Canada’s milk marketing boards cannot challenge a corporate scheme to avoid prohibitively high cheese import tariffs because they are not importers, a federal trade tribunal has ruled.
The dairy industry says the scheme is a serious challenge to the supply management system and demands a government response.
The May 3 ruling by the Canadian International Trade Tribunal allows tariff-free import of mozzarella cheese packaged with pepperoni, which avoids the normal over-quota cheese tariff of more than 240 percent.
BalanceCo, which represents 10 provincial milk marketing boards, appealed to the CITT to stop tariff-free imports of mozzarella as a violation of Canadian supply management import controls.
The CITT said that as non-importers, the milk marketing boards cannot challenge the imports.
Dairy Farmers of Canada quickly issued a statement suggesting a further appeal is possible.
It also called on the federal government to react by defending the import protections that supply managed sectors have under a system supported and defended by Ottawa.
“Today’s decision by the CITT should be as concerning to government as it is to Dairy Farmers of Canada,” DFC said.
“CITT has decided that domestic industry is not in a position to raise issues about the clear breaches such as direct circumvention of the trade rules.”
The dairy lobby said the federal government supports supply management import controls as part of a production control and price-setting system and “expects the federal government will continue to demonstrate its clear role in upholding the mechanisms that support the system.”
The scheme devised by J Cheese Inc. to import mozzarella cheese in a tariff-free package with pepperoni has allowed several thousand tonnes of cheese to be imported without control, the dairy industry argued.
The case mirrors an earlier dairy industry battle when importers in the 1990s were bypassing import tariffs by mixing butter oil with 51 percent sugar to avoid the dairy tariff and then separating the butter oil for domestic use in cheaper ice cream.
After years of legal challenges, the dairy industry lost the battle to include butter oil-sugar imports under supply management tariff controls.
The CITT decision came two days after the milk marketing boards agreed to a compromise that will allow processors to buy Canadian milk at a lower price if it is used to produce mozzarella cheese in Canada.
They say the milk pricing compromise and the CITT case are not related.