August 2002 DEIP Update:
USDA Delays Start of New Fiscal Year

The new fiscal year for the Dairy Export Incentive Program (DEIP) began on July 1, 2002, but there has not been any activity, because the U.S. Department of Agriculture (USDA) has not yet issued the required notices. To initiate the DEIP year, USDA must officially announce the tonnage allocations for the three products – cheese, nonfat dry milk (NFDM) and butterfat -- included in the program. The only announcement USDA has issued to date is a technical revision to its policy on liquidated damages within DEIP. (For more information on that announcement, click here.

Since fiscal year 2000, the United States has been at the maximum allocation for each of the three products under DEIP, as outlined by U.S. agreements within the World Trade Organization (WTO). These allocation limits allow for 3,030 metric tons (MT) of cheese, 68,201 MT of NFDM, and 21,097 MT of butterfat to be accepted into DEIP contracts.

DEIP provides bonuses to exporters of these three dairy products to compensate them for procurement costs and market price shortfalls that might otherwise prevent the export of U.S. dairy products. Once USDA announces the allocations, USDA can issue a formal invitation for bids for each product. Potential exporters propose quantities and bonus amounts for sending these products to foreign markets. Successful performance of the contract results in payment of the bonus. Non-performance can result in a contract being revoked, and that tonnage could be made available for a second time. ###

Posted August 12, 2002