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Processor-producer spat back in the open

Ingredient pricing disagreement wasn’t causing any sparks in recent times but it was always in the background

Food processors and supply-managed farmers are upset with each other again, over border controls for ingredients.

Consultations launched by Agriculture Minister Lawrence MacAulay on contentious agri-food border issues brought the old dispute back into public view.

The minister said the consultations will examine potential changes to the Duties Relief and the Import for Re-Export programs. As well, the federal government is looking for ways to improve inventory reporting to better track the level of imports.

Chicken Farmers of Canada has pressed the government to more strictly monitor imports of broiler meat deliberately mislabelled as spent fowl, while Dairy Farmers of Canada is concerned about shipments of diafiltered milk, produced in the U.S., to circumvent Canadian limits on milk imports.

However, Food Processors of Canada says those problems are a matter of border enforcement not the operation of the duties program. It says the issue that needs to be dealt with is the failure of the farm groups to provide processors with ingredients that will enable them to be internationally competitive. It has been voicing this complaint for years.

“Manufacturers would rather buy Canadian dairy and poultry, but producers are uninterested in supporting our export ambitions,” says the letter signed by FPC president Christopher Kyte. The duties program “allows all manufacturers to purchase inputs at the lowest possible prices and to export finished products at the best prices.”

CFC chairman David Janzen says, “Our farmers and processors have been afflicted by leakages in the market that have been occurring for many years now, meaning they face uncertainty in their own production, and consumers face uncertainty in the safety of their food. We are hopeful that a meaningful consultation process will result in changes benefiting the chicken sector in Canada.”

DFC spokeswoman Isabelle Bouchard said her organization is “encouraged to see movement on this file and will participate in the consultation.”

MacAulay has promised action on the issue for months. No timeline was attached to the consultations, but they’re expected to continue into the new year.

While proclaiming the government’s strong support for supply management, MacAulay announced the government wants to address the concerns of import predictability and effective border controls for supply-managed commodities. It also wants to ensure that Canadian processors that use dairy and poultry inputs can remain competitive in export markets.

The Duties Relief Program enables qualified companies to import goods without paying duties, as long as they later export the goods. Earlier this year, Canada Border Services Agency verifications found that five participants in the Duties Relief Program were passing off spent fowl as chicken broiler meat and suspended their import permits.

MacAulay says he hopes the consultations will “result in a timely implementation of better rules to stop the distortions into the Canadian chicken market created by inappropriate program duplication and design, and circumvention of tariff classifications.”

Chicken Farmers says the duties program administered by the Canadian Border Services Agency “was not designed for agriculture goods and does not provide adequate safeguards to address the potential for diversion into the domestic market that is presented when chicken is imported into Canada for further processing and subsequent re-export.”

As well, Global Affairs Canada’s Import to Re-Export Program was created specifically for agricultural goods and has adequate verification and safeguard processes, CFC says.

However, Kyte says Global Affairs “does not do a good job of supporting food companies building sustainable export businesses.” Manufacturers won’t hold to poultry or dairy ingredients for four years because of cost and product deterioration. “They are not diverting premium products into the Canadian marketplace. Smuggling is not their business model.”

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