Recent Halt in Domestic French Fry Production Raises Questions Concerning Tariffs

import tariff iceland french fries

When Icelandic frozen- and ready-made food company Þykkvabæjar stopped producing french fries earlier this summer, they were the last remaining producer of the popular side dish in Iceland.

Now, with no domestic producers left, all french fries in Iceland must be imported. The lack of domestic production, however, has raised questions over what, exactly, protectionist tariffs are protecting.

In a recent report by the National Association of Employers, it came to light that Icelandic consumers have paid a total of ISK 800 million in french fry tariffs in the past two and a half years.

Those imported from Canada and the EU are taxed at a rate of 46%, and french fries from elsewhere are taxed at a much higher 76%. Given the growing share of the tourism and service industries, this cost is not trivial.

The National Association of Employers has petitioned the Minister of Finance to repeal the tariffs, stating that they no longer protect anything and only hurt the consumer.

Ólafur Stephensen, managing director of the National Association of Employers, has cited the french fry tariff as one more unnecessary burden. During a time of high inflation, he stated, such burdens should be minimized as far as possible: “These numbers clearly show that there is a lot at stake for Icelandic consumers, the trade and the restaurant sector to abolish this protectionist tariff that no longer protects anything. The duties amount to 300-400 million per year and at a time when food prices are constantly rising, such sums make a difference.”

Ólafur, along with other consumer-advocacy groups, has since called on the Minister of Finance to repeal the tariff.

 

 

First Summer Ferry Arrives in Seyðisfjörður

Seyðisfjörður Norræna ferry

The first summer ferry docked in the East Fjords town of Seyðisfjörður yesterday, RÚV reports. During its first visit of the summer, the ferry was carrying 750 passengers, 120 crew members, and 400 vehicles. This was the first of 11 planned journeys that the Norröna, operated by Faroese company Smyril Line, will make from Denmark to Seyðisfjörður this summer.

The Norröna, which departs from Hirtshals, Denmark and on certain journeys stops over in the Faroe Islands en route to Iceland, can accommodate up to 1,000 passengers. (It’s worth noting that the population of Seyðisfjörður is, by contrast, 673.) Based on previous years’ bookings, Germans make up the ferry’s largest group of passengers, followed by Danes, Faroese, Dutch, and French travellers.

The customs office in Seyðisfjörður said that nothing unusual occurred during yesterday’s inspection, although increased attention is being paid this year to whether a vehicle on the ferry is being brought into Iceland for personal use or business. If there is a business reason for the vehicle to be coming ashore, an additional fee must be paid.

Customs Duties on Imported Potatoes May be Suspended

Customs duties on imported potatoes will be likely be suspended from May 3 until August 11, RÚV reports. The Ministry of Industries and Innovation has temporarily lifted these duties because of a shortage of high-quality domestic potatoes. Iceland’s current potato crop suffered after a wet and cold summer last year.

Local farmers and the Icelandic Federation of Trade have been calling for a suspension of import duties for the last three weeks, saying that that even the Sales Association of Vegetable Farmers (SFG) has supported the idea. But these petitions had been denied by the Ministry of Industries’ Advisory Committee on the Import and Export of Agricultural Products, which said that duties could only be suspended in the event of a shortage of domestic product.

Per the provisions of the laws governing agricultural products, there can only be a suspension of import duties when two leading domestic distributors and two key domestic producers cannot keep up with demand. Since technically, there are enough Icelandic potatoes, the advisory committee said there shouldn’t be a suspension of customs duties. Local retailers were unhappy with this interpretation, saying that it missed the point. “We have plenty of potatoes,” Gréta María Grétarsdóttir, CEO of the Krónan supermarket chain remarked. “But the quality of Icelandic potatoes is not as good as Icelanders are accustomed to…these are not the first-class Icelandic potatoes that Icelanders are used to getting.”

After reevaluating of the situation on Tuesday, the Advisory Committee has reversed its position. The proposed suspension of customs duties was presented to domestic producers, who were given four days to respond. However, according to Ólafur Stephensen, the CEO of The Icelandic Federation of Trade, there are two Icelandic potato farmers who “are holding the potato market hostage,” so whether the suspension will actually go into effect is still an open question.

 

Shortage of ‘First Class Icelandic Potatoes’ Say Grocers

The Icelandic Federation of Trade is calling for a suspension of duties on potatoes so that potatoes grown abroad can be imported at an acceptable cost to local consumers. RÚV reports that Iceland’s current potato crop suffered after a wet and cold summer last year. As such, locally-grown potatoes are not up to their usual standard and grocers and produce importers want to see customs duties adjusted accordingly.

“We have plenty of potatoes,” Gréta María Grétarsdóttir, CEO of the Krónan supermarket chain remarked. “But the quality of Icelandic potatoes is not as good as Icelanders are accustomed to…these are not the first class Icelandic potatoes that Icelanders are used to getting.”

 

Imported potatoes “30% more expensive than they need to be”

Guðmundur Marteinsson, CEO of the Bónus supermarket chain, echoed this sentiment, telling RÚV that he finds it strange that import duties on potatoes have not been waived for the time being, given that even the Sales Association of Vegetable Farmers (SFG) has support the idea.

In an announcement on its website, the Icelandic Federation of Trade stated that the Ministry of Industries and Innovation has not complied with requests from importers to suspend custom duties. The organization says this is to the detriment of consumers because imported potatoes will be more expensive. “It isn’t possible to import potatoes unless the duties are cancelled,” said Guðmundur. “We started complaining three weeks ago.”

“When this situation arises, it often happens that customs duties are lifted,” explained Gréta María. “But not now. As such, foreign potatoes are 30% more expensive than they need to be.”

 

No Shortage of Potatoes

By law, the Advisory Committee on the Import and Export of Agricultural Products, which is part of the Ministry for Industries, submits proposals to the minister regarding suspensions of custom duties. This happens, for instance, when there is a shortage of a specific agricultural product on the domestic market. Per the provisions of the laws governing agricultural products, this can only happen when two leading distributors and two key producers cannot keep up with demand. The committee says, however, that no such shortage exists. The situation is being closely monitored, they say, and new data on the local potato crop will be obtained on April 23.

“It’s very strange because SFG’s largest retailer has sent a letter to the committee in which it urges for tolls to be cancelled because there are not enough potatoes of an acceptable quality,” said Guðmundur. “There aren’t enough, but there are some. We’re scraping together what we can for the weekend,” he said, referring to the Easter holiday this week. “That’s where we’re at.”

Ólafur Stephensen, the CEO of The Icelandic Federation of Trade, had stronger words for the committee. “Saying that there’s no impending shortage is preposterous,” he wrote in the published announcement. “And it means that importers are losing the precious time it takes to order and bring into the country products that meet consumer demand.”