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Importers Use Back Door Method To Avoid Paying Tariffs on Imported Dairy Products - Violating The Spirit Of Existing Trade Laws

Schumer To Introduce Legislation To Close Loophole Allowing Importers to Avoid Existing Tariffs on a Wide Range Of Imported Dairy Products

There Are Currently Tariff Rate Quotas On Most Imported Milk Products, But MPC's Were Exempt Because They Were Originally Not Used In Food - Now They Are

Today U.S. Senator Charles E. Schumer unveiled legislation, The Milk Import Tariff Equity Act, that closes a loophole in federal law that allows for the unlimited importation of foreign Milk Protein Concentrate (MPC) for use in food.  As a result, over the last decade, MPC imports have more than doubled -- undermining the market for domestic powdered milk, reducing the farm price for milk, and costing New York dairy farmers millions every year. As MPC's have replaced powdered dry milk in the market, they have driven down the price of milk for New York's farmers and resulted in significant losses in revenue. Some foreign producers in countries including New Zealand, Australia, Canada and some European countries also mix small amounts of milk protein with powdered dry milk, to avoid existing tariff rate quotas (TRQs) on powdered milk.

MPCs are a product derived from milk that is used in a wide variety of both food and non-food related industries.   According to the National Milk Producers Federation, 27,800 metric tons of MPCs, valued at $108.7 million, were imported during 2004-2007, and that is revenue that New York Farmers are missing out on.  On the call, Schumer said imposing TRQs on imported MPC is consistent with the spirit of the United States’ existing dairy trade regime, and will raise demand for domestic milk and allow U.S. dairy farmers to compete on a level playing field for a share of this market.  

"For too long our farmers have been getting hammered on all sides," Schumer said. "If it isn't weather problems, it's the USDA’s failure to provide adequate aid to farmers during market crisis. If it isn't problems with harvests, it's ill written trade agreements that allow importers to circumvent the intent of our trade rules. Instead of New York milk in our dairy products like coffee creamers and snack foods, we end up with imported MPCs. Using MPC’s to bypass our dairy trade regime has got to stop now."

Current TRQs on dairy products went into effect in 1995 following the Uruguay Round of World Trade Organization negotiations. At that time, milk by-products such as milk protein concentrate (MPC), casein and caseinates were not widely used in the production of dairy products and were therefore not included in the TRQs for dairy. Since then, imported MPCs have become common in many processed dairy products, displacing domestic dairy. Some importers even adjust the protein content of powdered milk for export to the U.S. so that it is classified as an MPC and, thus, not limited by the TRQs and licensing requirements on powdered milk. Schumer said that  it is in the spirit of the original trade agreement to place TRQs on imported dairy products intended for consumption but importers are using MPCs to skirt existing TRQs.  The Milk Import Tariff Equity Act will close the loophole in our current system that allows these foreign dairy products unlimited access to domestic markets.


If MPCs were produced domestically, below are the numbers, as they break down across the state.  This is in addition to the increase in milk prices farmers would experience because of increased demand.


o   In the Capital Region, there are 59,600 milk cows.  The region’s additional share of the domestic dry milk market would be an estimated $691,000 per year.


o   In Central New York, there are 107,100 milk cows. The region’s additional share of the domestic dry milk market would be an estimated $1,242,000 per year.


o   In the Hudson Valley, there are 21,000 milk cows.  The region’s additional share of the domestic dry milk market would be an estimated $243,000 per year.


o   In the North Country, there are 143,700 milk cows.  The region’s additional share of the domestic dry milk market would be an estimated $1,666,000 per year.


o   In the Rochester-Finger Lakes region, there are 78,800 milk cows.  The region’s additional share of the domestic dry milk market would be an estimated $914,000 per year.


o   In the Southern Tier, there are 85,400 milk cows.  The region’s additional share of the domestic dry milk market would be an estimated $990,000 per year.


o   In Western New York, there are 128,000 milk cows.  The region’s additional market share of the domestic dry milk market would be an estimated $1,484,000 per year.


Schumer today said that the U.S. dairy industry is in crisis and immediate action must be taken to help dairy producers weather unprecedented low prices. Since last summer the domestic dairy industry has been grappling with a serious imbalance which threatens the stability and future of American dairy farmers. Unprecedented low dairy prices, caused in part by high supply, are creating extreme financial strain for dairy farmers across the country, forcing many to go out of business. 


Schumer is also taking other actions to increase aid dairy to farmers.  He is co-sponsoring legislation to increase MILC reimbursement rates to 90% and has recently written to Secretary of Agriculture Tom Vilsack, requesting that prices paid to farmers by the U.S. government for dairy products purchased through the Dairy Product Price Support Program be raised by at least 5%.


Schumer is meeting with Secretary Vilsack later this afternoon to emphasize the crisis being faced by dairy farmers in New York, and to continue pushing for an increase in prices through the Dairy Product Price Support Program. 


In January, Senator Schumer, along with Senators Feingold, Kohl, Stabenow, Snowe, and Johnson wrote to the Secretary of Agriculture urging him to consider other measures to bolster demand. Their letter encouraged the USDA to exercise its existing authority to: increase its purchases of milk powder through the Commodity Credit Corporation; restore the payments to offset the cost of packaging milk, which were ended under the last Secretary of Agriculture; and restore a program to promote dairy exports, which would tighten the domestic market.  Subsequently, Secretary Vilsack has reinitiated a key dairy export program and announced that he would bolster demand by transferring 200 million pounds of powdered milk from the Commodity Credit Corporation (CCC) to USDA's Food and Nutrition Service for use in domestic food programs.


Schumer also successfully fought for strengthening the MILC program in the 2007 Farm Bill.  The new MILC program significantly raised the reimbursement rate for dairy farmers from 34% to 45% in cases where the price of milk falls below the target price, which is currently stipulated at $16.94. This was an important increase in the safety net for dairy farmers to offset against plummeting milk prices.




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