Considered in Grand Committee
That the Grand Committee do consider the Organic Production and Control (Amendment) (EU Exit) Regulations 2019.
My Lords, these instruments correct technical deficiencies in legislation relating to organic production to ensure operability on exit. The instruments introduce no new policy and preserve the current regime’s organic standards. The Government are strongly supportive of organic standards, many of which were developed in the UK and adopted by the EU. The UK has a world-recognised standard of food production and labelling which we wish to see maintained. We have grouped these instruments for discussion as they both relate to amendments to organic legislation.
Early indications from the sifting committees were that SIs laid as negative but with a connection to agriculture were being selected to be uplifted to affirmative. While the Organic Production and Control (Amendment) (EU Exit) Regulations 2019 were not specifically recommended for uplift by the sifting committees, we chose to voluntarily uplift this SI to reduce the risk of it running out of parliamentary time. The Organic Production (Control of Imports) (Amendment) (EU Exit) Regulations 2019 contain transfer of function provisions, and as such the affirmative procedure must apply.
These statutory instruments apply to the United Kingdom, and we have worked with the devolved Administrations on their development. The legislation amended by the Organic Production and Control (Amendment) (EU Exit) Regulations 2019 relates to devolved matters, and the devolved Administrations have consented to that SI. The Organic Production (Control of Imports) (Amendment) (EU Exit) Regulations 2019 are reserved. Officials have had very helpful discussions with their counterparts in the DAs, and we are working with them on all aspects of the organics regime to form an agreement on how we all work together going forward.
The Organic Production and Control (Amendment) (EU Exit) Regulations 2019 ensure that organic standards remain the same as now for organic operators within the UK by amending deficiencies in the retained EU legislation: for example, references to the UK as a member state. The certification and traceability of organic food and feed products will continue. This instrument sets out minor technical amendments and lays down a time-limited period during which the UK would not require additional border checks for organic products imported from the EU, the EEA and Switzerland.
The Organic Production (Control of Imports) (Amendment) (EU Exit) Regulations also amend deficiencies in the retained EU legislation but deal with reserved measures covering imports and trade in organic food, feed and vegetative propagating material or seeds for cultivation. The SI transfers powers from the Commission to the UK to recognise countries and control bodies that can operate for the purposes of export to the UK. It also sets out minor technical amendments and lays down a time limit for the recognition of organic products imported from the EU, the EEA and Switzerland.
The UK organics industry is currently regulated by EU law, which sets out standards for organic production. Regulations apply to the production of food, animal feed and livestock, including bees and farmed fish, and any food or feed products marketed as “organic”. They set out the requirements for organic production, processing, labelling and imports, as well as the inspection systems that must be in place to ensure the requirements are met. They stipulate that organic food must be inspected and certified within the scope of a tightly regulated framework and originate from businesses registered and approved by organic control bodies on the basis of a rigorous annual inspection. The regulations will now apply to imports at UK borders, rather than EU borders, and ensure the continued regulation and certification of organic products to the current standards applicable within the UK, and equivalent standards where these have been agreed with third countries.
In addition, to ensure we can maintain the status quo and allow UK organic importers to continue to access their goods and ingredients from Europe as now, we have added provisions which permit the UK, for a time-limited period until 31 December 2020, to recognise the EU, the EEA states and Switzerland as having an equivalent organic regulatory regime to the UK. During this period, the UK will also exempt the need for additional checks or paperwork for organic goods originating from these areas. This exemption does not apply to goods that are simply transiting through these territories. This will ensure the status quo remains immediately after exit.
These measures remain essential to ensure UK organic businesses can maintain their organic certification and thrive in this growing sector. These instruments will ensure operability and that the strict standards in place for organic production are maintained when we leave the EU.
Officials have engaged regularly with the United Kingdom organic certifiers group. Our decision to continue to recognise the EU, the EEA and Switzerland for a time-limited period has been welcomed by the group as providing certainty on imports for the immediate future. We continue to work closely with it on this and on the future implementation of the UK regulations. I beg to move.
My Lords, I thank my noble friend the Minister for introducing these two Motions. I am particularly pleased that there will be a smooth transfer into UK law. The organic sector is still considered a fairly small one, but a very important one. The UK sector brings in a good, healthy amount of money—£2.2 billion to the UK economy and exports worth some £200 million —so the continuation of this trade is hugely important. At this stage I declare my own family farming interest, but we are not organic. We produce very healthy, good food, but it is not purely organic.
