An Oregon hazelnut farm has accused the USDA of violating organic law by providing overseas producers with a loophole to avoid annual inspections.

A federal complaint filed by Pratum Farm of Salem, Ore., alleges a new USDA regulation unlawfully favors “foreign agribusiness,” allowing food exporters to aggregate and sell crops as “organic” though only about 2% of their suppliers are “spot checked” by certifiers.

“Today, the 2% Rule primarily serves to (1) reduce costs for foreign and/or multi-national agribusinesses that want to use the USDA organic seal and (2) debase the overall integrity of the U.S. organic system in the U.S. domestic market,” the lawsuit claims.

Certification practices under the regulation are so lax that crops effectively undergo “organic alchemy,” said Mark Kastel, executive director of the OrganicEye industry watchdog group.

“You just swap out a piece of paper and they go from conventional to organic overnight,” he said.

The system under which overseas farms cooperatively obtain organic certification isn’t new, but the purpose of these grower groups has been warped by large companies, Kastel said.

“They’ve changed from their original intent,” which was to allow small, disadvantaged producers to band together and participate in the organic market, he said.

Traditionally, certifiers “spot checked” samplings of farm cooperatives, which were composed of neighbors who’d pooled their money for organic verification, the complaint said.

The system developed informally and actually predates the Organic Foods Production Act and the USDA’s oversight of organic production, according to the lawsuit. Earlier this year, however, it was formally authorized under the agency’s “strengthening organic enforcement” regulatory overhaul.

The complaint alleges the traditional “farm co-op model” has largely been replaced by an “agribusiness model,” with food manufacturers and marketers now exploiting the USDA’s regulation.

Processors and traders obtain organic certification as if they were members of a grower group, when they simply buy farm goods for export to the U.S., the lawsuit said.

Instead of a “community elder” leading the effort, the organic certification is being obtained by processors and marketers who then use it as an umbrella for their supplier lists, Kastel said.

“It’s being administered by the business that’s buying the nuts, so they have an economic interest here,” he said.

Though this agribusiness model was already entrenched before the USDA’s 2% rule, which ostensibly means to correct accountability problems, “corrupt certifiers” can easily misuse the regulation’s weaknesses, according to the lawsuit.

The new regulation is part of the pattern in which the USDA has bent to global food companies who profit from the organic label, said Kastel.

“The USDA has been watering down the definition ever since corporate agribusiness started investing in organic brands,” he said.

The agency has no evidence the 2% sampling rate is reliable and it’s easily gamed so that certifiers can inspect processors and handlers rather than more distant farms that grow the food, the complaint said.

In the hazelnut industry, the regulation has allowed Turkish exports to be sold as “organic” in the U.S. despite the USDA lacking any records of organic hazelnut farms in that country, the complaint said.

The premiums for these Turkish hazelnuts are negligible compared to what’s normal for organic crops, which typically command higher prices due to lower yields and steeper bureaucratic costs, the complaint said.

For example, Pratum Farm’s organic hazelnuts previously fetched 70% more than their conventional counterparts, the lawsuit said. Meanwhile, Turkish hazelnuts labeled as organic have only received a 3% premium, which distorts the market, according to the complaint.

Due to the price disparity, “the Oregon processor is under significant pressure to likewise meet the Turkish processor’s organic price — which reduces the prices the processor can pay to local Oregon organic farmers like Pratum Farm,” the complaint said.

The farm initially urged the U.S. International Trade Commission to investigate the issue, but the matter was turned over to the USDA, which hasn’t taken action, Kastel said. “Since that complaint was filed, we’ve heard nothing from them.”

While hazelnut trade has brought the new regulation’s deficiencies to light, other high-value organic crops are also affected, he said.

Due to the lack of constraints, it’s possible for unscrupulous traders to take advantage of the loophole more broadly, he said. “There’s no limit as to scale. It could be soybean farmers in China. We just don’t know.”

Consumers can protect themselves from mislabeled organic foods by buying locally, but this isn’t always possible for more exotic crops, Kastel said.

“I have to trust the certification because I don’t know these people,” he said. “We created the certification system to back up claims and instill confidence in the marketplace.”

Kastel said he expects the lawsuit to be a “slam dunk” because the USDA is allowing farmers to avoid inspections “without any statutory authority to do so.”

The complaint has asked a federal judge to declare the 2% rule unlawful and to order the USDA to prohibit organic certification in such circumstances.

A change to national organic law would be necessary to render such a sampling system legal, Kastel said. If that’s accomplished, the USDA could impose size limits and other controls to ensure grower groups are legitimate.

“There has to be some way to tighten this up,” he said.