Israel - AgricultureIsrael - Agricultural Sector
Israel has shifted from an agricultural based economy to a more sophisticated, industrialized economy with a diversified manufacturing base. Agriculture today is different from what it used to be, with a huge shift incorporating state of the art technologies in water consumption and in the use of pesticides. Most of the new technologies find their way rapidly into the international market and are available to farmers all over the globe. Two examples for new innovations of this kind are drip irrigation and cherry tomatoes.
The Israeli government aims to address public discontent concerning growing income inequality and high consumer prices. One of the government measures to reduce the cost of living and to support economic growth is reducing taxation of imported food items and agricultural goods, a process which is ongoing as this report is being written.
On January 2014, the Israeli Government approved the creation of a committee to focus on bringing down food prices by advancing parallel import of food products. The reform effectively opens the Israeli market to diverse imports of “non-sensitive” food products (e.g. pasta, cereals, baked products, rice etc.) thus exposing the market to competition and lowering the price for the consumers. The reform doesn’t apply to “sensitive food” such as baby formulas, animal products and more.
In addition, the Israeli Ministries of Finance and Agriculture are preparing to launch the most significant reform in the agricultural sector since the 1950’s, which will include the removal of production quotas and the lifting of custom tariffs, which increase the Israeli consumers’ price. This protection system will be replaced by direct support to farmers. This means the dismantling of agricultural production and marketing boards, including the Dairy Board and the Poultry Board. These steps follow the OECD recommendations that support the transition from supports by subsidies, custom tariffs and production quotas, to the more common methods being accepted in the OECD of direct support to the farmers.
The reform is expected to affect the import of fruits and vegetables, fish, meat, eggs, milk and frozen and processed vegetables. The Minister of Finance also plans to increase the quantity of tariff free olive oil, fresh beef, vegetables and more, imported from WTO countries.
The Israeli Ministry of Agriculture estimates the number of active farmers to be 9,000 to 10,000. The Israeli economy is expected to benefit from this reform. OECD’s estimations are that the volume of indirect subsidies stands today at approximately $950 million a year.
The Israeli government plans to implement new tax regulations for most products during the High Holiday seasons in Israel, (April and September). Moreover, the Israeli government recently increased the quota of duty-free fresh beef to 8,500 tons, reduced tariffs on the import of fish by 50 percent, increased the duty- free quotas for the import of olive oil to 4,000 tons, of fresh vegetables from 40,000 tons to 80,000 and increased the quota for imports of hard cheese customs free, from 4,800 tons to 5,400 tons.
Reform in imports of hard cheeses, which began in May 2015, led to a minimal markdown of 4 to 4.5 percent, despite government’s claims that such steps could lead to a significant markdown of 30 percent. Most of the expected discount due to the lifting of the tariffs was absorbed by the importers and the retailers, instead of the consumers benefiting from the reform.
General Food and Agricultural Import Considerations
Israeli importers face two main considerations when selecting a particular product: quality and price. In terms of price, U.S. products are not always competitive due to relatively higher production and freight costs than products from Europe, the Far East and the Black Sea basin. Also, transport costs from the United States are about the same as transportation costs from the Far East. Transportation costs are less crucial when dealing with higher-end products or products with very high value-to-volume ratios such as spices, essences, flavorings, and concentrates, and for products eligible for tariff preferences under the Israel-U.S. Free Trade Agreement (FTA). Under the FTA, U.S. goods enjoy a 10-22 percent tariff advantage over European and other most-favored nation status (MFN) suppliers on a broad range of processed and semi-processed foodstuffs.
The Israeli food and food supplements legislation and standardization system is increasingly harmonized with the EU system, which, in many cases, can differ from that in the United States, resulting in challenging import licensing process for American goods.
Exporters need to consider the issue of “kashrut” or kosher. Kosher certification is not a legal requirement for importing food into Israel, except for meat and meat products. However, non-kosher products have a much smaller market, as most supermarkets and hotels refuse to carry them. Manufacturers who produce kosher products must be able to satisfy Israeli rabbinical supervisors’ demands that all ingredients and production processes meet kosher standards. According to the Law for Prevention of Fraud in Kashrut, only the Chief Rabbinate of Israel can approve a product as kosher for consumption in Israel, or may authorize another supervisory body to act on its behalf. Here too, U.S. products have an advantage as the kashrut certification issued by many U.S. rabbis is recognized by Israel’s Chief Rabbinate. It is, however, quite simple for Israeli importers to send an Israeli rabbi to any supply source, thereby reducing the U.S. advantage. In recent years, opportunities for non-kosher foods have been increasing as immigrants from the Former Soviet Union (FSU) now account for a significant share of Israel’s purchasing power (15 percent).
