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Canada Dairy TRQ Allocation Measures, final panel report CDA-USA-2021-31-010

USMCA dispute settlement panel · 2021-12-20

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CANADA-UNITED STATES-MEXICO AGREEMENT

ARBITRAL PANEL ESTABLISHED PURSUANT TO ARTICLE 31

CANADA – DAIRY TRQ ALLOCATION MEASURES
(CDA-USA-2021-31-010)

Final Panel Report

December 20, 2021

Panel Members
Elbio Rosselli (Chair)
Julie Bédard
Mark C. Hansen

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CONTENTS

I. Introduction ..........................................................................................................................1

II. History of the Proceedings ...................................................................................................1

III. Factual Background .............................................................................................................4

A. Treaty Provisions .....................................................................................................4

B. Canada’s Dairy Tariff Rate Quotas..........................................................................8

C. Canada’s Supply Management System ....................................................................9

IV. Decision of the Panel .........................................................................................................13

A. Preliminary Considerations ....................................................................................13

1. Burden of Proof..........................................................................................13

2. Interpretive Principles ................................................................................14

B. The Issue in Dispute...............................................................................................16

1. The United States’ Interpretation ...............................................................17

2. Canada’s Interpretation ..............................................................................20

C. The Panel’s Analysis..............................................................................................26

1. Article 31 of the Vienna Convention on the Law of Treaties ....................27

2. Article 32 of the Vienna Convention on the Law of Treaties ....................35

3. Canada’s Administrative Discretion Under the Treaty ..............................47

4. The Parties’ Remaining Arguments ...........................................................49

V. The Panel’s Findings..........................................................................................................50

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I. Introduction

The United States in this proceeding has asked this Panel to determine whether Canada’s
current practice of reserving 85 to 100% of 14 separate dairy tariff rate quotas (“TRQs”) for
“processors and further processors” is inconsistent with its obligations under the Canada-United
States-Mexico Agreement/United States-Mexico-Canada Agreement (the “Treaty”), namely:

 Its commitment in Article 3.A.2.11(b) not to “limit access to an allocation to processors”
when administering an allocated TRQ;

 Its commitment in Article 3.A.2.11(c) to ensure that in administering an allocated TRQ,
“each allocation is made . . . to the maximum extent possible, in the quantities that the
TRQ applicant requests”;

 Its commitments in Articles 3.A.2.4(b) and 3.A.2.11(e) to provide “fair” and “equitable”
procedures and methods for administering its TRQs; and

 Its commitment in Article 3.A.2.6(a) (together with its Schedule to Annex 2-B, Appendix
2, Section A, paragraph 3(c)) to not “introduce a new or additional condition, limit, or
eligibility requirement on the utilization of a TRQ . . . beyond those set out in [Canada’s]
Schedule to Annex 2-B.”

II. History of the Proceedings

On December 9, 2020, pursuant to Articles 31.2 and 31.4 of the Treaty, the United States
requested consultations with Canada concerning the measures through which Canada allocates its
dairy TRQs under the Treaty.

On December 21, 2020, the United States and Canada held consultations over
videoconference. The Parties failed to reach a mutually satisfactory resolution to the dispute.

On May 25, 2021, the United States requested the establishment of a panel to examine the
matter pursuant to Article 31.6.1 of the Treaty, which concerns perishable goods, with the terms
of reference set out in Article 31.7 of the Treaty. The United States also proposed that, pursuant
to Article 31.9.1(a) of the Treaty, the panel be comprised of three members.

Per Article 31.6.4 of the Treaty, a panel was established on May 25, 2021, the same day as
the United States’ request.

---

On May 31, 2021, the disputing Parties agreed to a three-member Panel. Pursuant to
Article 31.9(b) of the Treaty, Mr. Elbio Rosselli was selected as the Panel Chair on June 16, 2021.
On July 5, 2021, Ms. Julie Bédard and Mr. Mark C. Hansen were selected to serve as the other
members of the Panel.1

In an email dated July 9, 2021, the Secretariat informed the disputing Parties that the Panel
sought their views on a timetable for the proceeding as required under Article 18.2 of the Rules of
Procedure for Chapter 31. After receiving comments from the Parties, the Panel approved a final
timetable on July 12, 2021.

The United States filed its Initial Written Submission on July 12, 2021, pursuant to Article
18 of the Rules of Procedure for Chapter 31. The submission came seven days following the date
on which the last Panelist was selected.

On July 23, 2021, per Article 20.3 of the Rules of Procedure for Chapter 31, Patrick
Pelliccione, Chairman of the International Cheese Council of Canada (“ICCC”), a non-
governmental entity, formally requested leave on behalf of the ICCC to submit written views in
the dispute.

In accordance with Article 20.3 of the Rules of Procedure for Chapter 31, after
consultations and taking into consideration the comments expressed by the disputing Parties, on
July 30, 2021, the Panel decided to grant the ICCC leave to submit written views in the dispute.
The Panel also noted that one of the issues the ICCC requested to address, the issue of “how
Canada should allocate and administer its TRQs,” fell outside of the Panel’s mandate.

The Panel accepted Canada’s request for an extension from August 12, 2021, to August
20, 2021, for Canada to file its written submission. Accordingly, Canada filed its Initial Written
Submission on August 20, 2021, pursuant to Article 18 of the Rules of Procedure for Chapter 31.

1
The following were appointed as Assistants to the Panelists: Mr. Aaron Murphy (Julie Bédard) and Ms. Ana
Nikolic Paul (Mark C. Hansen).

---

On August 27, 2021, the ICCC filed its submission, providing written views on issues in
the dispute.

On September 3, 2021, Canada filed comments on the submission of the ICCC.

Also on September 3, 2021, Canada filed a request for a preliminary ruling on whether the
Panel’s terms of reference include a claim regarding the consistency of Canada’s dairy TRQ
allocation measures with the first clause of Article 3.A.2.11(c) of the Treaty, which provides: “A
Party administering an allocated TRQ shall ensure that . . . each allocation is made in commercially
viable shipping quantities.”

The United States filed its Rebuttal Submission on September 10, 2021, pursuant to Article
18 of the Rules of Procedure for Chapter 31. Paragraph 11 of the United States’ Rebuttal
Submission argued that it had not made and was not pursuing a claim under the first clause of
Article 3.A.2.11(c).

On September 13, 2021, the Panel requested additional views from Canada in light of the
United States’ confirmation that it was not pursuing a claim under the first clause of Article
3.A.2.11(c). Canada provided further comments on September 15, 2021, and explained its view
that a preliminary ruling was still necessary to clarify the scope of what was outside the Panel’s
jurisdiction in relation to the first clause of Article 3.A.2.11(c).2 On September 28, 2021, the
United States provided written comments as well, opposing Canada’s request.

Canada filed its Rebuttal Submission on October 1, 2021, pursuant to Article 18 of the
Rules of Procedure for Chapter 31.

On October 20, 2021, after noticing errors in Exhibits CAN-132 and CAN-134, Canada
filed corrected versions of these Exhibits and promptly informed the Panel Chair of the correction
via email.

2
The United States confirmed on September 28, 2021, that it was not pursuing a claim under the first clause of
Article 3.A.2.11(c) regarding “commercially viable shipping amounts.” The Panel declines to issue a Preliminary
Ruling because the point is moot and the argument is outside the Panel’s Terms of Reference.

---

The Oral Hearing was held, as scheduled, in Ottawa, Canada, on October 25 and 26, 2021.
Certain members of the Parties’ delegations attended virtually.

In an email dated October 27, 2021, the Secretariat informed the Parties that the Panel did
not have any additional questions following the Oral Hearing. The Secretariat also explained that
the Panel was providing the Parties the opportunity to respond in writing to previous questions
brought by the Panel or clarify responses provided during the Oral Hearing.

Pursuant to Article 18.2(g) and (h) of the Rules of Procedure for Chapter 31, on November
3, 2021, Canada provided written clarifications to responses provided during the Oral Hearing,
and responded in writing to some of the Panel’s written questions that were not discussed at the
Oral Hearing.

Pursuant to Article 18.2(g) and (h) of the Rules of Procedure for Chapter 31, on November
10, 2021, the United States submitted comments to Canada’s written responses.

The Panel met on October 25, 26, and 27, 2021, in person. The Panel members also
communicated by end-to-end encrypted messaging. The Panel circulated drafts of its Initial Report
for discussion and comment before completing the Initial Report, which was being presented to
the Parties on November 24, 2021, as provided in Article 31.17 of the Treaty, in accordance with
the schedule to which the Parties agreed by email submission to the Secretariat on November 5,
2021, and as announced by the Panel on November 15, 2021.

On December 9, 2021, the Parties submitted their comments to the Panel’s Initial Report,
as provided in Article 31.17 of the Treaty. The Panel took these comments under advisement and
issued a Final Report on December 20, 2021.

III. Factual Background

A. Treaty Provisions

The Treaty was signed on November 30, 2018, which was followed by re-negotiations,
resulting in the signing of the amended Treaty on December 10, 2019. The Treaty went into effect
on July 1, 2020.

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Under the Treaty, Canada maintains TRQs – a preferential tariff rate on a specified quantity
of goods – on, inter alia, certain dairy products. As part of its tariff commitments set out in Treaty
Chapter 2, Annex 2-B Tariff Commitments, Appendix 2: Tariff Schedule of Canada – (“Tariff
Rate Quotas”), Canada has adopted TRQs on 14 different categories of dairy products: milk,
cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk
powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey
powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other
dairy.3 The administration of these TRQs, and whether it is consistent with the Treaty, is the issue
in this dispute.

As defined in the Treaty, a “tariff rate quota” is “a mechanism that provides for the
application of a preferential rate of customs duty to imports of a particular originating good up to
a specified quantity (in-quota quantity), and at a different rate to imports of that good that exceed
that quantity.”4 Canada is permitted under the Treaty to distribute TRQ amounts pursuant to an
“allocation mechanism.” An allocation mechanism is defined in the Treaty as “any system in
which access to the tariff rate quota is granted on a basis other than first-come first-served.”5

Canada’s chosen allocation mechanism for the 14 dairy TRQs involves the establishment
of “pools” or reserved amounts of the TRQs for “processors,” such that only processors, including
further processors, have access to certain amounts defined in the TRQ Notices to Importers (from
85 to 100%). Other eligible TRQ applicants may apply only within their “pool” for the remaining
TRQ amounts – up to 15%.6

The Parties dispute the meaning of five Articles in the Treaty: Articles 3.A.2.11(b),
3.A.2.11(c), 3.A.2.11(e), 3.A.2.4(b), and 3.A.2.6(a).

Article 3.A.2.11(b) provides that:

3
Canada Initial Written Submission at ¶ 5; U.S. Initial Written Submission at ¶ 16.
4
Treaty, Article 3.A.2.1.
5
Id.
6
Canada Initial Written Submission at ¶¶ 74-77; U.S. Initial Written Submission at ¶¶ 21-22.

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A Party administering an allocated TRQ shall ensure that: . . .

(b) unless otherwise agreed by the Parties, it does not allocate any
portion of the quota to a producer group, condition access to an
allocation on the purchase of domestic production, or limit access to
an allocation to processors.

The Parties agree that Article 3.A.2.11(b) can be divided into the following four clauses:
(1) “Unless otherwise agreed by the Parties” (the “Agreement Clause”); (2) A Party shall ensure
that “it does not allocate any portion of the quota to a producer group” (the “Producer Clause”);
(3) A Party shall ensure that “it does not . . . condition access to an allocation on the purchase of
domestic production” (the “Domestic Production Clause”); and, (4) A Party shall ensure that “it
does not . . . limit access to an allocation to processors” (the “Processor Clause”).7

Article 3.A.2.11(c) provides that:

A Party administering an allocated TRQ shall ensure that: . . .

(c) each allocation is made in commercially viable shipping
quantities and, to the maximum extent possible, in the quantities that
the TRQ applicant requests.

Article 3.A.2.11(e) provides that:

A Party administering an allocated TRQ shall ensure that: . . .

(e) if the aggregate TRQ quantity requested by applicants exceeds
the quota size, allocation to eligible applicants shall be conducted
by equitable and transparent methods.

Article 3.A.2.4(b) provides that:

Each Party shall ensure that its procedures for administering its
TRQs: . . .

(b) are fair and equitable.

Article 3.A.2.6(a) provides that:

7
Canada Initial Written Submission at ¶ 94; U.S. Initial Written Submission at ¶ 27.

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Each Party shall administer its TRQs in a manner that allows
importers the opportunity to utilize TRQ quantities fully.

