WT/REG243/1  
19 December  2016 
(16-6888) Page: 1/25 
Committee on Regional Trade Agreements   
 
FACTUAL PRESENTATION  
FREE TRADE  AGREEMENT BETWEEN ICELAND AND  THE FAROE ISLANDS  
(GOODS AND SERVICES ) 
Report by the Secretariat  
This report, prepared for the consideration of the Free Trade Agreement  between 
Iceland and  the Faroe Islands , has been drawn up by the WTO Secretariat on its own 
responsibility and in full consultation with the Parties. The factual presentation 
reproduces as closely as possible the terminology used in the Agreement and in the 
comments provided and does not imply official endorsemen t or acceptance by the 
Secretariat of such terminology. The report has been drawn up in accordance with the 
rules and procedures contained in the Decision for a Transparency Mechanism for 
Regional Trade Agreements (WT/L/671) and thus does not imply any val ue judgement 
by the Secretariat regarding the contents of the Agreement.  
Any technical questions arising from this report may be addressed to  
Ms. Rohini  Acharya (tel: +41 22 739 5874) . Any statistical questions arising from this 
report may be addressed to  Ms. Rowena Cabos (tel: +41 22 739 5185) . 
 
 WT/REG243/1  
 
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TABLE O F CONTENTS  
Page 
1   TRADE ENVIRONMENT  ................................ ................................ ................................ . 4 
1.1   Overview  ................................ ................................ ................................ ....................  4 
1.2   Merchandise trade  ................................ ................................ ................................ ....... 4 
1.3   Services trade  ................................ ................................ ................................ .............  6 
2   CHARACTERISTIC ELEME NTS OF THE AGREEMEN T ................................ ......................  9 
2.1   Background Information  ................................ ................................ ...............................  9 
3   PROVISIONS ON TRADE IN GOODS  ................................ ................................ .............  9 
3.1   National treatment and market access provisions on trade in goods  ................................ ... 9 
3.1.1    General provisions  ................................ ................................ ................................ .... 9 
3.1.2    Import duti es and charges, and quantitative restrictions  ................................ ................  9 
3.1.3    Liberalization of tariffs and trade  ................................ ................................ ............... 10 
3.1.3.1    Liberalization by Icela nd ................................ ................................ ........................ 11 
3.1.3.2    Liberalization by the Faroe Islands  ................................ ................................ .......... 12 
3.1.4    Rules of origin  ................................ ................................ ................................ ......... 13 
3.1.5    Export duties and charges, and quantitative restrictions  ................................ ............... 15 
3.2   Regulatory provisions on trade in goods  ................................ ................................ ........ 15 
3.2.1    Standards  ................................ ................................ ................................ ............... 15 
3.2.1.1    Technical Barriers to Trade  ................................ ................................ ..................... 15 
3.2.1.2    Sanitary and phytosanitary measures  ................................ ................................ ......15 
3.2.2    Safeguard mechanisms  ................................ ................................ ............................ 15 
3.2.2.1    Global safeguards  ................................ ................................ ................................ .15 
3.2.2.2    Bilateral safeguards  ................................ ................................ ............................... 15 
3.2.3    Anti-dumping and countervailing measures  ................................ ................................ .15 
3.2.4    Subsidies and State -aid ................................ ................................ ............................ 16 
3.2.5    Customs -related procedures ................................ ................................ ...................... 16 
3.2.6    Other regulations  ................................ ................................ ................................ .....16 
3.2.6.1    Compe tition ................................ ................................ ................................ ......... 16 
3.3   Sector -specific provisions on trade in goods  ................................ ................................ ...17 
3.3.1    Fisheries  ................................ ................................ ................................ ................. 17 
4   TRADE IN SERVICES  ................................ ................................ ................................ .. 17 
4.1   Scope and definitions  ................................ ................................ ................................ ..17 
4.2   Denial of benefits  ................................ ................................ ................................ .......17 
4.3   General provisions on trade in services  ................................ ................................ ......... 17 
4.3.1    Market access  ................................ ................................ ................................ ......... 17 
4.3.2    Natio nal treatment and MFN  ................................ ................................ ...................... 17 
4.3.3    Movement of natural persons  ................................ ................................ .................... 18 
4.3.4    Investment  ................................ ................................ ................................ ............. 18 WT/REG243/1  
 
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  4.4   Liberalization commitments  ................................ ................................ ......................... 18 
4.5   Regulatory provisions on trade in services  ................................ ................................ .....19 
4.5.1    Domestic r egulation  ................................ ................................ ................................ .19 
4.5.2    Recognition  ................................ ................................ ................................ ............. 19 
4.6   Sector specific provisions on trade in services  ................................ ................................ 19 
4.6.1    Fisheries  ................................ ................................ ................................ ................. 19 
5   GENERAL PROVISIONS O F THE AGREEMENT  ................................ .............................  19 
5.1.1    Transparency  ................................ ................................ ................................ .......... 19 
5.1.2    Current payments and capital movements  ................................ ................................ ..19 
5.1.3    Exceptions  ................................ ................................ ................................ .............. 19 
5.1.4   Accession  ................................ ................................ ................................ ............... 19 
5.1.5    Institutional framework  ................................ ................................ ............................ 19 
5.1.6    Dispute settlement  ................................ ................................ ................................ ...20 
5.1.7    Relationship with other agreements concluded by the Parties  ................................ ........ 20 
5.1.8    Government procurement  ................................ ................................ ......................... 21 
5.1.9   Intellectual property rights  ................................ ................................ ........................ 21 
ANNEX 1  ................................ ................................ ................................ ........................  22 
 WT/REG243/1  
 
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Key Facts  
 
Parties to the Agreement:  Iceland and the Faroe Islands  
 
Date of Signature:   31 August 2005  
 
Date of Entry into Force:  1 November 2006  
 
Date of Notification:   10 July 2008  
 
Full implementation:   1 November 2006  
 
1  TRADE ENVIRONMENT1 
1.1  Overview  
1.1.  The Free Trade Agreement between Iceland and the Faroe Islands – "the Hoyvík Agreement" - 
(hereinafter the "Agreement") is the second bilateral agreement concluded by Iceland individually 
(i.e. not as a member of EFTA) and notified to the WTO, following the o ne with the European  Union 
(EU).2 It is the fourth agreement concluded by the Faroe Islands, following t hose with Norway, 
Switzerland , and the EU .3 
1.2.  In 20 13, Iceland's GDP  amounted to US$ 14,620 million, and it ranked 87th among g lobal 
exporters of goods and 104th among global importers  (excluding intra -EU merchandise trade) . The 
Faeroe Islands had a GDP of US $2,198 million in 2009, the latest year for which data are available. 
Its overall global ranking was 126 and 140 for merchandise exports and imports, respectively. The 
value of Iceland's  merchandise exports to  the world in 2013 was estimated at US$ 4,998  million, 
and imports at US$ 4,779  million, accounting for shares of both global exports and imports of 
goods of 0.03%.  In comparison, the Faroe Islands value of merchandise expor ts in 2013  was 
estimated at US$ 1,084  million, and imports at US$ 1,115 million.  Iceland's merchandise exports 
are dominated by fuels and agricultural products which accounted for alm ost 80% of total exports 
in 2013 ; it imports mainly manufactures (60% of imports in 2013 ). The main exports of the Faroe 
Islands are fish and fish products  (agricultural products at 81.7% in 2013), while it mainly imports 
manufactures (59.1%) . Both economies have relatively high exposures to trade, with Iceland's 
trade to GDP ratio on average over 2011 -13 at 108.9 while the Faeroe Islands' trade to GDP ratio 
in 2007 -09 was 98%.  
1.3.  In 2013 , Iceland's ranking among global exporters and importe rs of commercial services was 
55 and 68 (excluding intra -EU trade) , with exports valued at US$3,395  million and imports at 
US$2,893  million (0.07% of  both world exports and im ports).  In 2012, the Faroe Islands ranked 
136 and 137 among global exporters and importers of commercial services  with the  value of 
services exports and imports, respectively US$200 million and US$364  million.  
1.2  Merchandise trade  
1.4.  In 2014 , the Faroe Islands  accounted for 0.9% and 0.4 % of Iceland's global  exports and 
imports, ranking 9th and 17th in terms of exports and imports, respectively.  In 2009, Iceland was 
the eighth  largest export market for the Fa roe Islands, with a share of 1.4% of its global exports,  
and fifth  largest source of impor ts, accounting for 2.6 % of its  global imports.4 
1.5.  Recent developments in global and intra -Party trade are presented in Chart 1.1. Over the 
period 2000 -07, Iceland's global trade deficit grew but then narrowed as a consequenc e of a sharp 
                                                
