Trade Rules
Duties Relief Program
What is it?
According to the Canadian Border Services Agency (CBSA), the Duties Relief Program relieves the payment of duties, at the time of importation, on imported goods that will eventually be exported either in the same condition or after being used in the processing of other goods.
Why is this important to the chicken industry?
The program was not designed for agriculture goods and does not provide adequate safeguards to address diversion into the domestic market when chicken is imported into Canada for further processing and subsequent re-export.
What can be done?
Chicken Farmers of Canada has made recommendations to the federal government requesting that all chicken products be administered under Global Affairs Canada’s Import to Re-Export Program, which was explicitly designed for perishable agricultural goods.
Economic Losses as a Result
Farm Cash Receipts: $44.5million
Jobs: 1,423 jobs lost
GDP: $107.1 million
Taxes: $35.7 million
Spent Fowl
What is it?
Spent fowl are old laying hens. While broiler chickens are raised for meat consumption, spent fowl hens lay eggs, and when their productivity declines, they are processed for their meat.
Why is this important to the chicken industry?
Chicken coming into Canada is subject to import controls, however spent fowl is not. Data is showing that chicken meat is being imported into Canada and fraudulently declared as spent fowl in order to bypass import controls.
What can be done?
A mandatory certification process for spent fowl would put an end to this type of fraudulent import. We have successfully developed a DNA test that can distinguish between broiler and spent fowl meat. This test should be used to verify that there are no imports of broiler meat being smuggled into Canada as spent fowl in order to circumvent import controls.
Economic Losses as a Result
Farm Cash Receipts: $86.7 million
Jobs: 2,771 jobs lost
GDP: $208.5 million
Taxes: $69.6 million
Specially Defined Mixtures
What is it?
Chicken combined with 13% of other ingredients is labelled a “specially defined mixture” (SDM) and is not considered chicken for import control purposes. In other words, products containing up to 87% chicken meat are generally not subject to import controls.
Why is this important to the chicken industry?
By adding sauce to a box of chicken wings or by stuffing uncooked chicken breast, many companies are deliberately creating products whose sole purpose is to evade import controls.
What can be done?
The federal government needs to reinstate, into the Canadian Customs Tariff, the sauce and cooking requirements it has already negotiated in Canada’s World Trade Organization commitments.
Economic Losses as a Result
Farm Cash receipts: $8.2 million
Jobs: 262 jobs lost
GDP: $19.7 million
Taxes: $6.6 million
We support Canada’s balanced trade position that allows market access gains for Canadian exporters while preserving the integrity of Canada’s pillars of supply management. These challenges to the import controls pillar not only affect the quality of chicken you purchase, but the jobs and economic revenue associated with the Canadian chicken industry.
For more information on issues facing our industry, check out these pages on our website:
The Impact of Imports
Issues Facing the Industry
What's Trade Got to Do With It?
An effective supply management system requires the ability to determine supply from all sources, domestic as well as international. In order to be sustainable, the supply management system relies on three pillars: import controls, production discipline, and producer pricing. Import controls are essential to maintaining the stability of supply in Canada – it ensures that Canadian market demand for chicken is primarily met by Canadian farmers.
The volume of chicken imported into Canada is controlled by Tariff Rate Quotas (TRQs), which allow a calculated volume – or “quota” – of chicken to enter Canada with little or no tariff and higher tariffs for volumes exceeding said quotas. Combined with domestic production discipline – which discourages under- and over-production – TRQs ensure that there are no shortfalls or surges in the chicken supply, keeping prices stable and predictable. Finally, the system contains mechanisms that provide farmers with a fair and stable return for their product, keeping chicken farming sustainable.
What is a TRQ?
Tariff rate quotas set limits to the amount of chicken allowed into Canada with little or no tariff. As a signatory to the WTO Agreement on Agriculture – which came into effect on January 1, 1995 – Canada converted its existing agricultural quantitative import controls to a system of TRQs. TRQs were designed to offer some level of protection to countries’ sensitive agriculture sectors. Canada operates 21 of the world’s 1,425 TRQs, while the United States has 54 and the European Union has 87.
Under these TRQs, imports are subject to low “within access commitment” rates of duty up to a predetermined limit. Canada allows more than double its WTO commitment of 39,843,700 kilograms through its North American Free Trade Agreement (NAFTA) commitment, which is 7.5% of its previous year’s production. Unrestricted imports in excess of this limit are subject to significantly higher “over access commitment” rates of duty.
