Congress Food Fight on Dairy Import Fees

By FREDERIC J. FROMMER

WASHINGTON – A fight in Congress over whether to assess fees on dairy imports to help pay for promoting dairy products is pitting dairy farmers against big-name U.S. food companies.

The battle also extends to cheese importers, foreign countries – and even Alaska, Hawaii and Puerto Rico.

The Bush administration never implemented the dairy import assessment approved by Congress in 2002 because the Agriculture Department concluded the fees could create the appearance of favorable treatment. The fees on domestic producers are levied only on dairy farmers in the 48 contiguous United States .

This year, the chairman of the House Agriculture Committee, Rep. Collin Peterson, D-Minn., inserted into the 2007 farm bill language that would extend the mandatory fee to dairy farmers in Hawaii and Alaska (ranked 48th and 50th in dairy production, respectively) and Puerto Rico. That would remove the trade hurdle and pave the way for fees on imports, he argued.

The House passed the farm bill in July, but it awaits action in the Senate.

U.S. dairy farmers pay 15 cents per 100 pounds of milk sold for the promotions. Cheese importers would pay around 1.5 cents a pound because it takes about 10 pounds of milk to make a pound of cheese. The promotions pay for things like the “3-A-Day” marketing campaign, which encourages people to consume three servings of milk, cheese or yogurt a day.

The Senate version of the farm bill does not include the dairy imports language and eight senators – including the four from Alaska and Hawaii – sent a letter to Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, urging rejection of the House language.

They said dairy production was declining in the two states and “any further reduction in these farmers’ incomes could have a devastating effect.” They also argued it was unfair to extend the fees to dairy imports, saying the program doesn’t promote imported cheeses or dairy ingredients, such as milk proteins. Separately, the governor of Puerto Rico, Anibal Acevedo Vila, thanked Harkin for leaving the language out of the Senate bill.

But senators from large dairy-producing states such as Wisconsin and California are pushing for the House provision. Thirteen senators, led by Russ Feingold, D-Wis., called on the Senate to end the “freeloading of imported dairy products.”

“America’s dairy farmers feel that it’s a fundamental issue of fairness and only want everyone – including domestic production and imported production – to be treated equally,” said Chris Galen, a spokesman for the National Milk Producers Federation, which has been lobbying Congress to expand the dairy assessments to imports.

Pete Kappelman, a dairy farmer from Two Rivers Wis., and chairman of Land O’Lakes, made the same argument in a telephone interview.

“The imported products are riding free on the promotional efforts,” he said, calling the House proposal “a technical fix” to get the Agriculture Department to start collecting the fees enacted in 2002. Land O’Lakes is a member of the producers federation.

Cheese importers and U.S. food companies that use imported dairy products as ingredients have formed the Alliance for Fair Dairy Promotion to lobby against the assessment. The coalition includes companies such as ConAgra Foods, General Mills, Kraft Foods and Nestle, as well as groups such as the Cheese Importers Association of America, the National Taxpayers Union and the International Dairy Foods Association.

“It’s a big priority for the companies who are importing products,” said Connie Tipton, president and CEO of the International Dairy Foods Association, which represents processors of dairy products.

Opponents also include New Zealand and the European Union.

Rick Walker, vice president for government relations and trade at Fonterra USA, a subsidiary of New Zealand dairy exporter Fonterra Cooperative Group, said that his company makes ingredients, such as milk proteins, that are used in products like power bars that wouldn’t benefit from promoting dairy consumption.

It’s estimated that assessing imports would bring in an additional $8 million to $12 million a year, said Becky Unkenholz, a spokeswoman for the USDA’s Agricultural Marketing Service, which oversees the program. The fees on domestic producers currently brings in around $280 million, according to the agency.

Peterson, the Minnesota congressman, said he’s open to a compromise, suggesting that the assessment could be lowered. “I’m not trying to stick it to them,” he said, “but they need to pay something.”

If the Senate doesn’t add the import assessments provision prior to a final vote, it would be left to House-Senate negotiators to resolve the issue.