Vol. 147, No. 23 — November 6, 2013

Registration

SOR/2013-184 October 21, 2013

EXPORT AND IMPORT PERMITS ACT

Order Amending the Allocation Method Order (Beef and Veal)

Whereas the Minister of Foreign Affairs has, pursuant to subsection 6.2(1) (see footnote a) of the Export and Import Permits Act (see footnote b), determined an import access quantity for beef and veal;

Therefore, the Minister of Foreign Affairs, pursuant to paragraph 6.2(2)(a) (see footnote c) of the Export and Import Permits Act (see footnote d), makes the annexed Order Amending the Allocation Method Order (Beef and Veal).

Ottawa, October 15, 2013

JOHN BAIRD
Minister of Foreign Affairs

ORDER AMENDING THE ALLOCATION METHOD ORDER (BEEF AND VEAL)

AMENDMENTS

1. (1) The portion of subsection 3(1.1) of the Allocation Method Order (Beef and Veal) (see footnote 1) before paragraph (a) is replaced by the following:

(1.1) Despite subsection (1) and subject to subsection (2), the method for allocating the import access quantity for beef and veal that may be imported into Canada in the 2014 calendar year is as follows:

(2) Subparagraph 3(1.1)(a)(ii) of the Order is replaced by the following:

COMING INTO FORCE

2. This Order comes into force on January 1, 2014.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

1. Background

Fresh, chilled or frozen beef and veal imported from countries other than the United States, Mexico, Chile or Peru (non-FTA countries) are controlled under the Export and Import Permits Act and their imports are subject to a tariff rate quota (TRQ). Under the terms of Canada’s international commitments, the access level for beef and veal is 76 409 tonnes per year. “Within access” imports are subject to a rate of duty of 0%; all others are subject to the “over access” rate of duty of 26.5%. The Allocation Method Order (Beef and Veal) [AMO] is a regulation of the Government of Canada that establishes the method for allocating the import access quantity for the beef and veal TRQ. Seventy-five percent of the TRQ is allocated to processors and retailer-processors; 25% is allocated to distributors.

On May 20, 2003, the Canadian Food Inspection Agency announced that it had discovered a single case of bovine spongiform encephalopathy (BSE), commonly known as mad cow disease, on an Alberta farm. Following this announcement, many countries, including the United States, imposed restrictions on the importation of cattle, beef and their products. While several of these restrictions have been lessened or lifted, many still affect the beef industry.

Prior to 2004, the Canadian TRQ for beef and veal was allocated each year based upon the companies’ imports of beef from non-FTA countries during the previous 12-month period of November 1 to October 31. The market fallout from the BSE situation resulted in ample supplies of inexpensive Canadian beef being available to domestic processors. Many traditional beef importers decided to switch to domestic beef to help alleviate the situation.

In order to avoid penalizing these traditional importers, a decision was made to amend the AMO to base the 2004 allocations on imports of beef from non-FTA countries during a 16-month period, prorated to a 12-month period, prior to the BSE discovery (January 1, 2002, to April 30, 2003). The decision made by the Minister at the time was supported by the Tariff Quota Advisory Committee (TQAC) and the Ad Hoc Beef and Veal Industry Committee (Ad Hoc Committee). The decision was valid for one year only.

Given that the disruptions in the North American beef market continued, the TQAC and the Ad Hoc Committee recommended a similar amendment to the AMO every year since 2004. This consensus recommendation was aimed at allocating most of the TRQ to established industry members without penalizing those who had switched their usage to Canadian beef in the wake of the BSE situation, while addressing the needs of new industry entrants by reserving some portion of the TRQ for such new entrants. For every year since 2004, it was decided to give all TRQ applicants a choice between one of two possible base periods: the 16 months from January 1, 2002, to April 30, 2003 (prorated to a 12-month period), or the most recent 12-month period from August 1 to July 31. The AMO was amended accordingly for 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 to reflect the substantive intent of the consensus recommendation from the TQAC and the Ad Hoc Committee.