(a) Except as provided in subparagraph (b) and (c), no Party shall
introduce a new or additional condition, limit, or eligibility
requirement on the utilization of a TRQ for importation of an
agricultural good, including in relation to specification or grade,
permissible end-use of the imported product, or package size beyond
those set out in its Schedule to Annex 2-B (Tariff Commitments).
For greater certainty, paragraph 6 shall not apply to conditions,
limits, or eligibility requirements that apply regardless of whether or
not the importer utilizes the TRQ when importing the agricultural
good.

Additionally, the Parties also dispute the meaning of Section A of Appendix 2 to Canada’s
Tariff Schedule, which provides additional commitments regarding how Canada is required to
administer its TRQs. In particular, it provides that Canada is required to administer its TRQs
through an import licensing system and that Canada is required to allocate its TRQs to eligible
applicants, which are defined as applicants active in the Canadian food or agriculture sector.

For each TRQ, Section B of Appendix 2 to Canada’s Tariff Schedule sets out the following:

(1) the requirement that the originating goods covered by the TRQ shall be permitted duty-
free entry into Canada in each quota year;

(2) a table that sets out the aggregate quantity in each quota year that receives the duty-free
treatment gradually increasing over a specified period (e.g., 19 years);

(3) the tariff item numbers corresponding to the dairy products eligible for import under
the TRQ;

(4) the type of year (i.e., calendar year or dairy year) on the basis of which the TRQ will
be allocated.

In addition, four of the TRQs (Milk, Cream, Butter and Cream Powder, and Industrial
Cheeses) in Section B of Appendix 2 to Canada’s Tariff Schedule include end-use restrictions that

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require a certain percentage of the TRQ to be used for processing into ingredients for further food
processing, or used as ingredients for further food processing, and not for retail sale.8

B. Canada’s Dairy Tariff Rate Quotas

To administer its dairy TRQ volumes, Canada uses an import licensing system. This
system requires the issuance of shipment-specific import permits for all imports that draw upon
the TRQ volumes. Canada limits issuance of these import permits, and thus access to imports
under the TRQs, to allocation holders. The design of an allocation mechanism, including who
may obtain an allocation, is left up to the discretion of the importing Party, in this case Canada, to
determine, subject to compliance with the other provisions of the Treaty.9

On June 15, 2020, Global Affairs Canada published Notices to Importers concerning 14
TRQs for dairy products subject to the Treaty’s TRQ commitments.10 On October 1, 2020 and
May 1, 2021, Global Affairs Canada published revised Notices.11 These Notices were

8
E.g., Treaty, Chapter 2, Annex 2-B Tariff Commitments, Appendix 2: Tariff Schedule of Canada - (Tariff Rate
Quotas), Section B, para. 5(b)(i) (“Up to 85 percent of the TRQ quantities set out in subparagraph (a) shall be for the
importation of milk in bulk (not for retail sale) to be processed into dairy products used as ingredients for further
food processing (secondary manufacturing).”); id. para. 9(b) (“Only goods in bulk (not for retail sale) used as
ingredients for further food processing (secondary manufacturing) shall be imported under this TRQ.”); see also
Canada Initial Written Submission at ¶ 60; U.S. Initial Written Submission at ¶ 43.
9
Canada Initial Written Submission at ¶ 62.
10
CUSMA: Milk TRQ – Serial No. 1015, dated June 15, 2020 (Exhibit USA-1); CUSMA: Cream TRQ – Serial No.
1016, dated June 15, 2020 (Exhibit USA-3); CUSMA: Skim Milk Powder TRQ – Serial No. 1017, dated June 15,
2020 (Exhibit USA-5); CUSMA: Butter and Cream Powder TRQ-Serial No. 1018, dated June 15, 2020 (Exhibit
USA-7); CUSMA: Industrial Cheeses TRQ-Serial No. 1019, dated June 15, 2020 (Exhibit USA-9); CUSMA:
Cheeses of All Types TRQ-Serial No. 1020, dated June 15, 2020 (Exhibit USA-11); CUSMA: Milk Powders TRQ -
Serial No. 1021, dated June 15, 2020 (Exhibit USA-12); CUSMA: Concentrated or Condensed Milk TRQ-Serial No.
1022, dated June 15, 2020 (Exhibit USA-14); CUSMA: Yogurt and Buttermilk TRQ-Serial No. 1023, dated June
15, 2020 (Exhibit USA-15); CUSMA: Powdered Buttermilk TRQ-Serial No. 1024, dated June 15, 2020 (Exhibit
USA-16); CUSMA: Whey Powder TRQ-Serial No. 1025, dated June 15, 2020 (Exhibit USA-17); CUSMA:
Products Consisting of Natural Milk Constituents TRQ-Serial No. 1026, dated June 15, 2020 (Exhibit USA-19);
CUSMA: Ice Cream and Ice Cream Mixes TRQ-Serial No. 1027, dated June 15, 2020 (Exhibit USA-20); CUSMA:
Other Dairy TRQ-Serial No. 1028, dated June 15, 2020 (Exhibit USA-21).
11
CUSMA: Milk TRQ-Serial No. 1049, dated May 1, 2021 (Exhibit USA-2); CUSMA: Cream TRQ-Serial No.
1042, dated May 1, 2021 (Exhibit USA-4); CUSMA: Skim Milk Powder TRQ-Serial No. 1053, dated May 1, 2021
(Exhibit USA-6); CUSMA: Butter and Cream Powder TRQ-Serial No. 1040, dated May 1, 2021 (Exhibit USA-8);
CUSMA: Industrial Cheeses TRQ-Serial No. 1031, dated October 1, 2020 (Exhibit USA-10); CUSMA: Milk
Powders TRQ-Serial No. 1051, dated May 1, 2021 (Exhibit USA-13); CUSMA: Whey Powder TRQ-Serial No.
1045, dated May 1, 2021 (Exhibit USA-18).

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promulgated pursuant to the Export and Import Permits Act (“EIPA”) and its corresponding
regulations. Publication of the Notices opened the application period for access to allocations of
Canada’s TRQs. Under the authority of the EIPA, a product that is subject to a TRQ can be
imported only by someone who has a valid import permit. For all of Canada’s Treaty dairy TRQs,
access to 80% or more of the total quota volume is reserved for “processors.” For 10 of the dairy
TRQs, an additional 10 to 20% is reserved for “further processors.”12 And, for 13 of the dairy
TRQs, an additional 10 to 15% is reserved for distributors.

C. Canada’s Supply Management System

Canada has provided extensive information about the operation of the domestic market for
dairy products in Canada and its supply-managed production and marketing framework that is
based on three “pillars:” (1) controlled production, (2) pricing mechanisms, and (3) controlled
imports. That information is summarized below.

(1) Controlled Production. Because milk production cannot be stopped or paused easily,
significant efforts are required to ensure that the quantity of production of raw milk by
Canadian dairy farmers is within the quantity demanded from the marketplace. The
Canadian Dairy Commission (“CDC”) plays a role in ensuring milk production is aligned
with demand. The CDC calculates demand, referred to as Total Requirements, and it
calculates supply, otherwise known as Total Production Quota, which is set monthly.13

(2) Pricing Mechanisms. As part of Canada’s system, all raw milk produced and marketed
in Canada must be sold by producers to the provincial Milk Marketing Boards, which in
turn sells this raw milk as the primary raw materials input to processors. Prices paid by
processors and received by producers vary depending on how the milk is ultimately used
(the milk’s end-use). The Canadian dairy industry has organized these end-uses under the
Harmonized Milk Classification System.14

12
U.S. Initial Written Submission at ¶ 21.
13
Canada Initial Written Submission at ¶¶ 35-36; Canada Responses to Panel Questions at ¶¶ 3-4.
14
Canada Initial Written Submission at ¶¶ 40-42.

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(3) Controlled Imports. Canada has granted preferential market access to its trading
partners by establishing TRQs for supply-managed products under its trade agreements,
which allow a specified quantity to enter Canada duty-free or at a low rate of duty. As a
part of its import controls, Canada keeps track of the quantity of dairy products entering
Canada. This information is used in calculating the Total Production Quota to ensure that
supply (domestic production plus imports) aligns with domestic demand under the
production pillar.15

Canada argues that these three pillars are fundamental to the stability of the supply
management system and work together to balance supply and demand of dairy products within
Canada. This dispute involves the intersection between Canada’s TRQ commitments under the
Treaty, which provided significant additional access to Canada’s dairy market, and Canada’s
system of supply management (in particular, the third pillar).16

By the end of the 1980s, the three pillars of supply management were well established;
dairy farms became more specialized, earning most of their revenues from milk, and production
levels and milk prices stabilized, allowing producers to invest in their farms. Further, the matching
of supply and demand of milk provided predictable inputs for processing and the production of the
various products ultimately provided to consumers.17

There are six main actors in Canada’s dairy market: (i) producers (dairy farmers),
(ii) processors, (iii) further processors, (iv) distributors, (v) food service, and (vi) retailers. The
first two – producers and processors – are on the “supply side” as they provide products to the
others in the supply chain, while the others are on the “demand side,” including processors who
are on the “demand side” with respect to producers.

(i) Producers. Dairy producers (farmers) sell raw milk to provincial milk marketing
boards, which in turn sell raw milk for processing to licensed dairy processors for the

15
Canada Initial Written Submission at ¶ 44.
16
Canada Initial Written Submission at ¶ 15; Canada Responses to Panel Questions at ¶ 24.
17
Canada Initial Written Submission at ¶ 21.

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manufacturing of dairy products. In 2020, the total net farm cash receipts in this sector
was $7.13 billion, from production at 10,095 dairy farms with 18,805 on-farm employees.18

(ii) Processors. Dairy processors play a key role in turning raw milk from the farm into
dairy products for the consumer. Processors purchase raw milk from a provincial milk
marketing board and then use it to manufacture different dairy products such as butter,
cheese, yogurt, ice cream, etc. Processors then sell their products to further processors,
distributors, food service, and retailers. The dairy processing sector directly employs over
24,500 Canadians and accounts for more than 15% of total food and beverage
manufacturing sales, with $17.3 billion in manufacturing sales of dairy products in 2020.19

(iii) Further Processors. Further processors are entities that do not produce dairy products
but rather incorporate dairy products as ingredients in the manufacturing of further
processed products.20

(iv) Distributors. Distributors purchase food products, including dairy products, from the
food manufacturing sector (e.g., processors and further processors), for resale to a third
party.21

(v) Food Service. The food service industry (e.g., restaurants) purchases dairy products
from processors or distributors and therefore constitute part of the demand for dairy
products that requires supply from producers and processors.22

(vi) Retailers. Canada’s grocery retail industry is divided into two major categories:
(1) supermarkets and grocery stores, and (2) warehouse clubs and supercenters. The
Canadian supermarket/grocery store industry primarily sells food products, while the

18
Canada Initial Written Submission at ¶ 23.
19
Canada Initial Written Submission at ¶¶ 24-25; Canada Responses to Panel Questions at ¶¶ 5-6.
20
Canada Initial Written Submission at ¶¶ 28-29.
21
Canada Initial Written Submission at ¶ 30.
22
Canada Initial Written Submission at ¶ 31.

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warehouse club/supercenter industry is made up of large stores that primarily retail both
grocery products and merchandise items (e.g., apparel, home goods, and furniture). Both
categories of grocery retailers are heavily concentrated. The top five supermarkets and
grocery retailers held an estimated 80% of the grocery market share of sales in 2020. The
supermarket and grocery industry had sales of $99.3 billion in 2020.23

Canada notes that it has long taken the approach of administering its TRQs by reserving a
portion of its TRQs for processors. The practice dates back to 1995, when Canada created pools
for processors and other industry groups in administering the World Trade Organization (“WTO”)
TRQ for Chicken and Chicken Products.24

Under the Canada-European Union Comprehensive Economic and Trade Agreement
(“CETA”), Canada established dairy TRQs for Cheese and Industrial Cheese for the first time
under a free trade agreement. Since September 21, 2017, Canada has been administering these
TRQs by reserving a portion of the Cheese TRQ for processors, while the entire Industrial Cheese
TRQ is reserved for further processors.25

Additionally, under the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (“CPTPP”), the successor of the Trans-Pacific Partnership (“TPP”), Canada
established 16 dairy TRQs, which were also administered by reserving a portion of the TRQ for
processors. The TPP was signed on February 4, 2016, with the United States as a signatory. On
January 30, 2017, the United States withdrew from the agreement and the other TPP signatories
engaged in negotiations towards the CPTPP, which was signed on March 8, 2018, and entered into
force on December 30, 2018.26

Canada maintains that its allocation mechanism is, in part, designed to ensure a degree of
predictability for imports to avoid surges and excess domestic supply necessitating storage or

23
Canada Initial Written Submission at ¶¶ 32-33.
24
Canada Initial Written Submission at ¶ 45.
25
Canada Initial Written Submission at ¶ 46.
26
Canada Initial Written Submission at ¶¶ 47-48.