The Explanatory Memorandum talks about there being some 6,000 operators. Many of those are small businesses. Those classified as “small” employ “up to 50 people”. That is actually quite a lot of people in an organic movement. I wondered what proportion of the smaller ones have, say, 10 or five employees. What went through my mind was: although this is not supposed to have any financial burdens, if you are a smaller business it obviously has greater implications for you and the organisation of what you have to do. I would be grateful for a response on that one. I am glad that, on the control of imports, it is clearly laid out. I smiled slightly when we had a 20-page list of individual categories, which shows how complex and varied the whole organic sector is.
I welcome the production and control amendment, because I hope it will give great certainty to organic producers. It takes up to three years to turn to become organic from having been, perhaps, commercial farmers. We have often said that farming is a long-term investment —clearly it is—but on the organic side it is more demanding, because there are certain things you can and cannot do during your term of transfer.
Sitting suspended for a Division in the House.
My Lords, returning to our discussions of these two instruments, I have just about covered everything that I wished to. I stressed the importance of the organic movement: we are now up to some 6,000 organic operators. That is worth a lot of money to farming and agriculture in the UK economy and, even more importantly, to the growth of our exports.
I am grateful for the smooth transition the Government have planned, and apart from my question on the definition of “small” and “very much smaller” businesses, I well realise that the Explanatory Memorandum indicates that there is no expected cost to them. However, I would be grateful to the Minister for clarification on that when she comes to respond.
My Lords, we warmly welcome these SIs, which are absolutely essential for the continuity of trade in organic products. We particularly welcome the fact that the Government recognise the voluntary uplift.
I declare an interest which makes me a little more passionate about the sector. I used to work for the Soil Association, albeit very many years ago. It was an interesting time to be there, as it was developing certification techniques with the EU. The sector has moved on a lot in the 25 years since.
By and large, the sector is very happy with these SIs, as are we; it did not have any concerns about them as they currently are. The sector is happy that they are being proposed and debated as a framework for certainty for organic producers and consumers.
As the noble Baroness, Lady Byford, said, it is a really vibrant market. The organics market in the UK is worth some £2.3 billion, of which 8% goes abroad, mainly to EU countries. The importance of the organic sector for the UK is that it has introduced consumers to many ideas about more sustainable agriculture. So apart from being worthy both in economic terms and as an employer, it has been a flagship, introducing ideas around sustainability, the importance of soil, issues around chemical inputs and so on. It really is a sector that deserves our full attention.
The Government have taken the necessary step to ensure the continuity of trade through this SI. If there is any concern, it is really that this is a period of certainty for only 21 months. As annexe 2 mentions, at the end of that period, things will become uncertain again. In farming, 21 months is as nothing. If you are trying to make investments or change your farming methods, or if you are in conversion, 21 months is an extremely short time. Both producers and UK certification bodies would like to move as soon as possible to a period of greater certainty; I hope that the department is working on that.
The question of how the regulation will be administered, controlled and, particularly, developed in the light of future changes and challenges is something that I hope the Minister can touch on in her reply. Undoubtedly, there will be challenges from developments within other organic regulations. It is a fairly fast-moving scene now, with different products being withdrawn or coming on to the market. Of course, if we start to enter into trade agreements with the US—heaven forbid, but it is possible—that will be a massive challenge. I hope the Minister can give us some certainty about how this is going to be developed.
For consumers, it is equally important that the certification is gold-plated. Organic products command a premium price, so it is essential that consumers, when paying that premium price, can absolutely rely on the origin processing methods of that produce. Otherwise, if any doubt enters that market, it would adversely affect all those who are engaged in genuine organic production.
It would be difficult this afternoon not to mention tariffs—I heard the Minister’s caveat, so I will mention it only briefly. That will be another massive pressure on producers. I gather that tariffs are about to be published or may have been published this afternoon. That is another huge pressure on producers that I hope we will have the chance to debate in your Lordships’ House in the very near future.
My Lords, I am grateful to the Minister for introducing these SIs this afternoon and for organising the helpful briefing beforehand. We accept that these SIs are necessary to maintain current standards regulating the UK’s growing organic sector. The continued availability of high-quality produce and sustainable food supplies, in which the organic sector plays a key role, is vital for our food industry and important for consumers. For example, the Soil Association reports that the UK organic sector grew by 5.8% in 2018, its eighth consecutive year of growth. As the EM makes clear, the industry is worth something like £2.2 billion to the UK economy. I very much take the point of the noble Baroness, Lady Byford, who quite rightly said that so many people in that sector work in small businesses and make a particular contribution to the economy in that regard. Obviously, it is important that their futures are protected.
