Tariff Rate Quotas (TRQs) form a key pillar of Canada’s supply management system and have a significant impact on Canada’s farm sector. The supply management system limits the supply of certain agricultural commodities, such as dairy, eggs and poultry, to the levels that Canadians are expected to consume. The origin of this system can be traced to the 1960s which was a time when the overproduction of agricultural commodities was linked to low sale prices for farmers. The supply management system is designed to prevent the oversupply of goods and thereby to control and stabilize prices and support farmers’ incomes by ensuring that farming can be a sustainable business, without direct government support.
Canada sets TRQs for supply managed goods. Under the TRQ system, certain importers may apply for and receive a quota allocation and import goods pursuant to an import permit authorization. Goods that are imported under an import permit within the quota allocation may be classified as “within access commitment” at a normal rate of duty or duty free. Goods that are imported in excess of the quota allocation may be classified as “in excess access commitment” and subject to punitive rates of duty (in the range of approximately 300 percent).
Importers of supply managed goods have been targeted for Canada Border Service Agency verifications in recent years. This crackdown on supply managed goods can be traced to an Auditor General’s report which indicated that more administration and enforcement was warranted. An importer’s failure to obtain an import permit allocation and the failure to properly recognize and classify goods as supply managed goods can lead to a substantial duty liability risk. In some cases, importers who have been the subject of verifications and assessed punitive rates of duty, have applied for supplemental, retroactive import permits pursuant to the provisions of Canada’s Export and Import Permits Act. These applications have had mixed results.
Global Affairs Canada administers the TRQ program. It has launched a public stakeholder consultation regarding TRQs for supply managed goods established under the World Trade Organization (WTO), the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and, potentially, the Canada-United States-Mexico Agreement (CUSMA).
This consultation initiative is designed to inform the Minister of International Trade Diversification respecting the allocation methods and administrative policies relevant to Canada’s supply managed TRQs. The Minister is seeking views of all stakeholders with an interest in Canada’s dairy, poultry and egg sectors. Responses should be submitted by 11:59 pm (Pacific Time) on August 31, 2019. Global Affairs Canada will also entertain meeting requests. For advice or assistance respecting this matter please contact any member of the International Trade and Customs Group.