Statement from Ambassador Katherine Tai on the Publication of New Canadian Dairy Tariff-Rate Quota Policies

May 16, 2022

WASHINGTON – United States Trade Representative Katherine Tai released the following statement in response to the Canadian government’s publication of new dairy tariff-rate quota (TRQ) policies:
“The United States is deeply disappointed by Canada’s announcement today regarding its dairy tariff-rate quotas. Our top priority remains ensuring that U.S. workers, producers, farmers, and exporters benefit from the market access they were promised under the United States – Mexico – Canada Agreement – and I communicated this directly to Canada before it published today’s notices. To date, we have not seen the promises by Canada in the USMCA fully realized. We will evaluate all options, and work with stakeholders and members of Congress, as we determine our next steps in the coming days.”
A tariff-rate quota 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 the following types of 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 and reserved a percentage of the quota for processors and for so-called “further processors”, contrary to Canada’s USMCA commitments.  As a result of this restriction, Canada has been undermining the value of its dairy TRQs for U.S. farmers and exporters since entry into force of the USMCA by limiting access to in-quota quantities negotiated under the Agreement.  
In January 2022, a USMCA panel agreed with the United States that Canada’s allocation of dairy TRQs, specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors, is inconsistent with Canada’s commitment in Article 3.A.2.11(b) of the USMCA not to “limit access to an allocation to processors.”  The Panel additionally found that the Agreement makes no distinction between initial processors and “further processors”, and that therefore, the restriction in Article 3.A.2.11(b) applies to all processors, including specific subsets.  
USTR officials worked closely with staff from the U.S. Department of Agriculture throughout the dispute, and both agencies will continue working together to ensure that Canada fully complies with its USMCA obligations.