The noble Baroness, Lady Miller, said she felt that the sector did not have any concerns about these SIs. I will come back to that, but the Minister will be aware that the industry is already reporting negative impacts caused by the ongoing uncertainty of Brexit. Confidence is being undermined and businesses are warning that the consecutive years of growth achieved by the UK organic sector could be at risk. Therefore, we are looking to this batch of organic-related SIs, and to what the Minister is able to say this afternoon, to reassure the market of continued access, which the sector deserves and requires.
With this in mind, I have some questions for the Minister, the first of which is on imports. The noble Baroness, Lady Miller, raised the issue of the 21-month deadline. Annexe 2 of the Explanatory Memorandum says:
“For a strictly time-limited period of 21 months we will exempt the need for additional checks or paperwork for organic goods being imported directly from the EU, the EEA states or Switzerland except those organic goods which do not originate from but are simply transiting through these territories”.
I would like to explore what that 21-month deadline means. Can the Minister give some clarity on that? Has that amount of time been chosen to line up with the transition period? If so, what would happen if the transition period was extended? Is it an absolute deadline whether there is a deal or no deal? Is it written in blood, so to speak? Perhaps she could clarify the status of that 21-month deadline so that we are all clear on that.
Secondly, on exports, as has been touched on, future export arrangements with the EU are a matter for future negotiations. But can the Minister give us an assurance that future access to the EU market for our strong UK organic exporters is indeed a priority for the Government? Can she explain why we are giving guarantees to organic imports while no such guarantees are in place for UK organic exports? There is an imbalance there, and perhaps the Minister can explain why that is the case.
The Government have given notice that, after 29 March, importers will no longer use the EU’s Trade Control and Expert System New Technology, or TRACES, to register consignments of organic produce but must use a manual UK organic import system while a digital system is being developed. Can the Minister give the Committee an update on the progress in building the UK’s own digital system? Will it be fully functional on exit day? What work is being done to ensure that UK industry and its international partners are aware and prepared for this change? What assurances can the Minister give that the temporary manual system, and eventually our own permanent IT system, will provide the same level of certainty over origin and movement of produce as we have at the moment?
Paragraph 12.3 of the Explanatory Memorandum, on control of imports, explains that there has not been an impact assessment but:
“There may be minimal familiarisation needed for businesses to set up to use the new import and export systems”.
Can the Minister say what “minimal” means in this instance? Is she assured that this rather minimal objective has been achieved, and will that give businesses the information and knowledge that they need to be able to operate under these new systems? In other words, is the Minister sure that the communication and training systems are in place, running fully and meeting their objectives?
On the ongoing issue of resources and expertise, annexe 2 to the Explanatory Memorandum on control of imports states:
“The UK will be able to accept applications from overseas control bodies to certify to the UK organic standards, and subsequently approve these bodies if the UK wishes”.
Currently, Defra has approved eight certification bodies: six in the UK and two in Ireland. Is any additional expertise or resource needed for the UK to consider and process other applications when we are basically on our own in this matter, rather than having the EU’s information scrutiny process to rely on as well? Are those eight certification bodies up to the job and resourced properly, and do we need other certification bodies?
On a small point, annexe 2 in both SIs explains that certain duties—in Articles 29 and 38 of the Council regulations—have been downgraded from “shall” to “may”. The notes explain that these duties have already been completed by the EU. Will the Minister provide more information on what these articles include and why the specific duties have been downgraded? What is the thinking behind that? If they have been fully completed by the EU, perhaps they are not needed at all and there should be no reference to “may”.
On consultation, paragraph 10.2 in both EMs—they are word for word, so someone has done a great cut-and-paste job there, unless I have got that wrong—states that the department has,
“worked with the United Kingdom Organic Certifiers Group”,
on this legislation, but does not say whether that group was in agreement with the proposals. The noble Baroness, Lady Miller, said she thought they were, but I would like clarification on this. Were any concerns raised by the group concerning these SIs? If so, have they now been adequately addressed?
