Supply-managed groups pressuring government to address border issues

Unnecessary ingredients added to milk products to skirt tariffs and quotas

The Trudeau government is facing growing pressure from farm groups to improve border regulations and enforcement around supply-managed commodities.

The issue has been boiling over in recent days as the sector has felt growing pressure over European and Pacific trade deals.

Poultry producers pounded federal border rules and the Canada Border Services Agency during hearings by the Senate agriculture committee. Now the dairy groups have explained their frustrations to the Commons agriculture committee over mislabelled and misrepresented products entering the country and undercutting supply management.

Caroline Emond, Dairy Farmers of Canada.

Caroline Emond, Dairy Farmers of Canada.
photo: Dairy Farmers of Canada

“Currently those who would exploit the rules are well aware that when it comes to dairy, Canada’s enforcement and consistent application of our existing border measure is inconsistent,” Caroline Emond, executive director of Dairy Farmers of Canada, told MPs. “Adequate audit and enforcement are essential in discouraging those who would exploit those loopholes.”

Emond said the industry wants the government to enforce existing rules to allow only amounts agreed upon in trade agreements to enter the country.

The next day, federal Ag Minister Lawrence MacAulay told Parliament the government is aware of the problem.

“We are discussing it with the industry and we will come to a conclusion,” he said.

Asked about the minister’s response, DFC spokeswoman Isabelle Bouchard said in an interview that the time to talk about the issue has passed.

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“They know everything they need to know,” Bouchard said. “It is time for action.”

The issue of misrepresented dairy products entering Canada, mostly from the United States, is at least a decade old. Farm groups pressured the previous government about them with little effect. The new trade deals will raise the stakes, as dairy and poultry farmers face higher imports because of tariff reduction. They don’t want to have to also contend with product coming in the back door.

“People can be very creative in order to circumvent tariff and quotas,” Emond said. “Furthermore, it is more than just adding the right rules in place. The auditing and validation process and the enforcement of the rules are equally as important.”

Between 2009 and 2013, farmers lost an estimated $62.6 million due to rules-skirting imports, she said. One frequent strategy is to add a substance to a controlled commodity that doesn’t affect its use traits, but technically exempts it from tariffs. Emond said there have been issues with butter, oil and bran being added, and most recently salt to cream.

“All of that in order to avoid tariff and quotas,” Emond said. “The list goes on and on.”

CBSA will issue rulings on proposed imports without consulting the dairy or poultry industries, she added. The process should enable stakeholders an opportunity to offer input and response when appropriate, she said.

Much of the current controversy involves the significant increase in low-priced imports of milk protein concentrate in diafiltered milk, which is used as a milk substitute.

Peter Gould, general manager and CEO of Dairy Farmers of Ontario, said the dairy industry is at a critical juncture.

“Today’s decisions will influence, and perhaps I should say, determine the future success, viability and sustainability for the next generation of dairy farmers,” he said.

Ineffective border controls present challenges ranging from income instability to investment planning for both producers and processors, he said.

Unrestricted imports of milk protein isolates has increased exponentially since 2012 without any border restrictions, even though they are meant to displace Canadian product, he said. A confusing ruling by the Canadian International Trade Tribunal has only compounded the problem, he added.

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