The Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture is close to implementing a tariff on dairy imports, after submitting on Monday a final rule for clearance to the Office of Management and Budget. If OMB and the U.S.Trade Representative's office approve the AMS regulation, as IDFA expects, the U.S. Customs and Border Patrol will begin a process to collect new assessments on imported dairy products and foods with dairy ingredients. Implementation could begin early in 2011, although USDA has not provided a timeline.

The funds collected by the government will be added to the national milk producer's checkoff program, also known as the National Dairy Promotion and Research Board or Dairy Board. It's managed by a board of 36 domestic dairy producers who are appointed by USDA under the auspices of Dairy Management Inc (DMI).

Congress authorized the import assessment in 2002 under the condition that USDA could only implement the program if it could be made compliant with U.S. trade obligations. Congress amended the program in the 2008 Farm Bill to resolve problems that had kept the assessment from being adopted.

IDFA Opposed Assessment from Outset

"We see no benefits to jeopardizing the success of the current program, which was designed and has operated for 25 years to promote domestic dairy," said Ruth Saunders, IDFA vice president of policy and legislative affairs. "With the introduction of an import assessment, you cannot restrict promotion to U.S.-produced products. It also will encourage other countries to impose similar conditions on our exports. It doesn't make sense."

Among the impediments to implementation is a requirement that prohibits exclusive promotion of U.S. dairy. Currently, all DMI promotion and advertising is designed to increase demand for U.S. dairy products only. Imported dairy products are excluded from using logos such as the "Real Seal" and do not qualify for "business-to-business" partnerships or other promotional programs overseen by DMI.

U.S. dairy producers are also allowed to designate two-thirds of their assessment to a "qualified regional or state promotion program." In the proposed rule, USDA states that importers may direct one-third of their assessment to a qualified program, but there are no international programs at the present time. Unless one is created, all funds from the import assessment will directly support the Dairy Board budget, which had revenue of $95.5 million in 2008.

Dairy import assessments are estimated by USDA to raise about $6.1 million in 2011, making the assessment a significant portion, over 6 percent, of DMI's dairy promotion budget. U.S. dairy imports are declining and represent less than 3 percent of total U.S. milk production.

Domestic dairy producers pay a flat rate of 15 cents per hundredweight into the program on raw milk sold, which currently raises an estimated total of $280 million annually or 0.24 percent of the value of total domestic dairy product sales. USDA has estimated the proposed import assessment on a milk-solids basis, requiring conversion rates and estimates for over 271 different import product categories. The import tariff is estimated by USDA to represent 0.3% of the value of the imported products.

IDFA, as part of the "Alliance for Fair Dairy Promotion" coalition, submitted comments to USDA on the proposed rule that recommended changes to balance fairly the interests of domestic and foreign stakeholders and to comply with U.S. law and international trade obligations.

Source: IDFA