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Ottawa vows to crack down on chickens smuggled into Canada from the U.S.


Written By: Eric Anderson, Oct 19, 2015
  • 17 Oct 2015
  • National Post - (Latest Edition)
  • By Damon van der Linde Financial Post dvanderlinde@nationalpost.com Twitter.com/DamonVDL

fowl or fair

With TPP in place, Ottawa vows to crack down on chickens smuggled into Canada from the U.S.


It seemed like just another unassuming day at the chicken warehouse — until the authorities moved in. They had come for chickens that were passing themselves off as low-grade poultry. It was a lie.
United States Department of Agriculture agents raided the warehouse last year in upper New York State and found the evidence they were looking for: pallets stacked with chicken ready for export to Canada. Chicken that could have eventually found its way to Swiss Chalet rotisseries and supermarket deli counters across the country.
The crime? These chickens weren’t labelled as broiler chickens — the meaty and juicy birds we roast up or fry for the dinner table — they were slapped with stickers calling them something else: spent fowl.
Spent fowl are chickens, too. But they’re tough and scrawny hens. It’s not their fault: They were born to lay eggs or to breed chicks, so their meat — a.k.a. mechanically separated chicken — isn’t much good except as an ingredient in chicken hot dogs and pot pies. That’s why Canada lets it in tariff free.
Now, broiler chickens — that’s the market Canada’s supply-managed poultry producers have locked up, subjecting the tastier fowl to import quotas or tariffs of more than two times the meat’s original value. Or at least they thought they did — until investigators realized that the lock was broken: U.S. broilers were being snuck across the border disguised as spent fowl. And that’s just one of several ways that Canadian poultry producers say a market they were promised a tight grip on is being infiltrated by grey-market foreign fowl.
And it appears to be happening at a remarkable scale: Farmers say the industry is hemorrhaging more than $100 million a year due to importers circumventing the country’s quota system. They do it by intentionally mislabelling chicken as something else and using tactics that range from clever loopholes to outright fraud.
“These types of actions are like tax evasion versus tax avoidance: One’s illegal and one’s a smart business practice,” said trade expert Adam Taylor, director of ENsight Canada, a government relations firm.
Now, with the federal government committing in the Trans-Pacific Partnership deal, announced earlier this month, to permit an increase in chicken imports of 2.1 per cent, it’s also promising to finally crack down on those who keep finding new ways to get around the rules of the supply-management system, which farmers say have been unenforced for years.
“We accept it as a great first step,” says Mike Dungate executive director of the Chicken Farmers of Canada. “This has been a problem for a long time and something needs to be done.”
At the heart of the matter is how the Canadian Border Service Agency classifies what actually counts as “chicken” when it comes to the quota system.
For instance, there’s an import classification that includes value-added products like TV dinners, which might come packaged with veggies and rice along with some chicken. If the package is less than 87 per cent chicken, it qualifies as a general “meat product” and the chicken quota does not apply.
If it’s is more than 87 per cent chicken, the quotas kick in: the current trade rules state that only 7.5 per cent of Canadian domestic consumption can be imported with little to no duty. This year, if the national total of imported chicken exceeds 80.2 million kilograms, any further imports will be slapped with a whopping 238 per cent tariff.
If they’re spotted, that is. Some importers have been able to slip past the punitive tariffs by getting creative. A distributor might take a box of nothing but chicken wings, or chicken breast, and throw in a packet of marinade or sauce heavy enough that it equals 13 per cent of the total weight. That keeps it from facing quotas.
“(Importers) say it’s no longer chicken,” Dungate says. “This is where we would argue the ludicrousness is.”
But the thing is, the sauce would almost always have to be left as a separate item, rather than actually being put on the meat: in that kind of quantity, Dungate says, it would be far too much sauce for consumers to want to eat.
“People don’t want their wings drenched in sauce ... just in order to get it in freely traded,” he said.
As part of the TPP agreement, the federal government has promised to modify the definition of these combined products so that chicken products with added sauce packets are no longer able to avoid the tariffs.
But, apparently that’s only for products with sauce packets. And Dungate says he has already seen importers developing new methods so that the added weight looks like something other than a “packet” — by simply putting the weighty sauce in a different sort of container.
“Now, they put the chicken in a plastic tray and cover it with a film and in another one there is the sauce,” he says. “The know absolutely what they’re doing.”
Taylor says that when it comes to import quotas, businesses will always look for creative ways to slip through. And when they figure out a successful manoeuvre, it takes some time for authorities, and the national industry, to catch on.

