December 10, 2020
Office of U.S. Trade Representative Disputes Canada’s Tariff-Rate Quotas for Dairy Products in First USMCA Enforcement Action
Written by Chloe Marie – Research Specialist
In a press release issued on December 9, 2020, the Office of the U.S. Trade Representative announced that it was taking action to challenge the tariff-rate quota (TRQ) measures recently released by the Canadian government on imported dairy products. U.S. Trade Representative Robert E. Lighthizer stated that these measures were unfair and harmful to American dairy farmers and were contrary to the terms of the United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020.
TRQs provide for a preferential rate of custom duty applied to a defined quantity of agricultural and non-agricultural imported products. The main issue here has to do with the allocation of TRQs for dairy products, including milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other dairy products.
In a letter addressed to the Canadian Minister of Small Business, Export Promotion and International Trade Mary Ng, the Office of the U.S. Trade Representative indicated its objection to Canada for reserving most of the TRQs on dairy products for processors and “further processors,” thus restricting American dairy producers’ ability to sell their products in Canada. The agency also asserted that these allocation measures run counter to the following provisions laid down in the USMCA:
- Article 3.A.2.11(b) because Canada inequitably allocated TRQs to processors and “further processors” at the expense of producers;
- Article 3.A.2.4(b) and 3.A.2.11(e) because Canada did not guarantee fair, transparent and equitable methods and procedures for administering TRQs;
- Article 3.A.2.11(c) because Canada could not allocate TRQs to applicants in proportion to the quantities applied for due to reserving most of the TRQs to processors and “further processors;”
- Article 3.A.2.6(a) because Canada established new criteria for using a TRQ that goes “beyond those set out in [Canada’s] Schedule to Annex 2-B (Tariff Commitments).”
The Office of the U.S. Trade Representative also wrote that it hoped to resolve the issue through consultations with Canada. The U.S. and Canadian governments have 15 days to enter into consultations after the date of delivery of the request, pursuant to USMCA Dispute Settlement provisions. Should they fail to do so, the United States reserves the right to submit the dispute before an arbitration panel for further examination of the matter. According to a media report from CBC News, Canadian International Trade Minister Mary Ng expressed confidence that “Canada is meeting its obligations under the USMCA.”
References:
Supply-Managed Tariff Rate Quotas (TRQs) – Applications
Dairy TRQ Consultations Letter
USMCA Chapter 31 Dispute Settlement
“U.S. challenging Canada’s dairy quotas in test of new trade deal,” CBC News (posted Dec. 9, 2020)
This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.
