The US is expanding its challenge to Canada\u2019s dairy tariff rate quota policies under the United States-Mexico-Canada Agreement (USMCA).<\/p>\n
Under the USMCA, Canada has the right to maintain 14 tariff rate quotas (TRQs) on the following types of dairy products:<\/p>\n
A TRQ applies a preferential rate of duty to an in-quota quantity of imports and a higher rate to imports above that quantity.<\/p>\n
The US claims that Canada is not allocating its TRQ fairly, giving the bulk of the quota to Canadian dairy producers while their US counterparts aren\u2019t receiving the full level of access that they were promised.<\/p>\n
This is the latest development in a long-running dispute between the US and Canada after the US raised concerns to the USMCA over Canada\u2019s dairy TRQ allocation measures.<\/p>\n
Timeline of events<\/p>\n
June 2020, Oct. 2020 and May 2021<\/strong> \u2013 Canada publishes notices to importers for dairy TRQs that set aside and reserved a percentage of the quota for processors and \u201cfurther processors.\u201d According to the Office of the United States Trade Representative (USTR), \u201cas a result of this restriction, Canada was 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.\u201d<\/p>\n Jan. 2022<\/strong> – A USMCA dispute settlement panel\u00a0concluded that Canada\u2019s dairy TRQ allocation measures to be inconsistent with Canada\u2019s USMCA obligations.<\/p>\n March 2, 2022<\/strong> – Global Affairs Canada initiated public consultations regarding proposed changes to its policies with respect to the allocation of Canada\u2019s USMCA dairy TRQs and explained that the changes are intended to implement the findings of the USMCA Panel.<\/p>\n May 16, 2022<\/strong> – Canada introduced changes to its TRQ allocation measures in response to the findings of the USMCA, but the US said that the new policies did not resolve all of the concerns.<\/p>\n May 25, 2022<\/strong> – The US requested dispute settlement consultations with Canada.\u00a0 Since initiating those consultations, the United States has identified additional aspects of Canada\u2019s TRQ allocation measures that are inconsistent with Canada\u2019s obligations under the USMCA.<\/p>\n Dec. 2022<\/strong> \u2013 The US requested new settlement consultations with Canada over Canada\u2019s USMCA obligations and expanded its challenge to include Canada\u2019s use of a market-share approach for determining TRQ allocations.<\/p>\n In its latest release, USTR alleges that, \u201cCanada applies different criteria for calculating the market share of different segments of applicants, and Canada is failing to allow importers the opportunity to fully utilize TRQ quantities. The United States continues to challenge Canada\u2019s dairy TRQ allocation measures that impose new conditions on the allocation and use of the TRQs, and that prohibit eligible applicants, including retailers, food service operators, and other types of importers, from accessing TRQ allocations.\u00a0 Through these measures, Canada undermines the market access that it agreed to provide in the USMCA.\u201d<\/p>\n So what happens next? If the two sides are unable to resolve this matter through consultations the US may request the establishment of a panel under the USMCA. If the panel were to rule in favour of the US, Canada would have a certain period of time to make applicable changes. If that did not happen, the US might go as far as imposing retaliatory tariffs on imports from Canada.<\/p>\n