The U.S. and Chinese governments have reached an agreement that will increase access to Chinese markets for U.S. dairy processors who have been blocked from those markets since 2014.

In May of that year, the Chinese government implemented a new food-safety regulation spanning multiple food categories. Among other things, it required a nation to certify and register dairy facilities that want to ship to China and assure they meet Chinese standards.

The MOU between the FDA and the Chinese government formalizes a registration procedure in which third-party certifiers, on behalf of FDA, will audit U.S. dairy facilities to assure they comply with Chinese food-safety requirements.

The agreement is good news, and for some companies it’s a really big deal, said Matt Gould, analyst with Dairy Market Analyst.

The 2014 regulation froze additional plant approvals. If plants weren’t already approved, they couldn’t ship to China, he said.

Since then, new milk powder plants have been built in the U.S., and more are under construction. Additional whey is being produced, and China is the single biggest driver of whey exports. In addition, China’s fluid milk market is starting to mature, and that’s an avenue worth exploring, he said.

U.S. dairy organizations and the U.S. and Chinese governments worked on a registration process for more than two years. The issue was compliance with regulations between two countries with rigid regulatory systems, according to the U.S. Dairy Export Council.

“The deal marks a significant opportunity for the U.S. dairy industry. China is already the world’s largest dairy importer … . The potential to increase exports there is tremendous,” said Tom Vilsack, USDEC president and CEO.

The U.S. shipped $384 million worth of dairy products to China in 2016, making it the industry’s third-largest market behind Mexico and Canada. With Chinese demand increasing for imported milk and other dairy products, the potential for U.S. exports have been high -- but access has been a challenge.

The MOU is expected to increase access for more than 200 new exporters in the short term and pave the way for additional U.S. entrants in the future, according to USDEC.

“Although we expect the dairy plant list to be accepted within the next two to three weeks, China has not specified an exact date,” said Jonathan Gardner, USDEC vice president of market access and regulatory compliance.

Presently, 221 U.S. firms are eligible to ship dairy to China based on pre-decree access by the Chinese government. In addition, seven infant formula firms are also eligible. Those firms can continue to export their goods to China and will have two years to seek third-party certification and reapply for eligibility, said Peter Cassell, an FDA press officer.

Firms not currently on the list need to apply to FDA for registration and will need to seek third-party certification. FDA will soon issue guidance documents on the details, he said.

Source: Capital Press. Date: 2017-06-23