National Farmers’ Union – Supplementary Written Evidence (UST0050)
UK Sheep meat (including Lamb) Exports to US
1.1 Small Ruminant Rule: Background
1 In 1997 the US banned the importation of beef and sheep meat, products and live animals from countries that it deemed to be an “undue risk” for Transmissible Spongiform Encephalopathie (TSEs include BSE (affecting cattle) / Scrapie (affecting goats / sheep).
2 In 1999 the OIE (the world organisation for animal health) designated countries into three categories of risk with regards TSEs - Negligible risk, controlled risk and undetermined risk.
3 In December 2013, the US aligned its federal rules on BSE with the OIE approach and amended its domestic rules on the importation of cattle / beef products allowing the importation from countries with a Negligible and Controlled risk such as the UK. It did not make the same amendments to its federal register for imports of sheep / lamb products. This means that the US currently bans imports of sheep meat from a number of countries, including the UK (*see list of countries banned in Annex 1).
3.1 Small Ruminant Rule: Current Review
4 In July 2016, the US authorities (APHIS) launched a public consultation to amend its Federal Rules to align the US rules with the OIE rules and remove BSE related import restriction on sheep and goat. The proposed rule change is known as the “small ruminant rule.”
5 The consultation closed September 2016 with 53 submission. Without notable exceptions, all submissions welcomed the proposed rule change, including support from the American Sheep Industry Association (ASI). The ASI is the national trade association for the U.S. sheep industry representing nearly 90,000 US sheep producers and allied organizations through its affiliated state organizations. In its response the ASI said that “the ASI is generally supportive of the proposed rule and we believe that overall, the proposed changes are scientifically sound and appropriate.”
6 There have been no further public announcements on progress of this proposed rule change since the consultation closed in September 2016.
2. Equivalence of meat inspection – UK approval
7 To export meat to the USA, the exporting foreign government must demonstrate how its procedures achieve an “equivalent” level of public health protection as achieved by the U.S. inspection system. On March 6, 2020 the US authorities (FSIS) combined England, Northern Ireland, Scotland, and Wales into one food safety inspection system under the United Kingdom and granted equivalence across the 4 nations for beef, lamb and pork. Approved premises for beef and pork are listed here. Premises for lamb exports can be added to the UK equivalence once the “small ruminant” rule is addressed – see above.
3.1 Market Opportunity
8 The UK exports approximately 100,000t of sheep meat and lamb each year (>94% to the EU).
9 The US is the 2nd largest importer of sheep meat (including lamb) in the world - importing approximately 110,000t of sheep meat each year. Australia and New Zealand account for > 99.5% of imports to the USA (see table 1). Sheep meat imports from Australia do so duty free under an FTA, whereas NZ pays a negligible Most Favoured Nation (i.e. WTO) duty.
Table 1. US imports of lamb and mutton 2015 – 2019 (carcass weight, 1,000 pounds)
10 The United States is not a major producer of sheep. Over the past 10 years, the USA sheep inventory has fallen by 7.5 percent between 2010 and 2020 (from 5.62 million to 5.20 million head). The sheep that are produced are raised primarily in the West, with Arizona, California, Colorado, Idaho, Iowa, Montana, Oregon, South Dakota, Texas, Utah, and Wyoming accounting for two-thirds of total production.
11 Consumption of sheep meat is slowly increasing in the USA, mainly amongst millennials who are willing to be more ‘adventurous’, but it is still predominantly eaten out of the home. AHDB consider that there is some opportunity for UK lamb exports in the form of premium cuts and offal, mostly in the metropolitan areas of Northeast America where there are high concentrations of Middle Eastern, Caribbean and African consumers. However, considerable work would be required to penetrate the US market, especially as we would have to compete with NZ and Australia for market share who are already established suppliers and have much lower cost of productions. (AHDB calculates the AUS cost of production = $188 /100kg lamb liveweight v $419/100kg liveweight (UK lowland).
12 The Australian’s in particular have invested a lot building up contacts in retail and food service opportunities in the US. Realistically it would be extremely difficult to take market share and displace Australian and NZ lamb. The Australian product is closer to the US product, large carcasses and grain fed in feed lots. The best opportunity for UK lamb exports to the US lies in encouraging increased consumption for high quality, lamb with an established provenance linked to the historical ties between the US and the UK. Increased consumption of lamb in the US would then in turn help the US domestic industry to grow itself. In the same vein, increased consumption in the USA may at times mean that the AUS and NZ supply is short, when their industries are faced with issues such as drought and increased demand from Asia / China with the ASF outbreak - opening opportunities for UK to compete (especially from a seasonality perspective).
3.2 Tariff Barriers
13 The US MFN tariff applied to lamb and sheep meat is negligible. The US tariff on lamb carcase / half carcase = 0.35 cents / kg (£:$ = 1.22, 1 UK lamb = ~19kg,) Therefore US tariff payable per lamb = 6.65cents = $0.065 Current UK deadweight lamb price (9th May AHDB) = £4.7/kg, 1 lamb in UK = £89.3 = $108.95 Therefore US tariff equates to around 0.06% of today’s price
14 The UK cannot export sheep meat to the US until the proposed change to the Federal Register takes effect. When it does, other countries currently blocked from sending product to the US will be in the same position. The USDA suggests that the rule change will provide countries such as Argentina, Canada, Chile, Uruguay, Brazil, Panama, and Peru, (in closer proximity to the USA) and therefore with lower transportation costs, with an incentive for exporters to divert a share of their sheep and goat meat EU-28 shipments to the United States.
Annex 1. List of countries whose sheep meat is currently banned
15 *Federal register 92.24 The importation of meat, meat products, and edible products other than meat (excluding milk and milk products) from ovines and caprines that have been in any of the following regions is prohibited: Albania, Andorra, Austria, Belgium, Bosnia-Herzegovina, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, the Federal Republic of Yugoslavia, Finland, France, Germany, Greece, Hungary, the Republic of Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, the Former Yugoslav Republic of Macedonia, Monaco, Norway, Oman, the Netherlands, Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the United Kingdom.
2 July 2020