WT/TPR/S/65 Trade Policy Review
Page 24
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. Iceland has continued to pursue a liberal trade policy since its first Review in 1994, drawing
the benefits from its trade links.  The average MFN tariff rate is low, about 4%, with over two thirds
of tariff lines duty free;  the entire tariff was bound as a result of the Uruguay Round negotiations.
Iceland has largely shunned the use of non-tariff trade barriers and has not used contingency measuressince the establishment of the WTO.
2. Detracting from its liberal trade policy, protection in the agricultural sector remains high, the
average MFN tariff rate standing at 10.8% compared to 2.5% for manufactured goods.  Moreover, a
number of agricultural products are subject to licensing requirements and, in some cases, importation
is banned for sanitary and phytosanitary reasons.  Tariff quotas cover 320 agricultural products but inpractice are used only for products under minimum access commitments and for plants and flowers.
For these products, out-of-quota rates are high but seldom used as imports are often allowed at in-
quota or lower tariff rates.
3. Regional initiatives, particularly within the framework of the European Economic Area
(EEA), have given strong impetus to trade liberalization over the past six years.  Thus, the averagetariff on products from EEA partners has fallen to 1.8%;  all manufacturing products from preferential
sources enter duty free but liberalization of trade in unprocessed agricultural products has generally
been limited.  Iceland, as an EFTA member, has continued to expand its network of free-trade
agreements with eastern European and Middle-Eastern countries.  Since 1997, Iceland has used the
New European Rules of Origin, applying a system of cumulation that covers several free-trade
agreements.
4. Iceland's standards and technical regulations follow those of the EEA;  certification and test
data from other EEA and EFTA countries are accepted.  In accordance with the EEA Agreement,
Iceland pursues mutual recognition agreements in relation to conformity assessment, equivalent to
those already finalized by the European Union.  Competition policy also follows EEA guidelines,
enforcement taking place at the domestic, EFTA or EEA level.  Iceland's government procurement
rules are designed to conform to EEA standards;  it is not a member of the WTO GovernmentProcurement Agreement but is negotiating its accession.  Intellectual property legislation has been
amended in light of Iceland's obligations stemming from both the EEA and WTO Agreements.  Patent
protection to pharmaceutical products is fully granted since 1996. Copyright protection was extended
in 1996 to life plus 70 years.  Enforcement of intellectual property rights includes both civil and penal
procedures, and may result in seizure of imports, fines, and imprisonment.
5. Iceland has few measures specific to exports, other than the usual promotion activities and
supply controls on lamb meat.  With the exception of agriculture support programmes are not sector-
specific  Moreover, the network of support programmes has been streamlined and simplified in recent
years and increasingly limited to the co-financing of projects, especially in research and development.
A self-financing New Business Venture Fund was created in 1997, to provide risk capital, especiallyfor innovation-related projects.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Customs procedures
6. Imported goods must be accompanied by an import declaration specifying their customs
value;  an invoice;  a bill of lading or a transport document;  a certificate of origin, when preferentialIceland WT/TPR/S/65
Page 25
customs treatment is requested;  and an import licence or certificate when required.  Imports of goods
eligible for duty-free importation under preferential agreements must also be accompanied either by a
movement certificate, or by an invoice bearing the exporter's declaration made out by an approved
exporter.1  For consignments of a value not exceeding ECU 6,000, an invoice bearing a declaration
made out by any exporter is sufficient.
7. A new import clearance system, the Electronic Data Interchange (EDI), was introduced in the
autumn of 1992 and is increasingly applied.  This system is completely automatic and does not require
the physical presence of importers.  Some 95% of import consignments (some 70% of total
consignments) are handled using this system.  Clearance generally takes a few minutes if the EDI is
used.
8. Importers may appeal against  customs decisions to the local customs director if they believe
that customs value, tariff heading or duties are wrongly levied by customs officers.  They can re-
appeal to the State Customs Board, which gives the final verdict at the administrative level.
9. Preshipment inspection is not used in Iceland.2
(ii) Tariffs
10. Iceland adopted the Harmonized Commodity Desc ription and Coding System (HS System) on
1 January 1988 through Law No. 96/1987, which amended Customs Law No. 55/1987.  Amendments
to the HS System entered into force in Iceland on 1 January 1996.3  The Customs Law, which contains
the tariff, was amended a number of times, including by Law 87/1995 enacted due to Iceland’s
membership in the WTO.
11. Iceland has maintained a liberal trade policy re flected in low tariffs, with the exception of
agriculture.  Most imports enter duty free;  the average most favoured nation (MFN) rate was 4%
in 1999 (including only in-quota rates).  However, other charges on imports may be high in somecases (section (v) below).  For the most part, tariff revenue comes from imported manufactured items,
mainly from articles of clothing and footwear, fu rniture, and electrical machinery and equipment.
12. Iceland’s tariff has 7,540 lines at the eight-digit HS level. The tariff schedule is published
bi-annually, and is available on the Internet.
4  Rates may be subject to ad hoc amendments, through
Regulations issued by the Ministry of Finance; importers have access to the latest tariff schedule via aCustoms on-line service.
13. Iceland accords at least MFN treatment to all its trading partners.  The entire tariff is bound, at
an average rate of 20.4% (when Uruguay Round reductions are fully implemented, in 2000).  Bound
rates range from zero for some manufactured products to 216% for dairy products and to a peak of
482% for fruit and vegetables (Tables III.1 and AIII.1).  Tariffs are applied ad valorem  except for out-
of-quota rates on the 320 lines for which Iceland maintains tariff quotas.  In practice, the out-of-quota
rates rarely apply, being limited to products where Iceland has minimum access commitments
(MACs) under the WTO Agreement on Agriculture and to in-season imports of vegetables.
                                                     
1 Approved exporters are those authorized by the customs authority of the exporting country to make
out declarations stating that goods are of preferential origin.
2 WTO document G/PSI/N/1/Add.4, 9 October 1996.
3 Notice No. 127/1995, amending Annex I to the Customs Law No. 55/1987.
4 Internet address:  http: www.tollur.is.WT/TPR/S/65 Trade Policy Review
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Table III.1
Summary analysis of Iceland's bound tariff, 1995-2000a
1995 1999 2000
Analysis Base
tariff rateb
(%)Bound
tariff ratec
(%)Range
(%)CV Standard
deviationFinal
tariff rate (%)
A.  Excluding out-quota rates
Total 32.3 21.4 0-482 2.04 43.6 20.4
By WTO definition   c
Agriculture 99.1 71.5 0-482 1.12 80.2 66.0
Coffee and  tea, cocoa, sugar,
etc.88.3 59.5 0-313 0.94 55.7 53.8
Fruit and vegetables 105.6 80.5 0-482 1.24 99.9 75.5
Tobacco 34.8 20.5 10-29 0.24 5.0 17.7
Grains 225.8 131.7 0-204 0.75 99.3 112.9
Live animals and products
thereof150.8 135.8 40-375 0.56 75.9 132.8
Dairy products 172.8 172.8 18-216 0.29 50.9 172.8
Manufactures 17.3 10.0 0-175 1.35 13.5 10.0
Fish and fishery products 22.2 8.5 0-175 3.76 32.0 8.5
By sector  d
Agriculture and fisheries 86.6 60.7 0-375 1.63 99.0 55.6
Mining 1.9 1.6 0-35 2.69 4.3 1.6
Manufacturing 29.7 19.4 0-324 1.91 37.1 18.6
By stage of processing
Raw materials 47.1 32.5 0-482 2.37 76.9 29.6
Semi-processed products 12.5 7.6 0-324 3.55 27.0 7.0
Fully processed products 39.5 26.3 0-324 1.48 39.0 25.4
B  Excluding in-quota rates e f
Total 43.2 30.1 0-590 3.17 95.5 28.6
By WTO definition   c
Agriculture 158.0 118.6 0-590 1.22 145.3 110.7
Coffee and  tea, cocoa, sugar,
etc.105.1 71.0 0-418 0.99 70.3 64.2
Fruit and vegetables 138.1 107.4 0-503 1.15 123.5 101.2
Tobacco 34.8 20.5 10-29 0.24 5.0 17.7
Grains 225.8 131.7 0-204 0.75 99.3 112.9
Live animals and products
thereof446.6 373.7 250-470 0.56 70.9 359.6
Dairy products 540.0 471.9 48-590 0.29 141.1 458.3
Manufactures 17.3 10.0 0-175 1.35 13.5 10.0
Fish and fishery products 22.2 8.5 0-175 3.76 32.0 8.5
By sector  d
Agriculture and fisheries 113.9 82.3 0-580 1.52 125.3 76.0
Mining 1.9 1.6 0-35 2.69 4.3 1.6
Table III.1 (cont'd)Iceland WT/TPR/S/65
Page 27
1995 1999 2000
Analysis Base
tariff rateb
(%)Bound
tariff ratec
(%)Range
(%)CV Standard
deviationFinal
tariff rate (%)
Manufacturing 39.8 27.5 0-590 2.61 71.9 26.3
By stage of processing
Raw materials 60.9 43.4 0-580 2.14 92.8 40.0
Semi-processed products 12.5 7.6 0-324 3.55 27.0 7.0
Fully processed products 55.6 39.0 0-590 2.40 93.6 37.5
a Iceland Schedule LXII of January 1997 including GATT concessions prior to Uruguay Round.
b For agricultural products subject to tariff quotas only ad valorem  duties were used.
c Tariff  reduction implemented in six annual instalments for agricultural products (except for HS 1504 and 1603-1605, which 
have a five-year phasing out), and five annual instalments for manufacturing products.
d In-quota rates taken from Section I.B Column 4 of Schedule LXII-Iceland [or 32% of base rate of duty].
e Out-of-quota rates taken from Section I.A Column 3b of Schedule LXII-Iceland.f ISIC (Rev.2) classification.
Note: CV =  coefficient of variation.
Source : WTO Secretariat estimates, based on data provided by the schedule of commitments, LXII-Iceland;  and data provided by the 
Icelandic authorities.
14. Specific out-of-quota duties on 320 HS eight-digit lines range from ISK 4 to ISK 1,462 per
kg., and ISK 50 to ISK 480 per piece.5  The average MFN tariff when using the ad valorem
equivalents (AVEs) of specific out-of-quota duties, rises to 4.3%.  The maximum  AVE for out-of-quota
rates was 421% in 1999.  According to the authorities, specific duties are maintained mainly to
counter subsidized agricultural exports.  Due to th e limited use of out-of-quota rates, in practice, the
ad valorem  MFN average of 4% is the more appropriate indicator of nominal protection.  The simple
average MFN rate on industrial imports was 2.5% in 1999, while the average for agricultural imports,
based on WTO classification, was 10.8%.  In agriculture, averages range to high levels when AVEs
are included:  45.2% for dairy products, 17.1% for fruit and vegetables;  the aggregate average tariff
was 13.5% (Tables III.2 and AIII.2).
15. In 1999, some 71.9% of tariff lines were duty free on an MFN basis (Chart III.1).  Some
73.5% of tariff lines for manufactured products bore a zero MFN rate (Chart III.2).  The remaining
manufactured items were subject to eight different tariff rates, with an average tariff of 9.6% or less,
down from 15% at the time of the last Review.  Only three lines, medicated sweets, were subject to a
maximum tariff rate of 20% (Chart III.3).6  Manufacturing imports subject to over three-quarters of
Iceland's imports enter duty free.
                                                     
5 Although they are specified in the tariff schedule only in specific terms, out-of-quota rates have been
bound in the WTO both at ad valorem  and specific rates, the higher of the two acting as the binding rate.
6 HS lines 3003.9001, 3004.5004, and 3004.9004.WT/TPR/S/65 Trade Policy Review
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Table III.2
Summary analysis of Iceland's tariff, 1998-99
1998 1999
Freq.
No. linesSimple avg.
applied tariff
(%)Importsb
(c.i.f.)
(US$ million)Simple avg.
MFN tariff
(%)Simple avg.
EEA tariffa
(%)Range
MFN tariff
(%)Std-dev
MFN tariff
(%)CV
MFN tariff
A.  Excluding out-quota rates
Total 7,540 4.1 2,438.6 4.0 1.7 0-78 8.6 2.2
By WTO definition   c
Agriculture 1,391 10.7 193.4 10.8 9.2 0-78 16.0 1.5
Coffee and  tea,
cocoa, sugar, etc.347 7.4 85.9 7.7 4.3 0-55 14.6 1.9
Fruit and
vegetables227 12.3 38.0 12.3 12.3 0-78 17.1 1.4
Tobacco 12 22.2 13.8 20.3 18.1 10-29 5.8 0.3
Grains 31 19.5 8.9 19.5 19.5 0-55 26.8 1.4
Live animals and
products thereof178 26.3 1.0 26.3 25.9 0-30 9.7 0.4
Dairy products 33 30.0 0.7 30.0 22.7 30-30 0.0 0.0
Manufactures 6,133 2.5 2,131.3 2.5 0.0 0-20 4.5 1.8
Fish and fishery
products371 1.7 83.3 1.7 0.0 0-10 3.8 2.2
By sector d
Agriculture and
fisheries406 7.9 48.0 7.5 7.3 0-55 14.1 1.9
Mining 118 0.0 19.7 0.0 0.0 0-0 0.0  -
Manufacturing 7,015 3.9 2,370.9 3.9 1.4 0-78 8.2 2.1
By stage of processing
Raw materials 923 4.1 156.1 4.0 3.7 0-55 10.8 2.7
Semi-processed
products2,280 0.8 336.1 0.9 0.6 0-55 5.6 6.2
Fully processed
products4,337 5.8 1,946.5 5.7 1.8 0-78 9.0 1.6
B.  Excluding in-quota rates e f
Total 7,540 4.5 2,438.6 4.3 2.1 0-421 16.7 3.9
By WTO definition   c
Agriculture 1,391 15.6 193.4 13.5 12.7 0-421 38.4 2.8
Coffee and  tea,
cocoa, sugar, etc.347 9.5 85.9 11.3 9.3 0-406 27.9 2.5
Fruit and
vegetables227 33.6 38.0 17.1 17.7 0-253 31.4 1.8
Tobacco 12 22.2 13.8 20.3 18.1 10-29 5.8 0.3
Grains 31 19.5 8.9 19.5 19.5 0-55 26.8 1.4
Live animals and
products thereof178 54.9 1.0 95.0 95.0 0-421 133.5 1.4
Dairy products 33 49.8 0.7 45.2 45.2 3-188 52.5 1.2
Manufactures 6,133 2.5 2,131.3 2.5 0.0 0-20 4.5 1.8
Table III.2 (cont'd)Iceland WT/TPR/S/65
Page 29
1998 1999
Freq.
No. linesSimple avg.
applied tariff
(%)Importsb
(c.i.f.)
(US$ million)Simple avg.
MFN tariff
(%)Simple avg.
EEA tariffa
(%)Range
MFN tariff
(%)Std-dev
MFN tariff
(%)CV
MFN tariff
Fish and fishery
products371 1.7 83.3 1.7 0.0 0-10 3.8 2.2
By sector d
Agriculture and
fisheries406 23.1 48.0 10.7 10.7 0-253 26.8 2.5
Mining 118 0.0 19.7 0.0 0.0 0-0 0.0  -
Manufacturing 7,015 3.7 2,370.9 4.0 1.6 0-421 15.9 4.0
By stage of processing
Raw materials 923 10.6 156.1 5.8 5.7 0-406 23.3 4.0
Semi-processed
products2,280 0.8 336.1 0.9 0.6 0-55 5.6 6.2
Fully processed
products4,337 5.5 1,946.5 5.8 2.1 0-421 18.6 3.2
Note: Unless otherwise specified, the data refer to non-preferential applied MFN 1999 duty rates in effect as of August 1999 inc luding 
all seasonal tariff lines for the whole year.
a Preferential rates were granted to members after Iceland joined the European Free Trade Association (EFTA), and its further 
participation to the European Economic Area.  Preferences are also granted under the free-trade area with Greenland and the 
Faeroe Islands.
b Import data provided by the Icelandic authorities.c 16 tariff lines are excluded from both WTO agriculture and manufactures definitions (essentially petroleum products).  This 
explains why the import total is higher  than the sum of WTO agriculture and manufacturing.
d ISIC (Rev.2) classification.e A number of products relevant to Iceland's current access commitments are no longer subject to any quota system upon import.  
These have been taken into account in the analysis.  Only applied rates of duty that are equal to or lower than the correspondi ng 
in-quota rates are applied (see WTO Notification G/AG/N/ISL/12 of November 1998).
f A number of out-quota lines for which ad valorem  equivalents could not be estimated were excluded from the analysis.  
Estimated ad valorem  equivalents based on unit price 1998 (Comtrade database).
Source : WTO Secretariat estimates, based on data provided by the Icelandic authorities.
16. Although the percentage of agricultural lines with duty-free treatment is lower than for
manufacturing (53.1% of lines on a MFN basis in 1999) , in terms of value almost 75% of agricultural
imports in 1998 entered Iceland free of duty.  Howe ver, some agricultural imports are hindered by
strict licensing requirements.  The highest ad valorem  tariff rate in agriculture in 1999 was 78%
(disregarding out-of-quota rates), applied to only three tariff lines.7  Other tariff rates applying to
agriculture fell under four broad bands:  10%, 20%, 30% and 55% (Chart III.4).
                                                     
