HIGHLIGHTS: January 7, 2022
• USMCA dispute settlement panel sides with U.S.
• Landmark victory in gruyere case
• November U.S. dairy export data
• New actions at Oakland, Los Angeles ports
• REGISTER NOW: Agri-Pulse supply chain webinar
• MAG and IAG meetings set for March 1
• Market Summary: GDT holds steady again
• Japanese milk glut
• Indonesia resumes plant reviews
• China plant registrations
• USDEC Export Guide December updates
• Company news briefs: Friso, Belgioioso
Featured
Multi-year USDEC effort delivers big win for U.S. dairy in USMCA dispute settlement case
A dispute settlement panel found that Canada is improperly restricting access to its markets for U.S. dairy products in violation of its U.S.-Mexico-Canada Agreement (USMCA) trade obligations. The decision is the culmination of a multi-year USDEC effort, supported by membership, dating back to the start of USMCA negotiations in 2017.
The challenge centered on Canada’s allocation system for tariff rate quotas (TRQs). USMCA requires Canada to open its TRQ-application process to anyone in the Canadian food and agriculture sector. Canada instead designates the bulk of its TRQs to domestic dairy processors who have less incentive to import.
The panel’s decision is “an essential victory,” USDEC president and CEO Krysta Harden said in a joint USDEC/NMPF press release on the ruling. “We expect Canada to abide by its trade commitments so that the American dairy industry can fully access Canadian markets just as USMCA promised.”
USTR Katherine Tai called it an historic win that “will help eliminate unjustified trade restrictions on American dairy products and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers.”
Broader implications
While applauding the ruling, Harden went on to say that this is just one positive step in the ongoing effort to enforce USMCA. “Our work to uphold the full benefits of USMCA continues, as we strive to reduce supply chain disruptions for our exports and ensure Mexico’s adherence to the dairy provisions of the USMCA, among other key matters,” she said.
The panel’s ruling could help facilitate such efforts. It is a landmark decision—the first dispute settlement proceeding under the USMCA—with positive implications not only for U.S. dairy but for U.S. trade policy as a whole.
As USDA Secretary Tom Vilsack noted, the decision “signals to our trading partners that the United States will stand firm against unjustified trade restrictions and continue fighting on behalf of our farmers and workers to ensure that we have full and fair access to foreign markets.”
USDEC’s role
Canada’s TRQ system came as no surprise. USDEC worked closely with the U.S. negotiating team in 2017 and 2018 to ensure that the text of the USMCA guarded against the type of TRQ allocation problems seen in other recent Canadian trade deals, like the EU-Canada Comprehensive and Economic Trade Agreement.
Knowing Canada’s history for sidestepping dairy trade commitments, USDEC vocally touted the importance of robust enforcement as USMCA moved toward congressional consideration.
After the trade deal passed, the United States tried to resolve the matter through consultations with Canada. USDEC and NMPF (backed by member input) provided detailed comments to Canada outlining necessary reforms to make its dairy TRQ process compliant with USMCA and helped inform U.S. government input into the process.
USDEC and NMPF engaged members of Congress and achieved broad bipartisan support from more than 125 legislators, encouraging USTR to enforce the USMCA dairy provisions. In direct meetings with USTR and USDA, they continued to push for action on the matter.
When Canada refused to change its policies, USDEC and NMPF urged the U.S. to initiate the dispute settlement panel, which it did last May.
Next steps
The panel issued its final report on Dec. 20, 2021, and Canada now has 45 days from that date to comply with the findings. Canada is expected to work with the U.S. within the 45-day timeframe to revise its TRQ policies to align with its USMCA commitments. If Canada refuses, the United States has the right to seek retaliatory tariffs through USMCA processes.
USDEC will continue to coordinate closely with the U.S. government and congressional supporters on Canada’s response to the ruling and will monitor TRQ fill rates to keep tabs on the issue’s impact on U.S. dairy trade.
CCFN and USDEC secure landmark victory for common food names
A U.S. judicial ruling has determined that “gruyere” is a generic style of cheese that can come from anywhere. The decision reaffirms that all cheesemakers, not just those in France or Switzerland, can continue to create and market cheese under this common name.
“Not only is this a landmark victory for American dairy farmers and cheese producers who offer gruyere, this win sets a vital precedent in the much larger, ongoing battle over food names in the United States,” said Jaime Castaneda, executive director of the Consortium for Common Food Names (CCFN), which helped lead the defense of gruyere’s generic status.