Israel’s Market Characteristics
Israel is a technologically advanced market-oriented economy. Consumers are sophisticated and enjoy cosmopolitan food tastes. Despite recent popular protests over food prices and high living costs, Israelis remain willing to pay for what they want.
Israel’s limited land and water resources preclude a high level of agricultural self-sufficiency, consequently influencing local production costs and consumer prices. The country posts sizeable trade deficits in food and agricultural products as well as other commodities.
Israel’s Food and Agricultural Production
The domestic product of the agricultural sector in Israel ($7.8 billion in 2014) represents approximately 3.3 percent of the national GDP with 18 percent of the agricultural production being exported. In 2014, the agricultural sector employed 52,000 persons, amounting to 1.2 percent of the total workforce. Foreign agricultural workers (primarily from Thailand and West Bank Palestinians) totaled over 29,000 persons, as well as 23,000 Israeli agricultural workers, who amount to just over 0.5 percent of the total workforce.
Israel has long valued the ideal of self-sufficiency in agricultural production and also has a policy of supporting employment opportunities in the “periphery”, areas near Israel’s borders and far from the major urban areas. In furtherance of these goals, the Government of Israel provides a variety of support and protection measures for a range of agricultural products. However, in recent years, the commitment to self-sufficiency has waned somewhat and yielded an increased reliance on imports to supplement domestic production of a number of food products.
Research and development expenditures since 2004 account for about 17 percent of the budgetary allocation for agriculture. Therefore, the future of Israeli agriculture lays in its expertise in cutting edge agricultural technology. The Israeli state, unlike the case of most other OECD economies, continues to retain title to most of the country’s land and water resources. An added unique characteristic of Israeli agriculture is the dominance of cooperative communities (i.e., the kibbutz and moshav) that account for 80 percent of farm output.
Israel’s Imports of Food and Agricultural Products
In 2014, Israel imported $4.26 billion of agricultural products and $1.34 billion of food items. Food and agricultural product imports account for about 7.7 percent of Israel’s total import bill. Israel reports importing significant amounts of the following food and agricultural products in 2014: cereals ($1.3 billion); meat (mainly bovine) and edible beef offal ($429 million); oilseeds ($371 million); sugar and sugar confectionery (- $301 million); miscellaneous edible preparations (HS 09 -$350 million); fish (HS 03- $472 million); edible fruits and nuts ($600 million); beverage ($231 million);and live animals ($131 million). Imports of cereals and sugar represent 90 percent of domestic use for these commodities; imported beef accounts for over 50 percent of local consumption.
Coarse grains, oilseeds, dried nuts, dried and fresh fruits, and prepared food products account for the bulk of U.S. food and agricultural exports to Israel; milling wheat, soybeans, and feed grains enter Israel duty-free. Tariff rate quotas (TRQ) and high import levies on U.S. products such as almonds (shelled and unshelled), raisins, and prunes limit imports. U.S.-origin shelled walnuts and pistachios do, however, enjoy duty-free access.
On February 2016 Israel lifted the two decade long ban on the import of U.S. beef into the country. The estimation of FAS Tel-Aviv is that the market share for U.S. beef and beef products may exceed $100 million annually.
Israel’s Kashrut law restrictions permits that only kosher meat, is allowed to be imported into the country. The Chief Rabbinate of Israel retains exclusive jurisdiction over the Kashrut law and kosher certification (including the recognition of kosher certifying bodies outside of Israel). These kosher certifications are costly, and unnecessarily drive up retail beef prices. While kosher certification poses a significant challenge to U.S. beef exporters, imports of non-kosher beef offal are permissible.
In recent years, Israel has progressively lifted BSE restrictions for bovine genetics and live cattle. Also a full Health Certificate for live cattle has been accomplished between the Animal and Plant Health Inspection Services (APHIS) and the Israeli Veterinary and Animal Health Services (IVAHS).Unfortunately, shipments at this point, despite strong local interest for U.S.-origin cattle for fattening are not sent. All shipments to Israel for feeder cattle arrive from Australia and from Eastern Europe. The annual consumption of feeder cattle in Israel is 200,000 heads. The Foreign Agricultural Service (FAS) Tel-Aviv estimates that 40 – 50 percent of this quantity can be supplied from the U.S.
