On December 9, 2020, United States Trade Representative Robert E. Lighthizer announced that the United States is exercising its rights under the United States-Mexico-Canada Agreement (USMCA) to address measures adopted by the Government of Canada that are contrary to the provisions of the agreement and harm U.S. dairy farmers. Specifically, the United States is challenging Canada’s allocation of dairy tariff-rate quotas (TRQs). By setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has undermined the ability of American dairy farmers and producers to utilize the agreed-upon TRQs and sell a wide range of dairy products to Canadian consumers.
Ambassador Lighthizer provided official notice to Canada that it was exercising its rights to enforce the USMCA in a letter to Canada’s Minister of Small Business, Export Promotion and International Trade Mary Ng. If the United States and Canada are not able to resolve the United States’ concerns through consultations, the United States may request the establishment of a USMCA dispute settlement panel to examine the matter.
Background
As defined in the USMCA, a TRQ is “a mechanism that provides for the application of a preferential rate of customs duty to imports of a particular originating good up to a specified quantity (in-quota quantity), and at a different rate to imports of that good that exceed that quantity”. Under the USMCA, Canada has the right to maintain 14 TRQs on 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.
In notices to importers that Canada published in June and October for dairy TRQs, Canada sets aside and reserves a percentage of the quota for processors and for so-called “further processors”, contrary to Canada’s USMCA commitments. This restriction undermines the value of Canada’s TRQs for U.S. producers and exporters by limiting their access to in-quota quantities negotiated under the USMCA.
A copy of the consultation request can be found here.
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