February 2006

Index

• Misleading Reports of Duty Relief on Imported US Corn
• Upcoming Dates Relating to the Countervail Process
• Federal Party Leaders' Assessments of the CAIS Program
• Assessment of Party Ag Platforms
• Canadian Federation of Agriculture News Release, January 16, 2005 - NDP Platform Very Impressive
• Ontario Grain & Oilseed Group News Release December 22, 2005 - Both Parties Will Have To Do Better To Win Rural Ontario Ag Voters
• Gold Star for Corn Producers
• Letter from Minister Dombrowsky, January 11, 2006
• European Union Clears 3 Types of GM Corn
  

Misleading Reports of Duty Relief on Imported US Corn

Canadian Corn Producers (CCP) are concerned that recent media reports are misleading when they inaccurately suggest that duty relief on imported US grain corn is widely available. Relying on such reports could spell trouble for Canadian corn users, especially those in the livestock sector.

On December 15, 2005, Canada Border Services Agency (CBSA) imposed provisional anti-dumping and countervailing duties totalling $US1.65/bushel (roughly $CAN1.90/ bushel at today's exchange rates) on unfairly traded US grain corn imports. In just 30 days, CBSA assessed over $3 million in duties.
Some corn users now appear confident that CBSA's duty relief programs will provide duty relief where imported US grain corn is consumed in a good that is subsequently exported. This confidence seems to have evolved following heavy lobbying by corn users of CBSA's duty drawback officials. Of course, CBSA had yet to hear from corn producers themselves. On January 13th, CCP's legal counsel met with CBSA's duty drawback officials and presented arguments contending that CBSA's duty drawback programs were never designed to deal with products used in biological processes, such as the feeding of livestock, including where livestock is processed and exported as meat.

At this January 13 meeting, CBSA duty drawback officials confirmed that they had withdrawn CBSA's 3-page Q&A document dated October 20, 2005 entitled "Drawback of SIMA Applied to US Corn". CBSA confirmed this document was only a working draft, intended for internal use only and that its release to the public at CBSA's cross-Canada December 22nd stakeholder information meetings was inadvertent. This is unfortunate as this document seems to have caused unnecessary worries for corn producers and unrealistic expectations for corn users.
CCP is also considering legal action to ensure the legislation is properly applied. If CCP's submissions are accepted by either CBSA or a court, the availability of the duty relief programs to corn users will be substantially curtailed. CBSA would then be required to collect from corn users any duty rebates, exemptions, refunds and other relief to which the corn users were not entitled.

While the duty relief programs may be available for certain usages of grain corn, CCP is confident that the programs are not the panacea that livestock producers and other corn users desire. Under the programs, corn users are responsible for interpreting and applying complicated rules to determine when the programs are applicable and how much duty relief can be granted. If corn users misapply the rules, inadvertently or otherwise, they can be subject to severe penalties and possibly other severe adverse consequences in addition to having to repay any duties to which they were not entitled.

CCP is concerned that corn users are misapplying the duty relief programs without a full awareness of the possible adverse consequences that await them down the road. Some corn users, especially some major livestock feeding operations, seem to be applying for duty relief thinking that is the end of the matter. They apparently don't realize that CBSA performs audits and some, if not all, of the duties will have to be repaid with penalties.
Under the duty relief programs, the amount of relief available is reduced as the result of any by-products that remain in Canada. By-products are common with goods that use corn inputs. For example, in the livestock scenario, livestock can produce such by-products as manure, offspring, mother's milk, offal, hides, and eggs. If corn users do not properly take into account all by-products and pay the applicable duties in accordance with CBSA policy, they will be subject to severe penalties and possibly other severe consequences in addition to having to repay any duties to which they were not entitled.

While some corn users may be relying on statements from CBSA officials in attempting to comply with the law, such reliance can be risky. Statements are not laws. With the withdrawal of CBSA's October 20th internal document, it is obvious corn users will not be able to rely on CBSA statements to the extent that the statements do not accurately reflect the law.

There is another concern that inappropriate application of duty drawback might unearth. CBSA's grant of excess duty drawback relief to Canadian livestock producers could give rise to actionable subsidies that are countervailable by the US.

Upcoming Dates Relating to the Countervail Process

The Canadian Border Services Agency is scheduled to release its final determination of dumping and subsidy investigations on or before March 15, 2006, and a statement of reasons for its final determination on March 31, 2006.

The Canadian International Trade Tribunal is scheduled to release its final finding on injury on or before April 18, 2006, and a statement of reasons for its final determination on May 3, 2006.


Federal Party Leaders' Assessments of the CAIS Program

It was interesting to hear the following summaries of the effectiveness of the Canadian Agricultural Income Stabilization program by the three leaders of the major Federal political parties at the January 9 Leaders' Debate:
Prime Minister Paul Martin, leader of the Liberal Party of Canada, and the governing party that developed and introduced CAIS. "The CAIS program isn't working."

Stephen Harper, Leader of the Conservative Party of Canada,"… the CAIS program has been a disaster. Anybody in the agricultural business has known this for years."

Jack Layton, Leader of the New Democratic Party of Canada, "This CAIS program simply doesn't work and they've been talking about reviewing it for ages."

And a final comment from Prime Minister Martin. "Our farmers are very efficient. They are very competitive. The problem is they're being hammered by unfair subsidies from the United States."


