Canadian restaurants serving pizza may have access to lower priced Mozzarella cheese, effective June 1, 2013. In order to qualify, however, restaurateurs must first meet the registration requirements of the Canadian Dairy Commission.
The Canadian Milk Supply Management Committee, under its authority from the National Milk Marketing Plan, has established a new milk class to allow the supply of milk at reduced prices for producers Mozzarella cheese for sale to certain restaurants. The aim is to promote the use of Canadian Mozzarella, as opposed to restaurants tapping into the often more affordable US cheese market.
In order to be considered eligible for the new Class 3(d), restaurants must fit the following criteria:
- must be a Canadian restaurant primarily engaged in preparing meals, snacks and beverages to customer order, and selling pizzas prepared and cooked on site (these establishments cannot be cafeterias, institutional food service or catering operations);
- must use Mozzarella cheese in packages of not less than 2.27 kg on a net weight basis for use only on pizza prepared and cooked on site;
- must have a food menu which includes pizza and must supply a copy of the menu to the Canadian Dairy Commission; and
- must complete the Class 3(d) application, which is available online.
The Canadian Dairy Commission will review each application and issue Class 3(d) registration numbers, which restauranteurs will be required to show to their dairy suppliers.
Mozzarella cheese suppliers, if not already registered in the Special Milk Class Permit Program, must provide the Canadian Dairy Commission with company information before being issued Class 3(d) Distributor Permits.
Interestingly, the announcement from the Canadian Dairy Commission was on May 1, 2013, just prior to the May 3 release of the decision of the Canadian International Trade Tribunal ("CITT") in the matter of BalanceCo v President of the Canada Border Services Agency ("BalanceCo"). BalanceCo had sought to appeal a Canadian Border Services Agency ("CBSA") ruling on pizza "kits." The CBSA had determined that imported pre-packaged shredded Mozzarella cheese combined with sliced pepperoni was not subject to customs duties on imported cheese. The CBSA issued an advanced ruling that resulted in these goods being classified as a food preparation, thus not subject to the substantial tariff rate quotas duties of 245.5% on imported cheese.
The practical effect of the CBSA decision was that some restaurants imported pre-packaged pizza kits for the cheese, and discarded whatever other products were included in the package (i.e. pepperoni, bread, sauce etc.). It was simply cheaper to buy these kits for the cheese alone than to buy Mozzarella from Canadian producers.
The CITT in BalanceCo upheld the CBSA's approach, ruling that BalanceCo did not have a right of appeal as an importer.
Almost 15 years ago, Canadian frozen pizza producers voiced their concerns about the significant price disparity for Mozzarella cheese between world and domestic markets that made Canadian-made products less competitive. This resulted in a similar exemption for frozen pizza makers, via a special milk Class 5(a) permit as a further processor, allowing them to pay 30% less for Canadian Mozzarella.
The Canadian Dairy Commission's creation of the new Class 3(d) is an effort to improve the competitiveness of Canadian Mozzarella, at a time where the cost of cheese remains the most significant food cost for the majority of pizza restaurants.
As with all complex trade issues, parties are encouraged to contact legal counsel to understand the impact of these initiatives on their businesses.