Infant Formula Export Thresholds – Serial No. 994

Date: June 3, 2020

This Notice to Exporters sets out the policies and practices pertaining to the administration of Canada’s export thresholds for infant formula 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 $4.25 per kg on global exports of infant formula above a set export threshold.

Exports of infant formula below the threshold will not incur a charge.

For the 2019-2020 dairy year, the below-threshold quantity (BTQ) has been set at 13,333,000 kg. This threshold increases to 40,000,000 kg for the 2020-2021 dairy year. For each subsequent dairy year, the threshold will increase by a cumulative 1.2%.

1. Definitions

“Dairy year” means August 1 to July 31.

“Distributor” means an establishment that buys infant formula 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 infant formula.
• 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 infant formula and sells it directly to final consumers.

“Infant formula” means a product that is included in Item 5200 of the Export Control List (ECL), namely products that are classified under subheading 1901.10 containing more than 10% on a dry weight basis of cow milk solids.

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

“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 infant formula in its own facility and is licenced under the Safe Food for Canadians Act.

“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 have planned production of infant formula in Canada at the time of application.
• 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 allocation year. 
• 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 infant formula planned for production during the allocation year in proportion to the total of all planned production of all eligible applicants.

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 April 1.
  • Any portion returned by April 1 will be considered used for the purposes of administering the under-utilization policy.
  • In the event there is some BTQ returned no later than April 1, 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 will be considered as not having been utilized until it is exported and will be factored into the under-utilization penalty for the following year.
  • You will be advised of the applicable penalty before the allocation is finalized for the new dairy year.

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 infant formula 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 infant formula 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 $4.25 per kg.
• The charge must be paid in full prior to the issuance on the requested export permit.
• For calculation and payment of the required charge, please fill out this 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.