 7 These items are potato chips (lines 2004.1002 and 2005.2002), and other potato products
(line 2001.9004).WT/TPR/S/65 Trade Policy Review
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(0.9%)(4.0%)(5.6%)(12.6%)(71.9%)
(5.0%)
01,0002,0003,0004,0005,0006,000
Duty free >0- 5 >5-10 >10-20 >20-50 >500102030405060708090100Chart III.1
Frequency distribution of  MFN tariff rates, 1999a
Number of tariff lines Per cent
Cumulative per cent
Number of lines (% of total)
Based on analysis of all tariff lines excluding out-of-quota rates in agriculture.
WTO Secretariat calculations, based on data provided by the Icelandic authorities.a
Source :
Share of lines in per cent
The total includes the double counting of tariff quota lines (320 in-quota tariffs and 320 out-of-quota tariffs) and seasonal r ates.    
Average tariff rate; based on WTO estimated ad-valorem equivalents for out-of-quota specific rates
WTO Secretariat estimates, based on data provided b y the Icelandic authorities (Au gust 1999).Chart III.2
Composition of Icelandic tariff, 1999
Total lines: 1,978 a
a
b
Source :(a) Agricultural sector [HS 01-24] (b) Manufacturing sector [HS 25-97]
In-quota
(ad valorem)
16.2%Out-quota
(specific rates)
16.2%
Total lines: 5,882Duty free
73.5%Other
ad valorem
26.5%
Duty free
53.1%
Other ad valorem
14.5%EEA
Duty free
60.8%EEA
Duty free
100.0%23.3%b72.8% bIceland WT/TPR/S/65
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010203040506070
25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 78 80 82 84 86 88 90 92 94 96Per cent
Average 1999
applied rate 
(2.5%)
HS       Description
25         Salt; sulphur; earths and stone, etc.
26         Ores, slag and ash
27         Mineral fuels, mineral oils, etc.
28         Inorganic chemicals; organic or              inorganic compounds of precious             metals, etc.
29         Organic chemcials
30         Pharmaceutical products31         Fertilizers    
32         Tanning or dyeing extracts etc. 
33         Essential oils and resinoids;             perfumery, cosmetic or toilet             preparations
34         Soap, organic surface-active 
             agents washing prep., etc.    35         Albuminoidal substances;             modified starches; glues, etc.
36         Explosives; pyrotechnic products;
             matches, etc37         Photographic or cinematographic 
             goods
38         Miscellaneous chemical products39         Plastics and articles thereof40         Rubber and articles thereof
41         Raw hides and skins and leather
42         Articles of leather, etc.43         Furskins and artifical fur; 
             manufactures thereof
44         Wood and articles of wood, etc.45         Cork and articles of cork46         Manuf. of straw, of esparto, etc.   
47         Pulp of wood or of other 
             fibrous cellulosic materialHS       Description
48         Paper and paper board, etc.
49         Printed books, newspapers, etc.
50         Silk
51         Wool; fine or coarse animal             hair, etc.52         Cotton
53         Other vegetable textile fibres 
54         Man-made filaments   55         Man-made staple fibres 
56         Wadding, felt and non-wovens;
             special yarns; twine, cordage, etc.57         Carpets; other textile floor             coverings
58         Special woven fabrics; lace, etc.
59         Impregnated, coated, covered or             laminated textile fabrics, etc.60         Knitted or crocheted fabrics    
61         Articles of apparel and clothing
             accessories, knitted or crocheted62         Articles of apparel and clothing
             accessories, not knitted, etc.
63        Other made-up textile articles;             sets, worn clothing, etc.64         Footwear, gaiters, etc.
65         Headgear and parts thereof
66         Umbrellas, walking-sticks, etc. 67         Prepared feathers and down, etc.
68         Articles of stone, plaster, etc.
69         Ceramic products70         Glass and glassware71         Natural or cultured pearls,
             precious or semi-precious
             stones, 
precious metals, etc.HS       Description
72         Iron and steel
73         Articles of iron and steel
74         Articles of iron and steel
75         Nickel and articles thereof76         Aluminium etc. 77         unassigned chapter.
78         Lead and articles thereof   
79         Zinc and articles thereof 80         Tin and articles thereof
81         Other base metals, etc.
82         Tools, implements, cutler             spoons and forks, etc.83         Misc. articles of base metals
84         Nuclear reactors, boilers,
             machinery, etc.85         Electrical machinery and             equipment, etc.
86         Railway or tramway 
             locomotives, etc.87         Vehicles other than railway
             or tramway rolling-stock; etc.
88         Aircraft, spacecraft, etc.89         Ships, boats, etc.90         Optical, photographic, etc. 
             apparatus
91         Clocks and watches, etc.92         Musical instruments, etc.
93         Arms and ammunition, etc.
94         Furniture, bedding, etc.95         Toy, games, etc.96         Miscellaneous manuf. 
             articles
97         Works of art, antiques, etc.Chart III.3
Tariffs on manufactured products by HS chapter, 1995-2000
Source:  WTO Secretariat calculations, based on data provided by the Icelandic authorities; and Schedule LXII - Iceland, 1997.Base rate, 1995Applied MFN 1999
Final rate, 1999-2000
Note:      No entries for HS Chapter 77. In manufacturing the bound 1999 rate is the final rate.WT/TPR/S/65 Trade Policy Review
Page 32
Chart III.4                                             
Tariffs on agricultural products by HS chapter, 1995-2000
050100150200250300350400450
01 02 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Per cent
Source :  WTO Secretariat calculations, based on data provided by the Icelandic authorities; and Schedule LXII - Iceland, 1997.Average 1999
applied rate
 (9.3%) 
HS
01
0203
04 
0506070809
10
1112131415
16
17181920
21
222324Description
Live animals
Meat and edible meat offalsFish and crustaceans, molluscs and other aquatic invertebrates
Dairy produce, birds eggs, natural honey, edible products of animal origin  
Products of animal origin, n.e.s.Live trees and other plants;  bulbs, roots and the like;  cut flowersEdible vegetables and certain roots and tubersEdible fruit and nuts;  peel of citrus fruits or melonsCoffee, tea, mate and spices
Cereals
Products of the milling industry;  malt;  starches;  wheat glutenOil seeds and oleaginous fruits;  miscellaneous grains, seeds and fruitLacs;  gums, resins and other vegetable saps and extractsVegetable plaiting materials;  vegetable products n.e.s.Animal or vegetable fats and oils and other cleavage products;  prepared edible fats; etc.
Preparations of meat, or fish or of crustaceans, molluscs or other aquatic invertebrates
Sugars and sugar confectioneryCocoa and cocoa preparationsPreparations of cereals, flour, starch or milk;  pastrycooks' productsPreparations of vegetables, fruit, nuts or other parts of plants
Miscellaneous edible preparations
Beverages, spirits and vinegarResidues and waste from the food industries;  prepared animal fodderTobacco and manufactured tobacco substitutes
Note:      The HS definition of agriculture is different from that of the WTO. The absence of entries for some HS chapters in 
               agriculture, is due to duty-free applied rates. Base rate, 1995Applied MFN 1999
Bound rate , 1999
Final rate , 2000Iceland WT/TPR/S/65
Page 33
17. Partly as a result of the significant number of duty-free lines, the spread of tariff rates remains
wide, although it has been shrinking in the past few years, particularly in manufacturing.  For
manufactured products, the standard deviation for the tariff was 4.5% in 1999, down from 7.2%
in 1993.  The dispersion of tariffs on agricultural items is much larger, with a standard deviation
exceeding 16%;  however, manufacturing has a higher , although narrowing, relative tariff dispersion,
confirmed by the drop of the disper sion index from 194.6 in 1993 to 180 in 1999.8
18. Tariff escalation is present in some industries,  mainly textiles and leather;  food, beverages
and tobacco;  wood and wooden furniture;  and basic metal industries.  Average tariffs on finished
products in these industries are at least four times higher than the tariff on raw materials.  Tariff
escalation is less evident or non-existant in other industries.  Imports of semi-processed goods face, in
general, lower tariffs than finished goods or raw materials (Chart III.5).9
051015
Food,
beverages and
tobaccoTextile and
leatherWood and
wooden
furniturePaper, printing
and publishingChemicals Non-metal
mineral
productsBasic metal Fabricated
metal
products,
machineryOther
manufacturingPer cent
First stage of  processing Fully processed Semi- processedChart III.5
Tariff escalation by 2-digit ISIC industry, 1999a
Based on analysis of all tariff lines excluding out-of-quota rates in agriculture.
WTO Secretariat calculations, based on data provided by the Icelandic authorities.a
Source :
19. The Minister of Finance allows import duties on raw materials for the domestic production of
industrial goods to be reduced or waived, on a MFN basis, if the duties on identical industrial goods
manufactured abroad are equal to or lower than th ose on the raw materials.  Waivers can also be
                                                     
8 The dispersion index refers to the coefficient of variation, which measures relative dispersion by
dividing the standard deviation, which measures absolute dispersion, by the average tariff rate.  The larger thecoefficient of variation, the greater the degree of dispersion.  A tariff schedule with a low degree of dispersion is
generally assumed to cause less distortion in the allocation of resources.
9 The difference between the 5.8% obtained for finished products, using the 2-digit ISIC industry
classification and the 2.5% obtained using the WTO definition of manufacturing is explained by the inclusion inthe ISIC definition of a number of industries, such as food processing and tobacco, which are classified underthe WTO as agricultural activities.WT/TPR/S/65 Trade Policy Review
Page 34
granted on duty on machinery, equipment, electrical goods, and other accessories and materials for
repairs intended for use in aircraft or in direct connection therewith.  These waivers can be granted to
a specific company or in general, and are advertised.  If duty has been refunded or waived on the raw
materials, the completed product is not eligible for pr eferential treatment.  No information is available
on the fiscal revenue forgone in recent years as a result of such waivers.
(iii) Tariff preferences
20. Tariff preferences are granted to European Union (EU) countries in accordance with the EEA
Agreement, except for a few cases where preferences are based on the bilateral free-trade agreement
between Iceland and the EU;  to EFTA members;  and to the Faroe Islands and Greenland.  EFTA
preferences also apply to goods from countries th at have a free-trade agreement with EFTA.  For
industrial products these preferences are the same as those granted to EFTA-EU members, while inagriculture and fisheries preferences are covered by the respective bilateral agreements between
Iceland and each preferential partner.
21. Preferential duty-free rates apply to all but 10% of Iceland's tariff lines.  Tariffs on trade in
manufactured goods with EFTA and the EU have been completely eliminated.  Although agricultural
products have, in principle, been excluded from those agreements, some 60.8% of tariff lines aregranted duty-free access on a preferential basis (an additional 10% of agricultural tariff lines enter
duty free on an MFN basis).  Preferential treatment is also extended on 44 eight-digit HS headings
subject to tariff quotas (agricultural products, mainly buttermilk, curdled milk and yoghurt containing
cocoa, cocoa powder, gingerbread and other biscuits, and various mineral waters), which are subject
to lower in-quota or out-of-quota rates (Table AIII.3).
22. In 1999, the average nominal preferential tariff on imports from EEA members was 1.7%, or
2.1% if only out-of-quota ad valorem  equivalents are included in the average.  With all manufacturing
products entering duty free, there is negative escalation on tariff with preferences.
23. As part of EFTA, Iceland has concluded free-trade agreements with Bulgaria, the
Czech Republic, Estonia, Hungary, Israel, Latvia, Lithuania, Morocco, the Palestinian Liberation
Organization (PLO), Poland, Romania, the Slovak Republic, Slovenia and Turkey (as of mid-1999,
the agreements with Morocco and the PLO had not been ratified, with preferences therefore notapplied).  These agreements stipulate duty-free status for all industrial products, fish and other marine
products, as well as processed agricultural products.  Trade in unprocessed agricultural products is
governed by bilateral protocols.
(iv) Tariff quotas
24. Tariff quotas apply to 320 lines.  These lines have two rates each, one ad valorem  for in-quota
imports, and a second for out-of-quota imports.  All these lines are potentially subject to the Special
Safeguards Clause (SSG) under the WTO Agreement on Agriculture.  For a number of lines,
generally where imports have been significant, quota restrictions have not been applied, and the
in-quota rates have been used for all imports.
10  For some products (mostly vegetables), out-of-quota
rates are applied seasonally and determined by regulation.  They may be a mix of specific and
                                                     
