Feds close pizza cheese import loophole

Thursday, December 19, 2013

by SUSAN MANN

The federal government’s move last month to clarify that the cheese in American pizza topping kits entering without duties are subject to tariffs has pleased Canada’s dairy farmers but angered pizzerias.

Jack Aubry, Finance Canada spokesperson, says by email the government brought in a technical amendment to the Customs Tariff law. The amendment was tabled in the House of Commons Nov. 22 and came into effect Nov. 29.

He says the technical amendment “was in direct response to ongoing attempts to circumvent that (Customs Tariff) law.”

Dairy Farmers of Canada has been lobbying the federal government to close the loophole for two years, says spokesperson Thérése Beaulieu, and is pleased with the government’s steps to close it. The organization first noticed the kits were coming across the border in 2011.

Dairy Farmers has argued all along the cheese in the kits should be classified as a dairy product and be subject to the 245.5 per cent tariff for cheese products that are subject to duties. But the Canada Border Services Agency ruled last year the kits, containing 80 per cent mozzarella and 20 per cent pepperoni, are a food preparation and the cheese in them could come in duty free.

Dairy farmers challenged the classification at the Canadian International Trade Tribunal, which ruled in May the dairy farmers’ corporation, BalanceCo, launching the challenge wasn’t eligible to question the classification. That meant the Canada Border Services Agency decision classifying the kits as a food preparation remained intact.

Beaulieu says speculation in a Globe and Mail article this week that the government’s amendment could spark a trade war with the United States is just that – speculation.  “That’s a lot of speculation by people who have seen their little trick thwarted.”

She adds, “Canada fully had the right to do what it did.” Canada didn’t change the classification but jut clarified “what was supposed to happen in the first place.”

Aubry agrees. “This amendment is fully consistent with Canada’s international trade obligations.”

But Garth Whyte, president and CEO of the Canadian Restaurant and Foodservices Association, which represents restaurants across Canada, called the government’s move to shut down the pizza cheese import process a “back door decision” that was particularly unpalatable since the border services agency already ruled the kits were a food preparation and that was upheld by the trade tribunal.

The restaurant association also questions the way the government brought in the amendment. The industry only received a one-week notice and “there was no transition,” he says.

The kits are the fresh pizza industry’s legitimate way to combating high priced cheese in Canada, he says. “People are looking for ways to keep their costs down and they’re looking for ways to sell more dairy.” He says he didn’t know how many of the kits were coming into Canada.

To address the restaurant association’s concerns that fresh pizza makers were paying 30 per cent more for their cheese than frozen pizza makers, the Canadian Dairy Commission introduced a new lower priced milk class on June 1. The restaurant association applauded the commission for launching the new class.

Beaulieu says the commission was looking into whether the new milk class to provide lower priced milk for manufacturing mozzarella for the fresh pizza market was slowing down American pizza kit sales. “The last I heard it was too early to tell. They were not really saying anything about that class.”

Dairy industry officials have said in previous reports the new class was implemented to boost sales of restaurant pizza cheese. BF