“One man’s trade circumvention is another’s clever business practice… that’s often the debate,” he said.
But Dungate says the spent fowl ruse is the most difficult one to detect in protecting against illegal chicken imports. In one instance, he says a Canadian meat distributor received a pallet of broiler chickens from an importer, and noticed that one label had been stuck on top of another.
“It was not quite adhered and they pulled it back and saw it labelled ‘spent fowl’ out of the U.S and approved by the United States Department of Agriculture,” he said. Presumably it had been properly relabelled as more expensive broiler chicken only after it was safely across the border. Unlike the sauce trick, these are the ploys that get exposed strictly by accident.
But it’s happening at such a scale that the Chicken Farmers of Canada say they’ve discovered that there is more spent fowl meat recorded as being brought into Canada than is produced in the entire United States.
In 2012, the amount of spent fowl imported to Canada was equivalent to 101 per cent of U.S. production — that is, all the mechanically separated chicken produced for American consumption and export — and this year that amount has already reached more than 84 per cent.
“That would mean that the Americans would not be eating (any) Chicken McNuggets,” said Pierrette Ringuette, a Senate Liberal who tabled a motion in 2014 to study the trade between the U.S. and Canada under NAFTA.
Dungate also says a lot of what is being brought in as spent fowl is labelled as breast meat — the most valuable cut of a chicken. He says in 2012, 48 per cent of spent fowl imports were breast meat, while this year it’s up to 72 per cent.
He says that looks very suspicious, given that breast meat is not a traditional cut for spent fowl, since the birds have so little meat on them.
“How is it that we could be importing more than they produce? This is why we think there is a huge amount of fraud,” he said.
To put an end to this practice, the Canadian Department of Foreign Affairs says imported spent-fowl meat will require certification from the U.S. Department of Agriculture to verify that the product actually is what its label says.
But that requires thorough co-operation from the U.S. side. The U.S. Poultry and Egg Association says a number of spent-fowl producers are willing to help out, but the American group says that all it can say about these supposedly subversive imports is what it has heard from Canadians.
“All we know is that there have been suggestions or accusations this has happened,” said association president Jim Sumner. “We have no idea who is doing it, but we have asked our government to investigate and to make sure this is not happening because it would be fraudulent if it was.”
Dungate claims that these unsavoury imports have already cost Canada 9,000 jobs in the poultry industry, but notes that the objective is to find fixes that are sustainable for enforcing the quotas in the long term.
“We’re not trying to add a level of red tape to our business. If we just try to tackle one specific issue, it’ ll pop up someplace else and it’ ll just keep on moving,” he said. “We’re prepared to ... suck it up until we get a permanent solution.”
The CFC has already invested more than $250,000 in a joint effort with Trent University to develop a DNAtesting device — it works like a hole punch for poultry —that can determine whether meat is spent fowl or broiling chicken. That would allow customs agents to spot imposter chickens at the border.
But Ringuette, the New Brunswick Senator, says she would have liked to see more decisive action on the part of the government to address rules that have existed since NAFTA came into effect in 1994.
“If the current government cannot enforce NAFTA, how can they commit to enforce the TPP and that we will believe them?” she said. “As far as I’m concerned, (chicken farmers) have been extremely patient.”
That may be because investigating a fraudulent chicken can be a lot harder than you’d think — not merely a matter of pointing the finger at the producer named on the label.
When the USDA charged that American spent-fowl exporter for the mislabelled chicken in upstate New York, the company argued that the stickers were also bogus: It hadn’t used those kinds of export labels in years, and the slaughter dates they had written down on them were for a week that the plant had been closed for cleaning. The charges were dropped.
“Clearly somebody had gotten ahold of some old labels, put in a slaughter date, had no idea this plant was closed down and got caught,” said Dungate.
No one el s e was ever charged for that chicken.
 
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Posted in Farm related news | Tagged with poultry TPP chicken trade | More articles by Eric Anderson