Assessment of Party Ag Platforms

Following are assessments of the three major party ag platforms from the recent Federal election. It will be important to keep reminding Federal politicians of their commitments, and shortcomings.

Canadian Federation of Agriculture News Release, January 16, 2005

NDP platform very impressive

The Canadian Federation of Agriculture (CFA) is applauding the New Democratic Party for offering a comprehensive agriculture policy platform. The points outlined in the NDP policy address the short and long-term issues facing the agriculture industry today.

"When a party is developing its agriculture policy, the first step should be to listen to farmers and hear what they are recommending. The NDP has clearly done that," said Bob Friesen, CFA President. "In this platform we see measures to address the immediate need facing farmers today, and long-term strategic policy and investment that address the root causes of the farm income crisis."

In the short term the NDP platform is promising $1 billion to assist grains and oilseeds producers. In the long-term the NDP is proposing a substantial list of initiatives that would address the farm income issue, including: empowering farmers through support for producer-run co-ops, working to reduce input costs, investing in bio-fuel produced from Canadian inputs, investment in value-added processing, and investment in agricultural environmental stewardship.

CFA also welcomes the NDP commitment to work with farmers in reviewing business risk management programs, and developing programs that meet the unique needs of different commodity sectors. The NDP platform also recognizes that the Canadian agriculture has both export and domestic trading sectors, supporting both the goals of our export industries and the right of farmers to maintain orderly marketing systems like supply management and the Canadian Wheat Board.

"There are some ideas in this platform CFA would want to have a closer look at, where there might be some concerns, but I think the NDP has made it clear in this platform that they would work with farmers before implementing anything," said Friesen. "As a foundation for building a sustainable farm economy, the NDP platform is definitely the strongest and most complete in this election."

Ontario Grain & Oilseed Group News Release December 22, 2005

Both Parties Will Have To Do Better To Win Rural Ontario Ag Voters

The 29,000 producers of the 7 commodity groups represented by the Ontario Grain & Oilseed Group are encouraged that both the Liberal and Conservative parties recognize the importance of a number of key rural southern Ontario ridings in this year's Federal election. The fact that both major Federal parties chose key southern Ontario swing ridings as locations to announce their agricultural platforms is significant.

Although both the Liberal and Conservative Party announcements of December 20 and 21 had a few interesting proposals, both were lacking in detail, lacking in fresh solutions to well-documented problems, and fell short of what is required to address the serious financial difficulties facing the Canadian grain and oilseed sector. Both parties will have to do better if they want to win these key ridings.

The Ontario Grain & Oilseed Group has written a letter jointly to Liberal Leader Martin, Conservative Leader Harper, and their respective party agricultural leaders requesting greater detail. The letter also provided the Group's solution to the sector's problems, and asked the Leaders to confirm that their respective parties will work with the provinces to remedy the situation, will endorse and adopt national income support programming, and will provide maximum flexibility in funding such programming.

Written responses were requested by early January. The Group will be intensifying requests to endorse their plan and proposal as the election progresses.

Gold Star for Corn Producers

The following is an excerpt from an article written by Alex Binkley, "veteran national affairs reporter based in Ottawa", and appearing in a number of national papers as well as the Tuesday January 3 Ontario Farmer. The article was titled "2005 brought noteworthy events, but little income, to farmers"

"The two contending parties in the Jan.23 election say in their platforms that there have to be programs to cover normal income fluctuations as well as disastrous situations such as the field crops sector has faced for most of the past decade. In that regard, the corn growers get a gold star for pushing their bid for a countervailing duty. Its main attribute is that it should force even the most reluctant federal bureaucrat to realize that the current stabilization regime isn't much good for most situations and that Canadian farmers shouldn't be left exposed to such unfair situations."

Letter from Minister Dombrowsky, January 11, 2006

The following letter was received from Ontario Ag Minister Ms. Leona Dombrowsky concerning the shortcomings of the pre-election Liberal promise of $755 million to grains and oilseeds across Canada. The OCPA, along with the Ontario grain and oilseed groups will be discussing the provincial commitment with Minister Dombrowsky.

"Dear Mr. Tuinema:
Thank you for you letter of November 25, 2005 with regard to the federal government's November 23, 2005 announcement of assistance for Canadian grain and oilseed producers. I appreciate that you have taken the time to share with me an excerpt from your letter to the Honourable Andy Mitchell, Minister of Agriculture and Agri-Food.

As you know, our government is committed to providing effective business risk management programs for Ontario producers. I am pleased that my federal counterpart has acknowledged the financial pressure facing grain and oilseed producers. I was, however, disappointed with the lack of a multi-year funding commitment with flexibility for the provinces that would provide a bridge to the next Agricultural Policy Framework and better address the systemic hardships that many Ontario farmers face. I want to continue to work with my federal colleagues and industry partners in developing a comprehensive investment strategy to help the industry move forward.

I look forward to working with representatives of Ontario's grain and oilseed commodity groups to develop that strategy."

Original signed by Minister Dombrowsky.

European Union Clears Three Types of GM Corn

On Friday, January 13, the European Commission cleared 3 types of genetically modified corn made by Monsanto for use in the single EU marketplace. Two types will be used for food and food ingredients, and the third mainly will be used for animal feed. None of the three types has been approved for cultivation in Europe, only for importation for usage. This brings to nine the total number of genetically modified strains licensed for use in the EU since a 6-year moratorium on biotech crop ended in Europe in May 2004.