Finally, I turn to the urgent consequences that would arise in the event of a no-deal exit. The Minister will be aware of the serious concerns raised by the industry. In the past couple of days, the NFU issued a press release, and the Soil Association recently published an open letter to the Secretary of State for Defra in which it raised concerns that the Brexit impasse has put growth at risk, caused uncertainty for suppliers and supply chains, and,
“risks harming the long-term prospects for more sustainable agriculture in the UK”.
If the UK does not achieve equivalence with the EU in a no-deal scenario—mutual recognition of one another’s organic standards—the EU market will be closed to UK organic certified produce from 29 March. What progress have the Government made in agreeing equivalence with the EU in the case of no deal? If the UK becomes a third country, UK organic control bodies will need to apply to the European Commission for recognition, and these applications can take up to nine months. The control bodies are not able to make an application until the UK becomes a third country. Defra has said it is negotiating the possibility of an expedited application process in the event of no deal: it would be very helpful if the Minister could give the Committee an update on these negotiations, because a lot of jobs rely on their outcome.
In the event of no deal, the labelling of organic produce becomes something of a minefield, as the Government have themselves acknowledged in a technical note they published last month. What kind of grace period will companies be guaranteed to use existing stock before they make the necessary changes? Have the Government done an impact assessment on the cost to industry of the uncertainty over whether they have to overhaul their entire packaging and labelling provision in the event of no deal? I know that these are broader issues, but the Minister will understand the real anxiety that this prospect is causing to the organic sector. I hope she will be able to put on record some words of reassurance that these issues are being urgently addressed so that our very strong UK organic sector can be protected. I look forward to her response.
I thank all noble Lords for their contributions today and for giving up the time to meet me beforehand to share some of their thoughts about these SIs. I start by recognising the strength of feeling across the Committee today about the strength of the organic sector in the UK. This was touched upon by my noble friend Lady Byford, who noted that the sector is worth £2.2 billion. Our figures say £2.3 billion, but what is £100 million between friends? It is an incredibly important area of growth and we must make sure that it continues to be strong and a key sector in the future. She talked about the fact that many of these are smaller operators, often with five to 10 members of staff, if that, and they are a very important part of the UK organic regime. The control bodies certifying organic operators are on the ground and are in touch with these businesses. While they cannot coach these businesses, they can provide them with information—and that is precisely what they do. I reassure noble Lords that there are no expected costs relating to this SI for such producers.
I will come on to the minimal familiarisation slightly later, but really it is very small. Familiarisation is only for those involved in import and export; for the majority who are not involved in those areas, this SI will have no impact at all.
It is important to note that we envisage financial support for organic farmers. I look forward to working with my noble friend Lord Gardiner on the Agriculture Bill when it finally gets to your Lordships’ House; I am sure we will have some good debates on that one—but it is not with us just yet, so back to no-deal Defra SIs.
The noble Baroness, Lady Jones of Whitchurch, asked about the 21 months. I agree with her: I looked at it and wondered why on earth that particular date was chosen. It was chosen for a good reason. The current EU organic regulation is due to be replaced from 1 January 2021, so it was thought appropriate to limit the recognition of these products to 31 December 2020 as those dates are commensurate. That date also happens to be the end of the implementation period, but this is a no-deal SI, and there would be no implementation period. Obviously I cannot give clarity as to what will happen thereafter; that will be up to any number of factors. However, we already have a very good idea of what those new regulations will be in 2021. Over the 21-month period, the Government will look at those regulations and aim to give the sector as much clarity as soon as we can. We recognise that farming cycles are much longer than those in other industries.
On regulations being developed in the light of future changes, the UK has always been a leader in this sector and it is our intention that we will continue to be so. We have an opportunity to be at the forefront of developments; if we do not have a deal with the European Union, we can work as an independent sovereign state and make sure that we pull others with us as we increase organic standards. We will of course work very closely with those in the industry—without them there is no organic sector at all—to ensure that future changes work for the UK and for consumers.
The noble Baronesses, Lady Jones and Lady Miller, mentioned tariffs. The noble Baroness, Lady Miller, is quite right: there was an announcement on tariffs at 7 am; I listened to it as I was driving. I have not had the opportunity to go into that in great detail. I suggest she look at what was announced today; it concerned tariffs across all sorts of industrial sectors. Organic products are subject to the same tariffs regime as conventional non-organic products. There has been a bit of movement on tariffs, and the Government have tried to reach a balance between making sure that consumers and businesses are protected and reducing tariffs as much as we can within that framework. It is, however, very important to remember that this is a temporary tariff; the tariffs announced today will apply only for a 12-month period, during which we will undertake a full review such that we can adjust the tariffs going forward. If there is no deal, we will be talking about tariffs for a very long time—which will be fun.
