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Viewing cable 05TAIPEI3606, U.S. ORGANIC EXPORTERS HAVE A GROWING MARKET IN

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Reference ID Created Released Classification Origin
05TAIPEI3606 2005-08-30 07:32 2011-08-23 00:00 UNCLASSIFIED American Institute Taiwan, Taipei
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 04 TAIPEI 003606 
 
SIPDIS 
 
USDA FAS FOR CMP/PPD/TRINGE 
STATE FOR EAP/TC, EAP/EP 
PLEASE PASS AIT/W 
 
E.O. 12958: N/A 
TAGS: ECON EAGR PINR EINV TW
SUBJECT: U.S. ORGANIC EXPORTERS HAVE A GROWING MARKET IN 
TAIWAN 
 
1. (U) Summary:  U.S. exporters of organic products will see 
a growing market in Taiwan.  In the past, inadequate 
labeling rules have made it difficult for consumers to 
determine whether a product was truly organic.  Three new 
changes could increase consumer confidence in organic 
products.  First, a new Agricultural Safety bill is expected 
to consolidate regulations of organic products under one 
government agency.  Second, new labeling rules for organic 
products are scheduled to go into effect in January 2006. 
Finally, new retail opportunities are opening up in the form 
of upscale supermarkets that specialize in organic/natural 
foods.  End Summary. 
 
Taiwan's Organic Standards 
-------------------------- 
 
2. Organic rules in Taiwan are similar to USDA organic 
standards.  Taiwan's organic standards distinguish between 
"organic" and "adjusted organic."  Organic crops use no 
chemical pesticides, herbicides or chemical fertilizers. 
Organic methods must be used for three years before a crop 
can be certified organic.  For "adjusted organic," there is 
limited use of pesticides.  The adjusted organic standard 
allows for pesticide use only during certain times of the 
year.  Organic livestock and poultry must be raised on 
organic feed.  They cannot be fed antibiotics, animal by- 
products, growth hormones or genetically modified organisms 
(GMO). 
 
3. Currently, the government has licensed four non-profit 
entities to certify organic farmers.  Farmers can apply to 
any of the four entities for certification.  Once the 
farmer's land passes inspection, the farmer can label all 
products with a seal from the organization that inspected 
them.  The seal can only be applied on certain products: 
vegetables, fruits, tea and rice.  This seal lets consumers 
know that the product has been grown in accordance with 
Taiwan Organic standards.  The four certifying entities: FOA 
(Formosa Organic Association), TOPA (Taiwan Organic 
Production Association), TOAF (Taiwan Organic Agriculture 
Foundation) and MOA (Mokichi Okada Association).  Based on 
an AIT Officer's personal observations, MOA is the most 
widely recognized label in Taiwan.  MOA is an international 
organization based in Japan that promotes organic farming. 
 
Lack of Labeling Regulations Inhibit Organic Market 
--------------------------------------------- ------ 
 
4. Although the organic standards are stringent, confusing 
labeling laws have prevented the market from growing.  "Many 
people want to buy organic products but don't know who to 
trust.  Anyone can use the word 'organic' without penalty." 
said James Su, president of FOA. 
 
5. There are three reasons why labeling regulations are 
confusing to customers.  First, compliance is voluntary. 
Farmers do not have to be certified to claim they are 
organic.  There is no restriction on using the word 
"organic" to promote one's product. Some producers have 
developed their own organic standards instead of going 
through the expense of being certified. 
 
6. Second, there are a several different organic labels 
available to farmers.  The four official certifying entities 
each issue their own seal. This creates confusion for 
customers inundated with a myriad of different seals on 
organic products. 
 
7. Third, the current certification seals can only be used 
on vegetables, fruits, tea and rice.  Products such as meat, 
poultry or processed foods cannot be certified in accordance 
with Taiwan organic standards.  Selena Bai, an official from 
the Council of Agriculture, Taiwan's equivalent of the USDA, 
told AIT/T that certifying livestock and poultry requires 
additional investment because of the training required.  Bai 
also said that no certifying entities have applied for the 
required additional training.  For products that cannot be 
certified, consumers have to rely on the claims of the 
manufacturer. 
 
New Agricultural Food Safety Bill in October 2005 
--------------------------------------------- ---- 
 
8. COA officials admitted that the lack of strict organic 
labeling rules is an impediment to developing a robust 
organic market.  Selina Bai, said "All of these concerns are 
addressed in the new Agricultural Food Safety Bill we are 
introducing to the Legislative Yuan in October 2005." 
According to Bai, the main problem is that responsibility 
for organic products is spread out over many different 
divisions within the COA.  For example, meat products are 
regulated by an animal husbandry division while product 
labeling is regulated by food products safety division.  The 
new law will give one division within COA broad powers to 
regulate all aspects of the organic market.  In addition, 
the new law will no longer make compliance voluntary. 
Organic products will need to be certified in accordance 
with Taiwan organic standards. 
 
9. Two COA officials contacted by AIT would not predict when 
the bill would become law.  But the officials said that 
there was pressure on COA to have the bill completed by 
October 2005 in order for it to be introduced in the current 
session of the Legislative Yuan.  The current session ends 
in January 2006. 
 
 
Uniform Organic Seal Slate for January 2006 
-------------------------------------------- 
 
10. As a stopgap measure, until the Agricultural Safety bill 
becomes law, COA will introduce a new organic seal in 
January 2006.  This new seal will replace the four different 
certification seals that are currently being used.  The four 
official certifying entities will begin issuing the seal 
instead of their own seals in January 2006.  COA officials 
hope that consumers will place more confidence in this seal 
because it will be the first seal approved by the 
government.  COA plans to begin educating the public about 
the new organic seal in December 2005. 
 
