Ultra-filtration technology separates the components of milk according to their size by passing milk under pressure through a thin porous membrane. Specifically, ultra filtration allows the smaller lactose, water, mineral, and vitamin molecules to pass through the membrane, while the larger protein and fat molecules—key components for making cheese— are retained and concentrated. (See app. II for further explanation of ultra filtration and its use in the cheese-making process.) Although ultra- filtration equipment is expensive, it creates an ingredient well suited for making cheese and other food products requiring a high milk protein content. In addition, the removal of water and lactose reduces the volume of milk, and thereby lowers its transportation and storage costs. All ultra- filtered milk imported into the United States in 2000 was in a dry powder form. The U.S. Customs Service’s milk protein concentrates classification includes processed milk products containing between 40 percent and 90 percent protein. Imported powdered milk products with less than 40 percent protein are usually classified as nonfat dry milk and are subject to a tariff-rate quota that limits the amount that can be imported at a low tariff rate. In addition to ultra-filtered milk products, the milk protein concentrate classification includes concentrates made through other processes, such as blending nonfat dry milk with highly concentrated proteins. These products are often tailored to a specific use in products requiring a protein ingredient. FDA’s standards of identity regulations permit cheese manufacturers under the "alternate make" provisions to use ultra filtration as an acceptable procedure during the cheese-making process. Consequently, milk that has been ultra-filtered as an integral part of the cheese-making process is acceptable as a component of a standardized cheese, according to FDA. In 1999 and 2000, organizations representing cheese makers petitioned FDA to amend its cheese standards to expand its definition of milk to include wet ultra-filtered milk. The industry petitioners requested permission to use wet ultra-filtered milk from external sources as an ingredient in standardized cheeses because it would increase the efficiency of cheese manufacturing and would explicitly recognize filtered milk products as interchangeable with other forms of milk. One of the industry petitioners, who had also asked FDA to allow the use of the dry ultra-filtered milk in standardized cheeses, later withdrew this part of the request when U.S. milk producers raised concerns that increased imports might displace domestic milk products. FDA has not yet acted on the petitions. Specific data on U.S. imports of ultra-filtered milk do not exist because these imports are included in the broader classification of milk protein concentrates. Milk protein concentrate imports increased 56-fold from 1990 to 1999. In 1999, they came primarily from New Zealand, Ireland, Germany, Australia, the Netherlands, and Canada. Milk protein concentrates are used as ingredients in cheese, frozen desserts, bakery products, and sports and other nutritional supplement products. The United States has no quota restrictions on milk protein concentrate imports, and duties are low. FDA officials told us that these imports pose little food safety risk and therefore receive minimal monitoring. U.S. milk protein concentrate imports grew from 805 metric tons in 1990 to 7,288 metric tons in 1995 to 44,878 metric tons in 1999 (see fig. 1). Imports almost doubled in 1999 alone. The volume of imported milk protein in these concentrates was approximately equivalent to 0.8 percent to 1.8 percent of the total U.S. production of milk protein in 1999. The estimate’s range reflects the fact that imported milk protein concentrates may contain between 40-and 90-percent protein. The U.S. Customs Service does not collect data on the protein percentage of milk protein concentrate imports. The total number of countries exporting milk protein concentrates to the United States grew from 4 to 16 from 1990 to 1999. (See app. III.) Australia was the only country to export milk protein concentrates in each of the 10 years. Figure 2 shows the growth in imports for each major exporter and other countries from 1995 to 1999. The share of imports among the six largest exporting countries rose from 75 to 95 percent during this 5-year period. Although the U.S. Customs Service does not categorize its data on milk protein concentrate imports according to the manufacturing process used, representatives of Australian and New Zealand exporters assured us that their milk protein concentrate exports were all made using ultra filtration. Conversely, Canadian government officials said all of their country’s milk protein concentrate exports to the United States are made by blending milk proteins. U.S. and foreign industry executives told us that U.S. milk protein concentrate imports rose rapidly in recent years primarily because of (1) the relationship between the U.S. and international prices of milk protein, especially nonfat dry milk, and (2) the growth of the U.S. nutritional foods industry and many other new products using milk protein concentrates. According to these executives, international milk prices were below U.S. milk prices in recent years, giving U.S. dairy food manufacturers a financial incentive to substitute imported milk protein