10 This applies to the following HS tariff headings: 00506, 0710, 0711, 0712, 1001, 1002, 1003, 1004,
1005, 1006, 1008, 1101, 1102, 1103, 1104, 1105, 1106, 1108, 1201, 1202, 1204, 1206, 1207, 1208, 1212, 1501,
1502, 1505, 1506, 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514, 1515, 1516, 1517, 1518, 1519, 1520, 1521,
1701, 1702, 1703, 1806, 1902, 1904, 2001, 2002, 2003, 2004, 2005, 2102, 2103, 2104,  2106, 2202, 2301, 2302,2304, 2306, 2309, 3501.  WTO documents, G/AG/N/ISL/1, 13 November 1995;  G/AG/N/ISL/8, 16 September1997, and , G/AG/N/ISL/12, 6 November 1998.Iceland WT/TPR/S/65
Page 35
ad valorem  duties, at or below the out-of-quota level inscribed in the tariff schedule.  Out of season
imports of these products face in-quota rates.
25. Tariff quotas are allocated to importers by the Minister of Agriculture, based on
recommendations made by a special committee of representatives from the Ministries of Agriculture,
Finance, and Commerce in charge of administ ering imports of agricultural products.  Since
1 January 1999, applicants no longer need a wholesale permit.  If applications exceed the quota quantity,
the quota is allocated to the highest bidders at quota auctions or by drawing lots.  Auctions have been
used to allocate all minimum access quotas and in a few cases quotas under HS Chapter 6 (live plants
and flowers).11  Licences are normally valid for a minimum of 60 days, but can be valid for a whole
year.  Parts of the quota have been reserved for the domestic food processing industry but, according to
the authorities, this has not been the case for some time.12
(v) Other charges affecting imports
26. All imported goods are subject to a value-added tax (VAT), motor vehicles and certain other
imports are also subject to commodity taxes.  The burden of these charges on imports is in many cases
larger than that of the tariffs themselves.  Thus, while official data for 1998 show that tariff
collections amounted to some ISK 2 billion (US$27.8 million), or slightly over 1.5% of the total valueof merchandise imports, tariff plus taxes collected on imports were some ISK 10.9 billion, or 8.1% of
the import value.  Including the commodity tax on motor vehicles and excise taxes on alcohol (but
excluding VAT), it is estimated that total taxation on imports was some 17.9% of their value.  While
VAT and commodity taxes are in principle also collected on domestic production, in practice when no
local production exists these other charges apply only to imports, notably in the case of motor
vehicles.  However, other import charges, unlike tariffs, do not discriminate between MFN and
preferential suppliers.
27. The VAT must be paid by all corporations, individuals and state and municipal entities that
sell or provide any kind of taxable goods or services.  The general rate is 24.5%;  a lower rate of 14%
applies to most kinds of food, hotel room rates, television and radio licences, books and magazines
and papers in Icelandic, road tolls, and hot water, electricity and fuel oil used for domestic and
commercial heating.  A number of goods and services are exempted from the VAT, including allexport sales, public health care services, educational establishments, transportation, services to foreign
entities rendered outside Iceland, insurance services, and the operations of banks and other financial
institutions.  VAT registration is mandatory for a turnover exceeding ISK 200,000 (US$2,800) per
year.  Most importers taxable for the VAT on imported goods, domestic products or maintenance
services are automatically granted a credit period on imported goods as well as on services related tothese goods.  In the case of imported goods, the VAT must be paid along with customs duties when
the goods are imported:  it is calculated on the c.i.f. prices plus the tariff and the commodity tax.
28. Commodity taxes (excise taxes) are levied on a limited range of imported and domestically
produced industrial goods.
  Exports are not taxable;  tax paid on materials used in exports is refunded.
Commodity duties can be specific or ad valorem .  Specific commodity taxes on a range of agricultural
products range between ISK 8 and 60 per kg.;  commodity taxes on beverages are ISK 8 per litre.
Ad valorem  charges are calculated on the customs duty-added c.i.f. price in the case of imported
goods, and on the factory price for goods produced in Iceland.  Until 1996, this value was inflated by
25% to account for the wholesale mark-up.  In the context of changes to the system of excise duties to
comply with EEA requirements, the 25% mark-up was abolished, and the rules for tax collection on
                                                     
11 WTO document G/AG/N/ISL/4, 18 November 1996.
12 WTO document G/AG/N/ISL/1, 13 November 1995.WT/TPR/S/65 Trade Policy Review
Page 36
imported goods and domestic products were harmonized.13  Ad valorem  rates are 15% for products
such as chemicals, wood, textiles, metal products, machinery, furniture, and spare parts for
automobiles14;  20% for some metal products, machinery, and electrical equipment and appliances15;
and 25% for products such as electric appliances and machinery (mainly telecommunications and
radio broadcasting equipment, television receivers, and other some other electrical appliances).
29. Other production and consumption taxes appl ied on domestically produced and imported
goods include an excise tax on alcoholic beverages,  a commodity tax on motor vehicles, a charge on
hazardous chemicals, an intellectual property rights charge, and others (Table III.3).  The scope of
application of these duties is wide, ranging from agricultural products to petroleum, cement,
chemicals, and electrical machinery and appliances.  The commodity tax on imported motor vehicles is
applied at rates between 7.5% and 70%;  however , no import duties are imposed on motor vehicles.
Customs duties of 7.5% or 10%, and a 15% commodity tax apply to vehicles parts.
(vi) Customs valuation
30. Tariffs are applied to the c.i.f. value of imports.  Customs valuation procedures are spelled out
in Regulation No. 374/1995 on Customs Value and the Determination of Customs Value, cf.
regulation No. 457/1995, issued to comply with the provisions of the WTO Agreement on CustomsValuation (CVA).
16  Minimum prices or reference prices are not used for customs valuation.  Average
prices for tariff headings and exporting country are sometimes used as guidance to uncover valuation
discrepancies.
31. Valuation for customs purposes follows the CVA, according to the authorities.  Special
regulations apply for the determination of the customs value of imported vehicles.  Regulation
No. 374/1995 provides for a comparison of the vehicl e’s transaction value as stated in the import
declaration to values of vehicles of the same model and year in the country where the vehicle waspurchased.  The likely f.o.b. value of the vehicle is determined deducting the VAT, an estimated 12%
seller’s mark-up, the commodity tax, as well as an estimated amount covering the charges included in
the customs value.  If the vehicle is used, some depreciation allowances are made to the calculated
price according to the weight of the vehicle and up to a depreciation of 90%.  According to the
authorities, stated and typical values are compar ed mainly to identify suspiciously low declared
values.  The f.o.b. method to estimate an imported vehicle's value is used only if it not possible to use
any of the other methods listed in Regulation No. 374/1995, which follows the CVA.
32. In cases where the determination of the customs value of imported goods is delayed, the
importer may be permitted to release of the goods from customs, against security for border charges.
Upon written request, an importer has the right to  a written communication from Customs explaining
the determination of the customs value of the imported goods.
33. Complaints regarding the determination of the customs value are generally handled within
30 days.  A ruling can be appealed to the State Customs Board, either by the importer or by the
General Director of Customs.  The decision of the Board is final at the administrative level, but may
be appealed in court.  Importers may also appeal directly to the General Director of Customs.
                                                     
13 There was a formal charge against the Icelandic authorities from the EFTA Surveillance Authority to
the effect that the system of excise taxes did not fully comply with the EEA Agreement  (see Ministry of
Finance,  1997).
14 HS headings 39, 40, 44, 45, 56, 57, 58, 59, 67, 68, 69, 70, 73, 74, 76, 83, 84, 85, 87, 90 and 94.
15 HS headings 73, 84 and 85.
16 WTO document G/VAL/N/1/ISL/1, 20 October 1997.Iceland WT/TPR/S/65
Page 37
Table III.3
Other taxes on production and consumption (including imports) 1999
Tax HS heading Rates (% or ISK/kg/unit)
Excise tax on alcoholic beverages 2106, 2203-09ISK 52.80, 57.50, or 58.70
per litre
Excise tax on motor vehicles 877.5, 10, 15, 25, 30, 40, 65,
and 70
Charge on hazardous chemicals :
Coke and semi-coke; acyclic and cyclic hydrocarbons;aldehydes, some organic solvents2704, 2091, 2902, 2912, 3814 ISK 1.5
Anthracite; anti-knock preparations 2701, 3811 ISK 10
Compounds with other nitrogen functions 2929 ISK 1
Colour laces, paints, pigments, artists colours, mastics,
printing ink3205, 3208, 3210-15 ISK 6
Insecticides 3808 ISK 3
Halogenated derivatives of hydrocarbons, some organic
solvers2903, 3814 ISK 22
Chemical preparations for plants 3707 Range ISK 32.25-258
Derricks, cranes, bulldozers, and other moving machinery,
motor vehicles, vessels, optical fibre8426, 8427, 8429, 8430, chapter 87,
chapter 89, 9001101Range ISK 26-2,288
Intellectual property rights charge  (electrical machinery
(except motors), telecom equipment, electric appliances,
CDs, tapes)8503-261%, 2%, or 4%, or ISK 32
or 95 per unit, according to
products
Transportation equalization tax (petroleum products andcement)2523 (cement), 2710 (petroleum products)ISK 1.2, 0.2, or 0.65 per
litre for petroleum products;
ISK 0.05, 075, or 0.85 per
kg. on cement.
Deposit charge on disposable containers (waters, juices,alcoholic beverages)2202-2209ISK 5.91 or 8.4 per
container
Excise tax on petrol 2710 97%
Inspection tax on seeds, bulbs, plants, tubers, some flowers,
fertilizers, and some vegetables (potatoes, tomatoes,
cabbages, lettuces, carrots, cucumbers, leguminousvegetables, and other vegetables)0601-4 (bulbs, plants, etc.), 0701-10
(vegetables); 1209 (seeds); 3102-05
(fertilizers)0.1% (fertilizers); 1%
(vegetables); 2% (seeds,
bulbs, etc.)
Surveillance fee on electrical materials subject to
surveillance (plastics, electric blankets, articles of iron and
steel, electrical machinery, motors, optical fibres, timeswitches with motors, lamps and lighting fittings)3036, 4677,4677, 5450, 5526, 5603, 5849,
5851, 5865, 5868-75, 5878-81, 5883-85, 5892-
5905, a number of headings under HS chapters59, 60, 61, 62, 63, 64, 65, 66, 67, 84, 85, and90; headings 7326, 7419, 7616, 9107 and  94050.15%
Source : Information provided by the Icelandic authorities.
(vii) Rules of origin
34. Iceland applies the "New European Rules of Origin" system adopted at the beginning of 1997
in a number of free-trade agreements (FTAs) in which the EU and EFTA participate and which allow
inter-agreement cumulation.17  Under this system, Icelandic origin is conferred to products fulfilling
"sufficient processing" criteria, which vary according to the product.
                                                     
17 Joint communication by the European Communities, Bulgaria, the Czech Republic, Hungary,
Iceland, Liechtenstein, Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland (WTOdocument WT/REG18/N/3, WT/REG11/N/4, 20 August 1998).WT/TPR/S/65 Trade Policy Review
Page 38
35. Through these new provisions, separate free-trade zones have been merged into a
Europe-wide network.18  Although the general framework of the different existing FTAs remains
unchanged, the origin protocols in each trade agreement have been replaced by the pan-European
cumulation provisions.  Under the new rules, semi-f inished products originating in any country of the
system that are further processed or assembled in any other partner country may always be considered
as originating products, and may be traded according ly between any of the countries involved in the
cumulation system.
(viii) Import restrictions and licensing
36. Some 557 eight-digit HS lines, or around 7.4% of all tariff lines, are subject to some form of
import restriction.  The importation of a number of articles is prohibited for health or safety reasons.19
The list of prohibited articles includes:  narcotics and dangerous drugs;  unpasteurized milk and eggs;
and various weapons;  and imports of ozone-depleting substances other than
hydrochloro-fluorocarbons (HCFCs).20  The importation of uncooked meat and various meat products
is allowed only from countries where no diseases included in List A of the International Office of
Epizootics have occurred in the past six months (Notice No. 324/1999).
37. Other import restrictions apply in the form of licensing requirements.  Licences are not
transferable and are usually valid for only one shipment.  Automatic import licensing is not used in
Iceland.  Icelandic legislation does not allow for administrative discretion regarding import controls.
Imported goods affected by licensing requirements and authorizations are listed in Table III.4.
Requirements vary according to the product, ranging from health and safety reasons to compliance
with standards.
Table III.4
Licences affecting imports, 1999
Licence(s) Number of lines HS chapter(s) involved
Special authorization from the committee on poisonous chemicals 181 25, 27-29, 38, 81.
Health certificate for plants 36 6,12
Authorization for the import of radioactive goods 16 28, 85, 90
Authorization for the importation of machines for public works 34 84
Authorization for the importation of weapons and explosives 32 36, 84, 93, 95, 97
Authorization for the importation of tree seeds 5 6, 12
Authorization for the importation of communication equipment 27 85, 89, 95
Authorization for the importation of fur animals 4
Authorization for the importation of animal fodder, fertilizers and seeds 91 10, 12, 23
Authorization for the importation of drugs 118 12, 18-19, 21, 28-30
State monopoly 13 22, 24
Source : Information provided by the Icelandic authorities.
38. Among licensing requirements for health reasons, the importation of live animals requires a
permit from the Ministry of Agriculture and compliance with quarantine requirements;  and the
importation of flowers and other plants requires a phytosanitary certificate issued by the relevant
                                                     
18 In the case of Iceland, the agreements covered include:  EC-EEA countries (Iceland, Norway,
Liechtenstein);  FTA EC-Iceland;  Stockholm Convention  (EFTA);  FTA EFTA-Czech Republic;  FTA
EFTA-Slovak Republic;  FTA EFTA-Slovenia;  FTA EFTA-Hungary; FTA EFTA-Poland;  FTA EFTA-Bulgaria;  FTA EFTA-Romania;  FTA EFTA-Estonia;  FTA EFTA-Latvia;  and FTA EFTA-Lithuania.
19 WTO document G/LIC/N/1/ISL/1, 26 January 1999.
20 WTO document G/LIC/N/3/ISL/1, 14 September 1998.Iceland WT/TPR/S/65
Page 39
authorities in the country of cultivation, endorsed by the Icelandic Agricultural Research Institute.21
The importation of animal fodder, fertilizers and seeds requires an authorization from the Ministry of
Agriculture.  The importation of therapeutic medicines containing narcotic drugs or psychotropic
substances are subject to special import licence requirements under Act No. 93/1994 on
Pharmaceutical Products, and Regulation No. 465/1995 on the Registration of Proprietary Medicinal
Products and the Issuing of Marketing Authorizations.
39. Iceland does not have national regulations concerning medical devices;  European Union
directives in this respect are used.  Parallel imports of medicines are in principle allowed, under the
rules set in the Regulation on the Registration of Parallel Imported Medicinal Products and the Issuing
of Marketing Authorization, No. 582/1995.
40. Licences to import communications equipment to be connected to public telecommunication
networks (cordless phones, remote control devices for toys and radio transmitters and receivers not
intended for regular broadcasting reception) are granted subject to type approval based upon
documentation from an approved external test laboratory or tests by the Post and Telecom
Administration.  According to the authorities, the purpose of the licensing system, which also applies
to EEA products, is to ensure that technical requirements are met;  a draft Telecommunications Act toimplement EU directive 1999/5/EC and eliminate these licensing requirements was under
consideration in late 1999.  Licences are issued by the Post and Telecom Administration.  The
importation of angling gear, riding gear and riding clothing used outside Iceland requires a certificate
of disinfection issued by an authorized veterinary officer.  Application for import licences for
agricultural goods must be made well in advance of arrival of the goods;  however, in certain
circumstances import licences may be granted at the point of entry.
41. Licencing requirements for safety reason apply to imports of a range of products including
chemicals, arms and ammunition, and machines fo r public works.  Only manufactures of toxic
substances, chemical factories, pharmacies, and dist ributors of toxic substances may import hazardous
(and health-related) goods.
22  A special authorization is required for the importation of poisonous
chemicals.  The importation of firearms and ammunition, explosives, and fireworks requires the
authorization of the State Chief of Police, under Act  No. 16/1998 on Weapons, and RegulationNo. 265/1997.  Imports of machines for public works are subject to a licensing system, which requires
prior application with the Administration of O ccupational Safety and Health for a registration
number.
23  The importation and use of asbestos is prohibited;  waivers may be granted by the
Administration of Occupational Safety and Health only in cases where there are no substitutes
available.24  The importation of ships, boats and floating structures is subject to licensing25;  the
authorities noted that this is in order to assess sea-worthiness.
(ix) Contingency measures
42. Iceland does not resort to the use of safeguard measures, nor does it have any legislation
regarding these measures.26
                                                     
