January 26, 2022

Earlier this month, the CUSMA Dispute Settlement Panel publicly released its decision on the USTR’s challenge of Canada’s administration of its dairy tariff rate quotas (TRQs). The Panel determined that Canada’s allocation mechanisms for CUSMA dairy TRQs are not consistent with its commitments under Article 3.A.2.11(b) of the Treaty not to “limit access to an allocation to processors”.

What does this decision mean for Canada and its dairy processing industry? 

  • Means that Canada cannot reserve pools of TRQs for processors exclusively
  • Does not force Canada to allocate to grocery retailers, or create pools for distributors
  • Recognizes the legitimacy of Canada’s supply management system
  • Acknowledges that Canada “has significant discretion in designing and implementing its allocation mechanisms” (subject to consistency with the other provisions of the Agreement)

In the report, the Panel acknowledged that domestic processing capacity is important for the Canadian dairy industry and the regulations of supply, including ensuring predictability in imports. A full analysis of the report was prepared by DPAC legal counsel and is available for DPAC members. 

Within the current timelines, Canada must comply or respond to the Panel’s decision by February 4, 2022. DPAC is working to ensure that the Canadian government’s resolution conforms to the Panel’s decision, but does not go beyond its findings. 

 

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