In the ruling, Senior Judge T.S. Ellis III, of the United States District Court for the Eastern District of Virginia, upheld the Aug. 5, 2020, precedential decision of the U.S. Patent and Trademark Office’s Trademark Trial and Appeal Board.
According to the Court’s decision, the arguments of the French and Swiss associations were “insufficient and unconvincing,” while CCFN presented “overwhelming evidence that cheese purchasers in the United States understand the term GRUYERE to be a generic term which refers to a type of cheese without restriction as to where that cheese is produced.”
With support from USDEC, as well as member and non-member companies that contributed to the effort, CCFN dedicated extensive time and resources throughout the appeal process to demonstrate the extensive use of gruyere in the U.S. marketplace and persuasively argue that all cheesemakers and their customers should retain their rights to continue to produce and sell gruyere in the United States. See the joint USDEC/NMPF press release on the decision for more details.
Big November pushes U.S. cheese, NFDM/SMP to annual records
November U.S. dairy exports attested to ongoing global dairy demand strength. Year-over-year U.S. dairy export volume (milk solids equivalent) grew 19% in November, rebounding sharply after an October pause in growth. Big months by NFDM/SMP and cheese and continuation of the year-long boom in U.S. butterfat exports led the gain.
U.S. suppliers’ stellar performance in November guaranteed year-end export records in a range of categories. Year-to-date NFDM/SMP exports (834,927 MT), cheese (373,634 MT) and total milk solids equivalent (2.14 billion MT) have already topped previous annual records only 11 months through the year. U.S. export value ($7.15 billion) is less than $100 million off the 2014 annual record of $7.24 billion.
NFDM and cheese
U.S. NFDM/SMP exports rebounded from a disappointing October, growing 25% (+15,119 MT) compared to November 2020. Strong gains to Southeast Asia (+37%, +7,275 MT) led the category, supported by growth in shipments to South America (+37%, +2,834 MT), Mexico (+9%, +2,229 MT), Central America (+196%, +2,024 MT) and China (+27%, +726 MT).
Year-over-year U.S. cheese exports increased 40% (+9,556 MT), with gains across geographies. Only two of the top 25 U.S. markets—Japan and the Philippines—saw cheese buying decline in November. Mexico (+65%), South Korea (+48%), Australia (+107%), Central America (+40%) and South America (+61%) led the increase.
U.S. butterfat exports nearly tripled in November (+196%, +3,130 MT). Year-over-year lactose sales jumped 34% (+9,208 MT).
Whey shipments were nearly flat (+0.3%, +158 MT) as exports to Southeast Asia, Mexico, Japan and other smaller markets grew just enough to collectively offset a 24% decline to the No. 1 U.S. whey market, China.
For a deeper dive into the data, read the U.S. Dairy Exporter Blog post, “NFDM/SMP, Cheese and Lactose Led the Way to Double-Digit Export Growth in November.”
Port of Oakland plan designed to help ag exporters; LA targets empties
The Ports of Oakland and Los Angeles announced further moves over the last two weeks aimed at providing some relief to the port congestion that continues to plague U.S. agricultural exporters.
Oakland
The Port of Oakland launched a program specifically to expedite U.S. agricultural exports. The Oakland plan centers on a new 25-acre off-terminal, paved container yard equipped to move containers off chassis and store them for rapid pick-up.
The port says it will provide faster truck turns without having to wait for in-terminal space. It also says that agricultural exporters will be assisted by federal and state ag agencies to use the yard, although it offered no details. USDEC is looking into the changes.
The port noted that Biden Administration Port Envoy John Porcari has been facilitating frequent discussions with ag exporters, shipping lines and the port, including talks about long-term solutions such as off-dock container yards and increased investment. In a press conference on supply chain issues on Wednesday, Porcari touted the importance of improving ag flows—a priority USDEC staff had directly urged Porcari to pursue more vigorously during a meeting with him in December.
Los Angeles
The Port of Los Angeles plans to implement a new fee for empty boxes clogging terminals starting Jan. 30. The port plans to charge ocean carriers $100 per day for every container left on premises for nine days or more. Long Beach is expected to follow its sister port’s lead and adopt the empty container plan.
But trucking groups have already expressed concern that the empty container fee would cause shipping lines to delay the return of boxes to the port.
A separate plan to charge for long-dwelling containers has been delayed multiple times over concerns about who would ultimately pay the charges, as well as claims that the simple threat of penalty has successfully reduced the number of long-dwelling containers by more than half.
