Notice to Importers

Dairy – CETA Industrial Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List)

Serial No. 905
Date: October 1, 2017

This Notice replaces Notice to Importers No. 896, dated August 1, 2017, and will remain in effect until further notice.

This Notice to Importers is provided pursuant to Section 6.2 of the Export and Import Permits Act (EIPA) and will remain in effect until further notice.

In Brief

Imports of cheese into Canada are subject to import controls under Canada’s EIPA. Accordingly, an import permit issued by Global Affairs Canada is required for shipments of cheese to enter Canada.

Under the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union (EU) and its Member States, Canada agreed to establish a tariff rate quota (TRQ) of 1,700,000 kilograms for EU industrial cheese imports (not for retail sale, in bulk), used as ingredients for further food processing (secondary manufacturing).

Import permits for shipments of cheese destined to the Canadian market are issued to allocation holders under the CETA industrial cheese TRQ, which is administered by Global Affairs Canada.

This Notice to Importers sets out the policies and practices pertaining to the administration of the CETA industrial cheese TRQ, including the allocation, underutilization, return, and transfer policies. This Notice also explains how to apply for import permits.

Summary of Key Dates and Access Quantity for the 2018 Allocation Year

• TRQ Year: January 1 to December 31
• Access Quantity: 567,000 kilograms

Application Deadline: November 15, 2017

• Reference Period for assessing applicant eligibility for an allocation: October 1, 2016 to September 30, 2017

Opening of the TRQ for imports: January 1, 2018

Date for Returning Unutilized Quota: August 1, 2018 (no later than 12:00h, Eastern Time)

• Reallocation of Returned Quota: August 2, 2018 (17:00h, Eastern Time)

Table of Contents

• Purpose
• Definition
• General information
• Products covered
• Allocation policy
• How to apply for an allocation
• Underutilization, returns and reallocation policies
• Transfer policy
• Import permits
• Contact us
• Appendices
• Appendix 1: Application Form
• Appendix 2: Affidavit of the applicant
• Appendix 3: Independent verification of the application
• Appendix 4: Information concerning related persons

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1. Purpose

1.1 The purpose of this Notice is:

• To set out the policies and practices pertaining to the administration of the CETA industrial cheese TRQ;
• To invite applications for allocation under the TRQ for the next allocation year; and
• To explain how to apply for permits for imports of cheese.

2. Definitions

“Cheese” means a product that is included in Items 141 to 157 on the Import Control List.

“Industrial cheese” means cheese used as ingredients for further food processing (secondary manufacturing) imported in bulk (not for retail sale).

“Further Processor” means an establishment that uses cheese as an ingredient in the production of further processed food products, other than cheese, in its own provincially-licensed or federally-registered processing facility. Food service establishments (e.g. restaurants) are not considered to be further processors.

“Market Share” means an applicant’s level of activity in the cheese sector in relation to the total activities of the other applicants under this TRQ.

“New Entrant” means:

• For the first five years following the provisional application of CETA: an eligible applicant who is not an allocation holder under Canada’s cheese TRQ under the World Trade Organization (WTO).
• As of Year six following the provisional application of CETA: an eligible applicant who is not an allocation holder under Canada’s WTO cheese TRQ or did not receive an allocation of the TRQs established under CETA in the preceding year.

N.B., A “New Entrant” will be treated as such for a period of three years.

“Small/Medium-Sized Enterprise” means an eligible applicant whose allocation under this TRQ would amount to less than 20,000 kilograms.

“Reference period” means the period of time used to measure an applicant’s activity in the Canadian cheese sector. For the purpose of this Notice this period is from October 1 to September 30 immediately preceding the applicable allocation year.

3. General information

3.1 Background

3.1.1. In accordance with its commitments under CETA, Canada has in place a TRQ for imports of industrial cheese from an EU country or other CETA beneficiaries.

