Pizza cheese eludes Canadian tariff

Thursday, October 18, 2012

by SUSAN MANN

American mozzarella cheese coming into Canada as part of pizza kits for fresh pizza manufacturers is allowed to enter duty free - and that’s taking a bite out of domestic sales, say Canadian dairy industry officials.

Dairy Farmers of Ontario alerted delegates of the situation during the organization’s fall regional meetings held across the province Oct. 9 to 12 and Oct. 18.

Therese Beaulieu, Dairy Farmers of Canada spokesperson, says they became aware last fall that mozzarella cheese in pizza kits was entering Canada from the United States. But they don’t know when the kits started coming in. The kits contain 80 per cent mozzarella along with 20 per cent pepperoni and are coming in to all parts of Canada.

Beaulieu says the kits are big brown boxes that have plastic containers of cheese and pepperoni.

The Canada Border Services Agency decided to classify the kits as a food blend allowing the cheese in them to enter duty free. Ordinarily, the tariff for mozzarella cheese is 245.5 per cent. That’s the percentage applied to imports above levels that can come in duty free each year.

Canada Border Services, which manages the access of people and goods to and from Canada, couldn’t be reached for comment.

DFO says in its report to fall regional meeting delegates that the Border Services decision “is already having a negative impact on domestic mozzarella sales and could have an even greater impact going forward in the absence of an industry program and/or government action.”

DFC’s preliminary estimate of the cheese coming in as part of the pizza kits is 2,000 tonnes to 4,000 tonnes annually. DFO’s document says the total fresh pizza cheese market is estimated to be about 35,000 tonnes annually.

Don Jarvis, president of Dairy Processors Association of Canada, which represents Canadian processors, says “we’d rather see domestically made mozzarella being used by the customers.” He says those customers are fresh pizza manufacturers.

The situation is probably occurring because mozzarella cheese is significantly cheaper in the United States than in Canada, he explains.
So far, DFC representatives have talked with government officials from Canada Border Services and other federal departments to get the classification of the kits changed. But those talks were unsuccessful.

“Our position is this product is a cheese product” and it should be classified as a dairy product, Beaulieu says, noting the mozzarella cheese should be classified under the dairy product section (Chapter 4) of Canada Border Services Customs Tariffs – 2012 document so the imported cheese would be subject to a tariff.

In January DFC put in a request to Canada Border Services for an ‘advance ruling.’ Beaulieu says that’s an official request “to look at what tariff line is the correct one.”

The next step is for DFC to take the matter to the Canadian International Trade Tribunal. Beaulieu says the tribunal’s role is “to rule on what is the proper classification.” The earliest the case will be heard is April 2013.

Beaulieu explains other parties can apply to be interveners in the hearing. Jarvis says the association isn’t directly involved in the hearing process. It wouldn’t have any standing since it isn’t affected economically by the situation. But individual cheese manufacturers who have been economically impacted directly “have the opportunity to support the DFC” and provide evidence.

DFC’s national market intelligence committee, made up of staff from that organization plus staff from the provincial marketing boards, is reviewing options that could be used to promote the use of domestic cheese. Beaulieu says the committee is still investigating the promotional options and “it’s not something that I can talk about at this point.” BF