Taiwan Is Challenging Organic Market

WASHINGTON - Sep 21/17 - SNS -- Tough tolerances on residues of unapproved chemicals make Taiwan a challenging market for organic exporters, notes the U.S. agricultural attache for the country.

"Taiwan maintains a number of requirements that are not found in international organics trade elsewhere. These requirements are an impediment to . . . exports to Taiwan.

"Taiwan regulations do not allow product labeled as organic to test positive for any unapproved substances. Unlike most other organic producers, such as the United States and European Union, this policy does not take into account unintentional presence of unapproved substances," The U.S. Agricultural attache reports.

Near Zero Tolerances

Taiwan maintains a limit of quantification (LOQ) for compounds not approved for organic production. The LOQ for pesticides is set at 0.01 ppm for fresh vegetables and fruit, spice plants and other herbs, 0.02 ppm for cereals and dried beans, and 0.05 ppm for dried tea, spice plants and other herbs. If the testing value is below the LOQ the inspectors will determine the result to be 'Non-Detected.' These levels are so low that they create a de facto zero tolerance for all un-approved substances.

AFA conducts random testing on imported organic products. The testing and approval process can take a month or more, during which time the product can be released onto the retail market but cannot be labeled as organic. The product can be labeled organic only after the testing and approval process is completed. AFA and local governments also conduct retail market surveillance of organic products.

If a product certified as organic product is found to contain traces of unapproved compounds during retail inspection AFA will add that certifier to a list of certifiers subject to increased inspection. Future imports of products certified by certifiers on this list are subject to 100% residue testing. The current list can be found on the AFA website.

The certifier and exporting country must submit an investigative report and compliance plan to the Agriculture and Food Agency (AFA) in order to remove a certifier from the list. If AFA accepts the reports, the certifier is moved to a 'watch list.' Testing for products certified by a certifier on the watch list will return to the normal inspection rate after five consecutive shipments of products with the exact same country of origin, tariff code, and importer are found to be compliant.

Removal Difficult

In practice, the requirements for removing a certifier from 100% testing are extremely difficult to meet. AFA often declines to accept investigative reports given the significant differences between Taiwan's organic requirements compared to those in most other countries. Even if AFA accepts the report, it is very difficult to meet the requirements for five consecutive shipments with the same certifier, country of origin, tariff code, and importer.

Due to the risk, most importers will not import any organic product that is subject to 100% residue testing due to the long waiting time for approval and risk of rejection due to Taiwan's de-facto zero-tolerance standard for traces of unapproved compounds. The U.S. agricultural attache in Taiwan is not aware of any certifier being successfully removed from the 100% inspection rate after AFA put it on its list.

Tougher Organic Regulations Pending

In May 2014, 22, Democratic Progressive Party (the majority party) legislators introduced a draft law titled 'Encouragement for the Organic Agriculture.' On November 9, 2015, COA released their own draft legislation regarding the accreditation, certification, production, marketing, and labeling of organic products, including imported products, as well as regulations regarding organic equivalency between trading partners. The draft text mandates bilateral organic equivalency, revoking any existing unilateral organic equivalency recognition Taiwan has with other trading partners.

On July 27, 2017, the Executive Yuan announced that the COA's draft organics law had passed the internal review and would be submitted to the Legislative Yuan at its next session in September 2017.

The bill retains the clause ending 'unilateral recognition.' The bill will enter into force one year after it is passed by the legislature. After that, Taiwan would cease recognition of other trading partners' organic products if they do not recognize Taiwan's organic system as equivalent within one year.

At this time, none of Taiwan's trading partners have recognized Taiwan's organic system. Taiwan has outstanding requests with a number of trading partners, including the United States, European Union, Japan, and New Zealand. AFA's list of 'recognized countries whose standards are equivalent to Taiwan standards for organic agricultural and livestock products' includes the United States, Canada, New Zealand, Australia, Chile, Switzerland, and 16 European Union member states.

On May 5, 2017, COA promulgated the guidance for recognition of environmentally friendly agriculture grower group and as well as the guideline for subsidization of eco-friendly and organic production. These policies provide subsidies to farmers to encourage them to reduce the use of pesticides and chemical fertilizers amongst farmers who are not yet ready or able to be certified as organic.

Some farmers in Taiwan are experimenting with the Participatory Guarantee Systems (PGS) as an alternative certification. The International Federation of Organic Agriculture Movements (IFOAM) - Organics International supports the development of PGS as an alternative and complementary tool to third-party certification within the organic sector and advocates for the recognition of PGS by governments. On December 12, 2016, Tribal E-shop, a shop run by Taiwanese aborigines, was listed by IFOAM PGS group as Taiwan first PGS operator.

Slow Expansion in Organic Area

Taiwan authorities are working to promote organic production and consumption. The Council of Agriculture (COA) provides subsidies to organic farmers and has set a target of increasing certified organic land from a reported 6,784 hectares in 2016 to 15,000 hectares by 2020. According to COA statistics, revenue from domestic organic production reached $123 million in 2016.

During Taiwan's 2010 Agriculture, Forestry, Fishery and Animal Husbandry Census, farmers reported 45,438 hectares of farmland under production without using any chemical fertilizers or pesticide, many times larger than officially certified organic farmland. The large difference may be due to in part to the difficulty and expense in getting land certified as organic, as well as the required waiting transition period to certify former conventional farms as organic. COA has set a target of increasing certified organic land to 15,000 hectares by 2020.

On September 1, 2016, the Executive Yuan announced a goal for school lunches to include domestic organic products in at least one meal a week. COA was given responsibility for managing this program. Eleven counties have adopted the one meal a week goal, covering 780,000 students. Based on conversations with organic farmers, the prices offered by COA through the school lunch program are not competitive. Moreover, smaller farms also have trouble supplying the large orders requested by COA under the program.

Market for Organic Foods

Revenue from domestic organic production reached $123 million in 2016 according to COA statistics, while imported organic products were reported to total $40 million. The actual amount of imported organic products may be higher as there are not separate tariff codes for all organic products. Per capita spending on organic products in Taiwan remains low by developed country standards. Unlike Taiwan, the United States tracks organic imports and exports for a select group of fruits and vegetables. Exports of these products to Taiwan totaled $28 million in 2016, making it our fourth largest export market after Canada, Mexico, and Japan.

According to the Almanac of Food Consumption Survey by Taiwan Food Industry Research and Development Institute, 27% of Taiwan consumers have consumed organic food or beverages products in recent past year. The main consumer demographic for organic products are women aged 45-60 years old. This group is willing to pay a premium for products they perceive as higher quality.

Organic products cost significantly more than their conventional counterparts and, based on a limited survey of retail markets by post, the premium for imported organic products compared to conventional products in Taipei is around 180% for apples, 115% for cereals, and 400% for cheese.

Consumers tend to associate organics with food safety and sustainable farming practices. According to sources, some consumers in Taiwan prefer organics because of their Buddhist beliefs.

Organic products are mostly sold through organic chain stores. On average, organic products make up around a third of the products sold in these stores. These stores also feature 'natural' foods, prepared health foods, and vitamins. Organic products are also available at conventional retail stores, but scattered across different sections.

A growing number of importers are claiming their products as 'natural' instead of organic due to current onerous requirements for importing organic products. Even though the price for 'natural' products is higher than conventional products, it is still around 20% less than an organic-labelled product. Some major grocery stores that have established sales of organic products are choosing to black out the organic labels on the products so that they can continue supplying their customers with these products while avoiding then lengthy delays and expenses involved with importing organic products.

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