United States Advances First USMCA Dispute Panel To Enforce Canada’s Dairy Commitments

May 25, 2021

USMCA Dispute Aims to Ensure Canada Administers Its Dairy TRQs Fairly, Benefitting U.S. Dairy Farmers, Workers, and Exporters 

WASHINGTON – Ambassador Katherine Tai today announced that the United States has requested and established a dispute settlement panel under the United States-Mexico-Canada Agreement (USMCA) to review measures adopted by the Government of Canada that undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers. The United States is challenging Canada’s allocation of dairy tariff-rate quotas (TRQs), specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors.  These measures deny the ability of U.S. dairy farmers, workers, and exporters to utilize the TRQs and realize the full benefit of the USMCA.  

“A top priority for the Biden-Harris Administration is fully enforcing the USMCA and ensuring that it benefits American workers,” said Ambassador Tai.  “Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers.”

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 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 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 dairy TRQs for U.S. farmers and exporters by limiting their access to in-quota quantities negotiated under the USMCA.  

The United States requested consultations with Canada on December 9, 2020.  The Parties held consultations on December 21, 2020, but did not resolve the dispute.  This is the first panel request ever filed under Chapter 31 (Dispute Settlement) of the USMCA, specifically Article 31.6.1.  Under the USMCA’s revised dispute settlement procedures, the panel is established upon delivery of the request (Article 31.6.4).  Under the timeline provided in the USMCA, the panel is expected to issue a report later this year.   

A copy of the panel request is available here.

This panel request is the most recent in a series of enforcement actions the United States has taken under the USMCA.  On May 12, 2021, the United States made the first-ever request under the USMCA Facility-Specific Rapid Response Labor Mechanism – specifically, a request that Mexico conduct a review of whether a Denial of Rights is occurring to workers at the General Motors de México facility in Silao, State of Guanajuato.  Earlier this year, Ambassador Tai requested Mexico’s cooperation under the bilateral Environment Cooperation and Customs Verification Agreement between the United States and Mexico (CVA) and Mexico agreed to work jointly with the United States on an environmental enforcement matter.  These enforcement actions reflect the Biden-Harris Administration’s deep commitment to enforcing the USMCA and to ensuring that U.S. trade policy works for America’s workers.

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