Skim Milk Powder and Milk Protein Concentrate Export Thresholds – Serial No. 993

Date: June 22, 2020

This Notice to Exporters sets out the policies and practices pertaining to the administration of Canada’s export thresholds for skim milk powder (SMP) and milk protein concentrate (MPC) under the Canada-United States-Mexico Agreement (CUSMA).

This Notice is provided pursuant to the authority of the Export and Import Permits Act (EIPA) and its corresponding regulations and remains in effect until further notice.

In brief

In accordance with its commitments under CUSMA, Canada has established a charge of $0.54 per kg on global exports of SMP and MPC above a set export threshold.

Exports of SMP and MPC below the threshold will not incur a charge.

For the 2019-2020 dairy year, the below-threshold quantity (BTQ) is set at 55,000,000 kg. This quantity decreases to 35,000,000 kg for the 2020-2021 dairy year. For each subsequent dairy year, the BTQ increases by a cumulative 1.2%.

1. Definitions

“Dairy year” means August 1 to July 31.

“Distributor” means an establishment that buys SMP and/or MPC and re-sells it to other businesses.

• For clarity, commission brokers do not meet the distributor definition. For purposes of this Notice, commission brokers procure or sell on behalf of others without taking ownership of or financial responsibility for the SMP or MPC.
• Additionally, retailers do not meet the distributor definition. For purposes of this Notice, a retailer is an establishment that is primarily engaged in retailing food, and which buys SMP or MPC and sells it directly to final consumers.

“Market share” means an allocation method that apportions an allocation on the basis of an applicant’s level of activity in the reference period in proportion to the activity levels of other similar eligible applicants.

“Milk protein concentrate” means a product that is included in Item 5200 of the Export Control List (ECL), namely products that are classified under subheading 0404.90.

“On demand” means export permits are issued on a shipment-by-shipment basis until the specified below-threshold quantity is reached (there is no official application/allocation).

“Processor” means an establishment that carries on the manufacture of SMP or MPC in its own facility and is licenced under the Safe Food for Canadians Act.

“Reference period” means the period of time used to measure an applicant’s activity in the processing of SMP and MPC in Canada. For the purpose of this Notice, the reference period is from May 1 to April 30 immediately preceding the applicable dairy year.

“Skim milk powder” means a product that is included in Item 5200 of the ECL, namely products that are classified under subheading 0402.10.

“Standard dry milk protein concentrate” means dry milk protein concentrate with a protein content greater than 42% on a dry matter basis, with a casein to whey protein ratio similar to that of the original skim milk.

“Year 1” means July 1, 2020 to July 31, 2020.

“Year 2” means August 1, 2020 to July 31, 2021.

2. Allocation policy

• To be eligible, you must be a processor active in the manufacturing of SMP and/or MPC in Canada at the time of application, and must remain active during the allocation year.
  • Note: You must in addition be active manufacturing SMP and/or MPC during the reference period.
• Individual applicants and related persons applicants are eligible for only one allocation.
  • Note: All applicants must provide a list of related persons.
  • Note: In the case of separate applications from related persons involving a parent company and one or more subsidiaries, only the application nominated by the parent company is considered.
• You must be able to substantiate that you meet all of the criteria throughout the entire reference period covered by your application.
• In the event that there is some BTQ unallocated, you may apply for a share of this quantity once you have utilized 80% of your initial allocation and provided that you have not returned any quantities.
• An allocation is valid only for the dairy year for which it is issued.

3. Calculation of allocations

• Year 1: The BTQ is available on demand to processors.
   
• Year 2: The BTQ is allocated to processors on a market share basis based on the quantity of SMP and/or standard dry MPC produced by all eligible applicants during the reference period, prorated to the protein content used in the production of these products.
• A market share allocation is prorated on the basis of the protein content of SMP and/or standard dry MPC produced by the applicant during the reference period in relation to the total market calculated within the group of eligible applicants. Proration is calculated according to the following conversion table:

• Market share is calculated for each eligible applicant by multiplying the total quantity produced of each commodity by the applicable conversion factor. An example of this calculation is provided below.
• Company A and Company B are the only two applicants applying for 35,000,000 kg of BTQ in Year 2. Company A makes 40,000,000 kg of SMP and Company B makes 10,000,000 kg each of MPC-70 and MPC-80. Their allocations are calculated as follows:

4. Transfer, return and under-utilization policies

Starting August 1, 2020 (Year 2):

• The transfer of allocations is normally prohibited. Transfers to distributors who act as the exporter of record for the transferred quantity may be considered.
  • If you are an allocation holder, you may submit a written request for a transfer to Global Affairs Canada for consideration.
• You may return any portion of your allocation by January 31.
  • Any portion returned by January 31 will be considered used for the purposes of administering the under-utilization policy.
  • If you return quantities between February 1 and April 30, your allocation in the following year may be reduced by an amount equivalent to 50% of the quantities that you returned.
  • You may not return quantities after April 30.
  • In the event there is some BTQ returned no later than April 30, you may apply for a share of this quantity once you have utilized 80% of your initial allocation and provided that you have not returned any quantities.
• If you use less than 95% of your allocation in one year, you may have your allocation adjusted downward by 100% of the unused quantity in the following year.
  • Any portion of your allocation that you transfer out, and that is not subsequently exported by the transferee, is considered as not having been utilized and will be factored into the under-utilization penalty to be applied against your BTQ allocation for the following dairy year.
  • You will be advised of the applicable penalty before the allocation is finalized.

5. Applications for allocation

• For Year 1, the BTQ is made available to processors on an on demand basis.
• You do not need to apply for an allocation.
• You can access the BTQ by applying for an export permit.

• For Year 2, you may apply for a BTQ allocation by submitting a completed application form and information concerning related persons (if applicable), by no later than July 3, 2020 to Export_Thresholds-Seuils_Exportation@international.gc.ca.

• You will be notified of your BTQ allocation on July 13, 2020.

6. Export permits

• An export permit is required for every shipment of SMP and MPC covered by this Notice.
• Information about the permit application process, including information about fees, the monthly billing system, and information required from applicants, is available on the Global Affairs Canada website: Applying for an Export Permit.
• Exporters that wish to apply for an export permit are required to submit an Application for Export/Import Permit form (a paper copy will be provided upon request).

7. Payment of the export charge

• Exporters of SMP and MPC who wish to export product in excess of the threshold (in Year 1) and/or their allocation (in Year 2) or those who have not received an allocation (in Year 2) must pay a charge of $0.54 per kg.
• The charge must be paid in full prior to the issuance of the requested export permit.
• For calculation and payment of the required charge, please fill out form and fax it to the Global Affairs Canada Cashier’s Office at 819-934-0227.

8. Contact us

• You can access contact information for the Help Desk and other Global Affairs Canada officials via this link: Contact Us.