reLAKSation 31.
Skirting the MIP: The NSL's trade and industry advisor, Jan Petter Lindsetmo, told Intrafish that exporters may be trying to find ways around the restrictions laid down by the EU salmon agreement. He said that this is tragic since it would undermine the agreement between Norway and the EU. Mr Lindsetmo believes that it will ruinous, not just for any exporter detected of bypassing the MIP, but for the whole industry, since the alternative would be the imposition of countervailing duties and other sanctions.
These latest claims have been fuelled by reports in the press that Norwegian exporters are trying to find ways to circumvent the salmon agreement. For example, Dagens Naeringsliv has listed alternative ways in which salmon is being exported to the EU. These include:
- Sales agreements with European customers that involve a mix of different salmon.
- Buying controls, based on a complex calculation formulated for smoked salmon products.
- Selling a mix of different species in the same consignment.
- Sales to European based subsidiaries of the exporting companies.
Such attempts to skirt the MIP and the salmon agreement are not new. As soon as the agreement came into force, some exporters began to look at ways to maintain their business with the EU. Yet, it is only now that salmon prices have fallen down to near the MIP, that such possibilities have again been highlighted.
As Mr Lindsetmo has indicated, the Norwegian authorities and industry organisations have frowned on such alternative practices. They believe that they are not considered to be within the spirit of the agreement and therefore should be discouraged.
Unfortunately, such attempts to bypass the MIP have clouded the views of the industry bodies. This has meant that any proposal to help overcome the constraints of the salmon agreement, have been perceived to be outside the spirit of the agreement, even if they are not.
Whilst there may be a question as to whether the various ways to circumvent the agreement highlighted by Dagens Naeringsliv are either legal or ethical, there is at least one alternative route for selling salmon into the EU, which is.
The EU salmon agreement is very specific about the constraints controlling the export of salmon from Norway to the EU. In addition to the minimum price, it also dictates the maximum export volume and more importantly, a precise range of salmon products.
These can be listed under the specific customs codes and these are as follows:
0302 1200 21 Fresh or chilled whole fish
0302 1200 22 Fresh or chilled gutted head-on
0302 1200 23 Fresh or chilled gutted headless
0302 1200 29 Other fresh or chilled, inc steaks
0303 2200 21 Frozen whole fish
0303 2200 22 Frozen gutted head-on
0303 2200 23 Frozen gutted headless
0303 2200 29 Other frozen, inc steaks
0304 1013 21 Fresh or chilled fillets 300g plus
0304 1031 29 Fresh or chilled fillets less than 300g
0304 2013 21 Frozen fillets 300g plus
0304 2013 29 Frozen fillets less than 300g
Had the salmon agreement not been in force then these salmon products would be subjected to a 2% import duty. The salmon agreement adds a further Euro 0.32/kg anti-dumping duty and a 3.8% countervailing duty as well as fixing the minimum price. This ranges from Euro 2.925/kg for whole fish to Euro 6.5/kg for the small fillets.
However, the aforementioned presentations are not the only way that salmon can be exported from Norway to the European market. It is both possible and legal to export smoked salmon products and as they are listed under a totally different customs code; 0305 4100 10, smoked salmon falls outside the constraints of the EU salmon agreement. Exporters can therefore openly trade in smoked salmon with Europe, selling as much as they like and at whatever price they like without breaking the terms of the salmon agreement.
Unfortunately, trade in smoked salmon may not be as desirable as that of other salmon products. This is because there is already a flourishing trade in smoked salmon within the European marketplace. Salmon is widely smoked throughout Europe in Scotland, Ireland France and Denmark and therefore the market is already extremely competitive. In common with fresh salmon, the smoked product is becoming extremely ubiquitous and this is reflected in the price.
However, exporters considering trade in smoked salmon as a way of avoiding the salmon agreement may well be deterred by the 13% duty on smoked salmon imported into the European Community. This level of duty may be sufficiently high to make exports of Norwegian smoked salmon uncompetitive in the European marketplace.
Yet, any awareness of this 13% duty may also deter investigation of ways to exploit the constraints of the salmon agreement. At least two years ago, the Fisheries newspaper Fiskaren discussed the potential for further processing of salmon in Norway. They concluded that whilst fresh whole salmon accounted for 70% of salmon exports, almost all of this fish has been processed one way or another before it is consumed. However, only 15% of Norwegian salmon is actually processed in the country. Most of this processing is just simple fillet preparation.
Back in 1999, Fiskaren highlighted the following reasons why more processing is not undertaken in Norway.
- Lack of tradition in manufacturing raw materials.
- Lack of well-known trade names to sell the goods.
- High costs, because Norway has to pay an export fee of 13% on processed fish, such as smoked salmon, to the EC.
- Not enough knowledge about the market.
- Lack of people to take this type of job.
Clearly, the most significant of these is the lack of market knowledge since a wider awareness of the market and market opportunities would have led to the identification of the most effective way to increase exports of Norwegian salmon without infringing the terms of the EU salmon agreement.
In addition to the export codes listed above, there is one other, which applies to imports of salmon into the EU marketplace. This is the code 1604 1100 30, which covers manufactured and processed products using Atlantic salmon. This code is assigned to a huge range of processed products, too numerous to mention and would include those products not yet even conceived.
The simplest example of the added value processing, which is encompassed by this code is canned salmon. Some Norwegian companies have already recognised this market potential and are exporting canned salmon to the UK. In the UK alone, the market for canned salmon exceeds 24,000 tonnes a year, most of which comes from Canada and Alaska. Yet, despite this market dominance, Norwegian salmon is making inroads into this market, either canned in Norway or Denmark.
Of course, should every farming company start to can salmon, the market would soon become saturated. There are many other potential products which could find a place in the European market. Some other examples might include salmon soup, salmon in sauce or even the most complex recipe dish.
The advantages of such added value production is that this is the most rapidly growing sector of the market, it is a market area outside the salmon agreement and most significantly, it only carries an import duty of 5.5%.
Clearly, there are obstacles to added value product development, but these can be overcome, unlike the on-going restrictions imposed by the salmon agreement.