Dave Natzke

Editor / Progressive Dairy

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A TQR applies a preferential rate of duty to an “in-quota” quantity of imports and a different rate to imports above that in-quota quantity. Under the USMCA, Canada has the right to maintain 14 TRQs on dairy products: 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.

In notices to importers that Canada published in June and October 2020 and May 2021 for dairy TRQs, Canada set aside a percentage of each dairy TRQ exclusively for Canadian processors. According to the USTR, this is contrary to Canada’s USMCA commitments by limiting U.S. access to in-quota quantities negotiated under the USMCA. A copy of the panel request is available here.

A December 2020 consultation between Canada and the U.S. failed to resolve the dispute.

According to Global Affairs Canada, the USTR request starts a 35-day period in which the composition of the panel must be finalized, and the dispute settlement process could take up to eight months to conclude (in this case, up to December 2021).

Under USMCA rules, if a panel determines a lack of compliance by Canada, the U.S. would then be granted the right to impose retaliatory duties if Canada fails to fix its administrative practices.

Mary Ng, Canada’s minister of small business, export promotion and international trade, expressed disappointment in the U.S. action, defending TRQ policies under the trade agreement (called the Canada-United States-Mexico Agreement, or CUSMA, in Canada).

“We are confident that our policies are in full compliance with our CUSMA TRQ obligations, and we will vigorously defend our position during the dispute settlement process,” she said. “Our government will continue to stand up for Canada’s dairy industry, farmers and workers and will continue to preserve, protect and defend our supply management system.”

Multiple U.S. dairy organizations, led by the U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF), have raised concerns over the Canadian TRQ system. Others include the FarmFirst Dairy Cooperative and Edge Dairy Farmer Cooperative.

"Canada has failed to take the necessary action to comply with its obligations under USMCA by inappropriately restricting access to its market,” said Jim Mulhern, NMPF president and CEO.

“Today's action is a critical step toward maximizing current export opportunities while sending a strong message in defense against the erection of future barriers in Canada and other markets as well," added said Krysta Harden, USDEC president and CEO.