21 The importation of up to 25 flowers;  bulbs, tubers and tuberous roots in unbroken packaging of up to
2 kg.;  and of up to three pot-plants from EEA/EFTA countries is allowed without a certificate.
22 Act No. 52/1988 on Toxic and Hazardous Chemical Substances.
23 Regulation No. 388/1989 on Registration and Inspection of Machines for Public Works, and
Regulation No. 580/1995 on Machinery and Technical Equipment.
24 Regulation No. 74/1983 prohibiting the import and use of asbestos.
25 Act No. 35/1993 on control of ships.
26 WTO document G/SG/N/1/ISL/1,  28 September 1995.WT/TPR/S/65 Trade Policy Review
Page 40
43. Iceland has never applied anti-dumping measures.  Since January 1994, three complaints have
been filed regarding dumping;  none has led to formal investigations.  Iceland has not applied
countervailing measures on imports;  no countervailin g investigations have been conducted, nor have
complaints been filed.  Under the EEA Agreement, anti-dumping and countervailing legislation may
not be used against imports from other EEA States.
44. Iceland's anti-dumping and countervailing legislation is contained in Articles 115-119 of
Customs Law No. 55/1987 as amended by La w No. 66/1994, and in Regulation No. 351/1994.27
The 1994 amendment to the Customs Law extended the coverage of anti-dumping and countervailing
duties to include trade in services, on the same conditions as applicable to trade in goods.
45. Anti-dumping and countervailing duties may be imposed on pr oducts assembled or produced
in Iceland containing imported materials.  For this, the products must be assembled or pr oduced by a
party related or associated to a foreign manufact urer on which anti-dumping or countervailing duties
will be imposed; the assembly or production must have started or substantially increased after the
opening of the anti-dumping investigation;  and the value of parts or materials, used in the assembly or
production and originating in the country of exporta tion of the product subject to the anti-dumping or
countervailing duty, must exceed the value of all othe r parts or materials used by at least 50%.  The
amount of the anti-dumping or countervailing duty to be applied is calculated taking into account the
share of the parts or materials imported on the c.i.f. value of the complete product.  This percentage is
then multiplied by the anti-dumping or counter vailing duty applicable to the manufacturer.
46. Complaints regarding anti-dumping and subsidy practices on imports are examined by an
Advisory Committee appointed by the Minister of Finance for a period of four years, and consisting
of seven experts.  The Advisory Committee then carries out preliminary examinations;  if the
Committee finds sufficient evidence of dumping and injury an investigation is initiated.  The AdvisoryCommittee must normally concluded investigations within one year from the date of initiation.
Requests for reviews of decisions to impose anti-dumping or countervailing duties and to accept
undertakings are addressed to the Minister of Finance.
47. Provisional anti-dumping and countervailing measures may be put in place, upon decision by
the Minister of Finance, for a maximum period of 12 months.  In the context of this Review, theauthorities indicated that the Ministry of Finance would amend Regulation No. 351/1994 to limit the
maximum period to six months.  Temporary duties may not be imposed for a longer duration than
12 months.  Duties may be in place for a maximum of five years from the day of their entry into force,
and may be imposed retroactively.  Anti-dumping duties may not exceed the margin of dumping, and
countervailing duties may not exceed the subsidies granted directly or indirectly for themanufacturing, processing, exportation or transportation of the goods.
28  No product may be subject to
both anti-dumping and countervailing duties for the purpose of dealing with the same situation.
Icelandic anti-dumping legislation allows the retroactive application of an additional duty in the case of
duty absorption by the exporter.  If an interested pa rty shows that the expiry of the measure would lead
again to injury, measures may be maintained beyond the five-year period following a determination bythe Advisory Committee.
(x) Government procurement
48. Iceland maintains a government procurement regime in accordance with the Public
Procurement Directives of the EEA.  Iceland is an observer to the WTO Government Procurement
Agreement (GPA), and applied for accession to this Agreement on 22 June 1998.  In mid-1999,
                                                     
27 WTO document G/ADP/N/1/ISL/1, 23 May 1995.
28 Regulation No. 351/1994, Art. 18.Iceland WT/TPR/S/65
Page 41
negotiations were ongoing between Iceland and inte rested parties on the basis of Iceland's draft
offer.29  The value of government procurement in 1998 reached ISK 65 billion (US$903 million), up
from ISK 63 billion (US$875 million) in 1997 (Table III.5).
Table III.5
Estimated value of  all government procurement in Iceland, 1993-98
ISK billion US$ million
1993 54.5 760
1994 57.5 798
1995 59 820
1996 61 850
1997 63 875
1998 65 903
Source : Information provided by the Icelandic authorities.
49. The Government Procurement Act of 30 March 1987 (Act No.52/1987) lays down rules on
government procurement.  The authorities pointed out that the Act is designed to make the
Government procure goods and services at competitive terms and at the same time create an
environment where bidders can compete fairly and equally for the business.
50. The Government Procurement Act formally placed the State Trading Center ( Ríkiskaup ) in
charge of procurement for all bodies and enterprises of the Government.  Other entities responsible
for government procurement are Government Construction Contracts ( Framkvæmdasýslan );  the
Public Road Administration ( Vegagerð ríkisins ); and the Icelandic Maritime Administration
(Siglingastofnun ).
51. Government procurement is under the responsibility of the Ministry of Finance.  The
management of government procurement is entrusted to a special three-member Board of Directors,
appointed by the Minister of Finance for a term of two years at a time, which is also the Board of the
State Trading Center.  This Center also surveys the need for goods and services and takes the
initiative in coordinating procurement of goods;  it sometimes provides information for the conduct oftendering, charging a fee for this service.  The Center is mandated to procure for government bodies
and enterprises all goods at cost price plus a fee, in accordance with a schedule set by the Minister of
Finance based on proposals of the Board.  The schedule of fees must cover the operation of the
Center;  fees range from 1% to 6% of the price for purchases, on a degressive scale.
30  Domestic
procurement thresholds are currently ISK 3 million (US$42,000) for supplies, and ISK 5 million(US$69,000) for public works.
52. In certain cases, the Minister of Finance may, having received the opinion of the Board,
authorize individual government bodies or enterprises to procure for themselves in accordance with
the provisions of the Government Procurement Act.
31  Only the Government Construction Contracts,
the Public Road Administration, and the Icelandic Maritime Administration have been granted this
special authorization.  The State Trading Center engages in the purchase of supplies for these bodies,
and assists them in tendering, but tendering for public works is undertaken by each body individually.
                                                     
29 Application for Accession to the Agreement on Government Procurement of Iceland , WTO
document GPA/W/73, 15 July 1998.
30 Act No. 85/1998, Article 9.
31 Act No.52/1987, Article 3.WT/TPR/S/65 Trade Policy Review
Page 42
53. Under the EEA agreement, procurement above the given thresholds for all public bodies,
including municipalities, their associations, bodies, enterprises or any public entity where the majority
of the board is appointed by public sector bodies, must be put up for tender in the EEA.  Exceptions to
this requirement are made for bodies engaged in business or industry, provided they are not engaged
in water supply, energy supply, transportation or telecommunications.
54. The threshold for putting up tenders at an EEA level is ECU 133,914, net of VAT, for goods
and services purchases by the State Trading Center or other bodies authorized to invite tenders;  as of
1 January 2000, the ECU thresholds are to be refere nce amounts only, and to vary with the exchange
rate of the ECU against the SDR.  Thresholds apply whether the procurement takes place through
purchase, hire, financial lease or purchase lease.  The value of contracts regarding hiring, financial
leasing or purchase leasing, is based on the total cost over the contract period;  if the contract is for anindefinite period it is based on a reference period of 48 months.
32  The threshold for purchases by a
body engaged in transportation with public vehicles, energy supply, water supply or the construction
of airports or harbours is ECU 400,000, while the threshold for enterprises or bodies operating
telecommunications systems or providing telecomm unications services is ECU 600,000.  Procurement
not falling in any of the above-mentioned categories is subject to a threshold of ECU 206,020provided it does not consist in the purchase of a service listed in Annex I of the Government
Procurement Act.
33  These thresholds are equivalent to those determined in the GPA.  According to
the authorities, procurement below EEA thresholds  is also sometimes tendered internationally to
obtain the best procurement conditions;  the authorities estimate that this is done in some 2% of such
procurement.  Procurement of services that do not fall under the EEA agreement is also sometimes
published in the EEA.
55. For all tenders advertised at an EEA level, notices must be sent to the Publications Directorate
of the European Communities for publication, following a decision to invite tenders or at the
conclusion of a purchase contract.  A special information notice stating the proposed total purchaseS
in the next 12 months of goods with a value equalling or exceeding ECU 750,000, net of VAT, by
product category, is published at the beginning of each calendar year.  Domestically, the State Trading
Center advertises in Icelandic newspapers every Sunday.  There is no margin of preference fordomestic suppliers.
56. Complaints regarding the result of a tender or with respect to tendering procedures may be
filed, according to the case, with the Icelandic co urt system, the EFTA Surveillance Authority, the
EFTA court, or with the Ministry of Finance, which has appointed a special complaints board with an
advisory role for this purpose.  According to the au thorities, several cases are sent every year to the
Ministry of Finance or the EFTA Surveillance Authority.  So far there have been no cases settled in
Icelandic courts.  Since 1994, the advisory opinion of the EFTA court has been sought only once.
(xi) State-trading enterprises
57. The State Alcohol and Tobacco Monopoly (ATVR) is the only enterprise in Iceland
considered to be a state trading enterprise in accordance with the provisions of GATT Article XVII.
34
The functioning of the ATVR is governed by Act No. 63/1969 on the Sale of Tobacco and Alcoholic
Beverages as amended by Act No. 95/1995, Regulation No. 607/1995 on the State Alcohol and
Tobacco Monopoly, Regulation No. 135/1996 on the Purchase and Sale of Alcoholic Beverages and
Terms of Business with Suppliers, and Regulation No. 529/1996 on the Purchase and Sale of Tobacco
                                                     
32 Article 11 of the Government Procurement Act, and Article 5, Act No. 55/1993 .
33 Government Gazette A 1993, pp. 277-280, cf. Government Gazette A 1998, p. 377;  services
contained in Annex I are those listed in footnote 49.
34 WTO document G/STR/N/1/ISL,  15 January 1997.Iceland WT/TPR/S/65
Page 43
and Terms of Business with Suppliers.  According to the authorities, the monopoly held by the ATVR
is based on health, fiscal, and social policy cons iderations and is in full accordance with the EEA
agreement.
58. Until 1995, the ATVR had an exclusive right on the importation, wholesale and retail
distribution of alcohol and alcoholic beverages (d rinks with alcoholic content above 2.25% alch/vol).
Act No. 95/1995 eliminated this exclusive right as of 1 December 1995, when the ATVR wasreorganized and a system of licensing was set up.  The Act limited the monopoly rights of the ATVR
to the retail distribution of alcoholic beverages (except as regards sales by licensees, such as
restaurants).
59. The ATVR, under the supervision of the Ministry of Finance, runs 29 retail outlets throughout
Iceland but it is no longer involved in any wholesale activity of alcoholic beverages.  The ATVR heldthe monopoly at the retail level and on the importation and wholesale distribution of ethyl alcohol
until 1 July 1998.
35
60. Since the dismantlement of the ATVR's monopoly rights, those wishing to produce, import
and/or distribute alcoholic beverages at the wholesale level must obtain a licence, initially valid for a
year and renewed with no expiration date.  There are three types of licences:  production licences,which allow the licensee to produce, distribute and export alcoholic beverages;  wholesale licences,
which grant the right to import, distribute and export alcoholic beverages;  and import licences, which
allow restaurants holding a liquor licence to import alcoholic beverages to be expended in the
restaurant.  Producers and wholesalers holding licences may engage in distribution to other
wholesalers holding a licence, to the ATVR, and to restaurants holding a liquor licence.
61. The dismantlement of the ATVR's monopoly rights has coincided with an increase in the
volume of imports of alcoholic beverages.  The ATVR ceased to be the major importer of alcoholicbeverages in 1997, with a share of 40% of total imports, down from 53% in 1996, and 100%
previously.  In May 1998, the ATVR ceased to import alcoholic beverages (Table III.6).
Table III.6
Imports and national production of beer, wines and spirits, 1992-98.
Year Import s of beer, wine and spirits Imported by ATVR National production
Quantity ('000 litres) Value (c.i.f.) ISK million Quantity ('000 litres) Quantity ('000 litres)
1992 5,071 914 5,071 3,110
1993 4,310 836 4,310 4,107
1994 4,395 892 4,395 5,459
1995 5,409 1,078 n.a. 5,313
1996 7,124 1,202 3,785 5,512
1997 7,803 1,249 3,119 5,550
1998 8,480 1,385 n.a. 6,750
n.a. Not applicable.
Source: WTO documents  G/STR/N/1/ISL,  15 January 1997, and G/STR/N/4/ISL,  16 December 1998;  and information provided by the 
Icelandic authorities.
62. The involvement of the ATVR in direct retail sales of beer, wines and spirits remains large,
but is declining.  In 1997, almost a quarter of total sales was by licensees (mainly restaurants), up
from 21.5% in 1996.  The pricing policy followed by the ATVR relies on determining markups for the
                                                     
35 WTO document G/STR/N/4/ISL,  16 December 1998.WT/TPR/S/65 Trade Policy Review
Page 44
different products;  in 1998 these were 13% for wine and beer and 7% for spirits, with an average
markup of around 10.5%.36
63. Act No. 95/1995 limited the monopoly rights of the ATVR to the importati on, wholesale and
production of tobacco and tobacco products.  Th e ATVR no longer has a monopoly on the retail
distribution of tobacco produ cts;  no specific licence is required to sell tobacco.  Imports of tobacco and
products are determined taking into account past demand.  Suppliers must provide the ATVR with atender including prices;  these must be quoted in U.S. dollars or sterling, unless the supplier is from
another EEA country, in which case, prices may be quoted in the currency of the country.
(3) M
EASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures and charges
64. Exporters are not required to comply with registration requirements but access to the
computerized system for customs clearance requires an exporter to be registered.
65. No taxes are applied on exports and there are no tariffs or other charges.
(ii) Export prohibitions, restrictions, and licensing
66. Iceland does not resort directly to the use of export controls, prohibitions or quotas.
However, domestic supply of lamb meat is regulated by varying the level of exports.  For theslaughter season 1998/99, 15% of lamb production was set for export; a limit extended to 25% for the
slaughter season 1999/2000.  The quota system applied to fresh fish, although not geared specifically
to exports, may result in export limitations, since some 90% of the catch is exported (Chapter IV.2).
67. Export licences are required for the exportation of live birds and eggs (from the Ministry of
the Environment) to prevent the illegal export of endangered species;  firearms, ammunition and
explosive (from the Ministry of Justice);  and some arms and related equipment under international
programmes (from the Ministry of Foreign Affairs and External Trade).  Special licences are neededfor the exportation of antiques and objects having natural historical value.
68. Iceland applies no export performance requirements in the context of support programmes or
under any other policy scheme.
(iii) Export subsidies, duties, and tax concessions
69. Iceland does not grant subsidies contingent on exportation.  Until 1992, exporters of lamb
meat received direct financial government aid to sell their excess supplies overseas.  Iceland has
notified to the WTO Committee on Agriculture the portion of payments benefiting exports.
Subsidized exports of sheepmeat have been below commitments under the Agreement on Agriculture
since 1995. In 1998, subsidized exports accounted for less than 2% of total sheepmeat exports.
Subsidies have not been granted to milk exports since 1995.
37
70. Iceland does not provide duty and tax concessions specifically aimed at promoting exports.
There are no income tax deductions, or export pre-financing schemes.  However, exporters may
                                                     
