Tax & Trade Blog
Importing Cheese & Dairy into Canada – TRQ Required!
The Canadian dairy industry is one of the most protected industries in the world, which while good news for Canadian diary producers is decidedly bad news for Canadian importers looking to import and distribute specialty dairy products like fine or specialty cheeses. These importers will face requirements for both import licenses and quota allocation, with the latter usually difficult if not impossible to obtain for first time entrants!
As indicated, Canadian importers must have access to a Tariff Rate Quota (“TRQ”) in order to import supply-managed goods that fall within Canada’s Import Control List (“ICL”) at “preferential tariff” rates.
Under the TRQ system, Global Affairs Canada (“GAC”) establishes a specific quantity of importable product (the “Available Quantity”), and allocates access to that Available Quantity through a TRQ, which is given to eligible applicants annually, using a prescribed allocation method. Without TRQ, the importer does not qualify for “preferential rates”, and that rate of duty on goods imported “over the access commitment” (without “preferential rates”) is absurdly high: for example, for cheese, which is included in items 141 to 157 of the ICL (Customs tariff items 04.06), the “over access tariff rate” is 245.5%.
Import Permit Requirement
Imports of ICL goods entering Canada require an import permit. There are two types of import permits: General Import Permits (“GIP”) and Specific Import Permits (“SIP”). Dairy products imported under a TRQ usually require a SIP. When imported without a TRQ, these goods may qualify for import to Canada under the authority of GIP, but would then be classified as “over access” and subject to the “over access tariff rate” (e.g., 245.5% for cheese).
The cheese TRQs are allocated to importers on their Canadian market share basis (quantity produced or sold), under one of the different preferential systems established by Canada with its global trading partners. These preferential systems allow Canada’s global trading partners access to Canada’s domestic cheese market. These are as follows:
- WTO - World Trade Organization – The WTO TRQ is applied on import of cheese from EU and Non-EU Countries, and is fully allocated to companies who were active before the initial TRQ began, proportional to their historical activity. This means that there is no room or access to TRQ for new market entrants!
- CETA - Canada-EU Comprehensive Economic & Trade Agreement – The CETA TRQ is applied on import of cheese from EU Members including the UK (for three transitioning years). New entrants are eligible for the CETA TRQ, even if not holding a prior WTO or CETA TRQ! However, to be eligible these new entrants still have to demonstrate their “Canadian Market Activity” on a monthly basis i.e., the volume of cheese purchased/manufactured or sold in the reference period (October 1 to September 30 of the preceding year).
- CPTPP - Comprehensive & Progressive Agreement for Trans-Pacific Partnership – The CPTPP TRQ is applied to imports of cheese from countries in the Asia-Pacific. Similar to the CETA TRQ, prior allocation is not required however, applicants are required to demonstrate their Canadian Market Activity in the reference period (October 1 to September 30 of the preceding year), to be eligible for a TRQ allocation.
- CUSMA - Canada-United States-Mexico Agreement – The recent CUSMA TRQ applies to imports of cheese from US. Again, prior allocation of TRQ is not a precondition but eligible applicants are required to remain active in Canadian cheese market during the reference period (October 1 to September 30 of the preceding year), to obtain this TRQ allocations.
Each of these systems come with their own sets of rules for eligibility.
TRQ for Canada’s dairy industry is the difference between a profitable import-export venture, and one that will not likely have long-term success. Navigating through Canada’s various TRQ rules is a difficult process. Persons interested in TRQ in the diary industry need to assess eligibility, and the legal assistance of a trade professional is usually recommended.
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