concentrates for domestic milk in products such as nonstandardized cheese. This price differential primarily stimulated U.S. imports of milk protein concentrates having lower percentages of protein—between 40 and 56 percent. More recently, U.S. demand for these milk protein concentrates has decreased, according to an Australian exporter, because the international price of milk protein is near the U.S. price. The strong growth of the U.S. nutritional foods industry has created new demand for high-protein milk protein concentrates that are 70- to 85- percent protein. Representatives of Australia and New Zealand exporters told us that this industry grew out of extensive research and development to create nutritional supplements for athletes, the elderly, and health conscious individuals. Milk protein concentrates provide an important source of protein in these nutritional products. Because high-protein milk protein concentrates are often customized for use in specific end products, their producers and exporters can sell them at higher prices than the equivalent amount of domestic milk protein, the exporters said. Despite their higher prices, the demand for these specialized high-protein products in the United States is strong. Industry executives noted that high-protein milk protein concentrate imports have not displaced domestic milk supplies because they are filling the growing demand for new nutritional products. In addition, a trade association representative and an academic expert noted that economic disincentives have prevented U.S. production of dry milk protein concentrates. Federal agencies and industry trade associations do not collect data on U.S. companies’ use of imported milk protein concentrates because this information is considered proprietary. According to milk protein concentrate exporters, U.S. cheese, frozen dessert, bakery, and nutritional foods industries primarily use the dry milk protein concentrate imports. In particular, dry milk protein concentrates containing lower levels of protein—42 to 56 percent—can be added to the raw milk used to make cheese, ensuring a consistent composition regardless of the seasonal variations in milk. Various concentrations of milk protein are also used in ice cream and other frozen desserts, bakery and confection products, and nonstandardized cheese. Milk protein concentrates containing higher protein levels—70 to 85 percent—are chiefly used in sport-, adult-, and hospital-nutrition products. Concentrates containing 90-percent protein are especially useful for manufacturers seeking lactose- and sugar-free claims for their products, according to a major exporter. (See app. IV for more details on the composition and uses of dry milk protein concentrate imports provided by some exporters.) The U.S. Customs Service and FDA share responsibility for monitoring milk protein concentrate imports for compliance with trade or food safety requirements. Unlike nonfat dry milk imports, which have less than a 40 percent protein content, the United States does not use a tariff-rate quota to restrict the quantity of milk protein concentrate imports. The United States imposes a duty of $0.0037 per kilogram on all milk protein concentrate imports except Canadian imports, which are duty-free under the North American Free Trade Agreement. The milk protein concentrates classification, which is intended to include all nonfat dry milk powder containing between 40 and 90 percent protein regardless of its method of production, allows a broad range of milk protein concentrates to enter the United States, according to the U.S. Customs Service. FDA and USDA’s Food Safety and Inspection Service are responsible for ensuring that imported food products are safe, wholesome, and properly labeled. FDA and USDA work with the U.S. Customs Service to ensure the safety of imported food products by monitoring and testing samples of imported foods. Customs uses a computer system containing information provided by the milk protein concentrate importers and FDA-developed screening criteria to determine which shipments may be automatically released and which should be subjected to inspection or laboratory testing. Products such as milk protein concentrates, which are believed to pose minimal safety risks, are frequently released automatically. FDA annually inspects or conducts laboratory analyses on less than 2 percent of all types of imported food shipments. FDA officials told us that they have little concern about the safety of dry milk protein concentrates because the products are treated with heat during pasteurization and drying, which kills pathogens. In addition to screening milk protein concentrate imports, the United States has agreements with Australia, Belgium, Denmark, France, Ireland, the Netherlands, New Zealand, Norway, and Sweden regarding dry milk and milk protein imports. The agreements are to ensure that these countries adhere to FDA’s food safety regulations, thereby minimizing the need for FDA to inspect these imports. No country has reached a broader agreement with the United States that their entire food safety system is equivalent to the United States thus enabling FDA to apply fewer resources to screening their imports. Dairy products, including milk protein concentrate products, will be subject to a not-yet-implemented “veterinary equivalency agreement” with the European Union and its 15 member countries.