by SUSAN MANN
Dairy Farmers of Canada is reviewing a trade tribunal decision dismissing an industry appeal challenging a classification that allows American shredded mozzarella cheese in restaurant pizza kits to enter the country tariff-free.
Dairy farmer organizations say the cheese in the kits, which also contain sliced pepperoni, should be classified as dairy and be subject to the 245.5 per cent tariff on cheese imports. The kits – and the cheese they contain – are currently classified as food preparation.
Dairy Farmers spokesperson Therese Beaulieu says the federal government has a very clear policy of supporting supply management. “The government or the government agency should be respecting that policy when they’re making that kind of decision about which tariff line to import under.”
She says all domestic industries and not just dairy should be concerned by the ruling because the “CITT (Canadian International Trade Tribunal) is basically saying that if you’re not the one that is importing then you don’t have the right to ask the questions under what tariff line the product should be coming in.”
Al Mussell, senior research associate with the George Morris Centre, says the situation means “the restaurants are able to access product more inexpensively than they would have been able to otherwise.”
The importation of pizza kits is a loophole in the supply management system similar to butteroil/sugar blends, which some companies import to make ice cream and other products, “and it could persist,” he says. “There continue to be dairy blends for which there isn’t a particularly good tariff line.”
Import controls are one of the three pillars of the supply management system, along with matching production to demand and stable prices for farmers.
The dairy farmer corporation that launched the appeal, BalanceCo, is a non-profit corporation with Canada’s 10 provincial milk marketing boards as its members. It obtained a decision on July 19, 2012 from the Canada Border Services Agency that affirmed a previous ruling it made to classify the kits imported by J Cheese Inc. as a food preparation.
BalanceCo appealed the agency’s decision to the trade tribunal, which first looked in to whether it had the jurisdiction to hear the appeal. The hearing on jurisdiction was on April 9 in Ottawa. In its May 3 decision on jurisdiction, the trade tribunal ruled BalanceCo wasn’t an eligible applicant for a Canada Border Services Agency ruling issued under the Customs Act and therefore the agency’s ruling was invalid. “That being the case, the tribunal finds that it has no jurisdiction to hear the appeal,” the tribunal’s decision states.
(Although the trade tribunal decided the agency’s ruling on BalanceCo’s appeal was invalid, the agency’s original decision to classify the pizza kits as food preparation has not been affected and still stands.)
The tribunal decision says BalanceCo acknowledges it’s not an importer of goods into Canada. But BalanceCo argued there’s nothing in government regulations that says there needs to be proof of importation or the actual importation of goods to get a ruling on tariff classifications.
But in its conclusion, the tribunal states the “evidence clearly indicates that at the time of its application, BalanceCo had no interest in importing the goods that were the subject of its advance ruling request.” In addition, the dairy corporation sought the advance ruling on the kits to restrict their importation. “As such, BalanceCo could not be considered as having been an ‘importer’ in any reasonable sense of the term,” the decision says.
J Cheese Inc. raised the question of the tribunal’s jurisdiction. It was an intervener in the case. The tribunal’s decision says J Cheese Inc. is an importer and distributor of food, including dairy products. It created the pizza kits for its customer, Pizza Pizza, which is Canada’s largest pizzeria with an estimated 690 outlets across the country, “and entered into what is described as an arrangement with a U.S. firm for the production of the goods (pizza kits) exclusively for JCI (J Cheese Inc.),” the decision says.
Pizza Pizza representatives couldn’t be reached for comment.
Asked for his opinion on the tribunal’s ruling, federal Agriculture Minister Gerry Ritz says by email “decisions such as this are taken by an arm’s length tribunal.” BF
Comments
Quote"she says all domestic industry and not just dairy should be concerned". Highly unlikely, I think our supply managed industry are the only ones with tarriff walls and pricing high enough to justify their so called fight. In other words, it is my understanding there is not enough incentive for this to happen with any other business importing into Canada. Is it possible this cheese comes out of the US plant aquired last year by Saputo after they downsized in Quebec? Raube Beuerman, Dublin, ON
Supply management was founded to increase farm gate prices, stabilize farm gate prices, and preserve the family farm. Since then it has strayed so far from that purpose that now the supply management system spends more time trying to perserve its ability to gouge the consumer by preserving 200% tariff barriers, by any means, than anything else. Ironically, BalanceCo, an organization with nothing balanced about it, was on the receiving end of the first "balanced" decision in a long time - the decision that the imports of this cheese topping could continue.