11. Bai explained that until the new Agricultural bill is 
passed, COA cannot require that organic farmers be 
certified.  The hope is that consumers will vote with their 
dollars and buy only organic products that carry the COA 
seal.  She hopes that if the public identifies the COA seal 
with organic products, organic farmers will have to apply 
for certification to continue selling their products. 
 
Private Investors see Potential 
------------------------------- 
 
12. Private investors see the organic market as ready to 
take off.  In August, Lawrence Hsu, owner of Mother Nature, 
the largest wholesaler of organic foods in Taiwan, told AIT 
that he will open Taiwan's largest organic/natural foods 
supermarket in Kaohsiung in September 2005.  Hsu has been 
importing organic food products for the last ten years; his 
main business is selling organic soybeans to stores that 
then process it into tofu and soymilk.  Now he wants to 
process and sell the food products directly to the customer. 
 
13. Hsu spent USD 10 million to build the 34,000 sq ft. 
store named Lohas.  A second store is being built in 
Taichung.  Mr. Hsu plans for 90 more store locations over 
the next two years. 
 
14. Mr. Hsu believes the image of an upscale organic 
supermarket will appeal to customers.  "When I go to the 
U.S. I notice that organic supermarkets like Whole Foods can 
charge a premium and still be very popular."  Mr. Hsu hopes 
to have the Lohas name carry the same cachet with Taiwan 
shoppers. 
 
15. A supermarket chain will bring big changes to the retail 
market in organic products.  Currently, the retail market 
for organic products in Taiwan is fragmented.  There are 
about 800 stores that specialize in natural foods.  Most of 
these stores are individually owned and about the size of a 
typical convenience store.  A large supermarket chain will 
force smaller stores to consolidate and may also attract 
more customers to organic products. 
 
16. In addition, a larger retail market will push the Taiwan 
government to regulate the market more effectively.  Hsu 
hopes the Lohas supermarket chain will lead to the creation 
of a trade group to lobby for stricter laws on organic 
products. 
 
Demand for organic growing 
-------------------------------------- 
 
17. Precise statistics on organic food sales are impossible 
to determine because the COA does not differentiate between 
organic products and regular food products in their records. 
Some estimates can be made based on imported organic food 
products.  Mother Nature for example, purchased USD 6 
million in U.S. organic products in 2004.  The company 
imports approximately 1.3 millions tons of organic food 
grade products a year.  Based on his company's imports, Hsu, 
the owner of Mother Nature, estimates that Taiwan consumers 
spent USD 36 million on organic products in 2004.  He 
estimates that the total organic market in Taiwan has been 
growing 7-10% a year. 
 
18. An indication of the market's potential can be found in 
sales of industrial food processing machines for organic 
products.  These machines are sold to supermarkets and 
restaurants.  They turn wheat or soybean into noodles, 
bread, tofu and soymilk.  Mother Nature, in addition to 
selling the machines, also supplies the raw materials for 
the machines. Hsu's explains that stores would not be 
investing in these machines if the demand was not there. 
Hsu said "Over 500 stores are using the machines to process 
organic products.  I estimate machines sales are growing 10- 
20% every year." 
 
19. Another indicator is the amount of certified organic 
farmland.  More farmers are applying to have their farmlands 
certified as organic.  COA statistics show that in 2004 
Taiwan had 1246 hectares of certified organic farmlands. 
This is an increase of 39% from five years ago when there 
were 898 hectares of organic farmland. 
 
20. James Su of FOA, believes the actual amount of organic 
farmland is much greater.  Many organic farmers do not see 
the need to be certified.  According to him, many of these 
farmers are small producers and sell to customers based on 
word-of-mouth and through local produce delivery 
organizations. 
 
U.S. Exporters can Benefit from Taiwan's organic market 
--------------------------------------------- ----------- 
 
21. U.S. exporters should benefit from Taiwan's growing 
organic market.  In Asia, many U.S. organic exporters have 
been focused on Japan and Korea for their products. 
However, the Taiwan market is ideally suited for U.S. 
organic exporters.  Unlike Japan and Korea, organic products 
do not have to be re-certified before they enter Taiwan. 
U.S. organic products can display the USDA organic seal in 
place of Taiwan certification.  However, the new 
Agricultural Safety bill may change this. COA official 
Selena Bai said that they are considering different methods 
for how imported organic products will be treated. Since the 
bill is still being drafted, it is uncertain what the final 
decision will be. 
 
22. In addition, many Taiwan consumers consider U.S. food 
standards to be more reliable and safe.  They may give more 
weight to an organic product from the U.S. than a similar 
product from Taiwan.  This is a fact that is apparent to 
Hsu. Sixty percent of the products in his Lohas supermarket 
will be of U.S. origin. 
 
23. Comment: The new Agricultural Safety Bill and the new 
COA organic seal are steps in the right direction for the 
organic market in Taiwan.  Questions remain about when the 
COA Agricultural Bill will become law and what impact this 
may have on the current status of the USDA organic seal.  It 
is also uncertain what impact the new COA organic seal will 
have if the Agricultural Bill is not passed.  Without the 
new law the organic seal will still only be voluntary.  A 
new upscale supermarket chain specializing in organic 
products will provide new retail opportunities for U.S. 
organic exporters.  All of these developments are 
indications that the organic/natural foods market in Taiwan 
is on the rise. End Comment.