The CUSMA dairy export thresholds are a set of new export controls Canada agreed to create as part of CUSMA.
The export thresholds require the payment of a charge on exports of certain dairy products once a set quantity of exports has been exceeded.
Each export threshold also includes a “below-threshold quantity” (BTQ) of exports not subject to a charge.
What dairy products are subject to the export thresholds?
One export threshold covers exports of skim milk powder (SMP), i.e., all products under HS 0402.10, and milk protein concentrate (MPC), i.e., all products under HS 0404.90.
The second export threshold covers exports of all infant formula that contains over 10% cow milk solids and fall under HS 1901.10.
What are the annual access levels for the export thresholds?
For the SMP and MPC export threshold, the BTQ will be 55,000,000 kg for Year 1, fall to 35,000,000 kg for Year 2, and increase by 1.2% a year thereafter.
For the infant formula export threshold, the BTQ will be 13,333,000 kg for Year 1, increase to 40,000,000 kg for Year 2, and increase by 1.2% a year thereafter.
What is the cost of the export charge?
All exports of SMP and MPC exported above the threshold will incur a charge of $0.54 CAD per kg.
All exports of infant formula exported above the threshold will incur a charge of $4.25 CAD per kg.
Do the export thresholds only apply to exports to the United States and Mexico?
No. The export thresholds apply to global exports of SMP, MPC and infant formula.
2. CUSMA entry-into-force and implementation
How will the entry-into-force date of July 1, 2020, affect the phase-in of the CUSMA export thresholds?
Year 1 of the export thresholds will begin July 1, 2020 and end July 31, 2020.
The full Year 1 BTQs will be made available for the month of July.
Year 2 of the export thresholds will begin August 1, 2020 and will span the entire dairy year (i.e., until July 31, 2021).
The full Year 2 BTQs will be made available for the 2020/21 dairy year.
3. Specific product coverage
Does the SMP/MPC export threshold cover products under HS 0404.90 that are not pure milk protein concentrate, such as dairy blends?
Yes. The SMP/MPC export threshold covers all products covered by HS 0404.90, even if their product name is not “milk protein concentrate”.
Does the SMP/MPC export threshold cover milk protein isolates or milk protein substances?
No. The SMP/MPC export threshold does not cover milk protein isolates, milk protein substances, or other products under HS 3504.00. These products can continue to be exported outside of the dairy export thresholds regime and without paying a charge.
How will I know if I am exporting a MPC or a milk protein substance?
For the purposes of the administration of the SMP/MPC export threshold, “milk protein concentrates” are products that contain a milk protein content of less than 85% by weight, calculated on the dry matter, while “milk protein substances” are products that contain a milk protein content of 85% or more by weight, calculated on the dry matter.
Does the infant formula export threshold cover infant formula made from goat milk or other milks?
No. The infant formula export threshold only applies to infant formula containing more than 10% on a dry weight basis of cow milk solids.
4. Allocation and administration
How will access to the BTQs be administered?
For Year 1, BTQs will be made available on demand to eligible processors. Export permits will be issued on a shipment-by-shipment basis until the specified BTQs is reached. No application process is needed to access BTQs beyond the application for the export permit.
For year 2, BTQs will be made available through an allocation administered by the Department. An application will be necessary to access an allocation.
Can distributors access BTQs?
For Year 1, BTQs will be made available to distributors exporting on behalf of processors as the exporter of record. As the exporter of record, distributors may apply for an export permit which provides them access to the BTQs. However, all distributor permit applications must list as the supplier an eligible processor and need to be approved through an e-mail from that processor.
For Year 2, eligible distributors may access BTQs only through transfers and under certain conditions. Please see the “Transfer, Return and Under-utilization Policies” section of the Notice to Exporters for more details.
How will the BTQs be administered for Year 3 of CUSMA and beyond?
The export thresholds are a new export control program.
As such, the Department will review the export thresholds allocation and administration policies after Year 2 in close consultation with stakeholders to ensure their long-term efficiency and effectiveness.
5. Year to year transition
If I receive a permit for BTQs under the Year 1 threshold quantity, can I use the permit to export goods without paying the export charge in Year 2?
No. Any permit associated with the export thresholds issued in Year 1 (July 1-31, 2020) expires before the start of Year 2 (August 1, 2020).
If you are issued a permit for BTQs in Year 1, you must export the goods listed on the permit before August 1, 2020 or it cannot be used.
Permits issued in one dairy year will expire at the end of the year and cannot be used to export in the following dairy year.
6. Year 2 allocation
Who is eligible to access BTQ allocations?
To be eligible for an allocation of the SMP/MPC BTQ, you must be
A processor active in the manufacturing of SMP/MPC; and
Able to demonstrate activity regularly in the applicable sector during the relevant reference period.
To be eligible for the infant formula BTQ, you must be
A ‘resident of Canada’ as defined in the EIPA;
An infant formula processor; and
Must have planned production of infant formula in Canada at the time of application.
How will the BTQs be allocated?
The SMP/MPC BTQ will be allocated on a market share basis based on the quantity of SMP and/or standard MPC produced by all eligible applicants during the reference period, prorated to the protein content used in the production of these products.
For more details about the specific allocation calculation methodology, please see the Notice to Exporters.
The infant formula BTQ will be allocated on a market share basis based on anticipated production for the upcoming dairy year.
7. SMP/MPC allocation calculation
What is “standard dry milk protein concentrate”?