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disposal, or unpredictable patterns of imports that cause disruptions to the milk production cycle
and shortages. Consequently, Canada has established “pools,” including those for processors, to
help with this effort. Canada further submits that processors are in a unique position within the
Canadian dairy supply chain to balance imports with domestic production, fill gaps in supply, and
respond to overall consumer demand and trends.27

The Panel has considered all of Canada’s arguments and submissions in regard to its
domestic dairy industry.

IV. Decision of the Panel

A. Preliminary Considerations

1. Burden of Proof

The Panel is guided by the Treaty Rules of Procedure for Chapter 31. Article 14.1 provides
that:

A complaining Party asserting that a measure of another Party is
inconsistent with this Agreement, that another Party has failed to
carry out its obligations under this Agreement, that a benefit the
complaining Party could reasonably have expected to accrue to it is
being nullified or impaired in the sense of Article 31.2(b) (Scope),
or that there has been a denial of rights under Article 31-A.2 (Denial
of Rights) or Article 31-B.2 (Denial of Rights), has the burden of
establishing that inconsistency, failure, nullification or impairment,
or denial of rights.

Canada points out that, as complainant, the United States has the burden of establishing the
inconsistencies alleged in its request for the establishment of a panel. The United States does not
contest this point and the Panel therefore will hold the United States to its burden of proof.28

27
Canada Initial Written Submission at ¶ 63; Canada Responses to Panel Questions at ¶¶ 3-19.
28
Canada Initial Written Submission at ¶ 235; U.S. Rebuttal Submission at ¶ 21.

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2. Interpretive Principles

In this section, the Panel sets out the general legal framework for the interpretation of the
provisions under which the United States has brought claims.

The Treaty instructs that the Panel must interpret the text “in accordance with customary
rules of interpretation of public international law, as reflected in Articles 31 and 32 of the Vienna
Convention on the Law of Treaties.”29 The Parties agree that the Vienna Convention is the
appropriate interpretive guide for resolving this dispute.30

The principal rule of the Vienna Convention’s interpretive methodology is Article 31(1),
providing: “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to
be given to the terms of the treaty in their context and in light of its object and purpose.”31

As the WTO Appellate Body has stated, the touchstone of analysis under Article 31 is that
the “interpretation must be based above all upon the text of the treaty.”32 The Panel must therefore
start by identifying the plain and ordinary meaning of the words used. In doing so, the Panel will
take into consideration the meaning actually to be attributed to each of the terms of the relevant
provisions by looking at the text as a whole, examining the context in which the words appear, and
considering them in the light of the object and purpose of the treaty to best illuminate the
provision’s plain and ordinary meaning.33

Context refers to “reading words in their immediate surroundings” and can encompass
other provisions of the treaty – its preamble, annexes, and other agreements.34 In this proceeding,

29
Treaty, Article 31.13.4.
30
Canada Initial Written Submission at ¶ 13; U.S. Initial Written Submission at ¶ 25.
31
Vienna Convention on the Law of Treaties Art. 31(1), May 23, 1969, 1155 U.N.T.S. 331 (“VCLT”).
32
Japan – Taxes on Alcoholic Beverage, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, (4 October 1996) at
11.
33
US – Section 301 Trade Act, WT/DS152/R, (27 January 2000) at ¶ 7.22; US – Continued Dumping and Subsidy
Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, (27 January 2003) at ¶ 248.
34
US – Section 301 Trade Act, WT/DS152/R, (27 January 2000) at ¶ 7.22; US – Continued Dumping and Subsidy
Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, (27 January 2003) at ¶ 248.

---

the Panel has looked to context from other provisions and other clauses in Article 3.A.2.11(b),
including in particular the wording and structure of the “Producer Clause” and “Domestic
Production Clause” to aid in interpreting its disputed adjacent clause, the “Processor Clause.”35

The Panel must also consider the “object and purpose” of the Treaty, including the
Processor Clause.36

Interpretation under Article 31 is also guided by longstanding and foundational rules of
treaty interpretation.37 The first key principle applied by the Panel is that “[a]n interpreter is not
free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to
redundancy or inutility.”38 This can also be understood as the interpreter’s obligation to “give
meaning and effect to all the terms of the treaty,”39 and reject interpretations that “deprive [the
provision] of effectiveness.”40 Effectiveness must be achieved through an interpretation that gives
full meaning to all provisions of a treaty,41 beyond purely nominal effectiveness.

A second key principle applied by the Panel is that interpretation must be designed to
“ascertain the ‘common intention’ of the parties, not the intention of [one party] alone.”42 In these

35
Treaty, Article 3.A.2.11(b).
36
The Panel takes note of the position of the United States, which suggested at the Oral Hearing that trying to
discern the purpose of particular treaty provisions rather than the treaty as a whole is “dangerous territory” that
“might have undue influence . . . on [the] reading of the terms in the clause.” See Transcript of Panel Hearing on
October 25, 2021 (“Day 1 Tr.”) at 148:1-149:24 (Can.).
37
VCLT, Article 31:3(c) (listing as a factor of interpretation “relevant rules of international law applicable in the
relations between the parties”).
38
United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/9, (20 May 1996) at 23.
39
Korea – Dairy, WT/DS98/AB/R, (12 January 2000) at ¶ 80.
40
US – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, (27 January
2003) at ¶ 271.
41
Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, (14 December 1999) at ¶ 95
(endorsing an interpretation by the panel that ensured certain safeguard measures were “given their full meaning and
their full legal effect”). Cf. United States – Subsidies on Upland Cotton, WT/DS267/AB/R, (3 March 2005) at ¶ 522
(affirming the panel’s interpretation that allowed a provision to be read to give “full and effective meaning to all of
[a treaty’s] terms”).
42
China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual
Entertainment Products, WT/DS363/AB/R, (19 January 2010) at ¶ 405 (explaining that ascertaining the common

---

proceedings, this means that unilateral evidence of intention, either of the United States or Canada,
is insufficient for interpretation of treaty provisions.43

At the outset, the Panel notes that it believes that both Parties have maintained their
positions in good faith. The Panel’s decision does not suggest that either side’s interpretation is
not in good faith.

The Panel has determined that its analysis of Article 3.A.2.11(b)’s Processor Clause
produces a clear, unambiguous, and rational result under Article 31. Because Canada has,
however, urged the Panel to consider materials relevant to the Article 32 analysis, and devoted a
substantial part of their submissions and arguments to these materials, the Panel has considered
them to confirm its interpretation under Article 31, and will set forth its conclusions about them
infra. The Article 32 materials do not change the Panel’s decision about the meaning of the
Processor Clause.

B. The Issue in Dispute

The Parties’ central area of disagreement is whether Canada’s allocation mechanism
limiting access to 85 to 100% of the 14 dairy TRQ amounts to processors (including further
processors) is consistent with Article 3.A.2.11(b). The Parties advance conflicting interpretations
of the clause.

The United States maintains that Canada has “limited access to an allocation” to
processors, because both the initial 85 to 100% set aside in reserved pools is an “allocation” that
is limited to processors (and further processors), and because access is limited to each specific
allocation made from the reserved pools.

intention of the parties is the key focus of treaty interpretation under both Article 31 and Article 32 of the Vienna
Convention).
43
In re Cross-Border Trucking Services, USA-MEX-98-2008-01, Final Panel Report (February 6, 2001) (noting that
the Panel “declines to examine the motivation for the U.S. decision to continue the moratorium on cross-border
trucking services and investment; it confines its analysis to the consistency or inconsistency of that action with
NAFTA.”).

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Canada maintains that it has not limited access to an allocation to processors, because it
has allowed access for at least one non-processor to at least one allocation. It further maintains
that the creation of the pools cannot itself be an allocation because only a specific grant to a specific
recipient can be an allocation, and that grants of allocation from within the pools are not
inconsistent with Article 3.A.2.11(b). Canada argues this is because when the TRQ is viewed as
a whole, access to an allocation has not been limited to processors: ergo, at least one allocation has
been made available to non-processors.

It should be noted that the Panel has duly considered all of the arguments raised by the
Parties in their submissions, made at the Oral Hearing, and in post-hearing supplemental responses
to Panel questions, even if some of the arguments are not explicitly addressed in this Initial Report.

1. The United States’ Interpretation

The United States argues that the term “allocation” in the Processor Clause refers to a
portion of the quota. Read in context, the phrase “not . . . limit access to an allocation to
processors” means to not “confine” or “restrict” to someone (“processors”), “the right or
opportunity to benefit from or use” something (“a portion, a share; a quota”). This provision is a
prohibition on reserving a portion of the quota for the exclusive use of processors.44

According to the United States, Canada violates the Processor Clause because by setting
aside and reserving portions of Canada’s TRQs for the exclusive use of processors, Canada has
limited access to an allocation to processors. While processors are eligible to apply for and receive
portions of the quota on the same terms as other quota applicants under the United States’
interpretation, they cannot have exclusive access to a portion of the quota.45

Based on the dictionary definition of “allocation,” the United States first posits that the
term can refer to either a procedure for dividing up a quota or a portion of the quota. However,
contextual evidence suggests the term refers to a “portion of the quota.”

44
U.S. Initial Written Submission at ¶ 50.
45
U.S. Initial Written Submission at ¶ 51.

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First, the United States argues that the structure and immediate context of the three clauses
in Article 3.A.2.11(b) suggest “an allocation” means a portion of the TRQ. The first clause
requires that a Party “does not allocate any portion of the quota to a producer group.” In that
clause, the verb “to allocate” means to assign a portion of a TRQ. The next two clauses use
different verbs (condition, limit) with “access to an allocation.” In these clauses, the TRQ has
been “allocated” – that is, assigned into portions – and the commitment relates to providing
“access” to those portions. The most natural reading of the provision is that “an allocation” is the
result of “allocat[ing] any portion of the quota.”46

Second, the United States suggests that reading the term “allocation” in the Processor
Clause of Article 3.A.2.11(b) as meaning “portion” would logically reflect an agreement by the
Parties that processors may apply for and receive a portion of the TRQ, but may not be granted
special access to a portion of the TRQ that has been set aside for them prior to administering the
procedure for dividing up the quota into portions assigned to particular quota applicants.47

Third, the United States contends that interpreting the clause differently would be at odds
with Article 3.A.2.11(c), which requires that the Parties ensure each allocation is made, to the
maximum extent possible, in the quantities that the TRQ applicant requests. Interpreting the term
“allocation” to allow for a system that designates 85% of the allocation to one importer group
cannot be said to ensure to the maximum extent possible that allocations are in the quantities
requested. Instead, it is likely that many TRQ applicants would be denied the quantities requested
under such a system.48

Fourth, the United States notes that Section B of Appendix 2 to Canada’s Tariff Schedule
provides end-use restrictions for milk, cream, and butter and cream powder, where “up to 85%” of
the quota must be for importation in bulk (not retail sale) to be processed into dairy products used
as ingredients for further processing. These end-use restrictions were agreed upon by the Parties
and represent the extent to which Canada may deviate from the prohibition on additional

46
U.S. Initial Written Submission at ¶ 38.
47
U.S. Initial Written Submission at ¶¶ 39-41.
48
U.S. Initial Written Submission at ¶ 42.