USDEC’s ongoing work
USDEC continues a multidimensional effort to find solutions to the port crisis. It has been a leading voice influencing the U.S. government’s consideration of how to best address the shipping supply chain crisis and shaping provisions of the Ocean Shipping Reform Act of 2021 (House of Representatives passed in late December) as part of a broad set of strategies to deal with the problem. (USDEC staff; Port of Oakland; The Loadstar, 1/4/22; Shipping Watch, 1/3/21)
Events
Register now for Jan. 31 webinar to explore supply chain solutions
On Jan. 31, Agri-Pulse will hold a free 1.5-hour webinar titled, “Digging into the ag export supply chain crisis and how to fix it.” USDEC and NMPF are sponsoring the event, which will feature members of Congress, Biden Administration officials and industry speakers representing various parts of the agricultural export chain.
USDEC Executive Vice President for Policy Development and Strategy Jaime Castaneda will kick off the webinar by moderating an industry supply chain panel featuring agriculture, coastal port and trucking sector representatives. USDEC President and CEO Krysta Harden will then moderate a U.S. government panel with invited guests White House Port Envoy John Porcari, USDA Secretary Tom Vilsack, and members of Congress. There will be Q&A sessions after each panel.
The event aims to outline global supply chain complexities and potential solutions to ensure that U.S. ag exporters, including dairy suppliers, do not see their reputations for reliability eroded and business compromised.
“Our competitors are eager to swoop in and scoop up those sales, which is why decisive actions by both Congress and the administration are so critical to address the export supply chain crisis,” says Harden.
To register for the virtual event, click here. It begins at 1 p.m. ET on Monday, Jan. 31.
Advisory groups for Market Access, Ingredients to meet March 1-2; hotel reservations due Jan. 31
USDEC’s Market Access and Regulatory Affairs (MARA) Advisory Group (MAG) and Ingredients Advisory Group (IAG) will meet March 1-2 in Los Angeles. The MAG meeting takes place the morning of March 1; the IAG meeting starts the afternoon of March 1 and continues all day March 2.
The MAG meeting will provide regional updates on regulatory issues in key export markets, ongoing MARA projects, logistics challenges and other market access issues. The IAG will discuss the strategic direction for 2023 U.S. dairy ingredient marketing programs and alignment with member priorities.
The meetings are being held in-person according to local public health safety guidelines, but USDEC will continue to monitor the COVID-19 situation and developments with the Omicron variant or others and adjust plans if needed.
The meetings are open to members of each respective advisory group. They will take place at The Line LA, a boutique hotel in the heart of Koreatown. To book a room under USDEC’s special group rate, click here. Attendees must register by Jan. 31, 2022 to receive the discounted rate.
If you are not a member of the IAG and would like to participate (or for more information on the meeting), please contact Allison Guzman at aguzman@usdec.org. If you are not a member of the MAG and would like to participate (or for more information on the meeting), please contact Jessica Smith at jsmith@usdec.org.
Market Summary
GDT holds steady once again
Tight milk supplies and supportive demand kept prices steady in the first Global Dairy Trade (GDT) event of the year with limited upward movement beyond cheddar cheese. The average winning price for the Jan. 4 auction moved up just 0.3% as WMP held at $3,866/MT (+0.0%) despite active participation from Chinese and Middle Eastern buyers.
The auction did see small gains by SMP (+1.0% with an average price of $3,773/MT) and butter (+0.3% with an average price of $5,868/MT), but anhydrous milkfat lagged 0.7% to $6,668/MT. Cheese was the only commodity to see significant upward movement, climbing 4.9% to $5,487/MT.
Overall, with limited milk production growth out of the major dairy exporters, international prices remain well-supported at multi-year highs. However, with high prices pushing many end-users to buy hand-to-mouth (resulting in inconsistent participation at the auction), further upward movement in prices has been dampened in recent auctions.
ALIC sets SMP tender for Jan. 13
Japan’s Agriculture and Livestock Industries Corp. (ALIC) will hold an SBS tender next week Thursday, Jan. 13 for 750 MT of SMP (the full allocated amount for all of fiscal 2021). For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.
Japanese dairy processors look to boost consumption in face of milk oversupply
Sustained milk production gains over the past two years coupled with reduced school and foodservice sales have caused a milk oversupply situation in Japan. Dairy processors and government authorities are looking for ways to redirect processed products and lift domestic consumption to limit any dumping of raw milk at the farm.
