Dairy groups urge U.S. officials to address alleged export loopholes during USMCA review process
Two major U.S. dairy industry organizations are renewing pressure on American trade officials to challenge Canadian dairy trade practices after a newly released federal report highlighted concerns over Canada’s nonfat milk solids pricing and export system.
The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) issued a joint statement Thursday citing findings from a U.S. International Trade Commission (USITC) Section 332 report titled Nonfat Milk Solids: Competitive Conditions for the United States and Major Foreign Suppliers.
The report examined competitive conditions surrounding global nonfat milk solids markets and included detailed analysis of Canada’s dairy pricing structure, export activity and production quotas.
According to the U.S. dairy groups, the findings strengthen their long-standing argument that Canada’s dairy policies distort international trade and undermine fair competition for American dairy producers and processors.
The organizations are now calling on the Office of the U.S. Trade Representative (USTR) to use the upcoming joint review process under the United States-Mexico-Canada Agreement (USMCA) to tighten enforcement measures and address what they describe as loopholes in Canada’s dairy export system.
Report highlights structural surplus concerns
USITC points to impact of Canadian milk quota system
The USITC report found that Canada’s milk production quota system contributes to an ongoing structural surplus of nonfat milk solids due to domestic policies designed primarily around butterfat demand.
According to the report, Canadian milk production quotas that “aim to match domestic supply and demand for butterfat lead to a level of raw milk production that results in a domestic structural surplus of [nonfat milk solids] components.”
The report also examined Canada’s government-administered milk pricing framework, stating that the system “unlinks its relatively high farmgate price of milk from the price that [nonfat milk solids] processors pay for milk components in Canada using regulated ‘price discrimination.’”
NMPF and USDEC said those structural conditions were a central issue during negotiations surrounding the USMCA trade agreement under the first Trump administration.
As part of the agreement, Canada committed to limiting exports of low-priced skim milk powder and milk protein concentrate products through annual export thresholds designed to prevent market disruption in the United States and other international markets.
“The deal established an annual threshold over which these nonfat milk solids exports are subject to a surcharge to ensure U.S. producers are not being undercut in the U.S. or international markets,” the organizations said.
Industry groups allege Canadian exporters exploiting tariff loopholes
Sharp rise in protein isolate exports cited in report
While the USITC report noted that Canada has generally complied with export limits on products formally classified as nonfat milk solids, it also highlighted a significant increase in exports under alternative tariff categories.
The report identified rapid growth in exports categorized as “blended dairy products” and “protein isolates,” products that currently fall outside the tariff categories directly regulated under USMCA dairy provisions.
According to USITC estimates, exports under the “protein isolate” tariff classification increased from just 76 metric tonnes between 2013 and 2015 to more than 32,000 metric tonnes between 2022 and 2024 following implementation of the USMCA agreement.
Although the tariff code is not exclusively limited to dairy proteins, the report stated that most of the exports were believed to be dairy-based products.
The USITC also noted that many of these products were being shipped from new or expanded dairy processing facilities in British Columbia and Manitoba.
The report added that “[i]n addition to access to cost-competitive sources of [nonfat milk solids] components, these facilities received grants and loans from national and provincial governments.”
U.S. dairy executives warn of market distortions
Industry leaders call for stronger enforcement during trade review
Executives from NMPF and USDEC argued during testimony before the USITC last year that Canada’s pricing and export practices continue to create unfair competitive pressures for American producers.
During the July 2025 investigation hearings, Jaime Castaneda of NMPF criticized the pricing imbalance created by the Canadian system.
“it is absurd that Canadian dairy producers receive one of the highest farmgate milk prices in the world by a wide margin, yet their nonfat milk solids end up on the global market at prices below our cost of production,” Castaneda said.
William Loux of USDEC also urged policymakers to pursue stronger enforcement measures through the USMCA review process.
“Canada’s actions distort markets and undermine fair competition … This information is critical to bring substantive results for U.S. dairy producers and processors, including during the upcoming USMCA review process,” Loux said.
The organizations said they plan to continue working closely with the USTR as negotiations and review discussions move forward.
Canadian dairy policies remain recurring trade dispute
Dairy access continues to create tensions under USMCA
Canada’s supply management system has remained one of the most contentious agricultural issues within North American trade negotiations for decades.
American dairy groups have repeatedly argued that Canadian quota systems, pricing structures and import restrictions unfairly limit market access and distort competition.
Canadian industry representatives and policymakers, however, have consistently defended the supply management framework as essential for protecting domestic dairy farmers and maintaining price stability within Canada’s agricultural sector.
The latest USITC findings are expected to add further pressure ahead of the formal USMCA joint review process, where dairy access and export rules are likely to remain central negotiating issues between Canada and the United States.