Suspicious Organic Grain Shipment Intercepted at U.S. Port

April 23rd, 2018

UPDATE: Interim Victory for Organic Farmers

A federal judge has denied Sunrise Food International, Inc.’s request that it be allowed to immediately unload 25,000 metric tons of what is purportedly “organic” corn currently stranded off the shore of California.

Sunrise asked the court to issue an emergency order allowing it to dock and unload the shipment, arguing that it faces catastrophic monetary losses and damaged business relationships if it is forced to comply with a U.S. Customs directive to re-export or destroy the shipment.

United States District Court Judge A. Mendez concluded that allowing Sunrise to unload and distribute the corn at this stage would essentially determine the outcome of the case and would be improper under the law.

The judge was also unconvinced by Sunrise’s argument that its monetary losses justified immediate court action.  If Sunrise was able to sustain approximately $11,500 in daily losses for nearly a month before asking the court to issue the restraining order, it failed meet the requisite standard for the court to act on an emergency basis.

Sunrise can pursue another avenue for interim relief, or it can elect to proceed in arguing the merits of the case. Should Sunrise pursue additional interim relief, a hearing is tentatively scheduled for May 22, 2018.

For now, the corn will remain offshore.  Cornucopia will continue to follow this important case.


Russian Corn Rejected; Lawsuit Filed

An organic industry watchdog, The Cornucopia Institute, which has been monitoring imports after investigations in 2007 discovered wholesale fraud, reports that twenty-five thousand metric tons of purportedly organic corn, grown in Russia, Moldova, and Kazakhstan, currently sit idle on the M/V Mountpark, a United Kingdom-flagged vessel lingering off the coast of California.

M/V Mountpark
Image courtesy of VesselFinder/
Duncan Brown

Whether the shipment, which also contains organic soybean meal, is ultimately allowed entry into the United States rests on a ruling by a federal district judge in California. On March 29, 2018, Sunrise Foods International, Inc., a Canadian-based importer, sued the USDA and U.S. Customs for rejecting the shipment, which Sunrise attests is worth millions of dollars.

Farmer-owned cooperatives in the United States contend that domestic grain producers have lost hundreds of millions of dollars in revenue in recent years, facing competition from fraudulent grain being imported to feed certified organic livestock in the U.S. Despite a decade of pressure from Cornucopia, the USDA’s National Organic Program did not start paying attention to the massive alleged improprieties until The Washington Post published an investigative story last year.

In this case, it wasn’t organic inspectors who intercepted the dubious shipment, but U.S. Customs that targeted the shipment for physical examination. Customs officials contacted the Animal and Plant Health Inspection Service (APHIS), a division of the USDA, to inquire about the country of origin of the corn on the M/V Mountpark.

Based on organic certification documents APHIS procured from the National Organic Program, officials testified that they had determined the corn was grown in Russia, Moldova, and Kazakhstan. Therefore, the shipment was illegal under federal regulations. Importing raw corn seed from certain countries, including Russia, Moldova, and Kazakhstan, violates USDA regulations because of concerns that contamination by pests and pathogens could place domestic producers at risk.

U.S. Customs continues to reject the shipment for offloading on the basis it violates federal law.  According to court filings, it appears Sunrise and/or its trading partners provided U.S. Customs with shipping documents that inaccurately identified Turkey as the country of origin when organic transaction records indicate this to be false. Sunrise denies the allegations made by federal enforcement agents.

“Instead of the USDA National Organic Program judiciously overseeing the massive amounts of grain being imported from countries with a history of fraud, both here and in Europe, these alleged improprieties are being investigated and discovered through the seemingly serendipitous, unplanned interactions between different USDA agencies,” said Anne Ross, a staff attorney/researcher with Cornucopia who holds an advanced degree in agricultural law.

Customs officials told the court that the M/V Mountpark’s cargo was placed on hold and selected for physical examination after their Automated Targeting System (ATS) flagged the shipment.

Although Cornucopia said that it is heartening to see different programs within the USDA cooperating, it is unlikely that the country of origin, or questions about organic authenticity, would have been discovered in this instance if the visual inspection of the cargo hadn’t led to suspicion.

Slammed in a damning audit by the USDA Office of Inspector General, and embarrassed by last year’s revelations in The Washington Post, the USDA’s National Organic Program has been criticized as primarily engaging in damage control and discussion within the industry rather than implementing emergency rulemaking to protect U.S. farmers and consumers from fraud.

