The Dairy Export Incentive Program (DEIP) helps exporters of U.S. dairy products meet prevailing world prices for targeted dairy products and destinations. Under the program, the U.S. Department of Agriculture (USDA) pays cash bonuses to exporters, allowing them to sell certain U.S. dairy products at prices lower than the exporter's costs of acquiring them. The major objective is to develop export markets for dairy products where U.S. products are not competitive because of the presence of subsidized products from other countries.

The DEIP was announced by USDA on May 15, 1985, and was reauthorized by the Food, Agriculture, Conservation, and Trade Act of 1990; the Uruguay Round Agreements Act of 1995; the Federal Agriculture Improvement and Reform Act of 1996; the Farm Security and Rural Investment Act of 2002; and the Food, Conservation and Energy Act of 2008. As part of its World Trade Organization commitments resulting from the Uruguay Round Agreement on Agriculture, the United States has established annual export subsidy ceilings by commodity with respect to maximum permitted quantities and maximum budgetary expenditures.

Who Benefits
The DEIP, administered by USDA’s Foreign Agricultural Service (FAS), helps U.S. agricultural producers, processors, and exporters gain access to foreign markets.

Eligible Products
Commodities eligible under DEIP initiatives are milk powder, butterfat, and various cheeses.

Participation
An exporter interested in participating in the DEIP must provide specific information, including a/an:

1)  office and agent for service of legal process in the United States, with names and street addresses

2)  description and documented proof of business structure—how and where incorporated, etc.

3)  Dun and Bradstreet number

4)  certified statement describing participation, if any, during the past 3 years in U.S. government programs, contracts, or agreements

5)  certified statement that the exporter is not debarred, suspended, or proposed for debarment from any federally administered program

In addition, exporters must post a performance security before submitting a request for a bonus.

Making a Sale
All sales under the DEIP are made by the private sector, not the U.S. government. An invitation for offers issued by USDA may be one of two types: those inviting exporters to submit a competitive offer for a bonus, and those inviting exporters to apply for an announced bonus. Once an invitation for offers is issued, it is up to agricultural exporters to contact prospective buyers in eligible countries and negotiate a sales contract covering price, quantity, quality, delivery, and other terms. The sale may be contingent on USDA’s approval of a bonus. Each prospective exporter submits an offer to USDA requesting a bonus that would allow the sale to take place at the agreed price. Under an invitation for competitive offers, USDA reviews all bids for the competitiveness of the bonus value requested and compares the bids with offers from other U.S. exporters and with sales of competitor countries. Under an announced bonus, compliant offers meeting all program requirements are accepted on a first-come, first-served basis. USDA has the right to reject any or all bids.

Once USDA accepts a bid, the exporter and USDA’s Commodity Credit Corporation (CCC) enter into an agreement. USDA notifies exporters submitting offers of the acceptance or rejection of their offers by 10 a.m. Eastern U.S. time the next business day after the date the offers were submitted for consideration. USDA also makes the information available in a program announcement on the FAS Web site.

Receiving the Bonus
The bonus is paid to the U.S. exporter in cash. The CCC determines the bonus payment by multiplying the bonus specified in the agreement by the net quantity of the commodity exported. Once an exporter furnishes USDA with evidence that the specified commodity has been exported to the target destination under the terms of the agreement, the exporter can request payment of the bonus.

Additional Information
For more information, contact: Credit Programs Division, Office of Trade Programs, FAS/USDA, 1400 Independence Ave. SW, Mail Stop 1025, Washington, DC 20250-1025; tel.: (202) 720-6211; fax: (202) 720-2495.