The current Agreement on Trade in Agriculture Products (ATAP) regime provides U.S. food and agricultural products access to the Israeli market under one of three different categories: 1) unlimited duty-free access; 2) duty-free TRQs; or 3) preferential tariffs set at least 10 percent below Israel’s Most Favored Nation (MFN) rates. Approximately 90 percent of current U.S. food and agricultural product exports (by value) enter Israel duty- and quota-free due to Israel’s implementation of its WTO, ATAP, and U.S.-Israel Free Trade Agreement (FTA) commitments. However, the remaining U.S. food and agricultural product tariff lines (mostly value-added consumer products) face a complicated TRQ system and high tariffs for imports above the quota. The average tariff on imported food and agricultural products is about 24 percent; we find that there is a lack of quota fill-rate and license allocation data.
U.S. food exporters should focus on establishing their business relationship with a reliable and efficient importer and distributor. It is also important to identify the appropriate distribution and sales channels. U.S. exporters and Israeli importers could expand trade by strengthening confidence through visits of U.S. exporters/manufacturers to Israel, exploring opportunities firsthand, and by meeting relevant Israeli importers. The USDA/FAS is willing to facilitate exchange groups of U.S./Israeli food exporters to Israeli /U.S. food shows and food conventions, however, U.S. companies must be willing to show interest and responsive to their Israeli counterparts.
Large food retail chains like Shufersal or Ha’Shikma (Rami Levi) have their own purchasing/importing division to handle food imports directly. Major supermarkets are increasingly importing directly from foreign suppliers in order to reduce costs. U.S. suppliers should initially contact the purchasing/importing divisions of these large food chains, especially for new-to-market food products. A list of contacts for Israel’s major food supermarkets and importers is available from FAS Tel-Aviv Office upon request. U.S. exporters should consider the price sensitivity of their customers, their product requirements, purchasing policies, and expected purchase volumes.
General Consumer Tastes and Preferences
During the last decade, an increasing share of consumers preferred to buy their products through supermarket chains (58 percent) instead of through the traditional channels of open markets and small grocery stores.
The 2011 consumer protests over high living costs forced local food companies and retail chains to cut prices and, as a result, there is significant price competition in the food sector in Israel. In recent years, local consumers identify private labeling with lower prices and with a guaranteed product quality. Currently, private labeling sales are about nearly 10 percent of total food products sell in Israel and the trend is extending.
Israeli consumers have become extremely health-conscious in recent years and are adopting a more balanced diet, looking for “health-foods” as well as gluten free and sugar free products. Kosher food products offer the greatest potential for U.S. exporters, as most of the retails food chains and HRI sector buy only kosher food products.
In 2015, purchasing food online continued to gain popularity, as retailers improved their websites to a more user-friendly and smarter shopping experience. Due to consumers’ price-sensitivity, some websites, such as Shufersal, offer a button to present cheaper alternatives to products ordered, as well as the option to choose healthier alternatives in terms of calories, fat or sodium. In addition, retailers expanded their distribution zones thanks to the rising demand for online shopping for convenience reasons.
The annual average household consumption expense for food items, including fresh fruit and vegetables, stands at an average of $8,000. More and more people are willing to pay a premium for organic and healthier food items.
Import Tariff Protection
Over the years, the OECD has found that Israeli consumers are paying higher than global average prices for food and agricultural products. Israeli farmers and ranchers still continue to benefit from a number of official trade protectionist measures, which needlessly drive up local food prices. In this sense, many of the “2010 OECD Review of Agricultural Policies: Israel” report conclusions still hold; largely that, although government supports systems have fallen over time, not all market distorting policies have been removed. FAS Tel Aviv finds that Israel’s tariff profile for some agricultural products (i.e., dairy, meat, eggs, and some fruits and vegetables) continues to remain often prohibitively high.
All imported goods from all destinations, including food and agricultural products, are subject to the Israeli import licensing requirements. For products that benefit from TRQs, the Ministry of Agriculture and Rural Development and/or the Ministry of Economy will issue TRQ-specific import licenses, with zero or reduced duties. All imported food and agricultural products require an import license and or a sanitary/ phyto-sanitary certificate for public health reasons, in addition to other import requirements the Israeli authorities request (lab tests, Free Sale Certificate/GMP certificate, HACCP, certificate that the product was produced in the U.S. in order to enjoy the FTA and ATAP agreements terms between Israel and the U.S.). Import licenses are issued by the Israel Veterinary and Animal Health Services (IVAHS), the Plant Protection and Inspection Services (PPIS), and the Food Control Service (FCS).
Sanitary and Phyto-Sanitary and Regulatory Systems
Four agencies are involved in Israel’s food, livestock, and plant safety supervision. These include: 1) the FCS, which is part of the Ministry of Health (MoH); 2) the Standards Institute of Israel (SII); 3) IVAHS; and 4) the PPIS, (both IVAHS and PPIS are part of the Ministry of Agriculture (MOAG). The Food Control Service handles imported food licensing, it is notorious for the onerous requirements it places on high-value food product imports. Depending on the product, the Ministry of Economy (MoE) and the MoAG share responsibility for managing quota allocations under the U.S.-Israel FTA.