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conditions, limits, or eligibility requirements in Article 3.A.2.6(a). If an allocation was understood
in a way that would allow dairy TRQs (for all products in addition to milk, cream, and butter and
cream) to be set aside for processors, that would render the carve-outs in Canada’s Tariff Schedule
“inutile.” Canada could administer TRQs with and without carve-outs the same.49

The United States further submits that Canada’s proposed interpretation contradicts its own
Notices to Importers, which state that 80% or more of the quota “is allocated to processors.” Thus,
in Canada’s own words, the “pool” is itself an “allocation.” The United States also points to the
EIPA, the law pursuant to which Canada’s Notices to Importers are promulgated, and states that
the law makes reference to “import access quantities” in the context of describing how the Minister
allocates the quota to different importer groups. Consequently, the United States asserts that
Canada’s own laws contradict its interpretation of the term “an allocation.”50

The United States argues that if Canada’s proposed interpretation were accepted, it would
lead to the conclusion that the pools Canada creates are groups of shares of quota that may be
granted to individual applicants. In other words, the pools are filled with allocations, by Canada’s
own definition of the term “allocation.” Therefore, because only processors can apply for and
receive an individual allocation from a specific pool, with respect to each allocation in the pool
reserved for processors, Canada is “limit[ing] access” to each individual allocation in the pool “to
processors.”51

The United States also notes that the dictionary definition of “an” (provided by Canada)
provides that the word can mean “any.” The United States cites other dictionary definitions to the
same effect. There would be severe implications if Canada’s interpretation is accepted. For
example, if there were 1,000 allocations, Canada could, from the outset, reserve 999 of them for
processors, leaving only one allocation available for a non-processor.52

49
U.S. Initial Written Submission at ¶¶ 43, 48.
50
U.S. Rebuttal Submission at ¶ 34.
51
U.S. Rebuttal Submission at ¶ 41.
52
U.S. Rebuttal Submission at ¶¶ 37-38.

---

Finally, the United States suggests that the dictionary definition of “processor” in Article
3.A.2.11(b) includes “further processors.”53 The United States cites the dictionary definition of
“processor” as “[a] person or thing which performs a process or processes something; spec. . . .
(b) a food processor.”54 Looking to the dictionary definition, the United States explains that the
term “processor” does not denote only the initial processing of a good or set a finite limit on the
number of times a good is processed before it is considered something other than a “processor.”55

2. Canada’s Interpretation

Canada argues that in the Processor Clause, the term “allocation” should be understood as
a share of an in-quota quantity that may be granted to an individual applicant. Properly interpreted,
the Processor Clause prohibits a Party from restricting only to processors the possibility of
obtaining “an allocation,” i.e., at least one share of an in-quota quantity that may be granted to an
individual applicant. Accordingly, if it is possible for a single non-processor to receive “an
allocation,” then there is no inconsistency with the Processor Clause.56

Canada contends that the United States incorrectly interprets the Processor Clause as
prohibiting Canada from reserving “any portion” of the TRQs for processors.57 The United States
further errs by failing to consider the determiner “an” with the noun “allocation.”58

Canada agrees with the United States that the ordinary meaning of the term “limit access
to” is “to restrict” to someone (“processors”) the “opportunity to benefit from or use” something
(“an allocation”). Similar to the United States’ position, Canada argues that based on the
dictionary definitions, allocation could refer to either a process or the outcome or result of the

53
U.S. Rebuttal Submission at ¶¶ 52-53.
54
Id. (citing definition of “processor” from Oxford English Dictionary Online).
55
U.S. Rebuttal Submission at ¶ 53.
56
Canada Initial Written Submission at ¶ 86.
57
Canada Initial Written Submission at ¶ 98.
58
Canada Initial Written Submission at ¶¶ 116-118.

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process. Canada’s interpretation corresponds to the second meaning: “That which is allocated to
a particular person, purpose, etc.; a portion, a share; a quota.”59

Canada argues that the ordinary meaning of the phrase “an allocation” supports its position
that an allocation is a share of an in-quota quantity that may be granted to an individual applicant.
The definition of allocation mechanism, as used in the Treaty, can be understood as a system in
which the opportunity to use (“access”) the TRQ is given to someone (“granted”) on a basis other
than first-come first-served. Considering both the dictionary definition of “allocation” and the
Treaty’s definition of the term “allocation mechanism,” an allocation is the specific share of a
particular recipient entity or person. Canada’s formulation appropriately reflects the fact that the
allocation is not yet granted to someone, rather, the Processor Clause is about the possibility of
receiving such a share.60

Contrary to the United States’ argument, Canada claims that the portion of a TRQ reserved
for processors cannot be “an allocation” based on the ordinary meaning of that term, because that
portion is not – and is not intended to be – allocated to a particular person. Canada suggests that
portion of a TRQ is properly understood as a “proportion” or “fraction” of a TRQ, which does not
correspond to the meaning of the term “allocation,” as an allocation requires the portion to be
assigned to someone.61

Furthermore, Canada argues that the United States ignores that “an” does not equal “any.”
The dictionary definition of “an” can mean a single but not specifically identified thing of a class,
or any in the sense of everything of the type referred to in a given sentence. Notably, in the
Processor Clause, the Parties chose to use the word “an” – unlike the Producer Clause, where the
Parties use the word “any.” The choice of the word “an” in the Processor Clause means “an

59
Canada Initial Written Submission at ¶¶ 97, 105, 108.
60
Canada Initial Written Submission at ¶¶ 98-107.
61
Canada Initial Written Submission at ¶ 112.

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allocation” is a single allocation, or single share of a TRQ that may be granted to a particular
applicant.62

If the United States’ interpretation were adopted, Canada contends it would mean that
Canada cannot set aside a single allocation that may be granted under a TRQ exclusively for
processors, and that non-processors must have access to every single allocation that may be granted
under a TRQ.63

Canada also points to contextual elements to support its interpretation. First, Canada
argues the portion of a TRQ reserved for processors cannot be an “allocation.”64 This is
demonstrated by the use of the term “any portion of the quota” in the Producer Clause. The United
States wrongly suggests that “an allocation” is shorthand for “any portion of the quota.” However,
if the Parties wanted to prohibit a Party from limiting access to a portion of the TRQ to processors,
they would have used the same language in the Processor Clause.65

Canada argues that the United States wrongly asserts that in the Domestic Production
Clause and in the Processor Clause “the TRQ has been ‘allocated’ – that is, assigned into portions
– and the commitment relates to providing ‘access’ to those portions.”66 However, as other
provisions in the Treaty confirm, a TRQ is not “allocated” unless and until the shares of the in-
quota quantity are allocated to individual applicants.67

Second, according to Canada, “an allocation” cannot mean “any allocation.” In other
provisions of the Treaty, including Article 3.A.2, the Parties used “any” when clearly intending to
refer to “every member of the class or group.”68 Canada contrasts the hypothetical statements that:

62
Canada Initial Written Submission at ¶¶ 114-117.
63
Canada Initial Written Submission at ¶ 90.
64
Canada Initial Written Submission at ¶¶ 121-122.
65
Canada Initial Written Submission at ¶ 123.
66
Canada Initial Written Submission at ¶ 124.
67
Id.
68
Canada Initial Written Submission at ¶¶ 125-128.

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“Gate-keepers shall not limit access to a fishing permit to club members” with “Gate-keepers shall
not limit access to any fishing permit to club members.” Canada therefore submits that only the
latter means non-club members must have access to all the permits.69

Canada also rebuts the contextual arguments of the United States as follows.

First, the United States erroneously uses the term “special access” when referring to the
TRQ pool for processors. The pool for processors does not constitute “special access” as there are
pools for other groups as well, such as distributors. Furthermore, the Processor Clause is not a
non-discrimination provision.70

Second, the United States incorrectly attempts to impute notions of substantive “fairness”
and “equity” as relevant context. However, the decision to set aside a portion of the quota is a
substantive policy decision distinct from procedures or methods of administering the TRQs as
governed by Articles 3.A.2.4(b) and 3.A.2.11(e).71

Third, Article 3.A.2.11(c)’s heed to “ensure that . . . each allocation is made . . . to the
maximum extent possible,” is not relevant context, and is an attempt by the United States to obtain
through these proceedings that which it did not secure through negotiations.72

Fourth, there are problems with the United States’ conclusion that, because Canada did not
reserve the right in its Tariff Schedule pursuant to Article 3.A.2.6(a) to set aside a portion of each
TRQ for processors, it is now prohibited from making such set-asides. Canada has not yielded
rights or made concessions in its Tariff Schedule with respect to its ability to grant allocations to
processors under its allocation mechanism. A tariff schedule is not an instrument to “reserve” (or
“withhold”) a right if that right is not yielded in the schedule in the first place. The United States
erroneously equates a set-aside for processors with an end-use restriction: The set-asides for

69
Canada Initial Written Submission at ¶¶ 130-131.
70
Canada Initial Written Submission at ¶ 135.
71
Canada Initial Written Submission at ¶ 136; Canada Responses to Panel Questions at ¶ 47.
72
Canada Initial Written Submission at ¶ 139.

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processors are a feature of Canada’s allocation mechanisms to designate who can import the goods,
not which products are imported or how imports are used. Canada has the discretion to design its
allocation mechanism in the manner it deems best for its commercial industrial policy objectives.73

Canada argues that the Notices to Importers do not signal that Canada considers a pool to
be an allocation. Canada’s use of the term “allocated” in the Notices means that a certain
percentage of a TRQ volume is set aside, or reserved, for certain groups for the purpose of
calculating individual allocations that will be issued, as the title – “[c]alculation of allocations” –
indicates. Canada also argues these Notices are “policy documents” for publication and general
information, and do not have the “force of law.”74

Canada submits the United States has a flawed understanding of what a set-aside or
reserved pool of TRQ volume is in contrast to what an allocation is. Pools are not collections of
individual allocations simply waiting to be distributed. Neither the overall within-access TRQ
volume itself (i.e., in-quota quantity) nor any pool that may have been established constitute an
allocation to an individual applicant. According to Canada, a pool is simply a proportion
(expressed in percentage) of an in-quota quantity – i.e., a determined volume – reserved for
applicants that may apply for an allocation from one part or another of a particular segment of the
Canadian market.75

Canada also argues that the United States’ interpretation uses an incorrect reference point
for determining whether Canada limits access to an allocation. The United States uses a set-aside
or reserved pool of TRQ volume as the “reference” for application of Article 3.A.2.11(b), rather
than the TRQ volume as a whole. However, the introductory paragraph of Article 3.A.2.11 and
language in Article 3.A.2.11(a) suggest the correct reference point for determining whether a Party
administering a TRQ “limits access to an allocation” is the TRQ volume as a whole.76

73
Canada Initial Written Submission at ¶¶ 140-143.
74
Canada Rebuttal Submission at ¶ 51.
75
Canada Rebuttal Submission at ¶¶ 54-57.
76
Canada Rebuttal Submission at ¶¶ 58-60.

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At the hearing, Canada stated that the United States was not without recourse if Canada’s
allocation mechanism is ruled to be consistent with the Treaty, but the United States remains
dissatisfied with the result.77 The United States has recourse, according to Canada, to the non-
breach dispute settlement provisions, as articulated in Article 31.2(c), which apply:

when a Party considers that a benefit it could reasonably have
expected to accrue to it under . . . Chapter 3 (Agriculture) . . . is
being nullified or impaired as a result of the application of a measure
of another Party that is not inconsistent with this Agreement.78

Canada further argues that pools are the only allocation mechanism that properly ensures
predictability and stability to Canada’s supply management system.79 Beginning in 2019, the
Canadian government commenced a comprehensive review of the allocation and administration
of all tariff rate quotas for supply-managed products, including those that could be implemented
under the Treaty. As the comprehensive review was still ongoing when the Treaty entered into
force, Canada implemented the policies set out in the Notices to Importers at issue in this dispute,
rejecting mechanisms based on historical imports, auctions/lotteries, pro-rata shares, on-demand
shares, and market-share/equal-share.80 Canada also surveyed relevant industry groups, and found
a preference for a market-share or equal-share allocation mechanism.81 Canada explains that
separate pools for processors and distributors cater to this preference by creating a market-share
approach in the pool for processors and further processors, and an equal-share approach in the pool
for distributors.82 Canada therefore argues that the inadequacy of other mechanisms and inability
to mix methods for allocation without pools means that separate pools for processors and

77
Transcript of Panel Hearing on October 26, 2021 (“Day 2 Tr.”) at 64:12-64:16 (Can.); Canada Responses to Panel
Questions at ¶¶ 37-38.
78
Treaty, Article 31.2(c).
79
Canada Responses to Panel Questions at ¶ 12.
80
Canada Responses to Panel Questions at ¶¶ 19-30.
81
Canada Responses to Panel Questions at ¶ 15.
82
Canada Responses to Panel Questions at ¶¶ 16-17.

