U.S. Tariff Commission,

December 20, 1968.

To the President:

Pursuant to your request of June 10, 1968, the U.S. Tariff Commission has completed an investigation under subsections (a) and (d) of section 22 of the Agricultural Adjustment Act, as amended (7 U.S.C. 624), to determine whether certain articles are being, or are practically certain to be, imported into the United States under such conditions and in such quantities as to render or tend to render ineffective, or materially interfere with, the price-support programs of the U.S. Department of Agriculture for milk and butterfat, or to reduce substantially the amount of products processed in the United States from domestic milk and butterfat. You requested that the Commission report its findings and recommendations to you at the earliest practicable date. 1/

Specifically, you referred to the following articles in your

request:

(1) Milk and cream, condensed or evaporated, provided for in items 115.30, 115.35, and 115.40 of the Tariff Schedules of the United States (TSUS);

1/ Public notice of the institution of the Commission's investigation was issued on June 11, 1968. The notice was posted at the Commission's offices in Washington, D.C., and in New York City, and was published.in the Federal Register (33 F.R. 8758) and in the July 3, 1968 issue of the Customs Bulletin. A public hearing was held July 22-25; interested parties were afforded opportunity to produce evidence and to be heard. In addition to the information submitted at the hearing, the Commission obtained information from briefs of interested parties, from fieldwork, from other Government agencies, and from other appropriate sources.

(2) Natural Cheddar cheese made from unpasteurized milk and aged not less than 9 months, which prior to exportation has been certified to meet such requirements by an official of a government agency of the country where the cheese was produced;

(3) Cheese and substitutes for cheese containing, or processed from, Edam and Gouda cheeses;

(4) Italian-type cheeses, made from cows' milk, not in original loaves (Romano made from cows milk, Reggiano, Parmesano, Provoloni, Provolette, and Sbrinz), and cheese and substitutes for cheese containing, or processed from, such Italian-type cheeses, whether or not in original loaves;

(5) Cheese and substitutes for cheese other than Colby provided for in items 117.75 and 117.85 of the TSUS; (6) Swiss or Emmenthaler cheese with eye formation; Gruyere-process cheese; and cheese and substitutes for cheese containing, or processed from such cheeses;

(7) Chocolate, cocoa and confectioners' coatings and other products; all the foregoing provided for in items 156.20, 156.25, 156.30, 156.40, 156.45, and 156.47 of the TSUS, if containing over 5.5 percent by weight of butterfat; and

(8) Articles provided for in items 182.92 and 182.95 of the TSUS, containing over 5.5 percent by weight of butterfat, the butterfat of which is commercially extractable, or which are capable of being used for any edible purpose for which products containing butterfat are used.

Some of the articles listed in your letter are already within the scope of import quotas imposed under section 22 of the Agricultural Adjustment Act. The current quotas on Cheddar cheese (numbered par. (2) of your request), American-type cheeses other than Colby (numbered par. (5)), and certain edible preparations in item 182.92 of the TSUS (numbered par. (8)) have been in effect since July 1, 1967 1/ and, as

1/ Presidential Proclamation No. 3790.

the result of your present request, are being reviewed by the Commission in accordance with the provisions of section 22(d). In addition import quotas are presently in effect under section 22(b) by virtue of emergency action taken on June 10, and September 24, 1968 1/ with respect to the articles described in numbered paragraphs (1) and (3) of your request and with respect to certain of the articles described in numbered paragraphs (5) and (6) thereof. 2/ The emergency action will continue in effect pending the Commission's report and Presidential action thereon.

1/ Presidential Proclamations Nos. 3856 and 3870, respectively. 2/ The emergency action with respect to the articles in numbered pars. (5) and (6) applies only to such articles if shipped otherwise than in pursuance to a purchase, or if having a purchase price (as defined in the proclamation) under 47 cents per pound.

INTRODUCTION

As compared with the domestic production of the milk equivalent thereof, U.S. imports of dairy products have been small for many years, Between 1953 (when absolute quotas were first imposed on imports of dairy products under the provisions of section 22 of the Agricultural Adjustment Act, as amended) and 1965 annual imports had been equivalent to from 0.4 to 0.7 percent of the U.S. output of milk. 1/ During 1966 and 1967, imports of dairy products (in terms of milk equivalent) rose sharply. In each of those years they were about 3 times as large as in 1965. Nonetheless, the ratio of imports to total domestic milk

production for 1966 and 1967 was 2.3 and 2.4 percent, respectively.

The increase in imports for those years was attributable to a rise in imports of dairy products not subject to quantitative limitations, especially Colby cheese, butterfat-sugar mixtures such as "Junex" and similar products, and frozen cream. On June 30, 1967, the President imposed section 22 quotas on the imports of dairy products that accounted for about 95 percent of the increase in imports during 1966 and the first half of 1967. 2/

Although imports of dairy products (in terms of milk equivalent) declined in the 6-month period following the imposition of the quotas in mid-1967, they were nonetheless about double--on an annual basis-

1/ Quotas on dairy products under sec. 22 of the Agricultural Adjustment Act, as amended, were first imposed in mid-1953 (Presidential Proclamation No. 3019). Imports of some dairy products had been subject to quotas before then under the provisions of the Second War Powers Act of 1942 and the Defense Production Act of 1950.

2/ Presidential Proclamation No. 3790.