While Dairy Farmers of Ontario have already lost two rulings that allow processors to use modified products in cheese and ice cream, they now fear a third ruling that will affect yogurt products.

The Canadian International Trade Tribunal (CITT) is holding a March 9 hearing after a major yogurt manufacturer started importing a beverage yogurt in 2008. The drink was subjected to tariffs but the ruling was appealed to the CITT.

"Our concern is that beverage yogurt will make a significant impact on our market if the CITT rules wrong," said DFO general manager Peter Gould. "What else will be accessed? This is the closest thing in real life to going through the looking glass."

Dairy farmers already lost two CITT decisions based on the tariff rate quota (TRQ) for imports. Both butter oil/sugar blends and milk protein isolatess are products developed to circumvent the tariff quota, Gould said.

Butter oil/sugar blends are typically used in ice cream products to replace the butter that was commonly used since butter imports are limited by a TRQ. While Dairy Farmers of Ontario have long depended on TRQs to protect their markets from a flood of imports, importers are circumventing the TRQs by modifying dairy products

"So the question before the CITT was ‘Do butter oil/sugar blends circumvent the TRQ for butter?’" explained Gould, "They answered in the following way; ‘Would you put a butter oil/sugar blend on toast?’. They reached the conclusion that no one would likely do that so butter oil/sugar blends are not a substitute for butter." However, since butter is normally used for butter oil, the average person would understand that the only reason butter oil/sugar blends are used is to circumvent the TRQ, he said.

Milk protein concentrates (MPC), used in cheese production, are also subject to TRQ. These concentrates are produced by removing the lactose and concentrating the protein to 50 to 80% range. 

"The MPC instance is even more bizarre. People started getting around the TRQ for milk protein concentrate by what they called Milk Protein Isolate. The only difference between a concentrate and an isolate is that an isolate has even more protein... and only exists to circumvents our TRQ."

Canadian Border Services Agency said that milk protein isolates should be subject to a tariff but the CITT determined that the protein isolate was so concentrated that it would not be appropriate to replace the concentrate. "Of course, that was exactly what the (milk protein isolate) was designed to do."