August 18th, 2017

By Didier Culat, Legal Counsel, Quebec city

On August 1, 2017, the Government of Canada issued a notice that it was receiving applications to distribute the 16,000 tonnes of new cheese import quota to qualified market players. The importation of cheese is highly protected in Canada and anything imported outside of the quota limit is subject to a tariff of 248.9%.

As a result of the provisional implementation of CETA, the 16,000 tonnes of cheese quota will be phased in over a 6 year period with 745,299 kg made available from October 2, 2017. Thereafter the quota will increase by 2,667,000 kg annually and reach its full implementation by 2022.

What is a qualified market player?

  • 30% of the quota will be reserved for small and medium sized manufacturers. Those manufacturers producing 50,000,000 litres or less during the reference year will qualify for this category. The reference year is from October 1 to September 30 of the immediate preceding year. That’s 4,800,000 kg of cheese import quota available for this category.

  • 20% or 3,200,000 kg of the quota will be reserved for large cheese manufacturing group.

  • 30% of the quota will be reserved for small and medium sized enterprise distributors and retailers. Those are the distributors and retailers dealing in 20,000 kilograms of cheese during the reference year.

  • 20% of the quota will be reserved for large distributors and retailers.

  • 30% of the quota will be made available for new market entrants during the phasing in of CETA. After 2022, only 10% of the quota will be made available to this category. A new market entrant are those who have never been allocated quota by Canada under the World Trade Organisation cheese quota allocation or under the CETA cheese quota allocation.

The quota allocation will be on a market share basis, proportional to the market share that the applicant holds within the group where they are applying. If however the applicant’s market share results in an allocation of 1000 kg or less, no allocation will be made, as it will be considered as not economically viable. As such, smaller players should carefully consider their market share prior to making an application.

Some may be tempted to multiply their applications through several entities to which they are affiliated. This however is prohibited as all related applicants will only receive one allocation.

If you successfully obtain a cheese import quota allocation on October 2, 2017, know that you must be in a position to quickly utilise it as any un-utilized quota must be returned for reallocation. Normally, the date for return such unused quota will be August 1 of each year, but for 2017, that date will be November 1, 2017. Unutilized quota will be subject to a downward adjustment in the subsequent yearly allocation, however if the quota allocation is returned before the deadline date, the quota will be deemed utilized when considered in the under-utilization adjustment policy. If however, a holder of quota returns 20% or more of the quota for 2 subsequent years, their quota allocation will be reduced.

If you are a resident of Canada and participated in the Canadian cheese sector between October 1, 2015 and September 30, 2016, you should actively consider applying for a cheese quota as these allocations have a significant economic value, the opportunities for having access to cheese import quota is very limited and acquiring quota from a third party is very onerous. The deadline for applying is September 8, 2017.

To apply, you need to fill the Application Form, the Affidavit for the applicant, the Independent verification of the applicant and the Information concerning related persons.

Are you ready for Europe?

BCF Our specialists at BCF will be pleased to advise you concerning the opportunities offered by the public procurement markets made available with the implementation of CETA. Notably at BCF we can assist you prepare for this opportunity as you prepare entry in the European market with your intellectual property plan, your tax plan, your commercial business implementation plan, your rules of origin plan or your labour mobility plan.