1 Unless otherwise indicated, data in this Section are from the WTO Statistics Database, Trade Profiles.  
2 WTO Regional Trade Agreement Database: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx  
3 These agreements we re notified to the WTO, respectively, by the EU, in February 1997, Norway, in 
February 1996, and Switzerland, in February 1996.  
4 UNSD, Comtrade Database (2006 and 2008).  WT/REG243/1  
 
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  decline in both exports and imports during 2008 -09; both have picked up since with imports 
exceeding exports in 2014.  Overall, during this period, Iceland has maintained a trade surplus with 
the Faroe Islands.  The Faroe Islands maintained a ba lance in its global merchandise trade during 
the period for which trade data are reported (2000 -09).  
Chart 1.1 Iceland and Faroe Islands: Merchandise bilateral trade and with world  
050100150200250300
0246810
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009US$ million US$ billionB. Faroe Islands
(2000 -2009)
Imports from Iceland (Right Axis)
Exports to Iceland (Right Axis)
Total Imports
Total Exports
050100150200250300
0246810
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014US$ million US$ billionA. Iceland
(2000 -2014)
Imports from Faroe Islands (Right Axis)
Exports to Faroe Islands (Right Axis)
Total Imports
Total Exports
 
Source: UNSD Comtrade dat abase.   
 
1.6.  The commodity structure of trade between the Parties, as well as their imports and exports 
to the world in the per iod 2003 -05, is shown in Chart 1 .2 on the basis of the Harmonized System 
(HS) sections.  
1.7.  Iceland's imports from the Faeroe Islands wer e dominated by animal products (52.9%) and 
vehicles (41.7%);  animal produ cts also account for the bulk of the  Faroe Islands'  global exports 
(84%) , followed by prepared foods (10 %). More than half of Faroe Island imports from Iceland 
were also concentrated in the same two categories, animal products (30.1%) and vehicles 
(24.4%).  Iceland's largest global export to the world is also animal products, although a significant 
share is accounted for by base metal exports.  Iceland's global imports comprised machiner y, 
vehicles, and chemicals, with shares of 23.3%, 15.8%, and 10.5%, respectively, of the total.  
Machinery and vehicles also accounted for 22.2% and 14.3% of the Faroe Islands global imports, 
followed by minerals (14.2%).  
1.8.  A further breakdown  shows that, wit hin the animal products section, the most traded 
commodities are products of animal origin (HS Chapter 5) and fish and crustaceans 
(HS Chapter  3). More specifically, products of animal origin dominate bilateral imports, accounting 
for 74.5% of Iceland's im ports from the Faroe Islands, and for 41.4% of the Faroe Islands imports 
from Iceland, over the period surveyed.  Fish and crustaceans account for over a quarter of the 
Parties' bilateral imports of animal products while, globally , they constitute nearly all animal 
products exported, representing 97.9% and 97.4% of Iceland and the Faroe Islands global 
exports, respectively.  WT/REG243/1  
 
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  Chart 1.2 Iceland and Faroe Islands:  product composition of merchandise trade, annual 
average (2003 -2005)  
 
53 425Iceland imports from Faroe Islands (%)
23
16
10 1085544332223Iceland's Global Imports (%)
841052Faroe Islands's Global Exports (%)
30
24 9975547Faroe Islands imports from Iceland (%)
22
14
14 1065544333224Faroe Islands's Global Imports(%)
48
2211433224Iceland's Global Exports(%)Total: US$ 18 million Total: US$3,839 million
Total: US$ 705 million Total: US$2,787 millionTotal:  US$ 607 million
Total: US$ 23 million
 
Source:  UNSD Comtrade database.  
 
1.3  Services trade  
1.9.  Chart 1.3 shows the breakdown of global commercial services trade for Iceland and Faroe 
Island in 2000-2012. While the Faeroe Islands has had a growing services deficit over this period, 
Iceland's deficit in services grew up to 2008, since when it has run a surplus in its services 
balance . The top three categories, for both exports  and imports, were transportation, travel, and 
other business services.  Data on bilateral services trade are n ot available.  WT/REG243/1  
 
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  Chart 1.3 Iceland and Faroe Islands: Trade in Commercial Services with world, 
2000 -2012  
0.00.51.01.52.02.53.03.5
2000 2002 2004 2006 2008 2010 2012A. Iceland's imports from world
(US$ Billion)
0.00.51.01.52.02.53.03.5
2000 2002 2004 2006 2008 2010 2012B. Iceland's exports to world
(US$ Billion)
050100150200250300350400450
2000 2002 2004 2006 2008 2010 2012C. Faroe Islands' imports from world
(US$ Million)
050100150200250300350400450
2000 2002 2004 2006 2008 2010 2012D. Faroe Islands' exports to world
(US$ Million)
 
 
Note:  
Iceland:  No export on Construction for 2006 -2008 and Royalties and licence fees for 2001, 2003, a nd 2005.  
Faroe Islands: No export on Insurance services for 2004 -2012.  
Source:  WTO Statistics database.  
1.10.   Chart 1 .4 presents Iceland's inward and outward stock  and flow  of FDI with the world in 
2000-2013. After increasing steadily up to 2007, both inward and  outward investment stocks and 
flows fell sharply in 2008. Stocks of both inward and outward investment have stabilized since 
then. The Faeroe Island's global investment, in terms of FDI stocks, is shown in Chart 1.5 for the 
period 2003 -08. It was a net ou tward investor during this period, although the levels of its stocks 
were relatively small (US$228 million in 2008). No data on FDI is available for the period since.  
1.11.   Data on Iceland's FDI in the Faeroe Islands is shown in Table 1.2 for 2001 -2008. Both 
inward and outward investment grew during this period although Iceland's investment stock in the 
Faeroe Islands significantly exceeds investment by the Faeroe Islands in Iceland.  WT/REG243/1  
 
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  Chart 1.4 Iceland: FDI stock and flow with world, 2000 -2013 
051015202530
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013A. Iceland FDI stock with world
(US$ Billion) 
Outward Inward
-6-4-2024681012
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013B. Iceland FDI flow with world
(US$ Billion) 
Outward Inward
 
Source:  UNCTAD.  
 
Chart 1.5 Faroe Islands : FDI stock with world, 200 3-2008  
050100150200250
2003 2004 2005 2006 2007 2008Faroe Islands FDI stock with world
(US$ million)
Inward Outward
 
Exchange rate DKK per USD are : 6.59 (2003), 5.99 (2004), 6.00 (2005), 5.95 (2006), 5.44 (2007), 5.10 
(2008) 
Source:  Faroe Islands authorities . 
Table 1.2 Iceland: FDI stock with Faroe Islands, 2001 -2008  
US$ million  
Year Inward  Outward  
2001 0.04 7.66 
2002 0.07 7.12 
2003 3.08 9.36 
2004 2.98 37.47  
2005 3.62 45.08  
2006 3.19 67.60  
2007 3.17 111.22  
2008 2.11 71.08  
Exchange rate ISK per USD are : 97.42 (2001), 91.66 (2002), 76.71 (2003), 70.19 (2004), 62.98 (2005), 
70.18 (2006), 64.06 (2007), 87.95 (2008)  
Source:  Iceland authorities . WT/REG243/1  
 
