Faced With Risk of Butter Shortage, Israel Extends Tariff Exemption for Imports

Faced with the risk of another butter shortage, Finance Minister Yisrael Katz announced on Wednesday that he was extending an exemption from duties on imported butter, which had been widely credited with ending last year’s shortage, by two years.

Officials had been debating for weeks whether or not to extend the exemption. Lobbyists representing the Israel Dairy Council and farmers were demanding that ceilings on duty-free butter imports be renewed while importers and consumer advocates sought to make the exemption permanent.

Behind the debate was the butter shortage of 2019, which only came to an end a year ago, after Moshe Kahlon and Eli Cohen, the finance and economy ministers at the time, decided to temporarily lift quotas on butter imports for the year 2020 by emergency order. The order is due to expire in December.

On Wednesday, Katz said on Twitter that “imports will prevent the shortages that have occurred in the past by increasing the options consumers have and will lower the cost of living.”

The Dairy Council responded angrily and warned it might appeal the decision in the High Court.

“Today, the government has proven again that it works in the interests of importers and not of consumers,” it said in a statement, saying the move violated a commitment the government had given to the High Court of Justice to exempt butter from duties under an emergency order for only one year.

“Adding insult to injury, instead of importing butter at controlled prices as the council had recommended, imported butter will continue to be sold to consumers at 20% above the controlled price,” it said.

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The ceiling on duty-free butter imports is designed to protect the local dairy industry. Duties on butter for consumers are high, ranging from 126% to 140%. In its defense, the council says that it isn’t opposed to what it calls a “controlled” level of butter imports to help supply a big increase in market demand over the last five years.

The Dairy Council says the price of 100 grams of imported butter averages 5.70 shekels ($1.69), 44% higher than the controlled price for the locally produced product. The solution is to restore the quotas and limit the quantity of high-priced imported butter entering the market.

Among the defenders for free butter imports are former Agriculture Ministry Director General Shlomo Ben-Eliyahu and the Kohelet Policy Forum, a think tank.

Elad Malka, founder and CEO of the Our Interest lobbying group, called the exemption extension a victory for the “average citizen and the consumer public.”

“Obstacles to imports are one of the main reasons for the high cost of living and for the shortages that the Israeli consumer suffers every few months,” he said. “Since duties were cancelled, butter has returned to the store shelves and the Israeli consumer can choose between high-priced butter and cheaper brands as he or she chooses. We approve of the decision and hope that it becomes permanent and expanded to other products.”