Stephen Thompson, Clinton ON
We have every reason to expect a public-relations onslaught by the dairy industry, containing all sorts of vitriolic fear-mongering about BST-laden imported cheese (all the while ignoring the fact that Canadian dairy farmers can readily import BST for their own use), and all sorts of flag-waving economic voo-doo about job losses (all the while ignoring the fact that tariffs and supply management are, by definition, net-negative for jobs and economic activity). As usual, and as always, the dairy industry did not have any sort of "Plan B" for this type of set-back, because, in their minds, they could not possibly lose, but they did. Unfortunately for us all, people who, like dairy farmers, aren't used to losing, often don't handle it well, as we are likely soon to see.
All farming has changed its now the BIG the BAD and the GREEDY. It doesn,t matter if its the sm farmers or not. Its no different in the processors or the stores .
Food processing and retailing operate on razor-thin margins and typically, when they are public companies, don't provide the sort of returns which endear them to the investment community. Every year for at least the last 30 years, Forbes, a US-based business magazine, has published financial indices of publicly-traded companies by sector, and food-related companies always lag when it comes to growth and return. Therefore, because farmers typically don't know, and don't understand, anything about food processing and/or retailing, one of the stupidest things we continually do is try to shift the blame for high retail food prices away from ourselves by trotting out the completely-meaningless farmers share of the consumer food dollar. Hey, people, nobody makes a killing in food, except for the legislatively-protected aristocrats in supply management and/or the corn growing bandits hiding behind ethanol legislation - we're the problem, not the people we sell to.
Stephen Thompson, Clinton ON
Loblaws announced on May 1/13 that their net profits soared 40%.
Loblaws Inc. earned $171 Million from a year earlier period with revenues rising to $7.2 Billion.
Thanks for pointing out how beleaguered groceries stores are scraping by on such "razor thin" profits.
joann
In typical farmer fashion, you're looking at things the way the NFU does, not the way a stock-broker does. Loblaw's profit as a percentage of sales, was about 2.3%, which is razor-thin by any yardstick. In addition, you have ingored the possibility that the most-recent figures could include non-recurring items which can, and often do, skew quarterly figures, and sometimes annual figures. Furthermore, you've reported aggregate figures which doesn't show profit as a percentage of sales on food items compared to non-food items. Food margins are typically a lot lower than the profit as a percentage of sales on non-food items. In additioin, you haven't reported return on share-holder equity, or any form of return on invenstment. In short, the figures you cited, are meaningless, and vividly demonstrate my point that farmers often don't know anything about the food processing and retailing sector, or how to analyze the financial data reported by any public company, and when they don't know anything, they shouldn't go out of their way to prove it. I guess what I'm trying to say is that your example would guarantee you an automatic failure on any managerial accounting or finance course.
Stephen Thompson, Clinton ON
I, like all farmers have blamed packers for "stealing" our hogs during periods of low prices. That came to an end (for me) when I became a packer and realized the truth.
There are times when packers actually have to pay more for the animal than they receive for the meat...I've never heard a farmer complain about that.
This winter, I agreed to help a young friend raise money for her Grade 8 class, by buying frozen pizza. When my order came, surprise, surprise, the entire pizza was made by Detroit-based - Little Caesar's, and was clearly marked as being a product of the USA. The knowledge that I was helping a Grade 8 student, and at the same time thwarting the single-minded greed of the Canadian dairy industry, added substantially to the taste. What would be even funnier is if one, or more, of my friend's Grade 8 classmates came from dairy farms and were also selling these imported pizzas, even (gasp) to their parents.
Stephen Thompson, Clinton ON
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