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Explaining Canada’s Impending Levy on Beef Imports

On July 30, Canadian Agriculture Minister Gerry Ritz and Canada Beef, Inc. announced an amendment to Canada’s Beef Cattle Research, Market Development and Promotion Levies Order that will impose an import levy on beef, beef products and beef cattle entering Canada for the first time. The levy on imported beef and beef products is designed to be the equivalent of 1 Canadian dollar (CAD) per head of cattle, which is the same amount Canadian cattle producers pay per transaction. The levy on imported cattle will be a 1 CAD per head.

How does this compare to Canadian beef or cattle imported into the U.S.?
Since the inception of the mandatory beef checkoff in the United States, the Cattlemen’s Beef Board has assessed a $1 per head checkoff on imported cattle and a checkoff on beef imports equivalent to $1 per head. So from a parity standpoint, Canada’s new levy will essentially mirror the practice that has been in place in the United States for many years.

When was the authority granted to impose a levy on imports?
According to Canada Beef staff, the agency has had the authority to impose this levy on cattle and beef imports since 2002, but first wanted to ensure that an enforceable system was in place for all inter-provincial cattle transactions. Now that this threshold has been reached, Canada Beef and the Farm Products Council of Canada decided to proceed with the regulatory steps necessary to initiate the import levy. The regulations were published in the Canada Gazette on June 5, 2013.

It also stands to reason that a levy on beef imports became a higher priority for Canada Beef because imports from the United States continue to make up a larger share of the beef consumed in Canada. In 2002, Canada imported 251,359 metric tons (mt) of beef. This included 98,673 mt – or about 10 percent of all beef consumed in Canada – from the United States. In 2012, Canada’s total beef imports were lower – reaching only 221,053 mt. However, 77 percent of this volume (169,718 mt) came from the United States – which was 17 percent of Canada’s total beef consumption. Imported Beef Market Share in Canada

So in the decade between 2002 and 2012, Canada’s total beef imports declined by 12 percent. But imports of U.S. beef soared by 72 percent and the U.S. share of Canada’s beef consumption increased significantly. Why does this matter? Simply because it must be increasingly difficult to explain to Canadian producers why their products entering the United States are assessed a checkoff equivalent to $1 per head, while U.S. beef entering Canada faces no similar levy.

What formula will be used to assess a 1 CAD per head equivalent?
The specific levy for each beef cut is outlined in both cents/pound and cents/kilogram in Schedule 2: Tariff Item Numbers And Related Levies For Imported Beef Products. This is similar to the schedule used by the Cattlemen’s Beef Board, which can be found in the assessments section of the Beef Promotion and Research Order.

What information must accompany payment?
Canada’s regulations on beef imports specifically state:

Each importer shall pay to the Agency, for each head of beef cattle imported or each imported beef product, a levy in the amount set out in Sched¬ule 1.

Levies shall be paid to the Agency by negoti¬able instrument in Canadian dollars and by the 15th day of the month after the month in which the beef cattle or beef products were imported into Canada.

The importer shall include with payment of the levy a statement that sets out the following information:
  1. the importer’s name, mailing address, tele¬phone number and, if available, email address and fax number;
  2. the number of head of beef cattle imported into Canada, broken down by the delivery destina¬tions of the beef cattle;
  3. the number of kilograms of beef products imported into Canada, broken down by tariff item numbers set out in Schedule 2;
  4. the amount of levy remitted to the Agency, broken down by beef cattle and imported beef products; and
  5. the date on which the levy was paid.

Importers must keep all records for a period of seven years and be prepared to make those records available for examination by Canada Beef.

Importers may be entitled to a refund if they can prove that the levy was not required to be paid, or that the levy paid was more than the 1 CAD per carcass equivalent.

Importers are well-represented on the Cattlemen’s Beef Board – will that also be true with Canada Beef?

Because a levy on imported beef was anticipated when the Canada Beef board of directors was created, we do not anticipate any immediate change in board structure when the levy actually takes effect. The Canadian Association of Importers and Exporters (aka I.E. Canada) holds one seat on the board, with the current representative being from Eastern Meat Solutions. Five seats are also held by the beef processing and distribution sector, with some of these representatives being from companies that import beef into Canada. However, the degree to which importers have participated in Canada Beef proceedings or sought to have a voice on the board is not entirely clear, since they have not previously paid into the marketing programs funded by the agency. This could represent an opportunity for greater involvement, if even no formal changes are made to the makeup of the board.

When will the levy take effect?
No specific date has been announced yet. But in news releases and our conversations with Canada Beef staff, late September/October has been identified as the most likely time frame. Staff indicated that significant educational outreach for importers will take place beforehand, and every effort will be made to ensure that importers are familiar with the requirements and payment procedures. USMEF is on the distribution list to receive this information, and will share it with members as it becomes available.

How much revenue will this generate for Canada Beef?
The estimate most commonly reported has been CAD 600,000 to 800,000 ($581,000 to $775,000, based on current exchange rate) annually. Based on recent trends, it is reasonable to project that 75 to 80 percent of this amount will be assessed on U.S. beef and U.S. live cattle, with the remainder being assessed on imported beef from Australia, New Zealand and Uruguay.

Will this levy be a burden for the U.S. industry?
From a financial perspective, it’s not likely that the new levy will have any impact on demand for U.S. beef in Canada or make U.S. beef less competitive. However, the flow of U.S. beef across the border could be affected if importers encounter problems complying with the new requirements. This is why it is important to gather as much information as possible before the levy takes effect and to make sure that it is widely understood by everyone involved. Canada is a critical destination for U.S. beef, and we want to ensure a smooth implementation process.