36 WTO document G/STR/N/4/ISL,  16 December 1998.
37 WTO documents G/AG/N/ISL/6, 9 June 1997, G/AG/N/ISL/10, 13 March 1998, G/AG/N/ISL/15, 2
September 1999, and G/AG/N/ISL/15Corr.1, 8 September 1999.Iceland WT/TPR/S/65
Page 45
benefit from some provisions for the reimbursement of tariffs and other taxes on inputs, such as the
suspension of duties on inputs for industries operating in competition with imported goods.
71. Iceland does not have free ports or free-trade zones.  However, Regulation No. 527/1991 on
Free Zones provides for the issue of licences to operate free-trade zones subject to the completion of a
feasibility study, payment of the cost of customs control in the free zone, approval of the relevant
municipal authorities, and the lodging of a secur ity with the Treasury.  The drawback of import
charges is allowed; but the value-added tax paid on imports is not refunded.
(iv) Export finance, guarantees, and promotion
72. The New Business Venture Fund, which started operations on 1 January 1998, runs an Export
Credit Guarantee Department, aimed at guarante eing loans, claims, services, investment, and
equipment connected with exports and activities of Icelandic companies or nationals abroad(section 4(iii)).  In the case of exports of goods and services, the Fund guarantees claims from foreign
buyers against domestic exporters.  In the case of investment and equipment, the guarantee is against
political risk.  The scheme is not concessional:  premiums are intended to cover the cost of running
the Department, paying claims and building up a reserve fund equivalent to 10% of prospective
obligations.
73. Export promotion activities are carried out by the Trade Council of Iceland, established
in 1986, which is managed by an executive board of seven members, five from the private sector, and
two appointed by the Government.  The Council provides information and marketing assistance to
exporters, advises the Government on export-related matters, and deals with investment issues,
primarily through the Invest in Iceland Bureau, opera ted in cooperation with the Ministry of Industry
and Commerce.  The Overseas Business Services  Office (OBSO), a dependency of the Ministry of
Foreign Affairs and External Trade, assists Icelandi c exporters, generally charging a fee.  Assistance is
mainly through information regarding a target market.  OBSO maintains six trade representatives, in
Beijing, Berlin, London, Moscow, New York, and Paris.
(4) M
EASURES AFFECTING PRODUCTION AND TRADE
(i) Legal framework for businesses
74. Most businesses in Iceland are limited companies, which may be public or private.  Other
types of business include partnerships, cooperative societies, branches of foreign companies, and
businesses of self-employed persons.  The majority of the board of directors as well as the general
manager of a limited company must be domiciled in Iceland or in an EEA or OECD country, although
the Minister of Industry and Commerce may grant exemptions to this requirement.
75. New limited companies must register with the Register of Limited Companies.  Registration
is subject to the payment of a fee of ISK 450,000 (US$6,300) for public limited companies, and
ISK 75,000 (US$1,000) for private limited companies.  Branches of foreign companies must also
register with the Register of Limited Companies and submit documents (copy of articles of
association, commitment to abide by Icelandic laws, the financial statements of the preceeding year,
and a letter of representation for the branch manager) translated into Icelandic.
(ii) Taxation
76. During the 1990s, the tax system in Iceland was substantially reformed to make it more
responsive to economic developments through built-in stabilizers.  The reform has aimed at shiftingWT/TPR/S/65 Trade Policy Review
Page 46
from indirect to direct taxation;  as a result, the share of indirect taxes in general government revenue
declined from some 60% at the beginning of the 1990s to slightly under 50% in 1998.
77. Corporations are liable for both income tax and equity (net worth) tax.  Resident corporations
are taxed on their world-wide profits.  The income tax rate on net profit of corporations is 30%
(limited companies) and 38% (partnerships).  Non-resident corporations are subject to income tax on
their income from Icelandic sources.  Capital gains are treated as ordinary income and taxed at theregular income tax rate.  A 10% capital income tax is withheld at source for dividend payments.
In 2000, a unified 5.23% social security tax will replace the two different rates, 4.78% levied on
agriculture, fisheries, manufacturing, hotels and restau rants, rental of cars, and computer services, and
5.53% on other sectors.  Other charges paid by corporations include the Industrial Loan Fund
contribution, the Industrial Charge, and a temporary net worth tax surcharge.
78. In general terms, withholding tax rates on non-residents are 20% on dividends paid to
companies and 10% on dividends paid to individuals, 30% on royalty payments to companies and
26.41% (or 33.41%) income tax on royalty payments to individuals.  In addition non-resident
individuals must pay the municipal income tax at its average rate (11.93% in 1999).  Double taxation
agreements provide relief from these payments.  Dividends are taxed at 15% instead of the general20% rate;  dividends paid to the parent company are either zero or 5%.  The payment of royalties is
either tax free or subject to a 5 or 10% tax rate (Table III.7).
79. Iceland has signed conventions for the avoidance of double taxation currently in effect with
the following countries:  Germany (1971);  Unit ed States (1975);  Finland, Norway, Sweden,
Denmark and the Faeroe Islands (1989);  Switze rland (1989);  United Kingdom (1991);  France
(1992);  Estonia (1996);  Latvia (1996);  China (1996);  Canada (1998);  and the Netherlands (1999).
Additionally, agreements have been signed with Belgium, the Czech Republic, Lithuania,Luxembourg, Poland, Portugal, Russia, Slovakia, and Viet Nam, as well as a new agreement with
Latvia, but these are not yet in effect.
38  An agreement with Spain is currently under negotiation.
(iii) Incentives
(a) Tax deductions and incentives
80. A number of tax incentives exist in Iceland;  they are available both to domestic and foreign
companies.  Incentives are generally aimed at making Iceland a more attractive investment location,
compensating for relatively high taxes.  Dividends received by a resident limited company from
another resident limited company are tax exempt;  dividends received from a foreign company
operating abroad are also tax exempt if they have been taxed abroad under provisions similar to those
prevailing in Iceland.  Other deductions include various initial expenses as well as research anddevelopment costs, which may be deducted in the year they accrue.  Inflation-adjusted tax losses may
be carried forward to the succeeding eight years.  Carry-backs are not allowed.  Taxation of capital
gains can be deferred in certain cases or spread over a period of successive years.  Capital losses can
be deducted from regular income.
                                                     
38 Directorate of Internal Revenue, Iceland [18 May 1999].  "Conventions for the avoidance of double
taxation", [Online].  Available at: http://www.rsk.is/skattyfirvold/english.asp.Iceland WT/TPR/S/65
Page 47
Table III.7
Taxation treaties and taxes applied, 1999.
Dividends (%)
CountryIndividuals,
companiesPaid to parent
company Royalties (%) Interest (%)
Canada 15i5a0b/10 0g
China 15i5c10 0g
Denmark 15d i0a00
Estonia 15i5c5f/10 0g
Faroe Islands 15d i0a00
Finland 15d i0a00
France 15i5a00
Germany 15i5c00
Latvia 15i5c5f/10 0g
Netherlands 15e i0a00
Norway 15d i0a00
Sweden 15d i0a00
Switzerland 15i5c00
United Kingdom 15i5a00
United States 15i5a00
Non-treaty countries 20i20 30/38/38.6f0
a Rate applicable to corporate shareholders with a minimum ownership of 10%.
b The zero rate applies to copyright royalties (except films), and to royalties for computer software or patent, or for informat ion 
concerning industrial, commercial or scientific experience.
c Rate applicable to shareholders with a minimum ownership of 25%.
d Countries under the Nordic Convention.
e Effective 1 January 1999.f The 5% rate applies to royalties paid for the use of industrial, commercial or scientific equipment.
g In accordance with Icelandic law interest paid to non-residents is not taxed. However, according to the Double Taxation 
Conventions concluded between Iceland and Canada, Iceland and China, Iceland and Estonia, and Iceland and Latvia, the source 
state has the right to levy a 10% tax on interest.
h The 30% rate applies to corporations, the 38% rate applies to partnerships registered as taxable entities, and the 38.6% rate 
applies to individuals.
i Dividends paid by resident companies to resident and non-resident individual shareholders are subject to a 10% withholding tax .
Source: Invest in Iceland Agency, Ministry of Finance.
81. There are a number of depreciation allowances for buildings and other structures, defined by
tax regulations.  Full-year depreciation is allowed in the year of acquisition.  Accelerated depreciationis allowed when a fixed asset is sold at a taxable profit.
82. To promote Stock Exchange activities, investment in domestic shares was made tax
deductible for the years 1998 to 2002.  Domestic shares eligible for deduction are those of companies
that are either listed on the Icelandic Stock Exchange or that have been confirmed by the Directorate
of the Internal Revenue and that:  have a share capital of at least ISK 22 million; have at least25 shareholders; do not restrict  trading of shares;  and provide public accessibility of their annual
accounts.  The deduction can reach 60% of the amount of purchased shares, but may not exceed
ISK 80,000 for an individual and ISK 160,000 for a married couple.  The authorities estimate the
revenue forgone under this scheme at some ISK 2.1 billion (US$29 million) in 1998;  a total of 21,055
individuals benefited from the tax deduction.WT/TPR/S/65 Trade Policy Review
Page 48
(b) Support programmes
83. With the exception of agriculture, state aid and support programmes in Iceland are generally
not specific to a sector, but are applied across sectors to address market failure, build comparative
advantage, tackle diseconomies of scale or problems in the labour market.  Support is provided in
areas such as research and development (R&D), development of small and medium-sized enterprises,
training, marketing promotion, and job creation.  While , except for agriculture, state aid has been low,
total outlays for the different support programmes were some ISK 6 billion in 1997, or about 1% of
total GDP;  recent years have seen it cut even further.  Many programmes, including some listed
below, were eliminated at the end of 1995 or 1996.  The current price support programme for dairy
products was terminated at the end of 1998, and a new agreement was negotiated with farmers, to be
in place through 2005.  The current programme for sheep farmers will end on 31 August 2000.39
Agricultural Agreements programme
84. The Agricultural  Agreements programme is the major support scheme in agriculture.  It is
aimed at achieving self-sufficiency to the extent possible; increasing efficiency;  securing an equitable
income for farmers;  and integrating environmental issues with agricultural policy.40  Support is
provided for milk, sheepmeat, wool, market regul ation, and to an agricultural productivity fund.
85. Support to producers of sheepmeat and milk consists of direct payments, which replaced the
previous system of consumer subsidies in 1993.  Until 31 December 1995, support was also provided
for vacation and temporary relief services.  Outlays under these programmes for the period 1994-98 are
shown in Table III.8.
86. The agreements that rule the direct payments granted to sheep and dairy farmers are
negotiated between the Minister of Agriculture and the Farmers’ Union, in accordance with Act
No. 99/1993 on Production, Pricing and Sales of Agricultural Products.  Since 1985, six main
Agricultural Agreements have been signed.  Under the support schemes, from 1991 producers receive
direct payments on volumes produced within individually allocated quotas:  all milk producers receive
the same amount of monetary support for each litre of milk delivered to the dairies;  and sheep
farmers receive support based on farm quotas, which are decoupled from production.  The current
programme of support for sheep farmers is expected to terminate at the end of 2000.  The currentprogramme of support to producers of dairy products took effect on 1 September 1998 and will last till
2005.  Under this programme, applied fixed administered prices were abandoned and replaced by a
minimum milk price, which is expected to remain in effect until 30 June 2001, when prices should be
completely liberalized at the wholesale level.  In the case of wool, scouring plants receive a price
support, which maintains the Icelandic producer pri ce for wool above the world market price level.
87. Until 31 December 1995, the Government maintained a vacation and temporary relief
services scheme, which provided temporary farm workers to dairy producers to allow them to take
vacation.  The cost of this scheme in the last year of its implementation (1995) was ISK 15 million.
Market regulation support for the production of sheep meat is used to pay for stockholding costs,
marketing efforts, and withdrawal of the sheepmeat  quota.  The authorities have indicated that this
                                                     
39 Outlays for the different support programmes are accounted for using the net cost to government
(NCG) method, where support from various instruments, i.e. grants, loans, guarantees, equity injections and tax
concessions, are added together. This method, does not measure the actual transfer of funds from theGovernment to the beneficiaries in any given year, but the net cost to government of support to industry.  Asnotified to the WTO by Iceland in WTO document G/SCM/N/3/ISL, 31 October 1996.
40 WTO document G/SCM/N/48/ISL, 23 June 1999.Iceland WT/TPR/S/65
Page 49
support scheme is applied to ensure accumulation and holding of stocks of sheepmeat between
slaughter periods (about six weeks in the months of September and October).41
Table III.8
Agricultural Agreements Programme Outlays, 1994-98
(ISK million)
1994 1995 1996 1997 1998
Agricultural Productivity Fund 300.0 250.0 209.6 274.0 175.0
Market regulation 816.5 945.6 927.6 429.3 353.0
Direct payments for milk and sheepmeat 3,973.3 3,478.7 4,059.6 4,206.4 4,350.0
Subsidies for the production of  wool 289.2 247.2 207.4 275.1 220.0
Vacation and temporary relief services a12.5 15.0 .. .. ..
.. Not available.
a Scheme terminated on 31 December 1995.Source : WTO documents G/SCM/N/48/ISL, 23 June 1999, G/SCM/N/25/ISL, G/SCM/N/38/ISL, 25 November 1998;  G/SCM/N/3/ISL, 
G/SCM/N/16/ISL, 31 October 1996; and information provided by the Icelandic authorities.
R&D and technological innovation
88. The Icelandic Research Council, a government agency reporting to the Ministry of Education,
Science and Culture, operates a Technology Fund to facilitate innovation through supporting research
and technological development.42  Support is granted to universities, public research institutes, business
enterprises, and individual scholars;  grants have generally covered between 25 and 30% of total project
expenses.  There is no time-limit for the duration of this support programme.  S upport through the Fund
is granted under four different schemes:  a general R&D project support scheme of matching grants
awarded upon annual application, with a maximum total duration of three years;  a matching grant of
up to 50 % of the salary of a scientist or technician hired by a small firm to define R&D strategies,also for a period of up to three years;  grants for exploratory and demonstration projects;  and grants to
cover partially travel expenses of  Icelandic scientists involved in multinational R&D projects  with
European (mostly EEA) and U.S. partners. Annual outlays under the Technology Fund were in the
order of ISK 190 million in the period 1994-97.
43  More than 100 grants have been awarded each year.
Additionally, the Research Council operates:  a Science Fund to finance projects for fundamentalresearch, with a budget of some ISK 170 million per year;  a Buildings and Instrument Fund, which
distributes some ISK 70 million annually for infrastructure investment in research activities and
facilities;  and a Graduate Training Fund of some ISK 30 million annually.  For 1999-2000 a research
programme in information and environmental scie nce and technology administered by the Research
Council and with a budget of ISK 580 million was put in place.
89. The Ministry of Fisheries operates a support programme for research and development in
marine aquaculture, aimed at enhancing scientific knowledge.  Grants are awarded annually based onapplications examined by a special committee.  The amount of support granted in 1997 was
ISK 19 million.
44
                                                     