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distributors is the only allocation mechanism adequate to serve the country’s legitimate need for
stability and predictability.83

Finally, Canada explains that the allocation measures specifically reference “further
processors” in creating TRQ pools84 and argues that because Article 3.A.2.11(b) only references
“processors” and not “further processors,” the clause does not apply.85 Canada first argues that
the term “processors” in the Processor Clause does not encompass “further processors” for whom
some TRQ pools have been created because the United States’ dictionary definition is not
dispositive of the meaning of the term “processors.”86 Canada instead offers that the term “further
processors” has a distinct meaning when properly understood in the context of Canada’s dairy
supply chain.87 Canada looks not to any dictionary definition, but rather the market-specific nature
of the terms “processor” and “further processor.”88

C. The Panel’s Analysis

The Panel finds that Canada’s acknowledged practice of reserving access to 85 to 100% of
14 separate dairy TRQs exclusively to processors (including further processors), is inconsistent
with Article 3.A.2.11(b) for it fails to “ensure that,” “unless otherwise agreed by the Parties,”
Canada “does not . . . limit access to an allocation to processors.” No one other than processors
has access to, or can apply for, these allocations. Hence access is limited to processors, which is
not permitted by the Treaty.

83
Canada Responses to Panel Questions at ¶ 31.
84
Canada Initial Written Submission at ¶¶ 74-76.
85
Canada Initial Written Submission at ¶ 119.
86
Id.
87
Canada Initial Written Submission at ¶¶ 146-47.
88
Canada Rebuttal Submission at ¶¶ 86-87.

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1. Article 31 of the Vienna Convention on the Law of Treaties

The Panel bases its ruling on Article 31 of the Vienna Convention. The Panel believes that
its analysis of Article 3.A.2.11(b)’s Processor Clause produces a clear, unambiguous, and rational
result under Article 31.

Article 3.A.2.11(b) of the Treaty provides:

A Party administering an allocated TRQ shall ensure that: . . .

a) Ordinary Meaning of the Words

Canada and the United States agree that the ordinary meaning of the term “limit access to”
is “to restrict” to someone (“processors”) the “opportunity to benefit from or use” something (“an
allocation”).90 The Parties further agree that the term “allocation” as used in Article 3.A.2.11(b)
does not refer to the process or procedure for dividing the quota into portions (verb form of
“allocate”) but instead refers to the grant of quota amounts (noun form).91

As the United States notes in its Rebuttal Submission, the United States and Canada also
appear to agree on the dictionary definition of the term “allocation”: “That which is allocated to a
particular person, purpose, etc.; a portion, a share; a quota.”92

Where the Parties’ interpretations diverge is the interpretation of “an allocation.” The
United States argues, in substance, that its plain and ordinary meaning in Article 3.A.2.11(b) is
any grant of a TRQ quota amount, i.e., Canada cannot reserve for processors or limit access to

89
Treaty, Article 3.A.2.11(b) (emphasis added).
90
Canada Initial Written Submission at ¶ 97; U.S. Initial Written Submission at ¶ 32.
91
Canada Initial Written Submission at ¶¶ 105,108; U.S. Initial Written Submission at ¶ 37.
92
Definition of “allocation” from Oxford English Dictionary Online, entry 3.b. Quoted in U.S. Rebuttal Submission
at ¶ 32; Canada Initial Written Submission at ¶ 103.

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processors for any such allocation. Canada rejoins that the plain and ordinary meaning of “an
allocation” is “a share of an in-quota quantity that may be granted to an individual applicant” or in
substance “one allocation,” such that it may not limit access to one allocation to processors. If
access to one allocation has not been limited to processors, Canada argues, the Processor Clause
has been satisfied. Thus, “[i]f it is at all possible for a non-processor to receive ‘an allocation’,
then the U.S. arguments must fail.”93

The Panel begins with the dictionary definition. As the Parties have recognized with their
submissions from multiple sources, the word “an” can mean: (1) “a single thing or person that has
not been mentioned before, especially when you are not referring to a particular thing or person,”
or (2) “any or every thing or person of the type you are referring to.”94

In its Initial Written Submission, Canada argues “the Parties chose to use the word “an”,
rather than the word “any”, . . . the choice of the word “an” as the determiner for “allocation” in
the processor clause naturally means a single allocation – that is, a single share of a TRQ that may
be granted to a particular applicant.”95 The United States notes that the terms “an” and “any” may
be substitutable in certain situations, but that either interpretation requires that “a Party
administering its TRQs shall not limit access to a single share or multiple shares of the TRQ to
processors.”96 In its Rebuttal Submission, Canada acknowledges that the word ‘an’ can mean
“inter alia, ‘any or every thing or person of the type you are referring to’”, and argues that, in the
context of the Processor Clause, the word “an” means “every”, or “all”, not “any.”97

Thus, the dictionary definitions alone do not provide a sound basis for deciding which
interpretation of the Processor Clause best fits the plain and ordinary meaning of the words “an
allocation.”

93
Canada Initial Written Submission at ¶ 133.
94
Canada Initial Written Submission at ¶ 115 (emphasis omitted).
95
Canada Initial Written Submission at ¶ 116 (emphasis omitted).

96
U.S. Rebuttal Submission at ¶¶ 37, 40.
97
Canada Rebuttal Submission at ¶ 63 (emphasis omitted).

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The Panel believes, however, that the most natural reading of the words comports with the
interpretation that the clause is intended to prevent limitation of access generally to processors,
and not merely to a single allocation.

Inserting the constructions offered by the Parties illustrates the point. When the clause is
read as “does not . . . limit access to any allocation to processors” (the United States’ construction),
it has coherence and flows naturally.98 When the clause is read as “does not . . . limit access to a
single allocation to processors” (Canada’s construction in its Initial Written Submission), the
clause remains ambiguous and arguably still supports the United States’ interpretation.99 That is,
if Canada cannot limit access to “one allocation,” that can be read to mean that it cannot limit
access, period. Any single allocation that is limited to processors is “one allocation” and cannot
be squared with the plain and ordinary meaning of the clause even as Canada construes it.

Canada’s alternative construction (offered in its Rebuttal Submission and at the hearing)
that “an” means “every” or “all” would, if accepted over the dictionary definitions that precede it,
provide support for Canada’s argument that its TRQ allocation mechanism is consistent with the
Treaty because it “does not . . . limit access to every allocation” or “all allocation[s]” to
processors.100 However, the Panel notes that Canada’s alternative construction is in tension with
the definition that it originally tendered, and is not simply an elaboration of a prior submission.
What’s more, while Canada’s second offering may be textually coherent, context clues reveal that
“every” or “all” is a less persuasive reading than “any”, as outlined in detail below.

The Panel’s interpretation is also supported by Canada’s use of the word “allocation” in
official implementation documents. Canada has stated, in the legal Notices issued by the
government in its implementation of the Treaty, that the pools themselves are “allocations” for
which access is limited to processors. Each of Canada’s 14 official Notices to Importers describe
the fixed pools of TRQ amounts reserved exclusively for processors as “allocated to

98
See U.S. Rebuttal Submission at ¶¶ 37, 40.
99
Canada Initial Written Submission at ¶ 116 (emphasis omitted).
100
Canada Rebuttal Submission at ¶ 63 (emphasis omitted); Day 1 Tr. at 116:24-117:14 (Can.).

---

processors.”101 Canada had no satisfactory explanation for this at the Oral Hearing. It noted that
“it’s unfortunate that these terms were used in the [N]otices, but again, these are of no legal
value.”102 Later, Canada added that the Notices in fact do have “legal value” but not “force of
law.” However characterized, the Notices are compelling evidence of the plain and ordinary
meaning of the words used in Article 3.A.2.11(b).

b) Context

The Panel next turns to relevant context. While the entire Treaty and related materials may
be searched for context, and in many instances the Parties have pointed to provisions throughout
the four corners of the document, the Parties have relied most heavily on the context provided by
the immediately adjacent language of Article 3.A.2.11(b). The Panel is likewise convinced that
this is the most helpful context for interpretation of the Processor Clause.

Canada relies on the Producer Clause and argues that if the Parties had intended a broad
prohibition against limitation of access to Processors, they would have chosen language similar to
the preclusive language of the Producer Clause, which provides that Canada cannot “allocate any
portion of the quota to a producer group.”103 This language, however, is not similar to the language
used in the Processor Clause, and it addresses a different requirement: the outright ban on

101
CUSMA: Milk TRQ – Serial No. 1015, dated June 15, 2020 (Exhibit USA-1); CUSMA: Milk TRQ-Serial No.
1049, dated May 1, 2021 (Exhibit USA-2); CUSMA: Cream TRQ – Serial No. 1016, dated June 15, 2020 (Exhibit
USA-3); CUSMA: Cream TRQ-Serial No. 1042, dated May 1, 2021 (Exhibit USA-4); CUSMA: Skim Milk Powder
TRQ – Serial No. 1017, dated June 15, 2020 (Exhibit USA-5); CUSMA: Skim Milk Powder TRQ-Serial No. 1053,
dated May 1, 2021 (Exhibit USA-6); CUSMA: Butter and Cream Powder TRQ-Serial No. 1018, dated June 15,
2020 (Exhibit USA-7); CUSMA: Butter and Cream Powder TRQ-Serial No. 1040, dated May 1, 2021 (Exhibit
USA-8); CUSMA: Industrial Cheeses TRQ-Serial No. 1019, dated June 15, 2020 (Exhibit USA-9); CUSMA:
Industrial Cheeses TRQ-Serial No. 1031, dated October 1, 2020 (Exhibit USA-10); CUSMA: Cheeses of All Types
TRQ-Serial No. 1020, dated June 15, 2020 (Exhibit USA-11); CUSMA: Milk Powders TRQ - Serial No. 1021,
dated June 15, 2020 (Exhibit USA-12); CUSMA: Milk Powders TRQ-Serial No. 1051, dated May 1, 2021 (Exhibit
USA-13); CUSMA: Concentrated or Condensed Milk TRQ-Serial No. 1022, dated June 15, 2020 (Exhibit USA-14);
CUSMA: Yogurt and Buttermilk TRQ-Serial No. 1023, dated June 15, 2020 (Exhibit USA-15); CUSMA: Powdered
Buttermilk TRQ-Serial No. 1024, dated June 15, 2020 (Exhibit USA-16); CUSMA: Whey Powder TRQ-Serial No.
1025, dated June 15, 2020 (Exhibit USA-17); CUSMA: Whey Powder TRQ-Serial No. 1045, dated May 1, 2021
(Exhibit USA-18)CUSMA: Products Consisting of Natural Milk Constituents TRQ-Serial No. 1026, dated June 15,
2020 (Exhibit USA-19); CUSMA: Ice Cream and Ice Cream Mixes TRQ-Serial No. 1027, dated June 15, 2020
(Exhibit USA-20); CUSMA: Other Dairy TRQ-Serial No. 1028, dated June 15, 2020 (Exhibit USA-21).
102
Day 1 Tr. at 105:25-106:1 (Can.).
103
Treaty, Article 3.A.2.11(b).

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allocations in any amount to Producers. The Panel is not persuaded that the failure to use this
language in the Processor Clause aids in the interpretation of that clause.

By contrast, the Domestic Purchaser Clause uses language very similar to the Processor
Clause and for a similar purpose – not restricting allocations, per se, but restricting access to
allocations. It reads: Canada may not “condition access to an allocation on the purchase of
domestic production;”104 the key word, here as in the Processor Clause, is “access.” If “an
allocation” were read here as Canada reads it in the Processor Clause, it would read as follows:
Canada may not “condition access to every allocation on the purchase of domestic production.”

Canada recognized at the Oral Hearing that this interpretation would make no sense and
conceded that, in this clause immediately preceding the Processor Clause, Canada could not
condition access to any allocation based on purchase of domestic production.105 Here, “an
allocation” can only mean “any allocation” as Canada simply cannot impose a domestic purchase
requirement on eligible TRQ applicants.

The Panel agrees with Canada that a contrary interpretation of the Domestic Purchaser
Clause does not make sense. And basic logic prevents the Panel from finding that the Parties
meant the polar opposite when they used the same words immediately following the Domestic
Purchaser Clause, in a clause that was likewise directed to limitations on access to TRQ amounts.
Canada’s arguments as to why those clauses serve different purposes are unpersuasive. The use
of the word “condition” versus “limit” in those two clauses does not warrant reading the term “an
allocation” to mean two different things in the same sentence. In context, the two clauses serve
the same purposes: putting a limit on whether and how Canada can restrict access to allocation of
TRQ amounts.