2. Issue

Should the amendment to the AMO that has been made annually for the past nine consecutive years not be made for 2014, the allocation method for the beef and veal TRQ will revert to what it was before 2004. However, the Canadian beef market has not entirely recovered from the effects of the BSE and the old method could prove detrimental to some importers. Moreover, industry stakeholders expect the allocation method implemented since 2004 through recurring amendments to continue in 2014 and they have been planning accordingly.

3. Objectives

The present change to the AMO is necessary to continue addressing the needs of the affected industry sector. By making this ministerial Order, the Government intends to minimize disruption to industry and to comply with the Export and Import Permits Act.

4. Description

This ministerial Order amends the AMO for 2014 such that beef and veal TRQ applicants will have the choice between a 16-month period (January 1, 2002, to April 30, 2003, prorated to a 12-month period) and a more recent 12-month period (August 1, 2012, to July 31, 2013) to serve as a base for the establishment of their 2014 allocations.

Through this Order, the Minister approves the TQAC recommendation that the method used for 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 allocations be continued in 2014.

5. Consultation

Members of the TQAC were consulted concerning the proposed amendment. The committee is made up of representatives from all the major beef and veal industry associations, including cattlemen, packers, processors, distributors, importers, retailers and foodservice operators, and from Agriculture and Agri-Food Canada, the Department of Finance Canada and Foreign Affairs, Trade and Development Canada.

The TQAC recommended giving all import allocation applicants the choice between two possible base periods for the 2014 allocation: a 16-month period (January 1, 2002, to April 30, 2003, prorated to a 12-month period) and a more recent 12-month period (August 1, 2012, to July 31, 2013).

6. Small business lens

The present change to the Allocation Method Order (Beef and Veal) is not expected to result in any increase in the administrative burden for small businesses in Canada.

7. Rationale

Since this amendment to the AMO has been made annually for the past nine consecutive years, industry stakeholders have developed an expectation that the option of two base periods will remain open to them (at least in the short term). In anticipation of continued progress in the recovery of the industry, consultations with the TQAC will be launched concerning the possibility of dropping the amendment in future years. However, it is the opinion of the stakeholders that the amendment to the AMO for 2014 is required at this time to ensure business continuity while industry consultations are undertaken concerning the possibility of phasing out this approach in coming years. Not making this change in the revised period would result in further disruption to the industry, as companies are already in the advanced stage of planning for 2014.

The revised base period may result in minor changes to import allocation quantities in 2014, but it will not affect Canada’s international trade commitments. The revised period change will provide applicants with a choice to apply for an allocation based on the optimal period under their individual circumstances.

A Canadian market review and forecast of the beef industry provided by Agriculture and Agri-Food Canada in July 2013 indicates that the market has basically recovered from the effects of BSE for Canadian cattle producers, but not for processors. Since the reopening of the U.S. and several international markets for Canadian live cattle and beef, producers are receiving strong fed cattle prices resulting from a tight supply and strong demand situation. Thus, the BSE impacts on cattle producers have basically been overcome. Processors, however, are still unable to realize the full value on carcasses due to some remaining market closures and continue to experience higher operating costs than the U.S. on specified risk material (SRM) removal/disposal requirements. The strong Canadian dollar has also had a significant impact on increased operating costs. While North American grinding beef supplies are always difficult to predict, forecasted supplies indicate that it is unlikely that Canadian import trade will exceed the TRQ in 2014.

8. Implementation, enforcement and service standards

The policies governing the administration of the beef and veal TRQ, including the allocation method, are set out in Notices to Importers published by Foreign Affairs, Trade and Development Canada (typically on an annual basis). A Notice to Importers will be issued in the fall of 2013 calling for applications for the beef and veal TRQ for the 2014 quota year. If the present regulatory amendment is implemented, it will be incorporated in the new Notice. The TRQ will therefore be allocated in 2014 based on the applicants’ choice of the two reference periods.

9. Contact

Ms. Katharine Funtek
Director
Trade Controls Policy Division (TIC)
Trade Controls and Technical Barriers Bureau
Department of Foreign Affairs, Trade and Development
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 613-996-0640