Regarding the current controversial shipment, the importer, Sunrise, contends that because the corn was “cracked,” not “raw,” rules prohibiting the importation of raw corn from certain countries don’t apply.  However, court documents indicate the USDA disagrees, stating the condition of Sunrise’s corn does not meet the requirements of processed “cracked corn.”

Undoubtedly, the outcome of this dispute will have important consequences for domestic organic grain markets.

John Bobbe, Executive Director of Organic Farmers’ Agency for Relationship Marketing (OFARM), an umbrella organization representing organic grain marketing cooperatives in 19 states, noted, “The information revealed thus far in the lawsuit gives the USDA’s organic program a roadmap, of sorts, on where to focus its enforcement efforts, including ports of entry.”

Cornucopia and OFARM have long advocated for the disparate regulatory programs within the USDA to collaborate on organic compliance. “The National Organic Program must take initiative to coordinate with their colleagues in other departments of the USDA, including those stationed overseas, to identify, as a standard course of business, misrepresentations made on shipping documents, as it appears is alleged in this case,” added Ross. Cornucopia researchers have also identified instances where the APHIS inspectors have discovered pest infestations in imported shipments, requiring treatment with synthetic, toxic fumigants. With no set procedure to inform organic program regulators, this has resulted in contaminated shipments entering domestic markets.

OFARM’s Bobbe contends the documents released as part of the pending lawsuit confirm that U.S. farmers are forced to compete with sophisticated international supply chains and illegal shipments of organic corn originating from former Soviet Bloc states with a history of organic fraud already documented in the European Union.

The lawsuit gives insight into the workings of major international players involved in organic grain imports. In legal filings submitted to the court, U.S. Customs officials note that they have encountered previous attempts involving an organic corn importer’s use of Diasub FZE to import whole corn kernels from prohibited countries.

Diasub is a division of Tiryaki Agro Food Industry and Trade Inc., a Turkish company engaged in selling organic grain for livestock feed. Sunrise purchased the corn in the currently embargoed shipment from Diasub. Diasub is also identified as the consignee and shipper of the corn cargo on the M/V Mountpark.

Turkey has long been the subject of scrutiny in the export of organic grain. The May 2017 front page story in The Washington Post documented cases involving three massive shipments of organic corn and soybeans.  All three shipments were fraudulent and all three hailed from Turkey.

According to the USDA’s APHIS, imports of raw corn seed from Turkey are allowed through a permit process, but imports from certain countries, like Russia, are not.  Sworn statements filed by government officials lead some organic industry observers to question whether Sunrise, and/or Diasub, may have altered documentation in an attempted subterfuge to illegally import cheap Russian corn.

“If these companies are willing to apparently cheat, in order to circumvent import prohibitions designed to protect U.S. farmers from noxious pest infestations, why would we assume that they would hesitate to cash in from misrepresenting conventional corn as organic?” asked Mark Kastel, Senior Farm Policy Analyst for The Cornucopia Institute.

The geographic proximity between Turkey and countries including Russia, along with trade transactions carried out by related corporate entities, which often buy and sell organic grain among one another, has created an environment ripe for fraud.

“While there may be sophisticated tax or trade-related justifications for incestuous corporate relationships, this type of corporate structuring certainly creates a fertile field where fraud can go undetected without vigorous enforcement mechanisms,” affirmed Ross.  “And unfortunately, the USDA’s organic program, and some of the largest independent certifiers they accredit, have basically ignored this problem for over a decade.”

There is no doubt the stakes are high. The court’s ruling could shed light on whether sophisticated corporate entities are playing fast and loose with the law by using perceived legal loopholes to legitimize importing organic corn from high-risk regions.

Organic traders, brokers, and livestock companies continue to buy from high-risk regions known for trade in dubious organic commodities. “‘Crack’ the corn to escape regulatory oversight? The game they are playing places the livelihoods of domestic producers at risk and gambles with the credibility of the organic label in the marketplace,” said Kastel.

Sunrise contends it has successfully imported 16 previous shipments to U.S. destinations in the past six months, that it stands to lose millions, and is incurring costs of $23,500 a day while its shipment is denied entry.