3.1.2. Under Canadian TRQs, in any given year, a predetermined quantity of imports of a good controlled under the EIPA can enter Canada at a lower rate of duty, while imports over this quantity are subject to higher rates of duty. The TRQs therefore have three components: an import access quantity negotiated with Canada’s international trade partners; a within access commitment rate of duty that applies to imports up to the access level; and a higher, over access commitment rate of duty for imports over the access level.

3.1.3. The within and over access rates of duty that apply to imports of cheese can be found in the Schedule to the Customs Tariff.

3.1.4. Pursuant to the EIPA and its corresponding regulations, when deciding whether to issue an import allocation or whether to consent to a transfer, the Minister shall take into account whether the import allocation holder has furnished false or misleading information in connection with any reports required by the Act or the regulations made under the Act or by any condition of an import allocation or import permit during the 12-month period preceding the period in respect of which the import allocation or transfer is to apply. Furthermore, the Minister may attach conditions to import allocations and/or to import permits, and may amend, suspend, cancel or re-instate import permits and allocations.

3.1.5. Failure by an applicant to provide any information requested by Global Affairs Canada, or failure to comply with any condition of an allocation or permit issued pursuant to the EIPA may result in the rejection of the application for an allocation under the CETA industrial cheese TRQ, the reduction or cancellation of an allocation issued pursuant to the EIPA, or the cancellation of associated permits.

3.2. Access quantity

3.2.1. The access quantity for CETA industrial cheese TRQ will be phased in over five years, in six installments:

• 2017 – 79,085 kilograms (283,000 kilograms prorated to the period between September 21 and December 31, 2017).
• 2018 – 567,000 kilograms.
• 2019 – 850,000 kilograms.
• 2020 – 1,133,000 kilograms.
• 2021 – 1,417,000 kilograms.
• 2022 and onward –1,700,000 kilograms.

3.2.2. The TRQ allocation method allows for new entrants each year. During the phase-in period from 2017 to 2021, at least 30 percent of the TRQ will be available to new entrants every year. After the end of the phase-in period from 2022 and in subsequent years, at least 10 percent of the TRQ quantity will be available for new entrants.

3.3. Allocation period

3.3.1. The allocation year for the CETA industrial cheese TRQ extends from January 1 to December 31, inclusive.

3.3.2. Eligibility for an allocation, and the size of that allocation, will be assessed on the basis of each applicant’s activity in the further processing of food using cheese as an ingredient during the reference period of October 1 to September 30 immediately preceding the applicable allocation year. An applicant must be a resident of Canada and be regularly active in the further processing of cheese, as defined in this Notice, during the reference period and the allocation year.

3.3.3. Being active regularly during the reference period and the allocation year is normally understood to mean monthly activity.

4. Products covered

4.1. This Notice pertains to Items 141 to 157 of the Import Control List (ICL), namely EU originating cheese under heading No. 04.06 in the list of tariff provisions set out in the Schedule to the Customs Tariff.

4.2. Importers who require a determination as to whether the product they intend to import is within the scope of this Notice are encouraged to obtain an advance tariff classification ruling from the appropriate regional client service office of the Canada Border Services Agency (CBSA).

5. Allocation policy

5.1. The CETA industrial cheese TRQ is entirely allocated to further processors as defined in the Notice.

5.2. The TRQ is allocated on a market share basis. Eligible applicants receive an allocation proportional to their respective market shares in relation to the total market share calculated under the CETA industrial cheese TRQ.

5.3 Further processors’ market shares are calculated on the basis of the quantity of cheese (in kilograms) that they used as an ingredient in the production of further processed food products, other than cheese, in their own provincially-licensed or federally-registered facilities during the reference period.

5.4. For the purpose of this Notice, where two or more applicants are related persons, they shall be eligible for only one allocation. To determine which persons are related, applicants are required to provide a list of “related persons”. A definition of related persons may be found in Appendix 4, “Information Concerning Related Persons”.

