Tariffs on infant formula are set to be reinstated on Sunday, even though more than half of U.S. households who use infant formula continue to be affected by ongoing shortages.
The dairy industry supports the return to normal trade as imports have soared to address the near-term needs.
Congress temporarily suspended tariffs on infant formula this summer in response to out-of-stock rates surging as high as 90% in some regions. In mid-October, President Joe Biden signed into law the Bulk Infant Formula to Retail Shelves Act which provided duty-free treatment to certain infant formula base powder used in manufacturing of infant formula in the United States through the end of the year on Saturday.
The bill sponsors said the safeguard duties are estimated to increase the consumer cost of formula by 27%.
Shawna Morris , senior vice president for trade with the National Milk Producers Federation told Agri-Pulse the dairy industry actively supported the suspension until the end of the year, but said continuing it longer would be a “giveaway to foreign companies” that are trying to turn a “unique crisis into a long-term path toward a permanent, unnecessary influx of imports into the U.S.”
Any shelf stock shortages or lingering issues are “not because there’s insufficient production at this stage,” Morris said. U.S. formula production since the peak of shortages has largely recovered, while imports to remedy past deficits surged when the tariffs were lifted. The U.S. Census Bureau reports formula imports are 147% above year-to-date through October by volume and 291% higher based on value.
“NMPF has strongly supported increased local production as the best solution to avoid a repeat of the infant-formula shortage that struck U.S. consumers this year. We also supported increased imports as a short-term measure to alleviate the worst of the crisis - but long-term reliance on imports is exactly the wrong solution for U.S. families,” Morris said.
The tariff rates on infant formula are complex and based on the composition of the final product. For example, any European Union infant formula imported over a quota starts at a base tariff rate of 7% to 8%. Additional tariffs are added based on the composition of dairy fat, vegetable fat and sugar, Morris said.
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If the United States eliminates its tariffs on dairy products used for infant formula it will only increase the trade deficit between those countries without a free trade agreement, she said.
Morris said “high European dairy tariffs and a barrage of regulatory red tape heavily drive the almost $2 billion annual dairy trade deficit between the U.S. and EU.”
She said that lifting U.S. tariffs on an agricultural import while other countries maintain their duties will "simply replace American-made formula with imported products and undermine U.S. food security of this critical product.”
Steve Abrams, University of Texas professor of pediatrics, said he doesn't expect major formula companies Bubs, Kendamil and Aptamil to reduce imports significantly even with the reinstatement of tariffs.
Abrams said in an email statement to Agri-Pulse he supports “an open marketplace with as few as barriers as is needed to importation both due to the shortages and the ability of families to make reasonable choices in the market.”
Abrams proposed a series of interventions to be taken by the government and companies to ensure the infant formula crisis doesn’t reoccur.
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