Standard dry milk protein concentrate is a product that:
contains a protein content greater than 42% but less than 85% on a dry matter basis; and
has a casein to whey protein ratio similar to that of the original skim milk.
8. Application process
How can I apply for an allocation of BTQs for Year 2?
Applicants who wish to apply for an allocation should review the relevant Notice to Exporters, found below:
The Notices include links to the application form that must be completed and submitted to the Department by the application deadline.
Applicants must include their EIPA number in the application for an allocation.
Note: Given that access to certain Government of Canada facilities has been severely restricted due to COVID-19 measures, all applications for BTQs are to be submitted electronically. The email address to which you must submit your application is included in the application form for each respective BTQ.
When is the allocation application period for the BTQs?
There is no allocation application period for Year 1.
The application period for Year 2 for both CUSMA BTQs begins on June 3 and closes on July 3.
I do not have an EIPA number. Can I still submit an application?
Yes. If an applicant does not have an EIPA number, the Department will assign one based on the information provided in the application for an allocation.
Please note that it may take longer to process an application without an EIPA number.
If I don’t export using the on demand BTQs in year one, can I still apply for an allocation in subsequent years?
Yes. The BTQs are allocated on an annual basis based on an applicant’s activity during the 12-month reference period for SMP/MPC and anticipated production for infant formula.
How can I apply for an export permit?
Information about the permit application process, fees, the monthly billing system, and information required from applicants, is available on the Department’s website: Applying for an Export Permit.
I am not currently active in the SMP or MPC sector. Am I eligible to receive an allocation of SMP/MPC BTQ?
At a minimum, an applicant must be a resident of Canada and have been active regularly in the SMP and/or MPC sector to be eligible for BTQ.
Activity is determined based on an applicant’s record of past production.
I am not currently active in the infant formula sector. Am I eligible to receive an allocation of infant formula BTQ?
Yes, so long as you have production of infant formula planned for the upcoming year.
Do I have to be able to demonstrate a history of exporting these products to apply for an allocation under the applicable BTQ?
No. Applicants’ eligibility for an allocation will be assessed against the eligibility criteria for the applicable BTQ.
Do I have to provide an accountant’s letter or affidavit with my application?
Recognizing the impacts COVID-19 is having on stakeholders’ ability to conduct normal operations, the Department has decided that, on an exceptional basis, the requirement to provide an accountant's letter for the upcoming BTQs will be waived.
There is no requirement for an individual affidavit with a BTQ application.
The Notice to Exporters says that only one applicant from a group of related persons will receive an allocation under an individual BTQ. How can I determine if I am related to another company?
The criteria for determining whether individuals or companies applying for BTQs are related are set out in the Information Concerning Related Persons. Applicants who are uncertain whether they are related should err on the side of caution and list the individuals or companies to whom they may be related and seek an assessment from the Department.
Once I have submitted an application, how will I know if I have qualified for an allocation?
Applicants will be informed in writing whether they have qualified for an allocation and the amount of BTQ they have been allocated.
Applicants will be informed whether they have received an allocation by July 13, 2020.
10. Transfer, return, and under-utilization policies
Do transfer, return and under-utilization policies apply in Year 1, given that BTQ will be issued on demand?
No. The transfer, return and under-utilization policies for the export thresholds take effect beginning Year 2.
Is it possible to transfer BTQ? If so, to whom and how?
Yes, but only under limited circumstances. The Minister may allow the transfer of allocations if:
The transfer is made to an eligible distributor, as defined in the applicable Notice to Exporters; and
The distributor acts as the exporter of record for the transferred quantity.
Any portion of an allocation that is transferred will be considered as having been used for the purposes of administering the under-utilization policy only when the transferred quantity has been exported.
All BTQ transfers must be referred to the Department for consideration.
Requests must be made by way of an e-mail to the Department.
What happens if I cannot use my entire allocation? Can I return some? How do I do that?
As of year 2, if an allocation holder anticipates that they may not be able to utilize all or a portion of their BTQ allocation, they may return any portion of their unused allocation by no later than April 30 for SMP/MPC and no later than April 1 for infant formula.
Any portion of an allocation that is returned by the return date will be considered as having been used for the purposes of administering the under-utilization policy.
SMP/MPC allocation holders that return between February 1 and April 30 may have their allocations adjusted downward by a return penalty for the new dairy year.
What happens if I cannot use my entire allocation and do not return it?
An under-utilization penalty will normally apply to allocation holders that do not utilize 95% of their allocation in a dairy year.
Allocation holders that do not meet the minimum utilization threshold in the dairy year may have their allocations adjusted downward by an under-utilization penalty for the new dairy year.
How can I access BTQ that has been returned by other allocation holders?
Returned quantities will normally be made available seven days after the return deadline to eligible allocation holders who have used 80% or more of their allocation and not returned any unused quantity of their allocation.
The issuance of returned BTQ will be in proportion to the applicant’s initial allocation.
11. Paying the charge
I want to export above the threshold. When do I need to pay the charge?
The charge must be paid in full prior to the issuance of the requested export permit.
How will I know the charge I have to pay? How do I pay the charge?
For calculation and payment of the charge, please fill out a payment form and fax it to the Department’s Cashier’s Office at 819-934-0227.
Do I need to fill out a new form for every shipment I export above the threshold?
Yes. The Department requires exporters to submit a payment form for each shipment exported above an export threshold for tracking purposes so that refunds can be issued for the cancellation of individual permits and shipments.
12. Further information
How do I get more information about the allocation process?
Applicants who wish to obtain more information regarding the export thresholds should review the relevant Notice to Exporters.