I turn now to the issue of uncertainty. The noble Baroness, Lady Jones, is absolutely right. Within the powers we have, we have managed to create as much certainty around imports as we possibly can by providing this 21-month period, during which time the system will stay at is.
It is obviously not within our gift to tell the European Union exactly what to do for our exports. However, for UK products to be exported to the EU, organic control bodies will need to be authorised by the EU. There is no definite length of time that it would take for this process to happen. The Government are already in technical conversations with the EU about making sure that it happens as quickly as possible, so we are working hard on that. If there is no deal, this will obviously come to the fore. We recognise the concerns of the NFU and the Soil Association.
I will investigate the expedited process further—it is not something about which I have information—but we recognise the concerns that this is a consequence of Brexit, not of the SI before us. I am sure all noble Lords would agree that, in this case, it would be very good if we could get a deal to make sure that our exports continued in the smooth fashion that they would expect. However, the EU has equivalency arrangements with a number of non-EU countries. The UK is aiming to transition those over to mirror the current arrangements. Because our organic standards will be as high as the EU’s, we believe that it will be possible to transition them to improve the flow of exports to those nations.
I turn to the topic of choices; may I point out first that it is TRACES NT, not TRACES? TRACES NT is new technology for controlling the import of organic food and feed; TRACES is for controlling the import and export of live animals, so for the record they are different systems. Regarding assurances on the manual and subsequent digital import system which replaces TRACES NT, work has been carried out to establish the needs of all users for its electronic replacement. The interim manual system largely mirrors the system that was in place just 17 months—a year and a half—ago. Users who could use that manual system will be familiar with how this works, and we have carried out a trial to make sure that they are still able to use it. We have also refined the guidance for all users. We will communicate with and issue further guidance for the sector, including third parties involved in using this system.
Organic products en route from third countries or in transit to the UK before the UK leaves the EU will be accepted with an EU certificate of inspection. Products that leave a third country after the UK has left the EU will be required to have a UK certificate of inspection, rather than an EU one. Instructions on the introduction and use of the UK certificate will be issued shortly. This brings me to the point about minimal familiarisation, as mentioned by the noble Baroness. That process should be within recent institutional memory for many of the organisations that will need to use it.
An issue raised by the noble Baroness, Lady Miller, and I think by the noble Baroness, Lady Jones, was about the UK taking power to accept applications from third-country control bodies and to permit them to operate in the UK. They asked who would oversee these control bodies. The Commission currently has the power to recognise third countries as equivalent to the EU, and to recognise control bodies as able to operate in third countries for the purposes of the input of organic products to the EU. This power will of course be transferred to the Secretary of State. Officials are in the process of considering how they will process and consider any such application but, before the UK accepts any application from third countries or control bodies, rigorous checks will be carried out to ensure that the current high organic standards in the UK are maintained.
Concerning the additional resource challenges, the UK is taking back control of organic regulations and the powers currently held by the EU. UK organic control bodies should continue doing what they do to a world-class level. The Government are working closely with the organic control bodies to ensure that any additional burden that falls on the organic sector is properly managed so that there is no fall in standards or public confidence as a result.
Turning to some final questions, what are the consequences of downgrading the references from “shall” to “may”? When EU Regulation (EC) No. 834/ 2007 was originally drafted, a number of references referred to the Commission needing to create specific rules. These were subsequently laid down in implementing EU Regulation (EC) No. 889/2008 and EU Regulation (EC) No. 1235/2008. Therefore, there is no longer a need for the UK SI to require rules to be made in respect of these matters—they have already been made. However, these instruments retain the power for further detailed rules to be made if necessary. I might write on that one. I do have an example here, but I think it would be more helpful if I put that in a letter, so that all noble Lords can understand the difference between “shall” and “may” in that circumstance.
I wish to assure the noble Baroness, Lady Jones, about the consultation. Concerns were raised about many issues, but it was the view of the group that there were not significant concerns about this SI. The biggest concern obviously is to maintain frictionless trade with the EU and we will do everything we can to address that.
Finally, there was a question about the grace period. Labelling is not covered in this SI, so I do not have anything further on that. However, I assure the noble Baroness that organic products that are already on the market in the EU before 30 March will be able to be sold and go through the system, but any exported after 29 March will not be able to be sold as organic until we have other arrangements in place.