Because this context from within the same Treaty subparagraph strongly supports the
Panel’s interpretation, the Panel has found it unnecessary to discuss the more remote context
argued by the Parties, which would not change the Panel’s interpretation. In context, the Processor
Clause is best understood to be an outright prohibition on exclusive, reserved access for

104
Id.
105
Day 1 Tr. at 115:20-116:6 (Can.).

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processors. While Canada argued that this interpretation would mean that Canada cannot grant
any TRQ quota amount to processors, that is incorrect. Under the Panel’s decision, Canada is not
restricted in the amount of quota it grants to processors; it is restricted in its ability to ring-fence
all or any part of a TRQ quota and permit access only to processors. The Panel addresses later the
distinction between the access to the TRQs and their ultimate allocation and explains the Panel’s
view that Canada’s administrative discretion in allocating the TRQs is not at issue in this case (see
para. 139 et seq.).

c) Purpose and Intent of the Treaty

As the Preamble to the Treaty explains, the Parties resolved to promote trade between the
signatory states by creating “freer, fairer markets,” and “incentivizing the production and sourcing
of goods and materials in the region.”106 In substance, the Treaty reflects an intent to open markets
to a greater degree than was the case before its effective date and under predecessor agreements.
In this dispute, Canada acknowledges that the “function” of the Processor Clause “has to be in
accordance with the object and purpose of the treaty.”107 The Processor Clause unquestionably
constrains Canada’s ability to deny access to non-processors, in furtherance of a more open trade
relationship. The dispute is only the degree to which Canada is restricted. The trade liberalization
background of the Treaty, while not definitive, serves to confirm the interpretation of the Processor
Clause reached by consideration of the plain and ordinary meaning and the surrounding context.108

d) Useful Effect

The Panel also finds that Canada’s interpretation of the Processor Clause would give that
clause no effect, which violates Article 31 interpretative principles.

Canada conceded at the Oral Hearing that its interpretation would mean that Canada could
allocate 1,000 TRQ amounts, reserving access to 999 such allocations for processors only.

106
Preamble to the Treaty. See generally, U.S. Initial Written Submission at 1-2.
107
Day 1 Tr. at 145:8-146:18 (Can.).
108
See, e.g., In the Matter of Cross-Border Trucking Services, USA-MEX-98-2008-01, (6 February 2001) at ¶ 219
(looking to NAFTA’s preamble as evidence of “purpose” for the treaty as a whole under Article 31 analysis); Chile -
Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/AB/R, (23
September 2002) at ¶ 204 (looking to the Agreement on Agriculture’s preamble as evidence of the object and
purpose of the treaty under Article 31).

---

Canada’s candid concession as to its interpretation established that the Processor Clause would
have no useful effect if that interpretation were accepted. Preserving access for .1% of a TRQ
amount does not rise to the level of useful effect.

When asked what useful effect preserving access for a single non-processor applicant
would have, as a practical matter, Canada could point to none, and instead observed that the United
States had certain rights under different provisions of the Treaty (non-breach dispute provisions)
that it could invoke.109 However, the existence of other mechanisms does not bear on whether the
Treaty provision at issue has useful effect. This is a fundamental consideration in the Panel’s view.

Furthermore, while Canada concedes that it cannot limit access to 100% of TRQ amounts
to processors; it has no satisfactory answer as to why 99.9% is not materially the same as 100% in
this context. Canada also argues that this is only a theoretical situation, as it has not in fact limited
access to virtually all of the allocations to processors.110 However, this is not relevant because the
Panel should not uphold an interpretation of the Treaty that would be inconsistent with the natural
meaning of the provision and would deny it useful effect. The Panel finds that what Canada would
or would not do does not answer the question of what the Treaty permits Canada to do.

Canada also argues that other provisions of the Treaty would guard against this
hypothetical scenario. But according to Canada, those same Treaty provisions are inapplicable to
“policy decisions” underlying the administration of the TRQs.111 And in any event, they do not
shed light on the meaning of Article 3.A.2.11(b), which must have meaning on its own.

Canada’s parallel argument – that preventing Canada from reserving even a single
allocation for processors would deprive the Processor Clause of proper meaning or utility – is an
overstatement. Canada can grant access to the entire TRQ amounts to processors, and can even

109
Day 2 Tr. at 64:12-16 (Can.).
110
Canada Initial Written Submission at ¶ 138.
111
Canada Initial Written Submission at ¶ 137; Canada Rebuttal Submission at ¶ 88; Canada Responses to Panel
Questions at ¶¶ 44-47. For example, Canada suggested that the “commercially viable quantities” provision (Section
1 (c)) provides protection. But Canada elsewhere argued that shipping quantities as small as 100 kilogram were
commercially viable. Canada Rebuttal Submission at ¶ 129. Regardless, a single allocation to a non-processor,
even in a larger amount, does not establish useful effect for the Processor Clause.

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allocate substantial TRQ amounts to processors, as the United States repeatedly conceded.112
Reading the clause to prevent limitation of access to other eligible applicants does not deprive it
of meaning: it gives it meaning, whereas Canada’s polar opposite construction deprives it of
anything more than nominal effect.

e) Avoidance of Absurd Results

It is canonical that the Panel should take care to ensure that its consideration of the Article
31 factors does not result in a construction that would be “absurd.”113 The Panel believes that
preventing Canada from barring access to all but processors for all or substantially all of the in-
quota quantity of Canada’s dairy TRQs is actually a logical result that gives the most natural
reading to the words chosen by the Parties. It prevents Canada from limiting access to processors
and entirely shutting out ab initio all other eligible applicants. This is a sensible result, particularly
when coupled with the uncontested fact of Canada’s substantial discretion to award TRQ amounts
to processors with limitations only as provided elsewhere in the Treaty.

The Panel likewise finds that Canada’s interpretation – allowing Canada to limit materially
all access to processors alone – would create an absurd result because it would deprive the
Processor Clause of any real meaning.

112
U.S. Rebuttal Submission at ¶ 27; see Day 1 Tr. at 122:22-123:6 (U.S.):

[T]here’s nothing in the agriculture chapter that prevents Canada from granting
allocations to processors, so without setting aside ahead of time and pre-
determining the outcome, in theory what Canada – one option that Canada could
do is have everybody on equal footing and be able to apply for a certain quantity
from within the TRQ. And whether that ends up with 80 to 90 percent of the TRQ
volume going to processors, if that’s the end result, that doesn’t, on its face,
conflict with the processor clause in 3.A.2.11(b).

See also Day 2 Tr. at 30:18-19 (U.S.) (Canada has “pretty wide discretion in administering its dairy TRQs.”); id. at
59:13-16 (U.S.) (“[T]here is no doubt that there are plenty of options available to Canada for administering its TRQs
that would not breach the USMCA.”).
113
See Canada - Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, (14 April 1999) at ¶ 5.4
(explaining the general principle that “the interpreter must avoid interpreting the treaty in a way that would lead to a
manifestly absurd or unreasonable result”) (citing I. Sinclair, The Vienna Convention on the Law of Treaties, 2d rev.
ed. (Manchester U.K.: Manchester University Press: 1984) at 120).

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f) Whether Processors Includes “Further Processors”

Finally, for purposes of this ruling the Panel finds that “processors” as that term is used in
Article 3.A.2.11(b) are entities engaged in the act of processing, using the dictionary definition of
the word. A “processor” is “[a] person who or thing which performs a process or processes
something; spec. . . . (b) a food processor.”114 While “further processors” may be different from
initial processors, and indeed while initial processors may be different from each other as well, the
common thread here is that all of them are engaged in “processing.” Article 3.A.2.11(b) makes no
distinction between or among processors and further processors. The phrase itself demonstrates
that further processors are processors – and Article 3.A.2.11(b) does not narrow or distinguish
between the type of processors subject to the restrictions of that section.

g) Conclusion

Under Article 31 of the Vienna Convention, the Panel finds that Canada’s practice of
limiting access to an allocation to processors for 85 to 100% of 14 dairy TRQs is inconsistent with
Article 3.A.2.11(b) of the Treaty.

2. Article 32 of the Vienna Convention on the Law of Treaties

As discussed above, the Panel interprets this Treaty “in accordance with customary rules
of interpretation of public international law, as reflected in Articles 31 and 32 of the Vienna
Convention on the Law of Treaties.”115

Article 32 of the Vienna Convention allows recourse to “supplementary means of
interpretation, including the preparatory work of the treaty and the circumstances of its
conclusion,” in two distinct instances: to “confirm the meaning resulting from the application of
[A]rticle 31,” or to “determine the meaning when the interpretation according to [A]rticle 31:

114
U.S. Rebuttal Submission at ¶¶ 52-53 (citing definition of “processor” from Oxford English Dictionary Online).
115
See Treaty, Article 31.13.4.

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(a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd
or unreasonable.”116

Article 32 regulates “what information and material outside the text of a treaty can be
brought into the process for interpreting it, and how this is done.”117 It has a very broad scope,118
reaching not only preparatory work and the circumstances of the Treaty’s conclusion but also other
supplementary means that can shed light on the Treaty’s meaning.

a) The Parties’ Submissions on the Use of Article 32

The Parties strongly disagree on whether the Panel should use Article 32 to resolve this
dispute.119 Canada has offered a slate of evidence it suggests the Panel may consider under Article
32 in order to discern the meaning of the Processor Clause in Article 3.A.2.11(b) of the Treaty. It
cites authorities suggesting the Panel has “certain flexibility in considering relevant supplementary
means in a given case,”120 that the decision to do so “basically depends on the assessment of the
interpreter,”121 and that “there are scarcely any clear limits” in taking relevant evidence into
account under Article 32.122

Canada submits that the United States’ strict opposition to Article 32’s liberal use “would
have the Panel assess the treaty terms in isolation without regard to the relevant context and

116
VCLT, Article 32.
117
O. Dörr and K. Schmalenbach, Vienna Convention on the Law of Treaties: A Commentary 2d ed. (Springer,
2018), Exhibit CDA-96 at 617.
118
Day 1 Tr. at 69:5-14 (Can.).
119
The Parties do not, however, disagree as to the purposes for which Article 32 may be used generally. See Day 1
Tr. at 8:23-9:2 (U.S.) (“Article 32, the supplementary means of interpretation is then applied, but only to confirm the
meaning resulting from the application of the general rule, or to determine the meaning if application of the general
rule fails to reveal the meaning.”); Day 1 Tr. at 71:1-7 (Can.) (“Just to respond to the U.S.[‘s] last point, the
language of 32 allows a party to resort to supplementary means of interpretation in two situations. It either allows a
party to confirm the meaning resulting from the application of 31 or to determine the meaning when the application
of 31 results in a meaning that’s unreasonable or absurd.”).
120
Canada Rebuttal Submission at ¶ 12 n.12 (citing Appellate Body Report, EC – Chicken Cuts at ¶ 283).
121
Id. (emphasis omitted) (citing O. Dörr and K. Schmalenbach at 627 (Ex. CDA-96)).
122
Id.

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circumstances in which they were agreed to,” a far too limited approach for a case such as this,
where the central terms of the dispute suggest multiple conflicting readings.123 To that end, Canada
urges the Panel to consider the factual and historical background on offer, which demonstrates that
Canada “had no intention whatsoever to forego its long-standing practice of creating ‘pools’ for
processors” when it entered the Treaty.124

The United States urges a plain reading of the Treaty text itself and contends that Article
32 may be applied only under certain conditions, and in this dispute Canada has not provided
evidence that those conditions exist. According to the United States, the Treaty – in particular the
Processor Clause in Article 3.A.2.11(b) – is clear enough as written, informed by the immediate
context and related provisions found elsewhere in the Agricultural Chapter. In any event, the
United States suggests that Canada’s evidence does not fall within the scope of Article 32.125
According to the United States, the evidence amounts to counsel’s accounts of internal reasoning,
and a party’s reasons for its actions “cannot change the ordinary meaning of the terms read in their
context, nor can they alter the object and purpose of the treaty.”126 Canada’s arguments that the
United States was (or should have been) aware of Canada’s long-standing pools practice are, to
the United States, irrelevant to the task at hand. With a satisfactory interpretation under Article 31
and no ambiguity to resolve, the United States submits that the Panel need not invoke Article 32.127

123
Canada Rebuttal Submission at ¶ 14. Canada also says the U.S. has tried and failed here before. In Canada-
Dairy, a WTO dairy dispute between the Parties, the U.S. peddled a strictly textual approach that ignored “relevant
and important factual background in which market access was agreed to by Canada.” The Appellate Body
disagreed, emphasizing that “special care must be taken to interpret the terms of the provisions that were in dispute,”
including by considering “the factual and historical circumstances of Canada’s market access regime at the time of
the negotiations, as supplementary means of interpretation.” Id. The U.S. says this is a misreading of Canada-
Dairy.
124
Canada Rebuttal Submission at ¶ 15.
125
See Day 1 Tr. at 166:6-11 (U.S.).
126
U.S. Rebuttal Submission at ¶ 15.
127
See Day 1 Tr. 9:3-10 (U.S.) (“If a treaty interpreter applies the general rule of interpretation and is able to discern
the meaning of the terms of the treaty, then the interpretive analysis is effectively concluded. There is no reason to
continue on and apply the rule relating to supplementary means of interpretation that is set forth in Article 32 of the
Vienna Convention, unless to confirm the meaning that results from the application of Article 31.”).