41 WTO document G/SCM/N/3/ISL and G/SCM/N/16/ISL, 31 October 1996.
42 As defined in Act No. 61/1994 on the Icelandic Research Council, as amended by Act  No. 44/1995.
43WTO documents G/SCM/N/48/ISL, 23 June 1999; G/SCM/N/25/ISL, G/SCM/N/38/ISL,
25 November 1998;  and G/SCM/N/3/ISL, G/SCM/N/16/ISL, 31 October 1996.
44 WTO document G/SCM/N/48/ISL, 23 June 1999.WT/TPR/S/65 Trade Policy Review
Page 50
Employment support programmes
90. These are a number of support programmes aimed, in general, at increasing the quality of
workers and strengthening labour demand, and, more specifically, at tackling the problems of
individuals with difficulties finding employment.  These are:  the Vocational Training Fund;  the
Employment Opportunities for Women in Rural Areas Programme;  the Vocational Rehabilitation and
Employment of Disabled Persons Programme, all three administered by the Ministry of Social
Affairs; the Vocational Training in the Fishing Industry Programme, managed by the Ministry of
Fisheries;  and the Job Creation Initiative programme, managed by the Ministry of Industry and
Commerce.  The latter is the largest employment support programme;  it was created to replace the
Industrial Research Programme, the Small Companies in Rural Areas Programme, and the Reaching
Out Programme, which were phased out in 1995 (the first two) and 1996, respectively.  Theprogramme's main objective is to foster the development of small and medium-sized enterprises,
particularly with respect to management skills, financing, product development, marketing, and
innovation.  Support under the initiative takes the form of specially tailored support programmes and
courses as well as grants to firms and individuals domiciled in Iceland, covering not more than 50%
of eligible expenses.  The programme has no determined time-limit, implementation being decided fora year at a time.  Total support provided by the programme was ISK 18 million in 1996, and ISK 81
million in 1997.
45
Regional Support
91. The Assistance to Development Projects programme, under the responsibility of the Institute
of Regional Development, is geared at assisting regional development through small-project grants
covering up to 40% of their costs (mostly product development, marketing, training, and feasibility
studies).46  Support granted under this programme totalled ISK 75.3 million in 1996 and ISK
120 million in 1997;  it is available to individuals, private companies, local development companies,
and municipalities.  The Assistance to Local Economic Development programme, also managed by
the Institute of Regional Development, is aimed at assisting local economic development companies in
providing counselling for small businesses in their area through grants of up to 50% of specified
running costs of counselling operations.  Outlays under this programme totalled ISK 42 million in 1996
and ISK 45 million in 1997.
New Business Venture Fund
92. The New Business Venture Fund (NBVF), established in 1997 by Act No. 61/ 1997, and in
operation since 1 January 1998, is aimed at providing risk capital, with an emphasis in
innovation-oriented investment projects.  This is ma inly provided through share capital, but also through
the granting of loans and guarantees.  The NBVF ru ns four types of programme, three of which are
under the responsibility of the Ministry of Industry and Commerce:  general programmes, which fall
under the Foundation Fund, with an initial capital of  ISK 4 billion (US$55 million);  programmes under
the Initiatives Fund, aimed at purchasing shares in  innovation activities, particularly outside of
Reykjavik, with an emphasis on information technology, also under the responsibility of the Ministry ofCommerce
47;  programmes managed by the Product Development and Marketing Department;  and a
programme of loan and investment guarantees for exports and for activities of Icelandic enterprises or
national, managed by the Export Credit Guarantee De partment, and under the control of the Ministry of
                                                     
45 WTO documents G/SCM/N/48/ISL, 23 June 1999; and G/SCM/N/25/ISL, G/SCM/N/38/ISL,
25 November 1998.
46 Act No. 64/1985 on the Institute of Regional Development.
47 The activities of this Fund, which has an initial capital of ISK 1 billion, are financed with the
proceedings of the partial privatization of the Icelandic Investment Bank (Chapter IV).Iceland WT/TPR/S/65
Page 51
Finance.  The three latter programmes are self-fin ancing and pay an administrative fee to the Foundation
Fund.
93. The NBVF covers potentially profitable inve stment projects in Iceland by Icelanders or
foreigners, and investment made by Icelandic parties abroad.  The financing limit for any single project
is 4% of the Foundation Fund's capital, or 8% for a si ngle party or for connected parties.  Furthermore,
participation by the NBVF may not exceed 49% of the total capitalization required to finance each
venture.  The Fund may not grant companies restructuring aid.
(iv) Standards and other technical requirements
(a) Technical regulations and standards
94. The Icelandic Council for Standardization (STRÍ) is in charge of standards.  The Council,
established in 1987, became an independent association in 1992;  its role is the publication ofIcelandic standards and the representation of Iceland in international and regional standards bodies.
STRÍ falls under the Ministry of Industry and Commerce, but is a completely independent body in
which representatives from Ministries, different associations and enterprises participate.  STRÍ is
financed partly by membership fees, sales of standards, and through a levy on salaries.  Three
sectorial standardization organizations operate under the auspices of STRÍ:  BSTR in the buildingsector, FUT in the information technology sector, and RST in the electrotechnical sector.
95. Since 1988, STRÍ has been a member of the European standards bodies CEN and CENELEC
and has participated in the Internordic Cooperatio n on Standardization (INSTA).  According to the
authorities, the significance of Iceland's participation in INSTA is small, since it manages only a few
standards.  STRÍ is also a member of ISO and an associate member of IEC.  Iceland notified the WTO
Committee on Technical Barriers to Trade (TBT) in 1997 that STRÍ had accepted the WTO TBT Code
of Good Practice.
48
96. Some 1,200 technical regulations and 8,857 standards were applied in Iceland in mid 1999;
of the latter, the authorities indicated that some 37.2% were equivalent to international standards
(either ISO or IEC).  Most Icelandic standards ( 8,422 out of 8,466 in 1998) were EEA standards, with
only a few standards specific to Iceland (Table III.9).
97. Technical regulations cover a wide range of products, including motor vehicles, household
appliances, construction material and equipment, textiles, foodstuffs, medicines, fertilizers, cosmetics,
telecommunications and data processing equipment, toys, tobacco, spirituous drinks, and medical
devices.  Most technical regulations follow EEA norms.  Certification and test data from other EEA
countries are accepted in Iceland.  In accordance wi th Protocol 12 of the EEA Agreement, Iceland
pursues mutual recognition agreements in relation to conformity assessment, equivalent to those
already finalized by the European Union.  These agreements provide for the mutual acceptance of
certificates, marks of conformity and test reports issued by the conformity assessment bodies of the
exporting  party in conformity with the legislati on of the importing party in certain defined product
sectors.
                                                     
48 WTO document G/TBT/CS/N/6,  17 June 1997.WT/TPR/S/65 Trade Policy Review
Page 52
Table III.9
Standards Iceland 1996-98
1996 1997 1998
Total number of Icelandic standards
of which:4,877 6,652 8,466
Total number of EEA standards 4,833 6,608 8,422
Identical to ISO standards 1,054 1,300 1,652
Identical to IEC standards 782 1,109 1,508
Source : Information provided by the Icelandic authorities.
98. At present, the EEA/EFTA States have signed mutual recognition agreements with Australia
and New Zealand and talks with Canada have been finalized.  Mutual recognition under these
agreements applies only to harmonized standards;  these are, however, the vast majority.  Certificationfrom testing houses in third countries that have been accredited as compatible with EEA norms
(procedures regarding testing and certification depend upon the product in question) is also
recognized.  The general principle is that the importer is responsible for the product and must be able
to prove to the authorities its conformity with the relevant requirements.
99. Iceland has notified a number of technical regulations to the WTO, mainly for safety and
health concerns, or for environmental reasons.  Notified regulations are those that are specific to
Iceland, and not harmonized within the EEA.
(b) Sanitary and phytosanitary measures
100. Iceland has notified the WTO that it has met its obligations under paragraphs 2 (Enquiry
Point) and 11 (National Notification Authority) of Annex B to the Agreement on Sanitary andPhytosanitary Measures (SPS) in 1997.
49  The Chief Veterinary Officer in the Ministry of Agriculture
is Iceland's enquiry point under the SPS Agreement.  The Ministry of Agriculture is the National
Notification Authority.  The Environmental and Food Agency of Iceland (EFA) is the agency in
charge of food quality control, with the exception of meat (Chief Veterinary Officer) and fish
(Ministry of Fisheries).  New foods are regulated by the EFA, which controls and reviews them and
either accepts or rejects them.  As a consequence of the EEA agreement, products accepted in the EU
are in principle accepted also in Iceland.  In practice, however, the EFA may reject a product acceptedby the EU.  This rejection does not require the acceptance of the other EFTA/EEA members (Norway
and Liechtenstein).  However, in the case of acceptance of a new product by the EFA, the consent of
Norway and Liechtenstein is required.
101. Iceland participates in the rapid-exchange-of-information system with other EEA members.
Through this system, the Icelandic authorities must report the finding of any hazardous product to theEuropean Commission and the EFTA Surveillance Authority.  There are two levels of reporting:  non-
alert and alert.  If there is an alert, the local auth orities are required to take action with respect to the
hazardous product.
102. The importation of plants and plant products is subject to certificate requirements and may be
restricted by the Minister of Agriculture to protect Icelandic flora against new diseases and pests.
50
The importation of harmful organisms and plants (as listed in Appendices I and III of Regulation
                                                     
49 WTO document G/SPS/GEN/27, 12 August 1997.
50 Act No. 51/1981 on protection against plant diseases and pests;  Act No. 77/1981 on veterinary
services;  and Regulation No. 189/1990 on import and export of plants.Iceland WT/TPR/S/65
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No. 189/1990), plant consignments rejected for importation into Denmark, Finland, Norway or
Sweden for phytosanitary reasons, coniferous trees from countries outside the European continent,
and most soil, compost, raw or cut tree bark and manure, is prohibited.  Plants and plant products
from countries where the New Zealand flatworm (Artioposthia triangulate) is found must be free of
soil unless there is an additional declaration on the phytosanitary certificate that states that the plants
come from a place of cultivation where the flatworm is not found.
103. The importation of feed containing antibiotics or growth promoters of chemotherapeutic
origin is prohibited.  In chicken production, certa in coccidiostatics may be used for growing birds
only.  All importation of feeds of animal origin is prohibited, although dried materials based on
pasteurized milk may be used.  The importation of animals is in principle prohibited unless the
authorized by the Minister of Agriculture by recommendation of the Chief Veterinarian subject tocertification from foreign authorities on the disease-fr ee status of the animals (Act No. 54/1990).  All
animals are subject to quarantine on arrival in Iceland.  Fur-bearing animals are subject to special
quarantine periods, which can exceed 12 months, in accordance with  Regulation No. 444/1982.
104. Under Act No. 25/1993 on animal diseases and their prevention, the Minister of Agriculture
can impose import restrictions on products such as hay, helm, soil, manure, meat and bone meal,blood and blood plasma, unpasteurized milk, uncooked eggs, wool, animal hair, feathers, and
eiderdown.  In the same line, Regulation No. 479/1995 forbids in principle the importation of raw
meat;  animal feed containing offal; unprocessed hi des;  skins and bones;  raw eggs and egg products;
unpasteurized milk and milk products;  blood, serum and other organic animal goods;  livestock
manure;  used saddlery, agricultural machinery and angling gear, unless disinfected, "to prevent
animal diseases from coming into Iceland with imported products".
51
105. Notice 324/1999 relaxes somewhat the stringency of Act No. 25/1993 and Regulation
No. 479/1995, by allowing imports of products, banned in principle, upon recommendation from the
Chief Veterinarian, and based on a petition from a potential importer.  When authorized, the
importation of meat and meat products an d dairy products (HS headings 0201-0210, 0401-0408, 1601
and 1602) that have not undergone heating treatment must be accompanied by a certificate from a
country sanctioned by the Chief Veterinarian.  Certificates from EU countries as well as from Canada,Cyprus, Malta, Norway, Switzerland, and the United States are valid in Iceland.
52  In the case of meat
and meat products, the health certificate must certify that no notifiable diseases, as recorded on list A
of the International Office of Epizootics, have occurred in the exporting country during the six-month
period prior to exportation.53  Imported products must also comply with Regulation No. 252/1995
with respect to the maximum animal drug traces allowed and must originate from animals not givenfeed containing growth stimulants and drugs. Slau ghterhouses must comply with health requirements
comparable to those applicable to imports to the EU or the United States.
106. The importation of animal and plants products th at have been given growth promoting agents
and hormones may be banned by the Minister of Agriculture under Act No. 87/1997.
(c) Environmental measures
107. Iceland is a party to the Montreal Protocol on Substances that Deplete the Ozone Layer and
adheres to the Protocol's rules.  Iceland is not a party to the Kyoto Protocol to the United Nations
Framework Convention on Climate Chan ge.  Although trade in protected birds is prohibited, Iceland
                                                     
51 Regulation No. 479/1995, Article 1.
52 Notification No. 483/1995 regarding the importation of agricultural goods, and  Notification
No. 262/1996, amending Notification No. 483/1995 regarding the importation of agricultural goods.
53 WTO document G/LIC/N/1/ISL/1, 26 January 1999.WT/TPR/S/65 Trade Policy Review
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is not a signatory to the Convention on Internationa l Trade in Endangered Species of Wild Fauna and
Flora (CITES).  Iceland participates in various European eco-labelling schemes.  Environmental
issues are dealt with by the Ministry of the Environment.  There is currently no overall legislation on
environmental issues in Iceland;  however, they are covered by a number of existing laws and
regulations, including: the Food Act of 1995;  the Animal Protection Act of 1994, as amended;  the
Obligation of the Government to Provide the Public with Information on Environmental Affairs Actof 1993;  the Environmental Impact Assessment Act of 1993;   the Pollution Control Regulations of
1992;  the Fisheries Management Act of 1990;  the Measures against Pollution from Single-Use
Beverage Containers of 1989;  the Toxic and Hazardous Chemical Substances Act of 1988, as
amended; the Radiation Protection Act of 1985.
108. Regulation No. 656/1997 implements the control agreed by Parties to the Montreal Protocol
on substances that deplete the ozone layer.  Import licences are required for
hydrochloro-fluorocarbons (HCFCs) since April 19 95;  the importation of HCFCs is subject to a
quota system requiring administrative approval prio r to import. According to the authorities, import
licences for manufactured products under certain custom codes, which may contain HCFCs,
chlorofluorocarbons (CFCs) or halon, are to ensure  that no such goods are imported;  import licences
for recycled or reused HCFC are intended to ensure that the substance meets minimum requirements
for purity, to check on the country of origin of the substance and also to control quantities.
109. Iceland does not produce any ozone-depleting substances.
54  Import of other ozone-depleting
substances is banned.  Importation of aerosols c ontaining CFC has been banned since 1 January 1990;
as have imports of CFC for insulation since 1 January 1994.  Import and sale of limited amounts of
metered dose inhalers containing CFC is granted on a yearly basis.  Administrative approval is
required prior to import of manufactured products that may contain ozone-depleting substances, suchas refrigerators and portable fire extinguishers.
110. The overall amount of allowable HCFC is published in Regulation No. 656/1997, which
follows the EU's phase-out policy.  Quotas are allocated by the Environment and Food Agency of
Iceland on a yearly basis for the period 1 January to 31 December.  The size of the quota is
determined on the basis of each applicant's impor ts of CFC and HCFC in 1989 (the sum of the
calculated level of imports of HCFC and 2.6% of th e calculated level of imports of CFC), and their
imports during the years prior to the application.  After the quotas are assigned, if there is any amount
left from the total allowable import, this is divided between all applicants based on the principle of
equality and proportionality.  The quota allocated to each country is not published nor the maximum
amount allocated to each importer.
111. Environmental impact assessment (EIA) of projects in a number of areas has been mandatory
since 1994.  A number of factors are taken into account for assessments:  the nature, size and location
of the project, and the activities resulting from it. 
 EIA is under the ultimate authority of the Minister
of the Environment, but the Director of the Nation al Physical Planning Agency (NPPA) is responsible
for its implementation.  Projects required to go through an EIA include:  hydroelectric power plants
with installed power of 10 MW or more;  geot hermal power plants over a certain capacity;
construction of high voltage power lines with 33 kV of voltage or more; tourist centres in uninhabited
areas;  disposal installations for poisonous and hazardous waste;  iron, steel and aluminium;  chemical
plants;  construction of new roads, railways airports, and ports over 1,350 t onnes.  Project developers
must present an Initial Environmental Impact Statement (IEIS), to the NPPA, which, after public
examination, must decide whether to approve the project or engage in further EIA, in which case the
                                                     