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  2  CHARACTERISTIC ELEME NTS OF THE AGREEMENT  
2.1  Background Info rmation  
2.1.  The Agreement between the Government of Iceland, on one part, and the Government of 
Denmark and the Home Government of the Faroe Islands, on the other part, was signed on 
31 August  2005 and entered into force on 1 November 2006.  It was notified by Iceland on behalf 
of both Parties to the WTO  on 10  July 2008 under Article XXIV:7(a) of GATT 1994 and 
Article  V:7(a) of the GATS, as document WT/REG243/N/1 and S/C/N/465.   
2.2.  The Agreement consists of 13 Articles and four Protocols, which constitute an integr al part of 
it (Article 10), and a Joint Declaration.  The text of the Agreement, together with the Protocols and 
the Declaration, can be found on the Parties' official websites : 
 Iceland:  
http://www.stjornartidindi.is/DocumentActions.aspx?ActionType=Open&documentID=23fa5
b2d-f456-4dfc-b43e-73f105130938  
 
 The Faroe Islands:   
 http://www. government.fo/foreign -relations/hoyvik -agree ment/  
 
2.3.  As stated in Article 1, the objective of the Agreement is to create a single economic area 
where any discrimination on the basis of nationality, place of establishment, or place of origin of 
the goods is prohibited.  
2.4.  Each Party may terminate the Agre ement by means of a diplomatic note to the other Party.  
The Agreement shall cease to exist on the first day after twelve -months have expired from the 
receipt of the notification terminating the Agreement (Article 12.1).  However, advantages granted 
to inves tors of the Parties under the Agreement shall continue to apply for a period of no less than 
five years after its termination (Article 12.2).  
3  PROVISIONS ON TRADE IN GOODS  
3.1  National treatment and market access provisions on trade in goods  
3.1.1   General provisions  
3.1.  The scope of the Agreement is indicated in Article 2.  Any measure taken by the Parties 
pursuant to the Agreement shall be limited to the territories of Iceland and the Faroe Islands, to 
their "natural persons" or "legal persons domiciled" therein.  The defi nition of "natural persons" 
according to Protocol 1 to the Agreement is for Iceland, a person with Icelandic citizenship and for 
the Faroe Islands, a person with Danish citizenship, domiciled or previously domiciled in the Faroe 
Islands.  
3.2.  National treatment  is granted under Article 5.  Accordingly, any discrimination between: 
(i) national persons of the Parties, on the basis of nationality;  (ii) legal persons domiciled in the 
Parties' territories, on the basis of their place of establishment;  and (iii) betwee n originating 
goods, on the basis of their place of origin, is prohibited (Article 5.1).  Each Party shall accord to 
nationals, legal persons, and goods of the other Party a treatment no less favourable than that 
accorded to natural and legal persons of any  other country and to goods originating outside the 
Parties' territories (Article 4).  
3.3.  The principle of non -discrimination set out in Article 5 applies to all sectors covered under the 
Agreement.  However, some exceptions to this principle are listed under A rticle 6 and apply to 
sanitary and phytosanitary measures, fishery, and licensing requirements for certain activities.  
3.1.2   Import duties and charges, and quantitative restrictions  
3.4.  Article 5.A prohibits the Parties from exercising any form of discrimination on  the treatment 
of goods on the basis of their origin  and from applying tariff measures or any kind of quantitative 
restrictions and measures having equivalent effect to trade between the Parties.  WT/REG243/1  
 
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  3.1.3   Liberalization of tariffs and trade  
3.5.  The Agreement does not h ave a transitional period for tariff liberalization.  Therefore, all 
customs duties5 were to be eliminated on all originating products upon the entry into force of the 
Agreement.  
3.6.  The overall tariff elimination commitments under the Agreement, and the corres ponding 
average value of tr ade, are presented in Tables 3 .1.A (Iceland) and 3.1.B (the Faroe Islands).  In 
2006, Iceland's MFN tariff schedule comprised 8,177 tariff lines at the HS 8 -digit level, of which 
382 held non ad valorem  duties (representing 4.7% o f the total).6 Before the entry into force of 
the Agreement, 5,738 lines were duty -free on an MFN basis, accounting for 70.2% of the total 
tariff and 98.6% of Iceland's imports from the Faroe Islands in 2003 -2005 on average.  Upon entry 
force of the Agreeme nt, the 2,439 remaining tariffs, which represented 29.8% of total lines and 
1.4% of imports from the Faroe Islands, were eliminated.  This resulted in full liberalization, both in 
terms of the number of tariff lines and imports.  
Table 3.1 Tariff elimination commitments under the Agreement and corresponding 
average trade  
A. Iceland  
Duty phase -out 
period  Number of 
lines  % of total lines 
in Iceland's tariff 
schedule  Value of Iceland's 
imports from Faroe 
islands  
(2003 -2005)  
in million US$  % of Iceland's 
total imports 
from Faroe 
islands 2003 -
2005  
MFN duty free (2006)  5,738  70.2 17.3 98.6 
2006  2,439  29.8 0.2 1.4 
Total  8,177  100.0  17.5 100.0  
Source:  WTO estimates based on data provided by Iceland.  
 
3.7.  In 2006, the F aeroe Island's applied tariff schedule comprised 5,699  tariff lines at the 
HS eight-digit level, of which 261 lines  held compound rates of duty ( 4.58%  of the total).7 Before 
the entry into force of the Agreement, 1,845  lines were already duty-free for all sources of 
imports, accounting for 32.4% of the total tariff and 65.3% % of total imports from Iceland in 
2003-2005 on average. Upon entry force of the Agreement, the 3,854  remaining tariffs  were 
eliminated for imports from Iceland , which represented 67.6% of total lines and 34.7% of imports 
from Iceland . This resulted in full liberalization, both in terms of the number of tariff lines and 
imports.  
Table 3.1 Tariff elimination commitments under the Agreement and corresponding 
average trade  
B. Faroe Islands  
Duty phase -out 
period  Number of 
lines  % of total lines 
in Faroe Islands' 
tariff schedule  Value of Faroe 
Islands' imports 
from Iceland  
(2003 -2005)  
in million US$  % of Faroe 
Islands' total 
imports from  
Iceland  
2003 -2005  
Applied tariff  
duty free (2006)  1,845 32.4 14.9 65.3 
2006  3,854  67.6 7.9 34.7 
Total  5,699  100.0  22.8 100.0  
Note:  Based on the HS 20 02 nomenclature.  
 Exchange rates used for converting Danish Krone (DKK) to US dollars (US$): 6.59 (2003), 
5.99 (2004), 6.00 (2005).  
Source:  WTO estimates ba sed on data constructed by the WTO Secretariat as provided by Faroe Islands . 
                                                
5 According to Protocol 3, "customs duties" means all duties, taxes, fees or other c harges which are 
levied and collected in the territories of the Parties, excluding fees and charges which are limited in amount to 
the approximated costs of services rendered (Article 1.(b)).  
6 Of these, 53 were specific duties and 329 were compound duties .   
7 All 261 lines had compound rates of duty.  WT/REG243/1  
 
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  3.1.3.1   Liberalization  by Iceland  
3.8.  A more detailed perspective of Iceland's tariff elimination schedule is offered in Chart 3 .1. At 
the time the Agreement entered into force in 2006, 5,738  lines were already duty -free. More than 
half of the tariffs liberalized by Iceland under the Agreement held base rates of up to 10% 
(1,427  lines) and up to 20% (523 lines).  A total of 382 lines were subject to specific duties.  
Chart 3.1 Iceland: Duty elim ination under the Agreement  
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,0002006Year of duty -free treatment
Number of duty -free lines (cumulative)
 
Source:  WTO Secretariat estimates based on data provided by Iceland authorities.  
 