5.5. In the case of separate applications from related applicants involving a parent company and one or more subsidiaries, only the application nominated by the parent company will be considered. If the parent company does not make such a nomination in writing, it shall be made by Global Affairs Canada.

5.6 Allocations to individual eligible applicants will normally be capped at a maximum 20 percent of the total CETA industrial cheese TRQ.

5.7. In order to ensure that allocations are issued in economically viable quantities, applicants whose market share calculation does not result in an allocation of 1,000 kg or greater will normally not be issued an allocation, unless they have indicated in their applications that they will accept a lesser amount based on the market share calculation.

5.8. To ensure an orderly transition between allocation years, eligible applicants may receive, upon Global Affairs Canada’s receipt of a complete application, advances of up to 30 percent of their initial allocation in the previous allocation year. Advances to applicants likely to be subject to an under-utilization penalty and/or a chronic return penalty will be evaluated on a case-by-case basis.

5.9 All import allocations expire at the end of each allocation year and applicants interested in receiving an import allocation must reapply each year.

5.10. In the event that the TRQ is not fully allocated, available quantities will immediately be offered to eligible applicants in proportion to their allocation, or on demand if quantities still remain after the first offer.

6. How to apply for an allocation

6.1. Applicants who wish to apply for an allocation under this TRQ are invited to submit their completed application form and any other relevant documents no later than November 15 immediately preceding the opening of the allocation year.

6.2. All applicants for an allocation are required to include as part of their application:

• a complete application form;
• a sworn affidavit; and
• a letter from an independent qualified professional (normally an accountant) verifying the information included in the application.

6.3. For the purpose of this Notice, an “accountant” is defined as a member in good standing of one of the professional accounting bodies in Canada: who is registered with his/her provincial professional organization to provide accounting services and is independent from the applicant (i.e., is not an owner, a partner, a director, nor an employee of the company applying for an import allocation).

6.4. All appendices to the application should be in the exact format of the models attached to this Notice. Any changes to the wording of the appendices will normally not be permitted. Any change to the appendices should be discussed and submitted in advance to be validated by Global Affairs Canada.

6.5. The information that the applicant provides will be considered when allocating the TRQ. Global Affairs Canada retains the right to request additional information. Applicants may be required to provide evidence of their activities. Accountants may be asked to explain the procedures used in greater detail and may be asked to provide Global Affairs Canada with copies of all working documents. Any costs associated with a request for additional information will be borne by the applicant. Failure to provide the information requested may result in the application being deemed incomplete.

6.6. The declaration in the application form allows Global Affairs Canada and its representative access to any information pertaining to the applicant in relation to the application for an import allocation or to subsequent applications for, or concerning the use of, import permits that is in the files of Agriculture and Agri-Food Canada or the Canadian Food Inspection Agency. Normally, applicants are informed of any such requests for information.

6.7. Section 18 of the EIPA forbids any person to knowingly induce, aid or abet any other person to contravene any of the provisions of the EIPA. Such contraventions by an applicant or its accountant may lead to prosecution for offenses under the EIPA.

6.8. Applicants are invited to send their applications by E-MAIL to the CETA Mailbox. Applicants sending their application by e-mail should be prepared to present the original version of their application upon Global Affairs Canada’s request. Failure to do so may lead to the cancellation of any allocation issued pursuant to the application and/or the cancellation of associated permits.

6.9. Applications sent by MAIL or COURIER should be addressed to the quota manager of the CETA industrial cheese TRQ at Global Affairs Canada. The mailing address of the Trade Controls Policy Division can be obtained on the Global Affairs Canada website, under Contact Us.

6.10. For legibility reasons, applications sent by facsimile will not be accepted.

6.11. Applications postmarked after the deadline immediately preceding the opening of the allocation year, or in a format other than that required, will normally not be considered. Lost applications will not normally be considered without acceptable proof that they were sent before the deadline (e.g., courier receipt).

