Fraudulent chicken imports undermine Canadian farmers' market share

Wednesday, March 9, 2016

by SUSAN MANN

MISSISSAUGA—The Canadian government appears to be willing to crack down on fraudulent chicken imports, says a Chicken Farmers of Canada official.

Mike Dungate, Chicken Farmers of Canada executive director said one of the primary concerns is spent fowl (old laying hens) being imported from the United States and passed off as broiler chickens.

“We know, because of the volume coming in, it’s not all spent fowl,” Dungate said during a break in the Chicken Farmers of Ontario annual meeting Tuesday. “It’s broiler chicken grown in the United States.”

At the conclusion of the Trans Pacific Partnership (TPP) negotiations last year, Canada’s former Conservative government announced it would implement measures to stem the flow of chicken imports that were avoiding tariff charges through either fraudulent means or legislative loopholes. Officials with Canada’s new Liberal government signed the wide-ranging trade agreement between 12 Pacific Rim countries in February but the deal has yet to be ratified in Parliament.

Dungate said talks between officials with his organization and government representatives indicate it’s likely the Liberal government will uphold the former government’s commitment to address the shady imports. Chicken Farmers of Canada representatives met with Agriculture and Agri-Food Minister Lawrence MacAulay and International Trade Minister Chrystia Freeland in December.

MacAulay couldn’t be reached for comment.

Canada’s supply management system includes import controls. The level of chicken imports that can come in duty free, if coming from the United States or other countries Canada has free trade agreements with, or with a 5.4 per cent duty for products from Brazil or Thailand, is based on the previous year’s production. Chicken Farmers of Canada manager of trade and policy Yves Ruel said in a telephone interview Canada’s duty free or low duty import level, also known as the tariff rate quota, was 80.2 million kilograms for 2015. For this year it’s 83.3 million kilograms.

Imports above that amount face a duty of 238 to 249 per cent depending on whether the product is a whole bird or chicken cuts. However, no one brings over-quota imports into Canada so “no one pays those tariffs,” he said.

Spent fowl imports in 2015, which come in as bone-in or boneless breasts, were 103 million kilograms, Ruel said. In 2012, there were 105.6 million kilograms of spent fowl imports, and they “represented 100 per cent of the United States’ slaughter volume,” Ruel said. In 2015, the spent fowl imports represented 96 per cent of the U.S. slaughter volume.

The problem of huge spent fowl imports has existed for several years. The spent fowl is used for further processed products, such as chicken wieners and nuggets. Ruel said those imports are legitimate. However, there also is mislabeling of product occurring.

“You can send boneless breast of chicken (into Canada) and it’s labeled as spent fowl,” Ruel said. The product crosses the border duty free and is sold in grocery stores labelled as chicken. “It’s just weird the product can change names after crossing the border.”

Customs officers don’t have the means to distinguish between spent fowl and broiler chicken. However, Trent University researchers have developed a DNA test that can distinguish between the two products, and Chicken Farmers of Canada wants the government to use that test.

Another area of concern is the duties relief program administered by Canada Border Services Agency (CBSA). It was designed for all goods and is mainly used for textiles or shipbuilding.  Chicken imports under this program in 2015 were 96.3 million kilograms.

The program gives importers up to four years to re-export finished goods, Ruel said. “You can bring in steel, build a boat and re-export the steel in a value-added form as a boat.”

This program needs better controls, Ruel said. The program wasn’t designed for agricultural goods “but they could not refuse the applicants when the applicants started to go to CBSA and request to use the relief program.”

Chicken Farmers is also concerned about the loophole allowing chicken mixtures containing mostly chicken to be imported duty free. The importation program exempts chicken mixtures from duties as long as more than 13 per cent of the total package is made up of other ingredients. “It’s pretty crazy for a product with 87 per cent chicken or less, it would not be considered chicken” and be under import controls, he said.

Ruel said Chicken Farmers would like to see rules for those chicken mixture products tightened because companies aren’t bringing in a further-processed, finished product, such as chicken cordon bleu (chicken stuffed with cheese and ham). Instead, “it’s just putting two products in the box, and as long as the product sitting next to chicken weighs more than 13 per cent it can enter Canada duty free.”

Dungate said if government adopts measures to stop the fraudulent chicken imports the impact would offset the hit to the industry from the pledge under TPP to increase access to Canada’s chicken market.

The deal calls for Canada to provide access equal to 2.1 per cent of its annual chicken production. Coupled with the 7.5 per cent access Canada already provides as part of existing World Trade Organization and North American Free Trade Agreement deals, Canada’s access (once the TPP is fully implemented) will be about 9.6 per cent of its annual chicken production.

Dungate said during the meeting the additional access will result in an extra 26.7 million kilograms of chicken coming in duty free. “When you put that into the context of our industry, that is 61 farms we will lose,” he said. “There are $57 million in farm cash receipts on those farms annually.” BF