---

b) The Panel’s Decision on the Use of Article 32

While the Panel has reached a clear reading of the Processor Clause under Article 31, the
Vienna Convention allows use of supplemental means of interpretation to “confirm the meaning
resulting from the application of [A]rticle 31.”128 The Parties offer opposing interpretations for
supposedly clear text, and their strongly held yet divergent views require the Panel to make a
rigorous case for its own decision. The purpose of treaty interpretation is to discern the common
intent of the authoring parties, which requires the interpreter “to bear constantly in mind the
historical background against which the treaty has been negotiated . . . in seeking to determine the
reality of the situation which the parties wished to regulate by means of the treaty.”129 The Panel
has endeavored to discern that intent under Article 31, and now seeks to confirm that interpretation
under Article 32.130 The Panel is free to consider Canada’s Article 32 evidence for that purpose.

The Vienna Convention should not, in the Panel’s view, be read to strictly limit the type of
evidence that may be considered. As long as a proper purpose is identified, the Panel may consider
materials relevant to the issues in dispute.131 Article 32 expressly refers only to the preparatory
work of the treaty and to the circumstances of its conclusion, but inserts the word “including” –
meaning that the list is illustrative, not exhaustive.132 “[N]o would-be interpreter of a treaty,

128
VCLT, Article 32.
129
EC-Chicken Cuts (Panel Report) at n.568 (citing Ian Sinclair, The Vienna Convention on the Law of Treaties,
Manchester University Press, 2d ed. (1984) at 141).
130
“Confirming” the meaning of a provision under Article 32 is not simply an exercise in reinforcing the Panel’s
already-existing opinion. The Article 32 process also “entails the option of not confirming and the possibility of
transforming the exercise into one where the preparatory work leads to a revisiting of the application of the general
rule to find a permissible interpretation, which is then confirmed. The investigation may also lead to the conclusion
that there is an ambiguity that has hitherto gone unnoticed.” O. Dörr and K. Schmalenbach at 629 (Ex. CDA-96).
131
O. Dörr and K. Schmalenbach at 627 (Ex. CDA-96).
132
See O Dörr and K. Schmalenbach at 620 (Ex. CDA-96); EC-Chicken Cuts at ¶ 283 (“We stress, moreover, that
Article 32 does not define exhaustively the supplementary means of interpretation to which an interpreter may have
recourse. It states only that they include the preparatory work of the treaty and the circumstances of its conclusion.
Thus, an interpreter has a certain flexibility in considering relevant supplementary means in a given case so as to
assist in ascertaining the common intentions of the parties.”).

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whatever his doctrinal point of departure, will deliberately ignore any material which can usefully
serve as a guide towards establishing the meaning of the text which he is confronted.”133

The range of materials available for consideration under Article 32 is quite broad. O. Dörr
and K. Schmalenbach describe this as follows:

Any material that was not stricto sensu part of the negotiating
process, but played a role because it covers the substance of the
treaty and the negotiators were able to refer to it, can thus be
introduced into the process of interpretation as other “supplementary
means”. Documents or facts may be considered that are sufficiently
closely connected to the preparation of the treaty and have,
therefore, in the eyes of the interpreter, a direct bearing on the
interpretation. This includes . . . documents originating from
independent bodies, such as the ILC, and preparatory work on
treaties that are identical or similar to the one under consideration.134

Nevertheless, there is a distinct evidentiary hierarchy under the Vienna Convention.
Article 32 plays a supporting role in treaty interpretation, subsidiary to the Article 31 analysis. As
Canada’s own authorities suggest, Article 32 evidence is “considered to be considerably less
reliable” than the text of the Treaty itself and other forms of evidence available under Article 31.
The Panel agrees with the United States that the terms of the Treaty “are the first and best evidence
of the common intention of the parties.”135 Evidence submitted under Article 32 therefore should
be viewed carefully and should not be used to override the plain meaning of the Treaty.136

133
EC-Chicken Cuts (Panel Report) at n.571 (citing Ian Sinclair, The Vienna Convention on the Law of Treaties,
Manchester University Press, 2d ed. (1984) at 116).
134
O. Dörr and K. Schmalenbach at 627 (Ex. CDA-96).
135
Day 1 Tr. at 11:22-23 (U.S.).
136
O. Dörr and K. Schmalenbach at 618 (Ex. CDA-96).

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c) Canada’s Article 32 Evidence

To the Panel’s eyes, Canada’s Article 32 evidence raises four separate arguments:

(i) The importance of pools for processors in Canada’s dairy
management system

Canada is seeking to protect its supply management system for dairy products, as outlined
supra. Canada submits that fresh milk’s high perishability requires carefully calibrated production
to ensure an efficient market and decent returns for participants.137 Provincial milk marketing
boards do this by calculating total production quota each month – if this calculation is faulty, it
generates an imbalance between supply and demand. This system is important because, according
to Canada, “[t]he underlying economic characteristics of milk production are difficult for
producers to manage independently and would otherwise result in unpredictable raw milk supply
for processing activity.”138

Processors are central to this. Their dual roles as both purchasers and sellers of dairy
products help guard against both market saturation and undersupply. Sensitive to the vagaries of
season and need, processors have a history of predictable and well-structured import practices,139
which provide the basis for forecasting, calculating, and issuing total production quota to dairy
farmers.140 Reserving TRQ pools for processors moderates market unpredictability and allows for
more accurate forecasts.141

Thus, Canada claims that reserving TRQ pools for processors is a key aspect of maintaining
overall system stability. While a variety of allocation mechanisms may exist, the pools system

137
Canada Responses to Panel Questions at ¶ 2.
138
Canada Initial Written Submission at ¶ 17.
139
Canada notes that “on a year-to-year basis, processors consistently imported 27% or 28% of their total annual
volume of imports in the first quarter, 22% to 25% in the second quarter, 21% to 26% in the third quarter and 22%
to 27% in the fourth quarter from 2016 to 2020.” Canada contrasts this with distributor and retailer imports, which
have much higher variations – those variations cause disruptions across the dairy market, possibly resulting in
“large-scale waste of raw milk and loss of producer revenues – the very situation that supply management is
intended to prevent.” See Canada Responses to Panel Questions at ¶ 8.
140
Canada Responses to Panel Questions at ¶ 6.
141
Canada Responses to Panel Questions at ¶ 9.

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ensures that Canada can use a mixed allocation methodology where warranted (as it does under
the Treaty).142

Canada suggests that such market background is critical to discerning the intent,
motivation, and understanding of each Party in agreeing to the provisions at issue.143 Namely, “it
could not have been the common intention of the Parties to significantly restrict Canada’s
administrative discretion in the manner claimed by the United States.”144 Canada, in its own
words, “would never have agreed to bargain away” the right to favor processors in its allocation
mechanisms by reserving TRQ pools for their exclusive use.

(ii) The Panel’s analysis

At the outset, the Panel notes that Canada’s administrative discretion in allocating the
TRQs is not at issue here. Rather it is the exclusive reservation of access to the TRQs that violates
the Treaty. Insofar as the actual allocation of the TRQs is concerned, the United States has
conceded that Canada enjoys significant discretion in how it administers its TRQs.145 At the Oral
Hearing, the United States also suggested that the substantive result (i.e., 80% or more of the TRQ
allocated to processors or further processors) is not prima facie problematic:

 “Another note, that the U.S. – Canada’s criticism of the U.S. interpretation that as
a factual matter one percent of the total quota could not be reserved for processors,
you know, there’s nothing under the U.S. interpretation that would prevent Canada
from providing the same access – the same eligibility to volume from within the
quota as any other importer group. The limitation is strictly on having a reserved
portion for that importer group.”146

 “The processor clause in and of itself is an obligation not to limit any portion of the
quota to processors. And any – if Canada employed a system that effectively ended

142
In Canada’s words, the Treaty TRQ allocations “combine[] a market-share approach (within pools for processors
and further processors) with an equal-share approach (within pools for distributors).” See Canada Response to Panel
Questions at ¶ 18.
143
Canada Rebuttal Submission at ¶ 11.
144
Canada Rebuttal Submission at ¶ 13.
145
See Day 2 Tr. at 58:8-10 (U.S.); U.S. Rebuttal Submission at ¶ 24; U.S. Initial Written Submission at ¶ 1.
146
Day 1 Tr. at 68:11-19 (U.S.).

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with the same result . . . while on its face it may look as though the methods that it
used to get there would not necessarily be in conflict with a specific obligation such
as the processor clause, we’ve also brought claims under the fair and equitable
treatment provisions in the USMCA and you’d have to start taking a look at the
specific facts that apply to the situation that ended with that result. So as we said
before, there’s no issue with Canada implementing a policy that gives certain pools
to particular groups.”147

The text of the Treaty bears this up. Article 3.A.2 empowers Canada to administer its
TRQs by an “allocation mechanism” – meaning “any system in which access to the tariff rate quota
is granted on a basis other than first-come first-served” – of its choosing. That right is only
bounded by the limitations set forth in the Treaty itself, limitations that Canada agreed to when it
signed the Treaty.

The real issue is whether, in the exercise of its administrative discretion, Canada can pre-
reserve or block the access to TRQs (in any amount) exclusively for the use of processors under
the plain language of Article 3.A.2.11(b).

(iii) Canadian practice under other free trade agreements

Canada argues that it has long reserved TRQ pools exclusively for processors, and that this
practice has never once fallen afoul of Canada’s commitments in prior free trade agreements,
including CETA and the CPTPP. The practice dates from at least 1995, when Canada created
pools for processors and other industry groups under its WTO TRQ for Chicken and Chicken
Products.148 Canada places great emphasis on the CPTPP, a re-branding of the TPP, which the
United States negotiated and signed before later withdrawing. The CPTPP’s provisions on TRQ
allocation mechanisms are, Canada notes, nearly identical to those in the Treaty. Indeed, the
CPTPP sets forth “all the obligations at issue in this dispute, in the same or very similar
language.”149

147
Day 1 Tr. at 133:9-23 (U.S.).
148
See Day 1 Tr. at 46:8-14 (Can.).
149
See Canada Initial Written Submission at ¶ 49.

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Canada submits that it sought the same leeway in both agreements, reserving for itself
considerable discretion on how to allocate its TRQs and consenting only to the (fairly gentle)
textual limits its preferred interpretation suggests. Under the CPTPP, Canada established 16 dairy
TRQs – all administered by reserving a portion of the TRQ for processors.150 This additional
evidence, suggests Canada, confirms its interpretation of the Treaty’s Article 3.A.2.11(b).

(iv) The Panel’s analysis

Evidence from different but similar treaties (like CETA and the CPTPP) is admissible
under Article 32, to be sure.151 But the evidence Canada adduces here is unhelpful to its case.

For one, Canada’s processor pools system has apparently gone unchallenged to date.152
Canada’s statements regarding the meaning of similar provisions in the CPTPP thus capture its
own interpretation, unbuttressed by additional evidence proving common intent. The United States
is also not a party to either CETA or the CPTPP. Though it participated in the TPP’s design and
drafting, the United States withdrew from that agreement and is not bound by its terms. Canada
has offered no evidence that the United States communicated a different position regarding its
processor pools during the TPP negotiations than the one it now holds under this Treaty.

Furthermore, even assuming that Canada’s commitments in other treaties suggest that it
consistently sought to preserve its discretion in administering TRQs under those treaties,153 that is
some way off from proving that the Parties to this Treaty both intended Article 3.A.2.11(b) to

150
Canada Initial Written Submission at ¶ 47 (citing Ex. CDA-30, “CPTPP TRQs reserving a portion of the TRQ for
processors.”)
151
See O. Dörr and K. Schmalenbach at 624 (Ex. CDA-96) (“It is submitted that material relating to earlier or
similar treaties is not stricto sensu preparatory work, but may, again, be considered other supplementary means
under Art. 32.”).
152
See, e.g., Day 2 Tr. at 38:8-13 (Mr. Hansen) (“Can I just add a slightly additional question? How do we know
what the TPP means if no one has ever challenged the clause there? In other words, I think all you have is this
language in there and no ones ever brought an action. But what significance is that[?].”).
153
See Canada Initial Written Submission at ¶ 53 (“Based on this understanding – that the TRQ administration
provisions in Article 3.A.2 would preserve Canada’s discretion in administering the TRQs, which accords with the
understanding that Canada had of the corresponding obligations in the CPTPP – Canada granted significant TRQ
volumes for dairy products, under [the Treaty], to the United States.”).