3.9.  Table 3.2 shows Iceland's tariffs elimination under the Agreement organized by HS section 
product categories.  Of the 8,177 tariffs forming Icela nd's tariff schedule, 5,738 lines were already 
duty-free in 2006.  These were mainly concentrated in chemical products (HS Section VI), 
machinery (HS Section XVI), and textiles products (HS Section XI).  The remaining 2,439 tariffs 
that were eliminated on en try into force of the Agreement were mainly prepared foods 
(HS Section  IV), textiles products (HS Section XI), and machinery (HS Section XVI).  
Table 3.2 Iceland: Tariff elimination under the Agreement, by HS section  
HS section and description  MFN average%  Total No of lines  MFN zero (2006)  Duty -free 
lines 
upon 
entry into 
force 
(2006)  
I Live animals and animal products  9.1 553 384 169 
II Vegetable products  12.6 407 256 151 
III Animal or vegetable fats a nd oils  0.0 102 98 4 
IV Prepared foods etc.  9.3 1,013  539 474 
V Minerals  0.0 179 178 1 
VI Chemicals and chemical 
products  1.2 988 839 149 
VII Plastics and rubber  2.4 368 240 128 
VIII Hides and skins  5.4 128 25 103 
IX Wood and articles  1.8 206 148 58 
X Pulp, paper etc.  2.1 187 139 48 
XI Textiles and textiles articles  4.2 1,174  792 382 
XII Footwear, headgear  12.7 82 7 75 
XIII Articles of stone  3.4 189 108 81 
XIV Precious stones, etc.  3.0 61 43 18 
XV Base metals and base metals 
products  1.2 698 597 101 
XVI Machinery  2.1 1,109  830 279 
XVII Transport equipment  1.2 275 238 37 
XVIII Precision equipment  0.1 252 249 3 
XIX Arms and ammunition  6.1 27 6 21 
XX Misc. manufactured articles  8.7 172 16 156 WT/REG243/1  
 
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  HS section and description  MFN average%  Total No of lines  MFN zero (2006)  Duty -free 
lines 
upon 
entry into 
force 
(2006)  
XXI Works of art, etc.  1.4 7 6 1 
Total  4.3 8,177  5,738 2,439  
Note:  For the calculation of  MFN averages , specific rates are excluded and the ad valorem  part of alternate 
rates are included.  
Source:  WTO estimates based  on data provided by Iceland.  
 
3.1.3.2   Liberalization by the Faroe Islands  
3.10.   A more detailed persp ective of tariff elimination by the Faeroe Islands scheduled under the 
Agreement is offered in Chart 3.2. More than half (3,455 lines) of the tariffs liberalized by the 
Faeroe Islands under the Agreement held applied rates of up to 10% while 208 lines had applied 
rates of up to 20%; 261 tariff lines are subject to specific rates of duty.  
Chart 3. 2 Faroe Islands : Duty elimination under the Agreement  
0 1,000 2,000 3,000 4,000 5,000 6,0002006Year of duty -free treatment
Number of duty -free lines (cumulative)
 
Source:  WTO Secretariat estimates based on data constructed by the WTO Secretariat as provided by Faroe 
Islands. 
3.11.   Table 3.3 shows tariff elimination under the Agreement by the Faeroe Islands organized by 
HS section product categories. Of the 5,699 tariffs forming its tariff schedule, 1,845 lines were 
already duty -free in 2006. The remaining 3,854 tariffs that wer e eliminated on entry into force of 
the Agreement were spread out across most HS Sections, with the majority found in Section VI  
(chemical products) , XI (textiles products), XV (base metals) and XVI (machinery).  
Table 3.3 Faroe Islands: Tariff elimination under the Agreement, by HS Section  
HS Section  Average  applied % No. of lines  2006 no. of duty -free lines  Number of duty -free lines 
under the Agreement  
2006  
I 6.9 433 156 277 
II 1.9 327 259 68 
III 1.7 47 40 7 
IV 9.0 260 94 166 
V 0.8 177 136 41 
VI 4.9 840 135 705 
VII 5.4 212 32 180 
VIII 1.6 74 45 29 
IX 2.7 84 43 41 
X 0.4 154 144 10 
XI 7.6 850 54 796 WT/REG243/1  
 
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  HS Section  Average  applied % No. of lines  2006 no. of duty -free lines  Number of duty -free lines 
under the Agreement  
2006  
XII 4.8 55 5 50 
XIII 3.2 146 57 89 
XIV 0.0 56 56  
XV 2.0 589 286 303 
XVI 2.6 846 132 714 
XVII 2.7 143 73 70 
XVIII 2.9 241 47 194 
XIX 1.9 21 7 14 
XX 2.4 137 37 100 
XXI 0.0 7 7  
Total  4.2 5,699  1,845  3,854  
Note:  For the calculation of averages, specific rates are excluded and the ad valorem  parts of compound  
rates are included . Based on the H S 2002 nomenclature.   
Source:  WTO estimates based on data constructed by the WTO Secretariat as provided by Faroe Islands . 
 
3.1.4   Rules of origin  
3.12.   The rules of origin applying on trade between the Parties are contained in Annex  III to the 
Agreement and are based  on the Pan-European  model.  According to Article 2, the following 
products are  considered as originating:  
a. products wholly obtained  in the territory of one of the Parties;8 or 
b. products obtained in one of the Parties by incorporating  materials that have und ergone 
sufficient working or processing in the territory of one of the Parties, in accordance with 
the conditions established in Article 6;  
c. products originating in the European Economic Area (EEA), within the meaning of 
Protocol 4 of the EEA Agreement.  
3.13.   Diagonal cumulation applies between the Parties (Articles 3 and 4).  A product is considered 
as originating if it has been obtained in any of the Parties, incorporating materials:  i) originating in 
Bulgaria, Switzerland (including Liechtenstein)9, Norway, Rom ania, Turkey or the European Union;  
or ii) originating in any country or territory which is a participant  in the Euro -Mediterranean 
partnership, based on the Barcelona Declaration other than Turkey,10 provided that the working or 
processing carried out in the Parties  goes beyond the operations referred to  in Article 7, without 
needing to undergo sufficient working or processing.  However, where the working or processing 
carried out in a Party does not go beyond the insufficient operations of Article 7, the pr oduct 
obtained shall be considered as originating only if the value added by that Party is greater than the 
value of the materials used.  If it is not the case, then the product obtained shall be considered as 
originating in the country or territory which a ccounts for the highest value of originating materials 
used in manufacturing in the Parties.  Products originating in one of the above mentioned countries 
or territories, which do not undergo any working or processing in the Parties, retain their origin if 
exported to one of these countries or territories.  
3.14.   Cumulation provided for in Annex III may be applied only if:  i) a preferential trade 
agreement, in accordance with Article XXIV of the GATT, is applicable between the countries or 
territories involved in t he acquisition of originating status and the country of destination;  ii) 
materials and products have acquired originating status by the application of rules identical to 
those in Annex III;  and iii) notices of the fulfilment of all necessary requirements t o apply 
cumulation have been published in the Parties' official gazettes.   
                                                
8 Article 5 defines the concept of wholly obtained products in Iceland or in the Faroe Islands.  
9 According to Annex III, the Principality of Liechtenstein has a customs union with Switzerland and is a 
Contra cting Party to the EEA Agreement.  
10 The Barcelona Declaration was adopted at the Euro -Mediterranean Conference held on 27 and 
28 November 1995. The participant countries are: Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, 
Tunisia, West Bank and G aza Strip .  WT/REG243/1  
 
