U.S. Trade Representative Katharine Tai on Tuesday initiated a dispute settlement case over Canada’s manipulation of dairy tariff rate quotas to discourage imports of U.S. dairy products.

The U.S. dairy industry has had longstanding concerns about Canada undermining its trade agreements. Those concerns didn’t go away with U.S.-Mexico-Canada Agreement implemented last year.

The issue is Canada’s allocation of TRQs, which were supposed to increase access for U.S. dairy products. U.S. dairy groups contend Canada’s allocation system was constructed to discourage imports by reserving a large percentage of TRQs for Canada’s own dairy processors, who have no incentive to import competing U.S. products.

The bulk of TRQ access is reserved for domestic processors. Only a small amount is left for distributors, and retailers are completely cut out, the groups say.

Dairy groups have been calling for full enforcement of Canada’s trade obligations and were quick to respond to Tai’s request to initiate a dispute settlement panel.

“Canada has failed to take the necessary action to comply with its obligations under USMCA by inappropriately restricting access to its market,” said Jim Mulhern, president and CEO of National Milk Producers Federation.

“This needs to stop, and we are thankful that USTR intends to make that happen,” he said.

The U.S. Dairy Export Council also expressed appreciation to the administration for moving forward with a dispute settlement action.

“Our trading partners need to know that failure to meet their agricultural trade commitments with the United States will result in robust action to defend U.S. rights — today’s action demonstrates just that,” said Krysta Harden, president and CEO of the export council.

The expansion of dairy market access opportunities is critical for the U.S. dairy industry, she said.

“Today’s action is a critical step toward maximizing current export opportunities while sending a strong message in defense against the erection of future barriers in Canada and other markets as well,” she said.

Dairy organizations have repeatedly cited Canada’s circumvention of its trade obligations in several meetings with USTR official and in an open letter to Tai in May. Members of Congress have also weighed in on the issue with USTR, and the Trump administration in December initiated pre-dispute consultation proceedings.

“We are very grateful to Ambassador Tai for moving forward with this enforcement action against Canada, the resolution of which is a critically important matter for U.S. dairy producers and processors,” said Michael Dykes, president and CEO of the International Dairy Foods Association.

“We appreciate Ambassador Tai’s open commitment to enforcing U.S. trade agreements to their fullest and maintaining a rules-based trading system,” he said.

“Our negotiators and our dairy companies work too hard for the market access obligations in these agreements to be ignored,” said Becky Rasdall, the association’s vice president of trade policy and international affairs.

“We’re indebted to Ambassador Tai and the teams at USTR and USDA for their efforts to advance this dispute,” she said.

A dispute panel will review the complaint by the U.S. and is expected to issue a report later this year.