producers of other crops, undercutting consumer confidence in organic certification.

The OrganicEye nonprofit, an industry watchdog that’s critical of USDA’s enforcement, has claimed the case exemplifies how the agency is willing to dilute organic standards to serve agribusiness interests.

On the other hand, the Organic Trade Association, Center for Food Safety and several other groups argued that without USDA’s regulation, certifying small organic farms around the world “would not otherwise be financially or logistically viable.”