- 14 - 
 
  3.15.   In most cases, origin is granted if the working or processing carried out on non -originating 
materials results in a change in tariff classification (CTC)  (see Appendix II to Annex I II). The 
"tolerance rule" permits the use of non -originating materials in the manufacture of a product 
provided that:  (a) their total value does not exceed 10% of the ex -works price of the product, and 
(b) any of the percentages listed for the maximum valu e of non -origina ting materials are not 
exceeded.  The tolerance rule does not apply to textiles and clothing (HS Chapter s 50 to 63).  The 
"absorption principle" provides that a non -originating material acquiring originating status by 
meeting the correspondin g processing requirements is considered to be 100% originating once 
incorpo rated into the final product.  Article 7 lists those operations that are considered as 
insufficient working or processing to confer the status of originating products, regardless of 
whether the requirements of sufficient working and processing are satisfied and whether or not the 
product meets the tolerance rule.  
3.16.   Annex III defines the unit of qualification to be used when determining classification of a 
good under the HS nomenclature , and for the treatment of accessories, spare parts and tools, 
sets, and natural elements when determining the origin of a good (Articles 8 -11). 
3.17.   The principle of territoriality requires that conditions for acquiring originating status must 
continue to be f ulfilled without interruption in a Party's territory.  Where originating goods exported 
from a Party  to another country return  they will be considered as non -originating, unless it can be 
demonstrated to the customs authorities that the returning goods are the same as those that were 
exported and have not undergone any operation beyond that necessary to preserve them in good 
condition while in that country or while being exported . The originating status shall not be affected 
by working or processing outside the Parties' territories  on materials exported from and 
subsequently re -imported by any of the Parties , provided  that such  materials : (a) are wholly 
obtained in one of the Parties,  or have undergone working or processing bey ond the insufficient 
operations prior to being exported;  and (b) it can be demonstrated to customs authorities  that the 
re-imported goods have been obtained by working or processi ng exported materials, and the total 
added value acquired outside the Parties' territories  does not exceed 10 % of the ex -works price of 
the end product for which originating status is claimed . For the purposes described above, the 
conditions for acquiring originating status shall not apply to working or processing outside one of 
the Parties' territories.  However,  where Appendix II provides for a rule setting a maximum value 
for all the non -originating materials incorporated  in the final good  in order to determine  its 
originating status, the total value of the non -originating materials incorporated in the territory  of 
the party concerned, together with the total added value acquired outside one of the Parties, shall 
not exceed the stated percentage of the ex -works price of the product.  These provisions do not 
apply to textiles and clothing (HS Chapter s 50-63) (Artic le 12) .  
3.18.   Goods benefiting from preferential treatment are to be transported directly between the 
Parties or through the countries and territories with which cumulation is applicable (see above).  
However, products constituting one single consignment may be trans-shipped through or 
warehoused in third countries if they are under the surveillance of the customs authorities in the 
third country and do not undergo operations other than unloading, reloading or any operation 
designed to preserve them in good condi tion. Originating products may be transported by pipeline 
across third countries (Article 13).  
3.19.   Originating products, sent for exhibition to the territory of a non -Party, and subsequently 
sold for import in the territory of either of the two Parties shall benefit from preferential treatment 
(Article 14).  Drawback of, or exemption from, customs duties of whatever kind  applicable to non-
originating materials used in the manufacture of originating products  is prohibited.  Such a 
prohibition also applies to any partial or complete arrangement for refund, remission or non -
payment of customs duties or charges having equivalent effect applicable to materials used in the 
production, where such refund, remission or non -payment applies, expressly or in effect, when 
goods produced from these materials are exported . Packaging operations (when  included with the 
product for HS classification purposes);  accessories, spare parts and tools;  and products in a set 
are also covered by the prohibition.  However, this prohibition do es not preclude the application of 
an export refund system for agricultural products, applicable upon export in accordance with the 
Agreement's provisions.11 
                                                
11 The Parties indicated that they do not apply export refunds.  WT/REG243/1  
 
- 15 - 
 
  3.20.   Article 37 establishes the Sub -Committee on customs and origin matters of the Joint 
Committee.  Its functions are exchanging information, reviewing developments, preparing and co -
ordinating positions, preparing technical amendments to the rules of origin and assisting the Joint 
Committee on matters under Annex III or any other matters as referred to it b y the Joint 
Committee. According to the Parties  the Sub -Committee has not been established.   
3.1.5   Export duties and charges, and quantitative restrictions  
3.21.   There are no provisions in the Agreement relating to export duties and charges.  
3.2  Regulatory provisions on t rade in goods  
3.2.1   Standards  
3.2.1.1   Technical Barriers to Trade  
3.22.   The Agreement does not contain provisions on technical barriers to trade.  
3.2.1.2   Sanitary and phytosanitary measures  
3.23.   Article 6.1 provides for an exception to the non -discrimination principle set out in Article 5 . 
All imported goods shall be subject to veterinary and phytosanitary rules of the importing Party, 
provided that such rules do not result in an obstacle to trade.  Nonetheless, according to the Joint 
Declaration attached to the Agreement, Article 6.1 shall  be in interpreted as to oblige the Parties 
to grant each other the same rights and obligations as laid down in the Protocol on Veterinary 
Matters that supplements the 1999 Agreement between the EC and the Faroe Islands.  
3.24.   The Parties are to ensure that trad e in products that are subject to sanitary and 
phytosanitary measures is facilitated.  They also undertake to establish border inspection posts and 
other facilities necessary to enable direct trade between them.  
3.2.2   Safeguard mechanisms  
3.2.2.1   Global safeguards  
3.25.   The Ag reement does not regulate the adoption of global safeguards on trade between the 
Parties.  However, Iceland, as a member to the WTO, retain its rights and obligations under 
Article  XIX of the GATT and the WTO Agreement on Safeguards.  The Faeroe Islands appl y the 
same rights and obliga tions. 
3.2.2.2   Bilateral safeguards  
3.26.   Article 5.J provides for the application of safeguard measures on import of certain 
agricultural products, that are included in Chapters 1 (live animals), 2 (meat), 4 (dairy products), 
5 (animal produ cts), 12 (seeds), 16 (prepared foodstuffs), and 21 (miscellaneous edible 
preparations) of the HS.  Where the import of such products is seriously detrimental to the 
production of the same products in the importing Party, the importing Party may, after 
consu ltation with the other Party, unilaterally take "appropriate and proportionate" measures.  
3.27.   The Agreement also foresees the possibility for the importing Party to adopt emergency 
safeguard measures, where circumstances require urgent actions, that are strict ly necessary to 
remedy the situation.  Emergency measures cannot be adopted during the three days preceding 
the date on which the other Party is informed and shall be immediately  notified to the Joint 
Committee.  The Joint Committee shall hold periodic consu ltations with a view to their abolition as 
soon as the circumstances no longer justify their maintenance (Article 5.J (ii) and (iii)).  
3.2.3   Anti-dumping and countervailing measures  
3.28.   Article 5.F(iii) allows each Party to take antidumping measures in accordance w ith Article VI 
of the GATT 1994 where it becomes aware of dumping of a specific product by an exporter of the WT/REG243/1  
 
- 16 - 
 
  other Party.  In such a case, the affected Party shall notify, in writing, the other Party and shall 
provide for a thirty -day period for consultati ons to find a mutually acceptable solution.  
3.2.4   Subsidies and State -aid 
3.29.   The non -discrimination principle set out in Article 5 also applies to subsidies and State aid 
(Article 5.H).  Where a Party finds that State aid or aid through state resources in the other  Party 
distorts, or threatens to distort competition by favouring certain undertakings or sectors, it shall 
refer the matter to the Joint Committee.  
3.2.5   Customs -related procedures  
3.30.   Proof of  origin is subject to the submission, by the  exporting Party, of either  a movement 
certificate E UR.1 or EUR -MED, or an invoice declaration made by an "approved exporter"12 or an 
exporter for any consignment consisting of one or more packages containing originating products 
whose total value does not exceed €6,000  (Articles 16 and 22.1, Annex III).  A certificate of proof 
of origin shall be valid for four months from the date of issue in the exporting Party and must be 
submitted within this period (Article 24, Annex III).  The exporter applying for a movement 
certificate or making out an invoice declaration shall keep these documents for a t least 
three  years.  The same obligation  applies to the customs authorities of the exporting and importing 
Parties (Article 29, Annex III). A certificate of origin may be issued retrospectively (Article 18, 
Annex III) or may be duplicated in the event of theft, loss or destruction (Article 19, A nnex III).  
Exemptions from proof of origin are indicated in Article 27 of Annex III.  
3.31.   Article 32 of Annex III provides for mutual assistance in verifying the authenticity of the 
movement certificate and invoice declaration.  Verifications of proof of origin  may be carried out 
randomly or whenever the importing Party's customs authorities have reasonable doubts about the 
authenticity of the documents or the originating status of a product.  The exporting Party has the 
right to ask for any evidence, to carry ou t any inspection of the exporter's accounts or any other 
check as considered appropriate.  Where the importing Party's customs authorities decide to 
suspend preferential treatment while awaiting the results of the verification, the imported products 
shall b e released subject to any necessary precautionary measures.  The results of the verification 
shall be communicated as soon as possible;  in the event of no response within ten months of the 
verification request, or if the response fails to provide sufficient  information to determine the 
authenticity of the proof of origin or the product's real origin, the importing Party may refuse to 
grant preferential treatment (Article 33, Annex III).  
3.32.   Article 34 of Annex III specifies that disputes relating to the verifica tion of origin which 
cannot be resolved between the Parties' customs authorities or relating to the interpretation of the 
Annex shall be submitted to the Joint Committee.  Disputes between the importer and the customs 
authorities of the importing Party shal l be settled under its internal legislation.  Penalties shall be 
imposed on any person who draws up, or causes to be drawn up, a document with incorrect 
information for the purpose of obtaining preferential treatment (Article 35, Annex III).  According 
to the Parties, they have not discussed the kinds  of penalties that are covered by Article 35.  
3.2.6   Other regulations  
3.2.6.1   Competition  
3.33.   The Agreement contains a general commitment to avoid any discrimination in the 
application of competition rules within the economic area  established by the Agreement (Article 
5.F(i)).  To this end, the Parties' competent authorities shall cooperate, exchange information, and 
consult each other on surveillance, either on general terms or in individual cases (Article 5.F(ii)).  
3.34.   Article 5.G do es not prohibit state monopolies provided that they act in a non -discriminatory 
way.  
                                                
