Global Trade Alert

On March 18, 2011 the U.S. Department of Agriculture published a final rule (based on a proposed rule in the May 19, 2009 Federal Register) imposing a fee on imports of dairy products. The revenues raised by this fee, set at a rate of 7.5 cents per hundredweight or its equivalent, arevused to promote the consumption of dairy products in the United States. The rule came into effect on April 1, 2011.
The proponents of this fee sought its imposition for nearly a decade. Domestic milk producers have paid fees into this promotional program since enactment of the Dairy Production Stabilization Act of 1983, and have sought to have the same fees imposed on imports. In principle, they succeeded in having these fees extended to imports under the Farm Security and Rural Investment Act of 2002 (commonly known as the 2002 Farm Bill), but concerns over the legality of the fee prevented the USDA from exercising its authority to implement the fee. Under the 2002 Farm Bill the domestic fee was not applied to farmers in all 50 states. Importers of dairy products argued that because not all U.S. production was subject to the fee, extending it to imports would mean violating the national treatment requirement of Article III of the General Agreements on Tariffs and Trade.
The Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) made two changes intended to ease the imposition of these import fees. First, it addressed the concerns over national treatment by requiring that the fee be applied in every state as well as the Commonwealth of Puerto Rico and (rather improbably) the District of Columbia. Second, it provided for a lower rate on imports than on domestic production. Section 1507(d) of the law provides that 'The rate of assessment for milk produced in the United States prescribed by the order shall be 15 cents per hundredweight of milk for commercial use or the equivalent thereof,' but that 'The rate of assessment for imported dairy products prescribed by the order shall be 7.5 cents per hundredweight of milk for commercial use or the equivalent thereof.'
The National Milk Producers Federation (NMPF) is the principal advocate of the program. In an April 3, 2009 letter to the Director of the Office of Management and Budget, the NMPF chairman stated that the lower rate on imports was 'obviously not ideal since it does not ensure completely equal treatment of imported vs. domestically produced dairy products.' He nevertheless urged that the administration 'swiftly propose and finalize a rule on the dairy import assessment,' despite the fact 'that there are a small handful of importers, led by foreign companies such as New Zealand's Fonterra and the International Dairy Foods Association, who are very vocally opposed to this measure since it would cost them a few dollars off their bottom line.' In response to the aforementioned call for comments, the NMPF filed its own comment on June 18, 2009.