It’s unlikely Sunrise will win the sympathies of domestic producers.  Bobbe stated, “Considering our domestic organic grain farmers have lost over $400 million from 2015 to 2017 to fraudulent organic imports, it’s about time we get some relief through regulatory enforcement and judicial redress.  We’ll be watching these proceedings closely.”

The focus shifts later this month to Tucson, Arizona where the National Organic Standards Board holds their semiannual meeting. The policy panel, created by Congress and recently stripped of much of its power by both the Obama and Trump administrations, is sponsoring a panel discussion on how to crack down on organic fraud in imports.

In 2017, The Cornucopia Institute formally petitioned the NOSB, requesting new rulemaking which would require certifiers to intensively check the audit trail of all major import shipments and perform residue testing to ferret out fraud.

Because the majority of organic corn and soybeans fed to certified organic livestock in the U.S. is coming from overseas, The Cornucopia Institute is currently preparing web-based tools that will assist consumers and wholesale buyers in identifying brands that exclusively source high-integrity domestically produced grain.

MORE: Both OFARM and Cornucopia have been concerned in the past that the amount of purported organic commodities being shipped out of Turkey and Romania does not reconcile with the acreage in those countries certified as organic. Industry insiders have long suggested that Russian grain was being illegally transshipped through third countries into the U.S. “This incident appears to substantiate those concerns,” according to Kastel.

Back-of-the-envelope calculations suggest that the volume included in one bulk cargo ship could supplant the annual production of 50 average-sized organic grain farms in the Midwest.

“If that’s true, it’s understandable how multiple ships have completely disrupted the market in the U.S., eroding sustainable prices for domestic producers,” stated Ross.

The formal petition submitted to the USDA by The Cornucopia Institute includes a request for mandatory testing for all bulk shipments entering the U.S.

“If one ship equals the production of 50 average U.S. farms,” said Kastel, “those farmers could be spending $100,000-150,000, cumulatively, on organic certification. It does not seem unreasonable to mandate spending a few hundred dollars on testing to protect consumers against fraud—and family farmers, and the ethical businesses and brands they partner with, from illegal and unfair competition.”

This is not the first time The Cornucopia Institute has uncovered alleged fraud in the imports of organic commodities into the U.S. From 2010 to 2011, partnering with member-owned farmer co-ops in the U.S. and Canadian organic producers, Cornucopia was able to document improprieties by Jirah Milling and Sales, a Québec-based feed mill and exporter.

Jirah was allegedly buying the majority of their soybeans as identity preserved, non-GMO, conventional production and then “laundering” them as certified organic.

Employees saved and shared documentation that was being shredded by the feed mill on a daily basis, and Cornucopia turned that information over when they filed a formal legal complaint with the USDA’s National Organic Program.

Jirah was subsequently banned from organic commerce in its home province of Canada, after voluntarily relinquishing their certification rather than going through an audit by Canadian federal organic officials. However, Jirah was later recertified under the USDA’s organic program by one of the largest certifiers in the U.S., Oregon Tilth, and resumed their exports to the U.S.

Cornucopia’s Kastel said the ultimate culpability for the mountains of fraudulent, pseudo-organic feed grain landing on U.S. shores rests with the giant vertically-integrated agribusinesses that have benefited from the cheap prices and have neglected to perform any due diligence on behalf of their customers.

“Chicken producers like Perdue, or egg producers like Cal-Maine, predominantly conventional enterprises, undercut legitimate farmers by feeding imported feedstuffs,” commented Kastel. “And lobby groups like the Organic Trade Association had nothing but praise for the National Organic Program regarding their oversight of the certification process until the organic manure hit the fan last year after the Washington Post story was published and the OIG released their damning critique of the NOP’s oversight of imports.”

In contrast, Cornucopia’s upcoming buyers guide, focusing on how consumers can shift their purchasing to brands of eggs, poultry, and dairy products produced exclusively with domestic feed, will highlight a number of companies that have gone out of their way to patronize U.S. farmers. One example is Bell and Evans, a modern, family-owned Pennsylvania poultry processor, whose products are available in the eastern half of the U.S. through member-owned cooperatives and specialty stores such as Whole Foods.

Newsletter

Please sign up for Cornucopia's electronic newsletter and action alerts. You can be confident that we will never share or sell your e-mail address and your personal data will be held in strict confidence.
  • This field is for validation purposes and should be left unchanged.