12 The definition of "approved exporter" is provide in Article 23 of Annex III.  WT/REG243/1  
 
- 17 - 
 
  3.3  Sector -specific provisions on trade in goods  
3.3.1   Fisheries  
3.35.   The Joint Declaration states that the Agreement's provisions do not restrict in any way the 
management or exploitat ion by the Parties of their respective living marine resources, and that no 
new provisions that diminish the possibility of enhancing trade in fish and fish processing between 
the Parties shall be adopted after the entry into force of the Agreement.  
3.36.   The Pa rties undertook to facilitate fish processing and bilateral trade in fish, and to eliminate 
any barriers without delay.  More specifically, Iceland undertakes to find a solution, in the near 
future, with respect to the 10% surcharge on quota , i.e. when vess els fishing in Icelandic waters 
land their catch in the Faroe Islands.13 The Faroe Islands undertake to find a solution in the near 
future with respect to the 30% surcharge of days -at-sea, i.e. when Faroese vessels fishing in their 
territorial waters have l anded more than 25% of their catch outside the Faroe Islands' territory 
and land their catch in Iceland.14 
3.37.   Pursuant to Article 7 of the Agreement, the Parties have committed to actively explore the 
possibility of enhancing co -operation in their respective r egimes on the management and 
exploitation of living marine resources.  
4  TRADE IN SERVICES  
4.1  Scope and definitions  
4.1.  Article 3 extends the scope of the Agreement to trade in services.  The objective of the 
Agreement is to create a single economic area where, amon g others, the movement of services 
and capital provided by natural persons or legal persons domiciled in any of the Parties' territories, 
is granted on a non -discriminatory basis  (Articles 1 and 2 ). The definition of "natural persons" is 
contained in Proto col 1 to the Agreement:  for Iceland, this is a person with Icelandic citizenship 
and for the Faroe Islands, a person with Danish citizenship, domiciled or previously domiciled in 
the Faroe Islands.  No definition of "services provider" is indicated in the A greement.  
4.2  Denial of benefits  
4.2.  The Agreement does not contain provisions on denial of benefits.  
4.3  General provisions on trade in services  
4.3.1   Market access  
4.3.  There are no specific provisions on market access in the services sector in the Agreement 
along the lines of  Article XVI of the GATS.   
4.3.2   National treatment and MFN  
4.4.  MFN treatment is granted by the Parties to each others' natural and legal persons pursuant to 
Article 4.  
4.5.  Article 5.1 prohibits any discrimination between the Parties' natural persons on the basis of 
their nationality, and  between legal persons domiciled within the territorial scope of the Agreement 
on the basis of their place of establishment.  Article 5.2.B specifically addresses the prohibition of 
any discrimination against a services provider of one Pa rty operating in the territory of the other 
Party.  The principle of non -discrimination also applies to the movement of natural persons and 
                                                
13 The Parties have specified that such quota is issued in Iceland for fisheries within the Icelandic 
economic zone.  
14 The Parties have specified that when vessels of the day -at-sea arrangement have landed more than 
25% of their catch (calculated every 4th of the month) outside the territory of the Faroe Islands, a surcharge of 
30% will be added to the ves sel's number of days -at-sea or to own quota for each time the catch has been 
landed outside the Faroe Islands.   WT/REG243/1  
 
- 18 - 
 
  right to residence (Article 5.2.C), to the movement of capital and investment (Article 5.2.D) and to 
the right of est ablishment (Article 5.2.E).   
4.6.  Natural or legal persons of one Party operating in the territory of the other Party must fulfil 
the same requirements as natural or legal persons of that other Party (Article 5.2.B(ii)).   
4.3.3   Movement of natural persons  
4.7.  Article 5.2 .C prohibits any discrimination, in law or in fact, regarding the right to residence or 
the free movement of natural persons within the Parties' territories.  It also requires that the 
access to schools, universities, and other institutions of learning in t he Parties' respective 
territories is granted on a non -discriminatory basis (Article 5.2.C(ii)).  
4.8.  An equivalent prohibition applies to any discrimination with respect to the right of 
establishment (Article 5.2.E).  In this regard, the Agreement establishes that after three years of 
residence by a natural person of a Party in the territory of the other Party, the person shall have 
the right to stand for municipal elections and cast a vote in municipal elections (Article 5.2.C(iv)).  
4.9.   Further to the provisions  of the Agreement, Protocol 4 states that the movement of natural 
persons shall be regulated by the three "Nordic Conventions" concluded by the Parties on, 
respectively, the creation of a common Nordic labour market, social security, and social assistance.  
In the Joint Declaration attached to the Agreement, the Parties agreed that any rights and 
obligations under the Nordic Conventions shall be regarded as minimum rights and obligations, 
and that nothing in the Agreement shall diminish or reduce them.   
4.3.4   Inve stment  
4.10.   The Agreement does not apply to investment by governments or governmental bodies of 
the Parties (Article 6.5).  
4.11.   Under the Joint Declaration, the Parties undertook to create and maintain favourable 
conditions for their respective investors, and to gua rantee free transfers of funds between them in 
connection with investment and trade in goods and services.   
4.4  Liberalization commitments  
4.12.   Trade in services between the Parties has been fully liberalized under the Agreement , 
except for the fisheries sector whe re some restrictions, existing at the time when the Agreement 
was signed , on foreign ownership and/or ownership by non -resident s as well as on the 
establishment of non -nationals and nationals who are not  legally domicile d in one of the Parties  
still remain  (Article 6.2 and 3).  According to the Parties these restrictions are still in force. For 
Iceland, these  restriction s may be extended to the fish processing  sector .  
4.13.   In addition, the Faroe Islands may continue to apply licensing requirements in accordance 
with the "Hydrocarbon Activities Act" of 1998  and its Articles 10, 11, and 18, under which  legal 
persons from Iceland established in the Faroe Islands, and natural persons from Iceland domiciled 
in the Faroe Islands are to enjoy rights under the Act on a n on-discriminatory basis.  The 
Agreement shall apply to all other aspects related to this area  (Article 6.4).   
4.14.   Under t he Agreement , Iceland  goes beyond the liberalization commitments inscribed  in its 
schedule to the GATS which covers nine out of 11 broad sec tors in the Services Sectoral 
Classification list, as follows:  business services, telecommunications services, construction and 
related engineering services, distribution services, environmental services, financial services, 
tourism and travel related serv ices, as well as on recreational, cultural and sporting, and transport 
services.   
4.15.   Limitations maintained by Iceland on market access and national treatment applying to all 
the inscribed sectors with respect to mode 3 (commercial presence), generally in the  form of 
investment limitations or residency requirements, as well as limitations on national treatment 
applying to subsidiaries of a third -country company formed in accordance with the law of a 
Member State of the European Economic Area (EEA) having only their registered office in the WT/REG243/1  
 