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permit policies reserving exclusive quota for processors. As such, the CPTPP is not a reliable
yardstick for determining the Parties’ common intent regarding this Treaty’s Processor Clause.

(v) Canada’s understanding of Article 3.A.2.11(b) during
Treaty negotiations

Canada claims that, during Treaty negotiations, it communicated to the United States that
the Treaty permitted Canada’s existing system of reserving TRQ pools exclusively for processors.
But Canada offers no evidence that the specific issue was raised, debated, and settled during the
Treaty talks themselves. Instead, Canada says it “made it clear to the United States at various
levels, including at the level of the Chief Agricultural Negotiator, that it would be important for
Canada to ensure that any deal preserves the broad discretion of its Minister responsible for
administering the TRQs under the Export and Import Permits Act.”154

Canada’s chief piece of evidence here is a statement by its Chief Agricultural Negotiator,
Mr. Aaron Fowler, saying that he communicated to his United States counterparts that the Minister
of International Trade has very broad discretion to determine an allocation method and to issue
allocations and that Canada would not accept in the Treaty to unduly fetter the discretion of the
Minister of International Trade. He further testified to the fact that Canada’s ability to accept
granting significant TRQ volumes to the United States was conditional on Canada’s ability to
mitigate the impact of increased imports on the sector. Additionally, Mr. Fowler stated that he
told the United States that Canada would seek to maintain the overall integrity of its supply
management system (including the “three pillars” of production controls, pricing mechanisms, and
import controls) and also sought to replicate the TPP’s provisions in the area of TRQ
administration.155

(vi) The Panel’s analysis

Mr. Fowler admits that Canada’s first clear communication of its position – that the Treaty
“allows Canada to create pools reserved to processors and only prohibits a Party from issuing

154
See Canada Initial Written Submission at ¶ 52.
155
Ex. CDA-99 at ¶ 3.

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allocations under a TRQ exclusively to processors” – occurred on April 1, 2020, in response to the
United States raising the practice as a concern.156 Nothing in the record suggests otherwise, as
neither Canada nor the United States has offered additional contemporaneous evidence regarding
the Treaty negotiations. Indeed, the Panel notes that neither Party has offered any evidence
properly considered as travaux préparatoires, the most common type of evidence considered by
international tribunals under Article 32 of the VCLT.157 At the Oral Hearing, the United States
indicated it believes that no such evidence exists.158 As it stands, there is no evidence that Canada
communicated its interpretation of Article 3.A.2.11(b) to the United States during the negotiations.
Mr. Fowler’s statement indicates that Canada generally desired to maintain broad discretion to
administer dairy TRQs, and makes reference to the TPP text regarding TRQ administration, but it
does not provide a specific interpretation of the provision at issue. Mr. Fowler’s statement,
therefore, does not establish the common intent of the Parties.

(vii) While the United States knew of Canada’s pools system, it
did not raise it as an objection during Treaty negotiations

The United States has admitted it “was aware” of Canada’s pools-for-processors practice
during the Treaty negotiations.159 Canada claims that awareness proves both Parties understood

156
Ex. CDA-99 at ¶ 5.
157
The Panel does not consider Mr. Fowler’s statement travaux préparatoires, since “only material and processes
that can be objectively assessed by an interpreter can qualify as preparatory work.” Ex. CDA-99 at 621. Mr.
Fowler’s statement purports to capture oral assertions made during the Treaty negotiations, but “oral statements are
difficult to evaluate, as long as they are not written down or cannot be corroborated by other evidence.” Id.
However, even unilateral acts, instruments or statements of individual negotiating parties may be useful to
discerning common intent – the Panel considers Mr. Fowler’s evidence in that spirit, though it finds the evidence
unilluminating. See EC - Chicken Cuts at ¶ 289.
158
See Day 1 Tr. at 161:16-24 (U.S.) (“I think we would have struggled intellectually to [submit historical evidence]
because I’m not aware of documentary evidence from the negotiations that would be relevant. And I’m sure if it
existed, Canada would have gleefully offered it up already with the other information it has provided to you. And I
don’t think that the United States would have engaged in the production of evidence the way Canada has done with
the kind of an affidavit from someone who was there, precisely for the reasons that those treaties get into.”); id. at
167:6-10 (U.S.) (“But, you know, where is this documentary evidence of what we both intended at the time when we
agreed to these words? I’m not sure that’s there. I’m not sure that exists. So you’re left with the words
themselves.”).
159
See Day 1 Tr. at 172:3-8:

(Ms. Bédard): “And I’m focusing on the first one for a second, which is the claim of an established
practice in Canada. Did the United States know about this Canadian practice?

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Article 3.A.2.11(b) to permit the practice. The United States raised no objections during the Treaty
negotiations and made no move when the text was reopened for supplemental negotiations. The
United States certified Canada’s compliance with the Treaty to the United States Congress during
the ratification processes.160 All along, the United States was “aware of Canada’s long-standing
practice of creating ‘pools’ for processors, including under the CPTPP.”161 It was also “aware of
Canada’s position that it could only provide significant TRQ volumes on the condition that Canada
was able to maintain its administrative discretion.”162 Despite this, the United States waited until
April 1, 2020 – after signature, and after Canada’s Notices to Importers had already been published
– to protest that Canada’s pools practice violated Article 3.A.2.11(b). With this knowledge in
hand, Canada suggests that the United States’ protest here is an attempt to “obtain through
litigation what it failed to obtain through the [Treaty] negotiations.”163

(viii) The Panel’s analysis

The Panel notes that Canada has not formulated a standard for any “duty to object” or
“silence equals consent” under public international law with regards to treaty practice. Without
more, Canada has not proved that the United States’ silence establishes that the Parties’ common
understanding of the Processor Clause comports with Canada’s own interpretation, which
contravenes the text’s plain meaning.

The plain meaning also cannot be overturned by the United States’ certification to its
Congress of Canada’s compliance with the Treaty. As the United States explained during the Oral
Hearing, certification is made to the whole of the Treaty, not just to the specific provisions at issue
here.164 Certification is also driven by broad-based political considerations, which render it a poor
fit for deducing a Party’s understanding of individual Treaty provisions. Additionally, in the

(U.S.): “We were aware of Canada’s practice under the WTO and other agreements, yes.”
160
See Canada Initial Written Submission at ¶ 57.
161
Canada Rebuttal Submission at ¶ 9.
162
Id.
163
See Canada Initial Written Submission at ¶ 2.
164
Day 2 Tr. 31:24-32:19 (U.S.).

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certification itself, the United States stated that “Canada and Mexico have taken measures
necessary to comply with those provisions that are to take effect on the date of entry into force of
[the Treaty].”165 It did not state that Canada was currently in full compliance, merely that Canada
had the laws in place to comply with the Treaty.

For the above reasons, the Panel is not persuaded that Canada’s interpretation of Article
3.A.2.11(b) captures the common intent of both Parties. Rather, the evidence tends to illustrate
either (1) Canada’s own general positions during Treaty negotiations or (2) Canada’s past practices
under separate trade agreements not involving the United States. There is no evidence that Canada
specifically communicated its understanding of Article 3.A.2.11(b) to the United States while the
Parties were still bargaining. Neither is there any evidence suggesting both Parties considered
Canada’s interpretation (that Article 3.A.2.11(b) allowed Canada to limit access to TRQ quantities
exclusively for processors) viable or applicable. The evidence appears to be more general in nature
about the discretion that Canada enjoys, and this discretion certainly exists with respect to the
ultimate allocation of the TRQs and is not the subject of the Panel’s decision, as the Panel explains
further below.

The purpose of treaty interpretation is to discern the common intent of the authoring parties,
and no evidence that Canada submits here gives the Processor Clause a meaning different from its
ordinary reading. Under the terms of the Treaty, Canada cannot “limit access to an allocation”
only to processors.

3. Canada’s Administrative Discretion Under the Treaty

The Panel’s ruling here is limited only to the facts of this case. The current Canadian
system, which sets aside significant TRQ volumes only for processors, does not pass muster under
the Treaty. However, nothing in the Panel’s ruling constrains Canada’s discretion to administer
its TRQ however it wants, within the Treaty’s set limits. Quite the contrary – Canada has
significant discretion in designing and implementing its allocation mechanisms. The Treaty itself
explicitly recognizes this in Article 3.A.2. The Panel agrees with Canada that “the design of an

165
See Letter from United States Trade Representative to U.S. Congress (April 24, 2020) (Ex. CDA-38).

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allocation mechanism, including who may obtain an allocation, is left up to the discretion of the
importing Party, in this case Canada, to determine, subject to consistency with the other provisions
of the Agreement.”166

The Panel takes seriously Canada’s statements regarding the importance of processors in
the Canadian dairy industry. The Panel does not question Canada’s interests in regulating supply
and demand within its dairy industry, including by striving to ensure predictability in imports.

Canada suggests that it has considered market-share, equal-share, historical, pro-rata, first-
come first-served, on demand, and auctioning/lottery methodologies, as well as combinations of
these.167 There are, in Canada’s eyes, problems with each approach. Market-share policies, for
example, could give small actors too-small shares, while equal-share policies would saddle them
with too much. Historical polices do not work for new TRQ access like the Treaty provides.
Auctions and lotteries invite too much unpredictability, as do pro-rata access and on demand
approaches.

According to the United States, under a different system, allocation amounts for processors
as high as 85% of TRQ totals could potentially be permissible, subject to the facts and
circumstances surrounding the allocation and Canada’s compliance with other sections of the
Treaty. In the words of the United States, it is “not seeking to eliminate all of Canada’s discretion
in administering its TRQs.”168 In its written submissions, the United States expressly states “that
it is not challenging Canada’s right to maintain its supply management system” and that the Treaty
“provides Canada with the discretion to administer the dairy TRQs through a system other than
one in which access is granted on a first-come first-served basis.”169 In other words, it is the
inflexible pool system Canada has designed here that is objectionable, not Canada’s general ability
to allocate its TRQs in the manner it desires.

166
Canada Initial Written Submission at ¶ 62.
167
See Canada Responses to Panel Questions at ¶ 15.
168
See Day 2 Tr. at 58:8-10 (U.S.).
169
See U.S. Rebuttal Submission at ¶ 24; U.S. Initial Written Submission at ¶ 1.

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The Panel expresses no opinion on these different methods and the substantive result
achieved by Canada’s current allocation procedures in terms of the percentage of TRQ quantities
that are ultimately awarded to processors. All the Panel decides today is that Canada cannot, in
substance, ring-fence and limit to processors (and “further processors,” which are processors for
purposes of the Processor Clause) a reserved “pool” of TRQ amounts to which only processors
have access. In Canada’s own official words, in 14 separate Notices to Importers, Canada has
allocated 85% or more of the amounts in each instance to processors. For each TRQ, Canada has
limited access to an allocation to processors, which is inconsistent with the Treaty.

4. The Parties’ Remaining Arguments

The Parties raise a series of further arguments, including whether Canada’s practices are
inconsistent with:

 Its commitment in Article 3.A.2.4(b) to “ensure that its procedures for administering its
TRQs . . . are fair and equitable”;

 Its commitment in Article 3.A.2.11(e) to ensure that in administering an allocated TRQ,
“allocation to eligible applicants shall be conducted by equitable and transparent
methods”; and

For reasons of judicial economy, the Panel need not answer those questions today. For
purposes of this proceeding, it is enough that Canada’s current practice of reserving TRQ pools
for processors is inconsistent with Article 3.A.2.11(b).

The Panel also notes that its Terms of Reference do not include:

 Whether Canada’s chosen allocation mechanism allows shipments to be made in
“commercially viable” quantities under Article 3.A.2.11(c).

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The Panel therefore lacks the jurisdiction to entertain this claim.

V. The Panel’s Findings

For the reasons set forth above, the Panel finds that Canada’s practice of reserving TRQ
pools exclusively for the use of processors is inconsistent with Canada’s commitment in Article
3.A.2.11(b) of the Treaty not to “limit access to an allocation to processors.” The Panel makes no
findings on the remainder of the Parties’ arguments.