At the same time PPIS has also been slow in conducting pest-risk-assessments (PRA) on U.S.-origin products entering Israel for the first time. The Standards Institute of Israel is the agency responsible for the development of most product standards, compliance testing, product certification, and industry’s quality assurance systems. The Food Control Service enforces food and food labeling standards. Although Israel is receptive to international standards, it is increasingly turning to EU standards that often vary and conflict with U.S. standards. Israel requires that food and health products be registered with the MoH before they can be sold. U.S. Food and Drug Administration (FDA) approval for food and health care products is not mandatory, but Israeli importers prefer FDA approval as it helps accelerate the product registration process and import license approvals. Product registration normally takes from 4 to6 weeks if all documentation is in order.
In October 2013 new draft regulations announced by Israel's Ministry of Health called "Public Health Regulations (Food) (Novel foods) 5773 - 2013" (G/TBT/N/ISR/710) were notified to the WTO for comments by other members. The scope of the definition "novel food" is limited to food for human consumption only. The following are the major requirements introduced by the proposed regulations:
Registration of novel foods which must go through a risk assessment process before being approved
Prohibition of the manufacture, importation, storage or sale of a novel food unless it is registered in the official list of permitted novel foods.
Labeling of genetically modified pre-packaged food, fruits and vegetables.
According to the Israeli Ministry of Health, genetically engineered food is defined as food that contains an ingredient produced through biotechnology. Regulation 12 of the Israeli Novel Foods regulation describes the terms for exemptions from mandatory labeling, which is when the ingredient, containing a Genetically Modified Organism (GMO), does not contain DNA and protein in a level exceeding 0.9 percent of the ingredient.
The new regulation has not been approved yet by the Israeli Government. Once approved by the Israeli Government, the new regulation will come into effect one year after the publication in Israel’s Official Gazette.
Israeli permits the development and growth of genetically engineered organisms for research purposes in accordance with requirements established by subsidiary legislation. Although genetically engineered seed and crop production is not permitted for commercial purposes, GE products may be imported, sold, and used in the production of food and pharmaceuticals in Israel. While Israeli scientists usually support the development of biotechnology, environmental activists have expressed concerns regarding what they see as potential harm resulting from their use. Israel’s religious kashrut authority has determined that the use of GMO ingredients in food does not affect its kosher status because GMOs are only used in “microscopic” proportions.
Recommendations for U.S. Food and Agricultural Product Exporters
Exporters that adhere to following recommendations will stand a better chance of success in the Israeli imported agricultural and food products market:
A U.S. Certificate of Free Sale, obtained from the FDA, facilitates MoH import licensing procedures.
Given that Israel is adopting EU standards, U.S. exporters already familiar with the EU import requirements will have a better likelihood of success in gaining entry to the Israeli market.
Products certified as being manufactured under Good Manufacturing Practices (GMP) or HACCP will have greater ease of access to the Israeli market.
Listing on the FDA’s list of registered facilities is viewed favorably by Israel’s import licensing authority. It provides confirmation that the exporting manufacturer’s facility has been inspected by the FDA and or USDA.
Products must have a minimum shelf life of 6 months.
Only facilities exceeding a minimal production capacity and export experience should consider exporting to Israel.
Kosher certification is an advantage and sometimes a necessity in the local market.
Post Contact and Additional Information:
USDA\FAS - Office of Agricultural Affairs, U.S. Embassy Tel Aviv
Tel: 972-3-5198671; Fax: 972-3-5102565
E-mail: email@example.com; Ronit.Averbuch@fas.usda.gov
USDA\FAS GAIN Reports http://gain.fas.usda.gov/Pages/Default.aspx
The Central Bureau of Statistics (CBS) www.cbs.gov.il/reader/?MIval=cw_usr_view_Folder&ID=141
Food Control Service, Ministry of Health www.health.gov.il/english/Pages/HomePage.aspx
Israel Veterinary and Animal Health Services (IVAHS) www.vetserveng.moag.gov.il/vetserveng
Ministry of Agriculture P.O. Box 12 50250, Bet Dagan, Israel www.ppiseng.moag.gov.il/ppiseng/
Standards Institution of Israel www.sii.org.il
Plant Protection and Inspection Service ● Tel: 972-3-9681560 ● Fax: 972-3-9681582, P.O. Box 78 50250, Bet Dagan, IsraelPrepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Israel Agribusiness Trade Development and Promotion