- 19 - 
 
  territory of an EEA Member State, are lifted for investors and service providers from the Faroe 
Islands.  Also, Iceland's GATS Article  II (MFN) Exemption List containing some limitations on 
market access in all sectors aimed a t promoting Nordic cooperation have been removed under the 
Agreement.  
4.5  Regulatory provisions on trade in services  
4.5.1   Domestic regulation  
4.16.   There are no provisions in the Agreement concerning domestic regulation.  
4.5.2   Recognition  
4.17.   Article 5.2.C (iii) requires each Part y to recognize diplomas and other professional 
qualifications obtained in the other Party as they were issued in its own territory, and to provide 
such recognition in a way no less favourable than that accorded to diplomas and other evidence of 
qualificati ons issued by a non -Party.  
4.6  Sector specific provisions on trade in services  
4.6.1   Fisheries  
4.18.   The Parties are permitted, under Article 6.2, to maintain those restrictions existing at the 
time when the Agreement was signed on the establishment of non -nationals and n ationals who do 
not have legal residence in one of the Parties in the fisheries sector.  For Iceland, this restriction 
may be applied also to fish processing.  
5  GENERAL PROVISIONS O F THE AGREEMENT   
5.1.1   Transparency  
5.1.  No specific provisions on transparency are cont ained in the Agreement.  
5.1.2   Current payments and capital movements  
5.2.  Article 5.D prevents the Parties from adopting any discriminatory measures on the free 
movement of capital or investment based on the destination of the capital or the place of 
investment withi n their respective territories.  
5.1.3   Exceptions  
5.3.  The Agreement does not contain specific provisions on exceptions.  Under Article 5.A(iv), all 
goods legally marketed within the territories of the Parties are subject to the requirements of 
protection of public mor als and safety.  
5.1.4   Accession  
5.4.  Article 11 permits other Parties or parts of the Kingdom of Denmark to accede to the 
Agreement, following an agreement on the terms and conditions of such an accession.  
5.1.5   Institutional framework  
5.5.  Article 8 establishes a Joint Committ ee responsible for the effective implementation and 
operation of the Agreement.  The Committee shall meet annually and at the request of either Party.  
It shall establish its own rules of procedures and determine the necessity to establish subsidiary 
bodies.  
5.6.  The Committee shall decide, by consensus, to amend Articles 5 (National treatment), 6 
(Exceptions from national treatment), and 7 (Cooperation in other areas) and to add Protocols to 
the Agreement in order to deepen liberalization and promote cooperation in other areas.  In WT/REG243/1  
 
- 20 - 
 
  particular, Article 7 requires the Joint Committee to involve the Parties in a strengthening and 
broadening of cooperation in:  culture, energy, environment, health services, human resources 
development in the public sector, research and technological development, resource management, 
telecommunications, tourism and transport.  
5.7.  Article 9 sets up the Council, composed of members of the governments of the Parties, which 
shall give political impetus for the implementation of the Agreement and shall orient the Joint 
Committee.  The Council shall meet annually and establish its own rules of procedures.  
5.1.6   Dispute settlement  
5.8.  The Agreement does not provide for a dispute settlement mechanism.  In case of 
disagreement, the Parties may hold bilateral cons ultations or in the framework of the Joint 
Committee.  
5.1.7   Relationship with other agreements concluded by the Parties  
5.9.  The Agreement establishes a direct link with the three Nordic Conventions signed by the 
Parties on the creation of a common Nordic labour mar ket, social security, and social assistance.  It 
also incorporates the rights and obligations derived by the Parties from the Protocol on Veterinary 
Matters to the Agreement between the EC and the Faroe Islands.  A list of other regional trade 
agreements in force, both notified and non -notified, to which the Parties a re party, are listed in 
Table  5.1. 
Table 5.1 Iceland and The Faroe Islands: Participation in other RTAs (notified and non -
notified in force), as of  18 November 2016  
RTA Name  Date of 
entry into 
force  Coverage  GATT/WTO Notification  
Year WTO Provision  
ICELAND (as a Member of EFTA)  
EFTA - Bosnia and 
Herzegovina  01-Jan-15 Goods  2015 GATT Art. XXIV  
EFTA - Central America 
(Costa Rica and 
Panama)  19-Aug-14 Goods & Services  2014 GATT Art. XXIV & GATS Art. V  
EFTA - Hong Kong, 
China  01-Oct-12 Goods & Services  2012 GATT Art. XXIV & GATS Art. V  
EFTA - Montenegro  01-Sep-12 Goods  2012 GATT Art. XXIV  
EFTA - Ukraine  01-Jun-12 Goods & Services  2012 GATT Art. XXIV & GATS Art. V  
EFTA - Colombia  01-Jul-11 Goods & Services  2011 GATT Art. XXIV & GATS Art. V  
EFTA - Peru 01-Jul-11 Goods  2011 GATT Art. XXIV  
EFTA - Albania  01-Nov-10 Goods  2011 GATT Art. XXIV  
EFTA - Serbia  01-Oct-10 Goods  2010 GATT Art. XXIV  
EFTA - Canada  01-Jul-09 Goods  2009 GATT Art. XXIV  
EFTA - SACU  01-May-08 Goods  2008 GATT Art. XXIV  
EFTA - Egypt  01-Aug-07 Goods  2007 GATT Art. XXIV  
EFTA - Lebanon  01-Jan-07 Goods  2006 GATT Art. XXIV  
EFTA - Republic of Korea  01-Sep-06 Goods & Services  2006 GATT Art. XXIV & GATS Art. V  
EFTA - Tunisia  01-Jun-05 Goods  2005 GATT Art. XXIV  
EFTA - Chile 01-Dec-04 Goods & Services  2004 GATT Art. XXIV & GATS Art. V  
EFTA - Singapore  01-Jan-03 Goods & Services  2003 GATT Art. XXIV & GATS Art. V  
EFTA - Jordan  01-Sep-02 Goods  2002 GATT Art. XXIV  
EFTA - Former Yugoslav 
Republic of Macedonia  01-May-02 Goods  2000 GATT Art. XXIV  
EFTA - Mexico  01-Jul-01 Goods & Services  2001 GATT Art. XXIV & GATS Art. V  
EFTA - Morocco  01-Dec-99 Goods  2000 GATT Art. XXIV  
EFTA - Palestinian  
Authority  01-Jul-99 Goods  1999 GATT Art. XXIV  WT/REG243/1  
 
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  RTA Name  Date of 
entry into 
force  Coverage  GATT/WTO Notification  
Year WTO Provision  
European Economic Area 
(EEA)  01-Jan-94 Services  1996 GATS Art. V  
EFTA - Israel  01-Jan-93 Goods  1992 GATT Art. XXIV  
EFTA - Turkey  01-Apr-92 Goods  1992 GATT Art. XXIV  
EFTA - Accession of 
Iceland  01-Mar-70 Goods 1970 GATT Art. XXIV  
European Free Trade 
Association (EFTA)  03-May-60 
01-Jun-02 Goods  
Services  1959 
2002 GATT Art. XXIV & GATS Art. V  
EFTA - Gulf Cooperation 
Council  01-Jul-14* Goods & Services  Not notified  
ICELAND (individually)  
Iceland - China  01-Jul-14 Goods & Services  2014 GATT Art. XXIV & GATS Art. V  
EU - Iceland  01-Apr-73 Goods  1972 GATT Art. XXIV  
THE FAROE ISLANDS  
EU - Faroe Islands  01-Jan-97 Goods  1997 GATT Art. XXIV  
Faroe Islands - 
Switzerland  01-Mar-95 Goods  1996 GATT Art. XXIV  
Faroe I slands - Norway  01-Jul-93 Goods  1996 GATT Art. XXIV  
* The EFTA -GCC Free Trade Agreement entered into force on 1 July 2014. While the EFTA States have fully 
applied the agreement since the date of entry into force, GCC countries have not yet implemented th e 
agreement due to some technical issues, in particular in connection with the use of the certificate of origin 
(form EUR.1). Member States of the GCC have now informed EFTA they will fully apply the EFTA -GCC Free 
Trade Agreement as from 1 July 2015.  
Source: WTO Secretariat.  
 
5.1.8   Government procurement  
5.10.   The Parties are requested, pursuant to Article 5.I, to avoid any discrimination in public 
procurement.  
5.1.9   Intellectual property rights  
5.11.   The Agreement does not contain disciplines on Intellectual Property.  
 