To demonstrate this system for chicken, the TRQ level for 2013 was set at 77.7 Mkg, representing 7.5% of the amount of chicken produced in Canada the year before. Imports up to 77.7 Mkg can then be imported with either a very small tariff or none whatsoever. Imports originating from the US pay 0% tariff because of the NAFTA and imports from other WTO members are subject to a tariff of 5.4% because of the WTO. All imports above the 77.7 Mkg limit are subject to a tariff of 238% (whole chicken) regardless of their origin, which would make imports significantly less appealing under normal circumstances.
TRQ Administration
The department of Foreign Affairs, Trade and Development (DFATD) plays a very important role in operating the TRQ system in Canada. They allocate the privilege to import at the “within access commitment” rates of duty to firms by issuing import allocations – or “import quotas” – as long as the firms meet the necessary terms and conditions. The Tariff Quota Advisory Committee (TQAC) was mandated to provide advice to the Minister of International Trade on the administration of the TRQ allocation system. The committee is comprised of CFC, CHEP and industry stakeholders (represented by CPEPC, FPPAC, CRFA, CARI, FPC, and NFDA) and government officials from several departments.
Chicken products not covered by the TRQ (Non-Import Control List products):
- Chicken meat products containing 13% or more other products (HS Chapter 16); e.g., TV dinners, entrees (“specially defined mixtures”) – those are products with 87% or less chicken.
- Food preparation containing less than 20% chicken (HS Chapters 19, 20 & 21); e.g., meat pies, soups, egg rolls, etc.
Allocation of the TRQ
Import quotas – in this 2013 example – are allocated to 566 Canadian companies that meet criteria in one of five pools: traditional, processors, foodservice, distributors, and non-import control list (non-ICL) products. The traditional pool receives its fixed quantity (20.9 Mkgs). The processor, distributor and food service pools are allocated 37.1% (processors: 62.6%, distributors: 26.8%, foodservice: 10.6%). The non-ICL pool receives its full requirements through the volume remaining in the regular allocation, special reserves, the market development policy and the supplementary imports to complete allocation.
Companies qualifying as both processors and distributors are allowed to apply under both pools but only receive one allocation; related or affiliated companies are only eligible for one allocation as well. Companies that use less than 90% of their allocation in any year have their allocation in the next year reduced to their actual level of use.
Supplementary Import Permits
The Minister of International Trade can authorize the importation of quantities of chicken and chicken products in excess of the import access quantity if they judge that it’s necessary to help meet Canadian demand. There are four categories of supplementary permits, and each category is subject to different conditions and procedures outlined below.
1. Supplementary imports for market shortages
Applications for supplementary imports to meet market shortages must meet the whole bird substitution policy, whereby market shortages are assessed in terms of the domestic industry’s supply and demand situation, based on production for the whole bird market. Applications for poultry parts are authorized only when there is a shortage of whole birds. Supplementary imports of parts when whole birds are available would interfere with the adjustment mechanisms in the market.
2. Supplementary imports to import chicken for the manufacturing of products exempt from the Import Control List (import to compete)
Manufacturers having an import allocation for processing of chicken products that are not on the Import Control List (ICL), referred to as “FTA quota”, are required to have exhausted all of their FTA quota allocation for the year before supplemental import permits may be issued under this provision.
Manufacturers importing chicken under this provision must substantiate that the chicken imported is used to produce products exempt from the ICL.
3. Supplementary imports to import chicken and chicken products for further processing and re-export (import to re-export)
All products manufactured from the imported chicken products must be exported within a period of three months from the date of issuance of the import permit.
The applicant must provide DFATD with copies of the import documents, including a CFIA inspection certificate for each import, document the use of imported chicken in the production of the exported product, and provide the export shipping documents. Failure to supply the documents may disqualify an applicant for additional import to re-export permits.
4. Supplementary imports to import chicken and chicken products for the purpose of test marketing
Import permits supplementary to the annual TRQ may be issued to facilitate the test marketing of new products that are unique or are produced with unique processes and require a substantial capital investment for their production. Companies that intend to do test marketing on a specific product must normally plan the activity within their annual TRQ allocations. Companies having a basic quota allocation must exhaust this allocation before supplementary imports may be issued under this provision. The supplementary import permits are only available to firms that market product directly to consumers. Companies are required to commence production in Canada as soon as feasible after the successful completion of the test marketing program.