The situation is significant enough that Prime Minister Fumio Kishida, at a news conference just prior to Christmas, asked consumers to drink an extra cup of milk a day and utilize dairy more in cooking. The prime minister and other government officials drank milk at the conference to drive the point home.
Many Japanese dairy processors are ramping up promotional programs, offering discounts on milk, handing out free samples and investing in new ad campaigns. Others are boosting donations to food banks, meal kitchens targeting children, nursing homes and similar operations. Japanese dairy farmers kicked off a social media campaign in which they purchased an additional liter per day from Dec. 25-Jan. 3.
Dairy processors are also trying to channel more milk into longer-life products, like butter, powder and cheese. But Japanese powder inventories have grown to near-record levels and butter inventories have been running well above the historic average for the past 18 months—despite sharp declines in butter and SMP imports this year. (USDEC Japan office; The Mainichi, 12/30/21; Bloomberg, 12/21/21)
Market Access and Regulatory Affairs
Indonesia to resume desk reviews of U.S. dairy facilities
USDEC’s Southeast Asia office reports that Indonesian authorities will resume desk reviews of U.S. dairy facilities starting Jan. 18. About 10 facilities are currently scheduled.
The resumption follows a sustained program of work by USDEC’s Market Access and Trade Policy teams to advance long-stalled U.S. plant registration requests. USDEC has been engaging with Indonesia and the U.S. government for some time on the facility-approval issue, most recently hosting and coordinating a visit for employees from the Embassy of Indonesia on a visit to a USDEC member manufacturing plant (see Global Dairy eBrief, 11/19/21) and meeting with USTR officials in December urging movement on the issue.
While the resumption of desk reviews does not completely resolve the immediate issue—nor provides the broader system revisions USDEC continues to work toward—it is an important step in the right direction. USDEC will continue collaboration with the U.S. government and outreach to Indonesia to press for swift approvals of the plants under consideration this month and to find a better long-term approach for future applications.
China facility registration numbers and lactose
The General Administration of Customs in China (GACC) has now issued the China Registration Number for all dairy plants. Manufacturers can look up their information here using their Overseas Registration Number (plant number registered by GACC via FDA’s Export Listing Module or ELM). U.S. firms exporting dairy products other than lactose that are currently listed as registered by GACC to export dairy and infant formula products to China do not need to take any action at this time related to plant registration.
U.S. firms exporting lactose to China that have the assigned China Registration Numbers should now be able to add lactose to their registration on the Single Window system using the login information provided by the FDA. After logging in, go to the “Application for modify” tab on the left. Then look for lactose under the sugar category in the drop-down menu and add. This registration number will be specific to this plant and includes all products produced at the facility.
GACC is aware that some lactose manufacturers have already registered their plant on the Single Window system (and received a separate registration number). In the case of a dairy plant that now has two registration numbers, GACC advises that manufacturers should use the lactose registration number only when shipping lactose. GACC will consolidate internally from their end and work with the FDA to solve the issue of dairy plants having possibly two different registration numbers.
Please see Volume 2 the USDEC Export Guide for more information and contact Eddy Fetzer (efetzer@usdec.org) if you have further questions.
December updates for USDEC Export Guide
The Market Access and Regulatory Affairs team updated 19 documents in the USDEC Export Guide in December. Some of the changes include:
Volume 2: Import requirements
- India: Cited new plant registration rules set for implementation in June 2022; unknown at this point if the rules will impact dairy.
- South Africa: Updated import and quota permit information.
- Sri Lanka: Updated mandatory inspection and sample import requirements.
Volume 3: Compositional Standards and Labeling
- China: Lactose, evaporated milk, and cheese micro criteria updated. Extensive updates to infant formula
- Korea: Incorporated new processed milk products standard and a new food for special/dietary use standard.
Every month, USDEC’s Market Access team emails a list of guide updates to interested members. If there is anyone at your company who should be included on the distribution list for that email in the future, please contact Jessica Smith at jsmith@usdec.org. (USDEC staff)
Company News
Company news briefs
Dutch dairy giant FrieslandCampina plans to sell its Friso infant nutrition business in a deal worth up to $2.5 billion. FrieslandCampina markets the brand in 25 nations, but its specialized nutrition division (which includes Friso) has underperformed of late. . . . Belgioioso Cheese is spending an estimated $6 million to turn a Glanville, N.Y., warehouse into a new cold storage facility. The facility will complement Belgioioso’s Glenville cheese plant that opened in 2020. (Reuters, 12/21/21; The Daily Gazette, 12/13/21)
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