How USDEC cuts red tape to keep U.S. dairy exports moving during COVID-19 pandemic

When Mexico issued a decree that could have reduced U.S. dairy exports by $120 million, USDEC worked around-the-clock to get that decision reversed.

In 2019, USDEC's Market Access and Regulatory Affairs (MARA) team freed up 52 containers detained in foreign countries.

We don't know yet what our internal scorecard will say by the end of 2020.

What we do know is the COVID-19 pandemic has prompted supply chain challenges with significant trade impacts, and only an around-the-clock rapid-response effort by USDEC’s MARA, Trade Policy and Strategic Development teams at the end of March averted a problem that could have cost our industry more than $100 million in lost sales.

That effort was an example of how USDEC staff in Arlington, Virginia, and nine international offices work extensively behind-the-scenes to monitor and resolve issues that could impact U.S. dairy trade. 

Our work frequently involves cutting through regulatory red tape and paying close attention to trade policy agreements, where the devil is often in the details. We do much of this discreetly behind-the-scenes on behalf of our member companies and the entire U.S. dairy industry. 

This article lifts the curtain on what we do and how we do it. 

Case in point: Mexico decree

Here’s what happened in Mexico.

On March 26, the Mexican Ministry of Health (COFEPRIS) issued a decree that announced a halt to all administrative action, including the issuance of about 6,000 import permits for dairy products. That would have represented an approximate value of US$120 million in lost U.S. dairy export sales.

COFEPRIS instituted the decree for an understandable reason: the agency wanted to focus on preventing the spread of COVID-19 in Mexico. The impact on dairy imports was an unintended side effect.

Word of the COFEPRIS decree on Friday, March 27, set in motion an all-out, 24/7 effort to make sure it would not hinder U.S. dairy exports to Mexico.

• USDEC’s Mexico office immediately contacted MARA and Trade Policy staff and closely monitored the situation on the ground. Working with the Mexico office, MARA notified the USDEC rapid response team.
• USDEC’s Mexico office and Trade Policy teams worked closely with the Mexican industry throughout the weekend to encourage direct contact with President Lopez Obrador’s office
• USDEC’s MARA team in Arlington canvassed members on import permit disruptions they were seeing, while USDEC’s Trade Policy team stayed in close contact with the U.S. Chief Agricultural Negotiator Gregg Doud and USDA Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney throughout several days to highlight the importance of the issue and urge aggressive action by the U.S. government to avoid trade disruption.
• The Trade Policy team also reached out to Mexico’s Under Secretary of Economia and key leaders of the Mexican industry to alert them to the potential repercussions for trade that would ensue from a suspension of import permitting processes.
• USDEC’s Strategic Development team assessed the potential economic damage the decree would have caused to support MARA and Trade Policy advocacy efforts.
• USDEC Mexico talked with fifteen members and several importers responding to questions and providing immediate updates on USDEC efforts to resolve this issue.
• USDEC Mexico worked with CANILEC (Mexico’s national dairy processor organization) in drafting a letter to COFEPRIS’s Commissioner urging the normalization of the import permit service and the avoidance of a shock in the supply of dairy products.
• USDEC Mexico contacted the director of the COFEPRIS division authorized to issue import permits and reiterated the importance of continued issuance of permits for food product imports.
• USDEC issued a Member Alert on Monday, March 30, notifying membership of the COFEPRIS decree and the work done to resolve the issue.

New directive clarifies the issue for U.S. dairy exporters

A week after the decree, on April 2, COFEPRIS, working closely with the Ministry of Economia and the office of Mexico’s president, issued a clarifying directive that deemed food and beverage sector supplies as “essential” during the pandemic and that tasks needed to maintain supply lines for those products would not be subject to halted administrative duties.

COFEPRIS then went a step further and committed to improving the capacity of Mexican regional and state offices to process import permits for food, while the central office in Mexico City would remain primarily, but not exclusively focused on the issuances of import permits for medical goods.

Always on the lookout

“Despite the clarified directive, the challenge isn’t over,” says Jonathan Gardner, USDEC senior vice president, market access and regulatory affairs. “Although, at this moment, we are not aware of any significant delay in the issuance of import permits, we will continue responding to any issues members may experience in receiving import permits to ensure that dairy trade into Mexico remains unimpeded.

"USDEC staff in Mexico and Arlington will also continue to work alongside our government and industry partners to confirm that Mexico institutes a viable, long-term solution.”

While this issue is the first of its scale that has arisen as a result of the COVID-19 outbreak, USDEC staff is actively monitoring threats to market access around the world day-in and day-out, working to investigate potential problems, address issues as they arise, and look down the road to aim to head off potential future disruptions.

Looking ahead at China dairy trade

One market where we are looking ahead is China.

USDEC’s MARA and Trade Policy teams have been working on multiple issues to maximize U.S. opportunity as part of the Phase 1 trade agreement with China signed in January (see USDEC news release). 

Those efforts will help lift U.S. competitiveness in China as it emerges from the COVID-19 outbreak and as dairy demand once again begins to ramp up.

In February, China announced that it would launch an application process to potentially exempt about 700 products from retaliatory tariffs that the nation previously implemented in response to U.S. tariffs.

The exemption application process is an attempt by China to encourage imports and help fulfill its purchasing agreements under the U.S.-China Phase 1 trade deal.

Chinese importers apply for the exemptions, not U.S. exporters. But the USDEC China office and the MARA and Trade Policy teams led the way in translating and communicating the application exemption process so U.S. exporters understood it and could work with buyers in China to facilitate it.

USDEC encouraged members with contacts in China to reach out to them to swiftly submit tariff waiver applications for ALL U.S. dairy products—not only for the dairy products among the 700 China identified.

Making U.S. more competitive

The result: China approved more than a half-dozen tariff exemptions less than two days after it opened the application process on March 2. Products covered included major U.S. export categories such as for skimmed milk powder, whey products, lactose and cheese.

As in the Mexican permit issue, the work does not end there.

USDEC’s Trade Policy team is working in conjunction with National Milk Producers Federation and collaborating with the U.S. Trade Representative’s Office (USTR) to track China’s agricultural purchases and ensure that the nation is fulfilling its purchasing obligations. Given the lag in trade data reporting, USTR has asked that ag groups share information on a confidential basis to monitor Chinese buying in real time.

“COVID-19 has temporarily restrained demand from China,” says Jaime Castaneda, senior vice president, trade policy. “But demand will return, and we want to be sure that the United States is positioned without competitive disadvantages so our members can  serve the market when that time comes.”

He adds, “The tariff exemptions were a step in the right direction, but USDEC has made it clear to U.S. trade negotiators that their work with China is not complete until the retaliatory tariffs against all U.S. dairy exports are fully lifted.”

For USDEC’s MARA and Trade Policy teams, their own work will never be complete as long as U.S. suppliers are unfairly excluded from any global market.

Matt McKnight is chief operating officer at the U.S. Dairy Export Council. Prior to becoming COO, McKnight held the position of USDEC senior vice president of market access, regulatory and industry affairs. 

Learn more:

• U.S. dairy industry reassures global customers about commitment to exports
• Work for U.S. dairy exports continues during coronavirus crisis (audio clips)
• Phase One U.S. trade deal with China positive step but U.S. dairy industry still needs tariffs lifted

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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.