7. Underutilization, returns and reallocation

7.1 Underutilization

7.1.1. Allocation holders with a utilization rate less than 95 percent in the previous allocation year may have their allocations adjusted downward by an under-utilization penalty for the new allocation year^{Footnote i}.

7.1.2. For allocation holders that under-utilized in the previous allocation year, allocations in the new allocation year will be reduced by the percentage of the allocation not utilized in the previous allocation year^{Footnote ii}.

7.1.3. Allocation holders that under-utilized during the previous allocation year will be advised of the applicable under-utilization penalty before the allocations are finalized for the new allocation year.

7.2 Returns

7.2.1. Allocation holders may return any portion of the balance of their allocation no later than August 1 of the allocation year. Any portion of an allocation that is returned by this date will be considered as having been used for the purposes of administering the under-utilization policy in Section 7.1.

7.2.2. Allocation holders that return 20 percent or more of their allocation for two consecutive years may have their allocation reduced in the next allocation year by the amount of quota they returned averaged over those two consecutive years. This provision will normally not apply to small/medium-sized enterprises and new entrants, as defined in Section 2 of the Notice.

7.2.3. Allocation holders that returned 20 percent or more of their allocation for two consecutive years will be advised of the applicable penalty before the allocation is finalized for the new allocation year.

7.3 Reallocation

7.3.1 Returned quantities will normally be made available immediately the day after the return deadline to eligible allocation holders who have not returned any unused quantity of their allocation. The reallocated quantity will be in proportion to the applicant’s allocation, or on demand if quantities still remain after the first offer.

8. Transfer policy

8.1. The Minister may allow the transfer of allocations between allocation holders. All requests for allocation transfer must be referred to Global Affairs Canada for consideration. Requests must be made by way of the CETA Cheeses Import Allocation Transfer Request form.

9. Import permits

9.1. Types of permits

9.1.1. An import permit issued by Global Affairs Canada is required for every shipment of cheese covered by this Notice to enter Canada. For a given shipment, importers may either present a shipment-specific import permit or invoke the appropriate General Import Permit (GIP).

9.1.2. Industrial cheese imported directly into a bonded warehouse does not require either a specific import permit or a GIP. However, an import permit is required to move goods out of a bonded warehouse for consumption in Canada.

9.2. Shipment-specific import permits

9.2.1. Shipment-specific import permits are normally issued on demand to allocation holders up to the amount of their allocation under the CETA industrial cheese TRQ. Shipments entering Canada under a shipment-specific import permit can normally do so at the within access rate of duty as long as there is sufficient quota remaining.

9.2.2. To claim the within access rate of duty for a shipment, the importer must present the shipment-specific import permit to the CBSA at the time of final accounting.

9.2.3. Shipment-specific import permits will not normally be issued retroactively for shipments that have already been imported into Canada, including under the authority of a GIP, regardless of the importer’s allocation.

9.2.4. For a shipment-specific import permit to be considered valid, the name on the permit must match exactly the name of the importer on the CBSA’s B3 customs entry and related documents at time of final accounting. Furthermore, the quantity on the permit must be the same as the net quantity on the Customs invoice. It is incumbent on the recipient of the permit to ensure that a permit application is made in the name of the importer of record and includes the correct quantity. Questions about the proper procedures to fill out customs entry documents should be addressed to local CBSA officials.

9.3 General Import Permit

9.3.1. The GIP that applies for industrial cheese is General Import Permit (GIP) No. 100 – Eligible Agricultural Goods. There is no limit to the quantities of industrial cheese that may enter Canada under the GIP; however, such imports will be subject to the higher over access rate of duty.

9.4 How to apply for a permit

9.4.1 Information about the permit application process, including information about fees, the monthly billing system, information required from applicants and the permit application form, is available on the Global Affairs Canada website: Applying for an Import Permit.

10. Contact us

10.1. Contact details for the Trade Controls Policy Division and the Help Desk are available on the Global Affairs Canada website: Contact Us

10.2. For directory assistance, you may call 343-203-6820.