GAO Report Focuses on Protein Imports

March 7, 2001

A new report by the General Accounting Office (GAO), the investigative arm of Congress, illustrates the harm that imported milk protein concentrate (MPC) is causing U.S. dairy farmers, according to the National Milk Producers Federation. The report, requested last year by several members of Congress, was intended to answer questions about the volume and applications of MPC in the United States and how the U.S. dairy sector is affected by the products.

The report specifically examines ultrafiltered milk products, which are classified as a type of MPC, although ultrafiltered milk is not the only form that milk protein concentrate can take. Ultrafiltered milk is made by passing milk through a series of membranes, separating out some of the lactose and water, leaving behind a highly-concentrated form of dairy proteins and fat. Products labeled as MPC are also being made by blending other dairy proteins, such as whey and casein, with nonfat dry milk.

According to NMPF, the GAO report reached four conclusions: a significant portion of domestically-produced U.S. skim milk powder is being displaced by imported MPC; there is currently no way to halt the increasing flow of MPC into the country; federal and state inspections to ensure that the MPC imports are not being improperly used are inadequate, and harmonized tariff schedules need to be changed to account for the surge of MPC into the country.

"This is report confirms our fears that imports of dry, ultrafiltered milk are damaging the economic health of dairy farmers across the country," said Jerry Kozak, CEO of NMPF. "To make matters worse, however, the GAO report illustrates that there are no easy fixes to this problem other than tackling the issue of how milk protein concentrate is classified under U.S. trade law."

The report found that ultrafiltered milk blends, ranging from concentrations of 40% to 90% protein, are coming into the country in increasing volumes. Milk protein concentrate imports grew from 805 metric tons in 1990, to 44,878 tons in 1999. NMPF estimates that on a skim milk equivalent basis, the 1999 figure of 44,878 tons represents the displacement of 246 million pounds of nonfat dry milk powder. That import volume represents approximately 0.8% to 1.8% of total U.S. milk production in 1999. An additional 260 million pounds of nonfat dry milk were displaced by MPC imports in 2000. The 1999 and 2000 MPC imports are approximate to the sum of domestically-produced, surplus skim milk powder that the U.S. government now has in storage.

The report noted that U.S. Customs Service regulations assess a tariff-rate quota on dairy ingredients with a protein concentration of less than 40%, because these products are usually classified as nonfat dry milk – a product subject to U.S. quotas. But current Customs regulations have no tariff-rate quotas on MPC, meaning that ultrafiltered milk, with its higher concentrations of protein, can come into the country with virtually no tariffs and be subject to no volume quotas.

"Our Customs regulations regarding MPC are so porous that you could drive a milk truck through the loophole that allows for the importation of MPC," Kozak said. "And that's exactly what has happened in recent years: we've witnessed a blizzard of dried MPC blowing into the U.S., all because our current trade policies don't impose any restrictions on the product." The U.S. does maintain quotas on related dairy imports, including cheese, nonfat dry milk and whey.

The GAO report also highlighted the lack of adequate enforcement of standards governing how dried forms of ultrafiltered milk are used. Food and Drug Administration standards of identity do not allow dry MPC to be used in standardized cheeses such as cheddar and mozzarella, although small amounts of MPC can be used in the starter culture for those cheese varieties. There are no standards restricting MPC use in non-standardized cheeses such as brie, ricotta and a product known as "pizza cheese." The GAO also reported that MPC imports are being used legally in nutritional supplements, frozen desserts, and sports beverages.

Because the FDA does not consider MPC imports to pose any health risk to U.S. consumers, it does not place a high priority on enforcing the regulations governing the end use of the products, Kozak said.

"We agree that MPC use is not a health issue for consumers, but it is a real threat to the economic health of U.S. dairy farmers," he said. "The GAO found that the FDA only conducted nine inspections of food processing plants in 1999 to specifically check to see if those facilities are making cheese in accordance with what the standards of identity allow. Both federal and state agencies lack the resources to adequately address this concern."

Based on the findings of the GAO report, Kozak said that NMPF will continue working with members of Congress, and the Bush Administration, to address the inadequacies in the regulation of imported MPC. NMPF will unveil later this month a detailed series of short- and long-term actions designed to stem the flow of MPC imports.