Protein Imports Still Bedevil Milk Industry

April 11, 2001

The National Milk Producers Federation is urging dairy industry leaders and federal lawmakers to work closely to help develop solutions to the milk protein concentrate (MPC) problem that has developed with MPC imports. NMPF estimates the MPC imports have increased by more than 600% since 1995.

In a report released Tuesday, NMPF examines the economic effect that increasing volumes of imported MPC are having on the United States dairy industry. The report is based on information gathered by NMPF staff and the findings in report released in March by the General Accounting Office. In calendar year 2000, NMPF estimates that imports of both MPC and casein (a related dairy protein) were equivalent to between 955 million and 1.1 billion pounds of U.S.-produced nonfat dry milk powder.

"The flood of imported dairy proteins is clearly displacing domestically-produced nonfat dry milk in a variety of end uses, including cheese," said Jerry Kozak, CEO of NMPF. "These imports are creating an artificial surplus of dairy proteins in this country, which costs the government extra money in the form of price support program expenditures. So this is an issue that affects dairy farmers and taxpayers alike."

Milk protein concentrate is the product of a technology known as ultrafiltration. During the ultrafiltration process, skim milk is passed through a membrane designed to separate out most of the water, lactose and other solids, leaving behind a product consisting of mostly protein and known as "retentate." In most cases, the retentate is subsequently dried for further distribution and/or storage.

Although NMPF's view is that MPC must be produced through ultrafiltration, some dairy exporting nations are employing other methods to create products labeled as MPC including the blending of previously processed dairy proteins such as casein, whey and nonfat dry milk. NMPF believes that blended proteins are being disguised as MPC and, as such, circumventing trade quota regulations designed to restrict imports of nonfat dry milk powder. Such a practice was specifically mentioned in last month's GAO report.

"Our report is designed to educate policymakers, and people in this industry, about the consequences of unabated imports of casein and milk protein concentrate," Kozak. "We are also offering three concrete approaches that need to be taken in the short term to help us rectify the problems we see in the current system of MPC import regulation."

The first approach outlined by the NMPF report is for Congress to mandate that the U.S. Customs service reclassify MPC products and casein under the Harmonized Tariff Schedule of the United States. Legislation directing Customs to reclassify milk proteins under a defined Tariff-Rate Quota (TRQ) would resolve the problem of whether these dairy proteins are circumventing U.S. trade statutes.

A second approach is for Congress to request that the U.S. International Trade Commission conduct an investigation of the MPC import situation. A member of either the House Ways and Means Committee, or the Senate Finance Committee (both of which have jurisdiction over trade law), can make such a request of the ITC. The results of an ITC report would help U.S. dairy producers generate information needed to prompt other potential trade actions by federal officials.

The final approach NMPF outlines in its report is requesting that the U.S. Customs service review the nature of the products labeled as "milk protein concentrate" coming into the U.S. If these products are not really ultrafiltered milk retentate, and are, in fact, blends of dairy proteins, then they would have to be reclassified under U.S. regulation and be subject to the same Tariff-Rate Quotas as those applying to nonfat dry milk and similar dairy imports.

To review the entire NMPF report – "Milk Protein Imports: Impact on Dairy Producers" – go to the NMPF website at www.nmpf.org/govissues/index.cfm.