54 WTO document G/LIC/N/3/ISL/1, 14 September 1998.Iceland WT/TPR/S/65
Page 55
developer must prepare a Second Environmental Impact Statement (SEIS).  The developer may
appeal the NPPA's decision to the Minister of the Environment.
(v) Competition policy
112. Competition policies are enforced at three levels:  the national level, when the effects of a
practice are limited to Iceland;  the EFTA level, when effects extend to other EFTA countries;  and
the EEA level, when practices affect other EEA members.
113. At the domestic level, the Competition and Fair Trade Authority ( Samkeppnisstofnun ) and the
Competition Council ( Samkeppnisráð )  are in charge of surveying the enforcement of competition
policy in Iceland.  The Authority prepares cases submitted to the Competition Council.  The Authority
may decide provisionally on individual matters and may take decisions of limited scope.  More
complex cases are submitted to the Compe tition Council, formed by five members appointed by the
Minister of Commerce.  Decisions can be appeal ed to the Competition Appeals Committee, composed
of  three members nominated and appointed by the Minister by the Supreme Court of Iceland.
Decisions of the Appeals Committee may be referred to  the courts.  The Icelandic authorities indicated
that some 300 cases are reviewed each year by the Competition and Fair Trade Authority, of these,
between 50 and 60 are taken to the Competition Council.
114. Following the acceptance of the EEA agreement, Parliament passed Law 8/1993, or
Competition Act, which outlaws practices whose effect or  aim is to fix prices, divide markets, or lead to
a dominant market position;  in this sense, cartels are not outlawed per se , but insofar as they lead to one
of these undesirable effects.  The Act also prohibits horizontal agreements relating to margins and
tendering, as well as the binding of resale prices.  The authorities have wide scope to grant exemptions
from prohibitions.  The Competition Act covers both goods and services, and applies to individuals,
private companies, and public enterprises.  The Act does not apply to export cartels or any other(anti-competitive) practice dealing with exports or th at has an effect only out side Iceland.  Employment
terms of wage earners (including wa ges), and subsidized services provided by public enterprises are also
outside the scope of the Act.
115. The Competition Act also regulates mergers and takeovers and gives the competition
authorities the power to prevent firms acquiring or maintaining a dominant position in a market.Prevention can take the form of a ban, an order,  or a conditional permission. Although there is no
explicit notification requirement, planned mergers may be submitted to the Competition and Fair
Trade Authority for consideration, or may be exam ined directly by the Authority, without prior
request.  A new merger or takeover leading to market dominance within Iceland may be declared null
and void even if it has already taken place.  A decision in respect of invalidation must be taken notlater than two months after the competition authorities become aware of the merger or takeover.  The
Competition Act entitles the Competition and Fair Trade Authority to order financial segregation
between operations without having to prove harm to competition.  The Act also allows action against
foreign firms with regard to measures affecting the Icelandic market.  Practices banned by the
Competition Act are null and void under civil law. The Competition Council may imposeimprisonment penalties (up to four years), administrative fines proportionate to the damage caused
and the gains obtained, and daily penalties until a decision is complied with.
116. The EFTA agreement contains rules regarding competition policy, prohibiting certain
restrictive business practices, as well as the abuse of a dominant market position.  The EFTA
Surveillance Authority has the task of ensuring compliance with these competition rules.  The
Authority may, inter alia , make on-the-spot inspections, impose fines and periodic penalties and, in
the case of an infringement, order the undertakings concerned to bring the infringement to an end.WT/TPR/S/65 Trade Policy Review
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117. Iceland also applies the competition rules spelled out in the EEA agreement, which are
equivalent to EFTA rules:  in the field of comp etition policy the EFTA Surveillance Authority has
equivalent powers and similar functions to those of the European Commission.  The European
Commission is generally responsible for cases falling under the competition rules of the Treaty of
Rome, while the Authority takes care of cases where there is an effect only on trade between EFTA
members.  For cases where trade between one EU country and one or more EFTA countries isaffected, attribution is based upon the relative importance of turnover in the EFTA and the EU
territories.  The EEA competition rules apply in Iceland in parallel with national competition
legislation for restrictive practices that affect trade with another EFTA State or with the EU above the
thresholds mentioned.
118. Practices incompatible with the competition rules of the EEA agreement are prohibited per se
with no need for any authority decision or court ruling for the prohibition to apply.  Prohibited
agreements are considered null and void and are consequently not enforceable between the parties.
Takeovers and mergers and acquisitions must be notified to the European Commission when the total
world-wide turnover of the merged companies am ounts to at least ECU 5 billion, of which at least
ECU 250 million for each company are realized within either the EU or the EFTA territory.  The EEArules do not apply for merging companies with at leas t two thirds of their turnover within one country.
In certain cases, concentrations may be prohibited if they create or strengthen a dominant position.
Agreements prohibited by or incompatible with Article 53 may be notified to the European
Commission or the EFTA Surveillance Authority in order to obtain an exemption from the
prohibition.  After notification, the company is granted a period of immunity from fines running from
the date of the notification until the decision on the matter by the Authority.  No exemption is granted
for agreements that enable companies to eliminate competition for a substantial part of the products
concerned. Agreements meeting the conditions of a "block exemption" need not be notified.  Block
exemptions currently included in the EEA comprise exclusive distribution agreements, exclusive
purchasing agreements, motor-vehicle distribution and servicing agreements, specialization
agreements, research and development agreements, franchise agreements, technology transfer
agreements, and certain agreements in the transport and insurance sectors.  The block exemptionsindicate contract clauses that are permitted (the "white list") and contract clauses that exclude the
application of the block exemption (the "black list").
119. Enforcement of competition law has intensifie d in Iceland in recent years. There were
1,371 restrictive business practice investigations by the Competition Authority in 1998, of which 745
were closed without further investigation.  Twenty-five judgements were given by the Courts in 1998,of which three were given by the Supreme Court.  Investigations involved both public and private
enterprises, a departure from the past when mostly public enterprise practices were analysed.  Several
investigations dealt with access to essential facilities for the provision of services, exercise of
monopoly power, and the possibility by wholesaler s of exercising monopsony power. Investigations
involved, among other areas, the provision of telecommunication services (20 cases were filed in1998 against Iceland Telecom), access to credit card services, access to mail delivery services, and
several cases involving mergers not exceeding the EFTA/EEA threshold (see below).
(vi) Intellectual property rights.
(a) Patents
120. The Patents Act No. 177/1991, which entered into force on 1 January 1992, as amended by
Act No. 67 of 1993, Act No. 36/1996, Act No. 91/1996 and Act No. 132/1997, is the main patent law
in Iceland.  The 1993 amendments extended patent protection to inventions concerning stimulants orfoodstuffs.  Provisions concerning exceptions fr om exclusive right were also amended in light ofIceland WT/TPR/S/65
Page 57
obligations stemming from the agreement establishing the EEA.55  The Patents Act was further
amended in 199656;  these amendments extended patent protection to pharmaceuticals, reflecting the
TRIPS Agreement;  the provision concerning prior ity was widened and those relating to compulsory
licences were changed to follow Article 31 of th e TRIPS Agreement.  To cover the provision of
Article 34 of the TRIPS Agreement, concerning the bur den of proof in respect of process patents, a new
Article 64a was added to the Patents Act.  A ne w chapter concerning suppl ementary protection was
added to the Act, in line with obligations undertaken  in the context of the EEA.  With these amendments
the procedure was also changed.  Currently, opposition ag ainst a patent is made after the granting of the
patent instead of before.
121. According to the Patents Act, patents are granted in Iceland to "any person who has made an
invention which is susceptible of industrial application" (section 1).  A negative list provides forinnovations that are not considered to be inventions for patent purposes, including computer
programs.  Although the Patents Act does not specifically prohibit the granting of a patent for plants
and animals per se , it states that a patent may not be granted for plant or animal varieties or biological
processes for the production of plants or animals.  However, patents may be granted for
microbiological processes.
122. Exceptions to the exclusive rights granted by patents apply in the case of: non-commercial
use;  experiments;  medicines prepared in pharm acies in accordance with a physician's prescription;
and, within the EEA, for the use of a product protected by a patent that is put on the market by the
patent holder or with his consent (section 3).  The commercial use of an invention grandfathers its use
after a patent application has been filed (section 4).  A priority period of 12 months is granted for the
filing of patent applications.  The 1991 Act granted this right only to applications made in Iceland or
in countries adhering to the Paris Convention.  Act No. 36 of 1996 extended this right to applications
made in countries not members of the Paris Convention, upon decision by the Ministry of Industry
(section 6).
123. The Patents Act of 1991 (section 75) temporarily denied patent protection to pharmaceutical
products until after five years from the entry into force of the Act.  Patents to protect a process for
manufacturing such material could, however, be gran ted.  This temporary provision was modified by
Act No. 36/1996 to comply with the mailbox provis ion of the TRIPS Agreement, allowing as of
1 June 1996 the granting of patents for pharmaceuticals on the basis of applications filed after
1 January 1995.  Patents were granted retroactively for applications filed between 1 January 1995 and
1 June 1996.
57  According to the authorities all applicat ions for pharmaceutical processes received after
1 January 1995 included claims for patenting of produc ts;  the examination of these applications was
delayed until 1 January 1996 in accordance with Article 70.8 of the TRIPS Agreement and no decision
was made until after Act No. 36/1996 had entered into force, on 1 June 1996.  Until that date, Icelandic
legislation did not provide for a "mailbox and marketing system" in the sense of Sections 70.8 and
70.9 of the TRIPS Agreement.  Pr oduct protection is not granted for applications presented prior to
1 January 1995, when it was not possible to have patent protection for pharmaceutical products.  A
committee appointed by the Minister  of Industry concluded, in 1995, that applications for a process
patent cannot be transformed to cover product patents.58
124. The Patent and Registration Office, within th e authority of the Ministry of Industry and
Commerce, receives applications for patents in Icel and.  Separate applications must be submitted for
each invention.  Granted patents are entered in a Register of Patents kept by the Patent Office.
                                                     
55WTO document IP/Q3/ISL/1,  5 December 1997.
56 Acts No. 36/1996 and 91/1996.
57 WTO document IP/Q3/ISL/1,  5 December 1997.
58 WTO document IP/Q3/ISL/1,  5 December 1997.WT/TPR/S/65 Trade Policy Review
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Oppositions may be presented to the Patent Office, w ithin nine months of the granting of the patent,
which must advertise that an opposition has been  presented.  All documents regarding a patent
application are made public after 18 months from the date of filing.  If a patent application has been
refused, however, the application documents are made public only if the applicant requests
resumption of the proceedings, appeals against the refusal or requests re-establishment of rights
(section 22).  Decisions by the Patent Office may be  appealed to the Patent Board of Appeal, whose
decisions may not be brought before any higher administrative authority.
125. International applications filed in countries signatories of the Patent Cooperation Treaty that
have been given a filing date are considered as havi ng been submitted to the Patent Office on that date.
Foreigners may file international applications with the Icelandic Patent Office;  patents may be granted
in these cases only after 20 months from the internat ional application date or after publication by the
International Bureau of the WIPO.  An applicant who decides to register an international application in
Iceland must, within 20 months from the internationa l date of filing or the priority day, pay the
corresponding fee to the Icelandic Patent Offi ce and submit a translation of the application.
126. Patent protection is granted for a period of 20 years from the application filing date.  A renewal
fee must be paid each year;  renewal fees must be paid a maximum of three months before the duedate, which is the last day of the month in which the fee year begins.  Patent rights may be transferred
through licensing agreements, which may, on request, be recorded in the Register of Patents.  A patent
may be terminated if the renewal fees are not paid, or by court decision on the grounds that it does not
allow an invention to be carried out, its subject-matter goes beyond the scope of the application as
filed, or that the scope of protection of the patent was extended after it was granted by the Patent
Office.
127. Compulsory licensing may be granted if a patentable invention is not given commercial use
within three years from the date the patent was granted, or four years from the filing of the
application.  Compulsory licensing may also take place if it is required for the exploitation of a patent
for an invention representing an "important technical advance", with "considerable economic
significance";  "when required by important public interests";  or when a person was already
commercially exploiting an invention at the time when a patent was granted without knowledge of the
application.  Compulsory licences do not prevent the patent holder from commercially exploiting the
invention, and may be granted only when the licence could not be obtained "on reasonable terms" and
to a person deemed to be capable of using it commercially.  Special provisions apply for the
compulsory licensing of semi-conductor technology, which may take place only for public
exploitation that is not of commercial nature, or to prevent anti-competitive behaviour.
59  Compulsory
licences are granted by the Reykjavik City Court, and are subject to compensation.  No compulsory
licences have been granted since 1995.
128. Infringement of patents rights is punishable by fines, or under aggravated circumstances,
imprisonment of up to three months.  Fines cover co mpensation for the exploitation of the invention plus
damages for the further injury that the infringement  may have caused.  A court may also decide that a
product must be altered or destroyed to prevent abuse due to patent infringement.  Reflecting
Articles 34.1 and 34.2 of the TRIPS Agreement, under th e Patents Act (Section 64a) the burden of proof
in civil proceedings, for patent infringement related to  a process patent, lies with the person presumed to
be infringing the patent.  The owner of an Icelandi c patent has the right to preclude the importation of
products protected by the patent.  According to the authorities, the principle of international exhaustion
applies within the EEA.
                                                     
