Finance Minister Yuval Steinitz on Thursday approved an exemption of import duties on butter and potatoes.“The decision to lift the customs duty was taken in view of the increased shortage in the dairy market and in response to the Agriculture Ministry’s request to the Israel Tax Authority to cancel all customs duties on imported, industrially produced butter in an effort to reduce the shortage in the milk market,” the ITA said in a statement.Following the decision, import duties will be lifted for an unlimited amount of butter for packages of over one kilogram until the end of January 2011. Imported butter is currently subject to a 160 percent customs duty.Throughout this year the ITA has been monitoring signs of a shortage in the milk market and had a duty exemption approved in July on the import of butter for packages of over one kg. for a limited quantity of 400 tons.The government levies customs duties on butter and other dairy products to protect local dairy farmers and dairies. Since Israeli cows yield less milk during the hot summer, the extra milk that is produced during the winter is made into milk powder, to be used throughout the year.Special cooling systems help improve the cows’ conditions and milk yield. However, this year, as a result of severe heat during the summer months and a relatively warm fall, dairy farmers have encountered difficulties in producing enough to meet demand.The dairy market is protected and allows very limited imports, which is under tight supervision by the Industry, Trade and Labor Ministry. Only about 550 tons are imported annually, in a market of some 9,000 tons of local production.Milk products make about 9% of the total agricultural products market value. Israel has a total annual output of approximately 1,217 million liters of cow milk, 9.0 million liters of sheep milk and 11.1 million liters of goat milk.Steinitz also approved an exemption of a customs duty of NIS 1.90 per kg. on the import of potatoes in response to signs of a shortage in local production in recent months.The exemption is limited to 5,000 tons of potato imports from all over the world.Last week, Steinitz signed a directive to cancel the customs duty on tomatoes in response to a sharp rise in tomato prices in September caused by summer heat waves. The customs duty on tomatoes of NIS 0.90 per kg. will be canceled until the end of 2010 and is limited to the import of 4,000 tons of tomatoes. Canceling the import duty is expected to lower prices by making it easier to import tomatoes and reducing the shortage caused by weather damage.