59 Act No. 36/1996, section 19.Iceland WT/TPR/S/65
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129. There were 35 patents granted in 1998, and only one rejection.  Between 1995 and July 1999,
150 patents were granted;  seven applications were rejected.  The average pendency time is relatively
high, at 5.5 years in 1998 (Table III.10).
Table III.10
Number of patents granted and average pendency time, 1994-1999
Year Patents granted Patent applications rejected Average pendency time (years)
1994 37 3 ..
1995 11 1 ..
1996 58 1 5.2
1997 41 4 5.0
1998 35 1 5.5
1999 (January-June) 5 0 ..
Total 187 10 ..
.. Not available.
Source: Information provided by the Icelandic authorities
(b) Integrated circuit layout designs
130. The main provisions regarding integrated circuit layout designs are contained in Act No. 78
concerning the protection of topographies of integrated circuits on semiconductors, passed in 1993,
with immediate entry into force, and amended in  1995 by Act No. 19.  The Act provides for the
granting of exclusive rights for the exploitation of topographies of integrated circuits of
semiconductors when the topography is first fixed or encoded, and for a period of ten years from the
calendar year when the topography was first commercially exploited anywhere in the world.
Protection is granted on a national treatment basis, independent of nationality or residency.
(c) Design protection
131. The Design Protection Act, No. 48/1993, which entered into force on 21 May 1994
establishes a system for the protection of industrial designs.  To be protected, a design must be
distinctive, i.e. it must have been made accessible to knowledgeable persons in the field concerned
before the date of filing in Iceland (for registered protection) or the date on which it was first made
available to the public (for unregistered protection) and its overall impression from the user's point ofview must differ significantly from other designs (Article 2).
132. Design protection may be obtained either by re gistration or by making the product accessible
to the public (Article 4).  Unregistered protection of a design is limited to a prohibition to make
unauthorized copies.  There is no ex officio  examination by the registration authorities as to
distinctiveness or prior rights;  however an investigation may be required in cases where it isnecessary to determine whether a certain design is identical or similar to another design.
133. Registered designs enjoy a period of protection of up to five years from the date on which the
application for registration was filed.  Registration may be renewed for periods of five years, up to a
total term of protection of 25 years (Article 23).  Unregistered designs are protected for two years from
the date they were first made accessible to the public (Article 22).  Protection of a design (registered andunregistered) can be declared invalid by a court (Art icle 25).  Registered desi gn protection can also be
declared invalid by the registration authorities (Article 26).
134. The Patent Office is responsible for the administration of the Design Protection Act and for
keeping a Register of Designs, which is accessible to the public.  A Committee of Appeal designatedWT/TPR/S/65 Trade Policy Review
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by the Minister of Industry reviews decisions by the Patent Office regarding designs.  Application for
the registration must be submitted to the Patent Office accompanied by a graphic or photographic
reproduction of the design;  a brief description of the design may be provided.  Applicants who are not
residents of Iceland must appoint an agent resident in Iceland to represent them in all matters
regarding application and registration.  Designs are classified by the Patent Office in accordance with
the Locarno Agreement.
135. Enforcement of design protection may lead to fi nes, and imprisonment of up to three months,
when rights have been infringed intentionally;  in some cases, seizure of possessions may be ordered
by a court (Article 36).  Infringement, deliberate or  through negligence, of design protection may lead
to the payment of "reasonable compensation for the exploitation and for other damages" (Article 37).
136. A total of 159 designs were registered  between 1994 and mi d-1999 (Table III.11).
Table III.11
Number of designs and trade marks registered, 1994-99
Year Designs registered Trade marks registered
1994 25 1,201
1995 29 1,394
1996 37 1,471
1997 24 1,728 + 352 international registrations
1998 32 1,414 + 1,734 international registrations
1999 (January-July) 12 680 + 1,024 international registrations
Total 159 7,888 + 3,420 international registrations
Source: Information provided by the Icelandic authorities.
(d) Trade marks and geographical indications
137. Trade mark rights in Iceland apply to goods and services:  they grant the exclusive
commercial use of a sign and the right to prevent its use in the same or similar goods and services
covered by the mark or if there is danger of confusion.  According to Icelandic legislation, the
acquisition of an exclusive right to a trade mark is given either by registration or use.  Well known
marks are protected from misuse or from the lessening of their reputation.
138. The Trade Marks Act No. 45 of 22 May 1997, replaced the previous Trade Marks Act
No. 47/1968, which was repealed on that date.  The new law was notified to the WTO in 1998.60  The
new Act revised the general provisions contained in Chapter I to extend the concept of trade mark to
"any visible sign to distinguish goods or services".  It  also contains an illustrative list of "commercial use
of a trade mark", which extends its scope to includ e:  "placing a mark on goods or their packaging;
offering for sale, placing on the market or preparin g to place on the market, goods or services identified
with the mark;  importing or exporting goods or serv ices identified with the mark;  using the mark in
advertisements, letterheads or in other similar fashion" (Article 5).
139. Actual use of a trade mark is not a condition for filing an application for registration.
Applications for registration must be submitted to the Patent Office, which maintains a Trade MarksRegister.  A condition for registration is that the mark be suitable for distinguishing the goods of the
proprietor from other goods.  Trade marks must be registered for a specific class or classes of goods
                                                     
60 WTO document IP/N/1/ISL/T/1/Rev.1, 20 February 1998.  The 1968 Act was notified in WTO
document IP/N/1/ISL/T/1, 11 November 1996.Iceland WT/TPR/S/65
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and services. Once the Patent Office considers that all the requirements for registration are fulfilled,
the mark is registered and an announcement of its registration is published in the Patent Gazette .  The
registration of a trade mark may be opposed after its publication through an opposition filed with the
Patent Office within two months of the date of publication.
140. Iceland recognizes a right of priority on the basis of an earlier trade mark application filed in
another WTO Member (or party to the Paris Convention) by a national of a WTO Member, as statedin Regulations No. 436/1990 and No. 287/1996 and in Article 17 of the Trade Marks Act of 1997.
The application for registration in Iceland must be filed within six months of the first application for
registration abroad.  Registered trade marks are protected from the moment the application for
registration is submitted and for ten years from the date of registration.  The registration is
subsequently renewable for periods of ten years.  Applications for renewal must be filed to theIcelandic Patent Office as early as six months prior to the expiration of the registration and no later
than six months after its expiration (Article 27).  Transfer and (non-compulsory) licensing of a trade
mark are possible under the Trade Marks Act.
141. The registration of a trade mark may be invalidated by an application benefiting from the
right of priority if the Patent Office deems that the application would have prevented the registration.This situation may also arise when the Icelandic Patent Office receives a request for application of an
international registration in Iceland and there is evidence that the international registration would have
prevented the registration of a mark that was applied for after the international registration took effect
(Article 23).  Non-use of a trade mark for a period of  five years from the date of registration may lead to
invalidation of the registration, where non-use refers to the mark not having been used in Iceland for
the goods and services for which it was registered;  however, the goods or services do not need to be
commercialized in Iceland, the mark may be used on goods or packaging for export (Article 25).
142. Wilful infringement of a trade mark is punishab le with a fine or with imprisonment of up to
three months, and is subject to the payment of a remuneration for the use of the trade mark and
compensation for damages.  Anyone profiting uninten tionally from a trade mark is obliged to make a
remuneration not exceeding the assumed profit (Article 43).
143. The number of trade mark registrations between 1994 and July 1999 reached 7,888.
Additionally, there were 3,420 international trad e mark registrations between 1997, when Iceland
became member of the Madrid Protocol, and July 1999.
144. There is no specific legislation concerning geographical indications in Iceland, but the Trade
Marks Act and the Competition Act contain provisions that grant protection to such indications.  The
Trade Marks Act contains provisions that prohibit the use of deceptive trade marks, includinggeographical indications (although this is not explicitly stated).  Article 14 prohibits the registration of
a mark that causes confusion regarding its origin, as well as the registration of a trade mark for wines
and spirits that implies a geographical name unless the product originates at the location in question.
Misleading use of geographical i ndications is also forbidden under Article 21 of the Competition Act.
(e) Copyright
145. Iceland is a party to the Berne Convention (Paris text of 1971), the Universal Copyright
Convention of 1952, and the Rome Convention.
61  The main legislation dealing with copyright is the
Copyright Act of 1972, as amended in 1984, 1991,1992, 1996 and 1997.62  The 1984 amendment
introduced a levy on blank audio and video tapes, as  well as modifications with respect to measures
                                                     
61 Iceland ratified Article 1-21 of the Berne Convention (Paris text of 1971) in August 1999.
62 WTO document IP/N/1/ISL/C/1, 22 July 1996.WT/TPR/S/65 Trade Policy Review
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regarding copyright infringements, sanctions, and procedures.  The 1992 amendment increased
protection for visual artists, right holders of com puter programs and performers.  The 1996 amendment
extended the period of copyright protection from 50 to 70 years.  The 1997 amendment made the
Copyright Act compatible with the Information Act, which enables people to have access to public
information.
146. Copyright is extended to the author of a literary or artistic work.  Literary and artistic works
are defined as "works (which) include any text composed orally or in writing, a dramatic work, a
musical composition, work of fine art, architecture, cinematography, photography or applied work".
Protection is extended to maps, drawings, and models;  designs are protected as applied.  Computer
programs are protected as literary works under Article 1 of the Copyright Act;  right holders of
computer programs (and cinematographic works) are granted the rental rights for their work(Article 24.2).  Compilations of data which constitute intellectual creations are protected either as
literary or composite works.
147. National treatment is granted to other WTO Members as regards copyright and neighbouring
rights, in accordance with international conventions.  Copyright protection currently lasts 70 years
from the end of the year of the author's death, or last surviving author if it is a collective work.Anonymous works are protected for 70 years from the end of the year in which they were publicly
presented.  This protection period applies retroactively to works, performances and phonograms made
before the entry into force of the Copyright Act in  1972 (Article 63) as amended in 1996.  Copies of
work publicly presented and protected by copyright (excluding computer programs and architectural
work) are allowed for private use, up to a maximum of three such copies (Article 11);  firms,
companies, associations and other legal entities are excluded from the scope of this provision.
63  No
compensation is granted for private copying since no rights are involved.
148. Provisions regarding neighbouring rights prohibit the audio recording, broadcast,
communication, and copying of a recording of a live performance without the consent of the
performer.  In accordance with Article 14(5) of the TRIPS Agreement, the rights of the performer
apply for 50 years from the end of the year in which the performance was made (Article 45);  if more
than twelve performers are involved in a performance,  the reproduction and reuse of the performancemay be authorized by the professional organization of the performers, provided that reimbursement is
made for such use.  In the case of video and audio recordings, the copyright is granted to the producer
(Article 46).
149. A fee is levied on equipment for audio and video recording, as well as for blank audio and
video tapes (Article 11 of the Copyright Act).  The fee is applied both to domestically produced andimported products, and responsibility for its payment rest with manufacturers and importers.  The
amount of  the fee as fixed in the Copyright Act is 4% of the import or manufacturing price in the case
of equipment, and ISK 32 and ISK 95, respectively, for audio and video tapes.  Total fee collection
amounted to ISK 25 million (US$350,000) in 1997.  The fees are collected by Customs based on an
private agreement with right holders.  They are passed to a joint collection centre of copyrightholders, including performers and producers, which keeps some 15% of the proceedings;  the rest is
distributed to member societies, which are responsible to the beneficiaries.  Compensation is afforded
to beneficiaries in other countries, on the basis of recipr ocity, i.e. provided that in the country in question
a remuneration scheme has been implemented for blan k tapes that provides the possibility for payment
of remuneration to Icelandic beneficiaries.
                                                     
63 WTO document IP/N/1/ISL/C/1, 22 July 1996.Iceland WT/TPR/S/65
Page 63
150. Compulsory licensing does not apply to copyright;  however, Article 23 of the Copyright Act,
provides for transfer of rights through extensions of agreed collective licences for mass uses.  The
transfer of rights consists in allowing a broadcasting organization that negotiates agreements for a
substantial part of Icelandic authors to broadcast works even if the author is not a member of the
organization, although right holders can prohibit broadcasting by a written interdict.64  The
organization to which the transfer of rights is made must be recognized by the Ministry of Education,Science and Culture;  only one such association in each field is entitled to exercise these rights.
Associations of copyright holders are also allowed to collect general royalties for performance rights
for authors who are not members of the association and, subject to approval by the Ministry of
Education, Science and Culture, to set rates for the performance of works other than broadcasting
(extended licence agreement).
151. Infringement of copyright may lead to fines, and imprisonment of up to two years  (Article 54
of the Copyright Act).  A court may order that infringing copies (both domestically produced and
imported) be seized and surrendered to the infringed party (Article 55), or that they be destroyed or
made available to the public against damage and compensation.  The same applies to equipment used
to make infringing articles.  The infringer may be ordered to pay reasonable remuneration (for the useof the right), damages, compensation, and tort.
152. Disagreements regarding compensation are dealt with by the Copyright Committee, which is
composed of five people appointed for a four-year period by the Minister of Culture and Education to
give advice in matters related to copyright.  The Copyright Council, chaired by  the Minister of
Culture and Education, and composed of the members of the Copyright Committee, and of
representatives of associations exercising authors rights, broadcasting organizations, and other interest
groups, deals with and discusses policy issues related to copyright.
(f) Enforcement of intellectual property rights.
153. Civil lawsuits concerning intellectual property rights are governed by the Civil Procedure Act
No. 91/1991.  Criminal prosecution is governed by the Criminal Procedures Act No. 19/1991.  The
Icelandic Customs Act No. 55/1987 was amended in 1995 to comply with the TRIPS Agreement.
Proceedings leading to a decision are primarily judicial;  injunctions can be granted on the basis ofadministrative proceedings, but the plaintiff must initiate court proceedings in order to confirm the
injunction before court.  The district courts a nd the Icelandic Supreme Court handle both civil and
criminal cases and have jurisdiction over intellectua l property right infringement cases.  The authorities
indicated that most disputes are settled out of c ourt, and that court injunctions, especially punitive
damages, are rare.  In 1998, only two cases resulted in punitive damages.
154. The suspension of the importation of goods infringing intellectual property rights is allowed
by Article 50A of the Customs Act No. 55/1987 for cases of counterfeit trade marks or pirated
copyright goods.  Action against the import of counterfeit or pirated g oods may be requested by a right
holder through an application in writing to Customs.  Once the application is examined, Customs may
suspend the release of the goods or retain them fo r up to ten days.  The owner, importer or receiver
may request the release of the goods against a security to protect the interests of the right holder.
Customs must give the right holder an opportunity to inspect the goods.  Exceptionally, import
suspension may also be applied to infringements of other intellectual property rights;  it does not  apply
to imports of goods put on the market in another country with the consent of the right holder and to
goods destined for exportation (Article 50 A (5)).
                                                     
64 WTO document IP/Q/ISL/1, 21 November 1996.WT/TPR/S/65 Trade Policy Review
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155. Temporary injunctions (interlocutory injunctions), whereby a right holder may request the
authorities to prohibit a party from committing an act that presents an imminent danger of
infringement of intellectual property rights, to maintain the status quo, are allowed under Article 24 of
Act No. 31/1990.  The possible recourse to interlocutory injunctions as regards infringements is also
mentioned in the Trademarks Act (Article 41); the Design Protection Act (Article 35); and the Patents
Act (Article 59).  A judicial procedure must be initiated within one week from the order.  Right holderspresenting a claim to suspend imports must provide a security, generally a monetary deposit,
sufficient to compensate the owner or importer of  the goods for the damage or costs that may be
derived from unjustified suspension of customs clearance.
65  Provisional measures may not be ordered
administratively.
                                                     
65 WTO document IP/N/6/ISL/1, 22 October 1997.