 WT/REG243/1  
 
- 22 - 
 
  ANNEX 1  
DETAILS OF TRADE LIB ERALIZATION UNDER TH E AGREEMENT  
1. A comparison between the tariff rates scheduled for elimination under the Agreement on the 
Parties' mutual imports and the MFN applied rates on imports of total, agricultural (WTO 
definition), and non -agricultural products is shown in Table A 1.1 (Iceland) and A 1.2 (the Faroe 
Islands) below.  Prior to the entry into force of the Agreement (2006), Iceland's average applied 
rate on all products was 4.3%, with 70.2% of lines being duty free. On agricultural pro ducts, the 
applied rate was 10.9%, with 56.3% of lines being duty free and on non -agricultural products was 
9.6%, with 73.9% of lines being duty free. Upon the Agreement's entry into force, Iceland 
eliminated all tariffs applied on all products, agricultur al and non -agricultural, resulting in full 
liberalization for imports from the Faroe Islands.  
Table A1. 1 Iceland: Indicators of MFN tariff rates and preferentia l rates for imports from 
the Faroe I slands  
Origin 
of 
goods  Year ALL PRODUCTS  Agricultural products a Non-agricultural products  
Average applied 
tariff  Share 
of 
duty-
free 
tariff 
lines 
(%) Average applied 
tariff  Share 
of 
duty-
free 
tariff 
lines 
(%) Average applied 
tariff  Share 
of 
duty-
free 
tariff 
lines 
(%) Overall 
(%) On 
dutiable 
(%) Overall 
(%) On 
dutiable 
(%) Overall 
(%) On 
dutiable 
(%) 
MFN 2006 4.3 14.5 70.2 10.9 26.1 56.3 2.5 9.6 73.9 
Faroe 
islands  2006 0.0 0.0 100.0  0.0 0.0 100.0  0.0 0.0 100.0  
a WTO Definition.  
Note:  For the calculation of  MFN averages, specifi c rates are excluded and the ad valorem  part of alternate 
rates are included.  
Source:  WTO Secretariat estimates based on data provided by Iceland.  
 
2. In 2006, the Faeroe Island's average applied tariff was 4.2% on all products, with 32.4% of 
its tariff being  duty free for imports from all sources. On agricultural products, the applied rate was 
3.7%, with 65.8% of lines being duty free, and on non -agricultural products was 4.3%, with 
27.1% of lines being duty free for all imports. Upon the Agreement's entry in to force , the Faeroe 
Islands eliminated all tariffs on all products, resulting in full liberalization for imports from Iceland.  
Table A1. 2 Faroe Islands: Indicators of applied  tariff rates and preferential rates for 
imports from  Iceland  
Origin of 
goods  Year ALL PRODUCTS  Agricultural products a Non-agricultural products  
Average applied 
tariff  Share of 
duty-
free 
tariff 
lines 
(%) Average applied 
tariff  Share of 
duty-free 
tariff 
lines (%)  Average applied 
tariff  Share of 
duty-
free 
tariff 
lines 
(%) Overall 
(%) On 
dutiable 
(%) Overall 
(%) On 
dutiable 
(%) Overall 
(%) On 
dutiable 
(%) 
Applied  2006 4.2 6.2 32.4 3.7 10.8 65.8 4.3 5.8 27.1 
Iceland  2006 0.0 0.0 100.0  0.0 0.0 100.0  0.0 0.0 100.0  
a WTO Definition.  
Note:  For the calcul ation of averages, specific rates are excluded and the ad valorem  parts of alternate 
rates are included . Based on the HS 20 02 nomenclature.   
Source:  WTO estimates based on data constructed by the WTO Secretariat as provided by Faroe Islands . 
3. Table A 1.3 sh ows market access opportunities for the Faroe Islands' top 25 exports in 
Iceland  over the period 2003 -2005, which accounted for nearly all (94.2%) of its global exports.  
Before the entry into force of the Agreement, 216 lines were already duty -free on a MF N basis.  Of WT/REG243/1  
 
- 23 - 
 
  these, one -third were frozen fish fillets.  The ten lines liberalized under the Agreement consisted of 
shrimp and prawns and o ther preparations used for animal feed. 
Table A1. 3 Iceland: Market access opportunities und er the agreement for the Faroe 
Islands' top 25 exports  
Faroe  Islands' top export products in 2003 -2005  Access Conditions to Iceland's import 
markets  
MFN (2006)  Duty -
free in 
2006  HS number and description of the product  Share in 
global 
exports 
(%) Averag e 
MFN 
applied 
rate 
(%) No. of lines  Duty -free 
Dutiable  
030420  Frozen fillets  20.8 0.0 70   
030212  Pacific salmon (oncorhynchus nerka, 
oncorhyncus gorbuscha, oncorhyncus 
keta, oncorhyncus tschawytscha, 
oncorhyncus kisutch, oncorhyncus masou 
and onco rhyncus rhodurus), atlantic 
salmon (salmo salar) and danube salmon 
(hucho hucho)  10.2 0.0 2   
030562  Cod (gadus morhua, gadus ogac, gadus 
macrocephalus)  8.1 0.0 5   
230120  Flours, meals and pellets, of fish or of 
crustaceans, molluscs or other aquatic 
invertebrates  5.8 0.0 13   
030530  Fish fillets, dried, salted or in brine, but 
not smoked  5.6 0.0 8   
030269  Fresh or chilled freshwater and saltwater 
fish (excl. salmonidae, flat fish, tunas, 
skipjack or stripe -bellied bonito, herrings, 
cod, sardines, sar dinella, brisling or 
sprats, haddock, coalfish, mackerel, 
sharks and eels)  4.7 0.0 12   
030262  Haddock (melanogrammus aeglefinus)  4.5 0.0 1   
890200  Fishing vessels; factory ships and other 
vessels for processing or preserving 
fishery products.  4.4 0.0 10   
030490  Frozen fish meat, whether or not minced 
(excl. fillets)  3.5 0.0 18   
030250  Cod (gadus morhua, gadus ogac, gadus 
macrocephalus), excluding livers and roes  3.0 0.0 2   
030321  Trout (salmo trutta, oncorhyncus mykiss, 
oncorhyncus clarki, oncorhy ncus 
aguabonita, oncorhyncus gilae, 
oncorhyncus apache and oncorhyncus 
chrysogaster)  2.5 0.0 2   
030264  Mackerel (scomber scombrus, scomber 
australasicus, scomber japonicus)  2.3 0.0 1   
051191  Products of fish or crustaceans, molluscs 
or other aquatic in vertebrates; dead 
animals of chapter 3  2.2 0.0 14   
030613  Shrimps and prawns  2.1 0.0 4   
160520  Shrimps and prawns  2.0 10.0  5 5 
230990  Preparations of a kind used in animal 
feeding (excl. dog or cat food put up for 
retail sale)  1.7 45.8 1 5 5 
030410  Fresh or chilled  1.6 0.0 15   
030379  Frozen freshwater and saltwater fish (excl. 
salmonidae, flat fish, tunas, skipjack or 
stripe -bellied bonito, herrings, cod, 
sardines, sardinella, brisling or sprats, 
haddock, coalfish, mackerel, dogfish and 
other shark s, eels, sea bass and hake)  1.6 0.0 15   
030322  Atlantic salmon (salmo salar) and danube 
salmon (hucho hucho)  1.5 0.0 2   WT/REG243/1  
 
- 24 - 
 
  Faroe  Islands' top export products in 2003 -2005  Access Conditions to Iceland's import 
markets  
MFN (2006)  Duty -
free in 
2006  HS number and description of the product  Share in 
global 
exports 
(%) Averag e 
MFN 
applied 
rate 
(%) No. of lines  Duty -free 
Dutiable  
030221  Halibut (reinhardtius hippoglossoides, 
hippoglossus hippoglossus, hippoglossus 
stenolepis)  1.5 0.0 4   
030569  Fish, salted o r in brine only (excl. 
herrings, cod, anchovies and fillets in 
general)  1.3 0.0 9   
030263  Coalfish (pollachius virens)  1.2 0.0 1   
030549  Smoked fish, incl. fillets (excl. Pacific 
salmon, Atlantic salmon, Danube salmon 
and herrings)  0.7 0.0 3   
490700  Unused postage, revenue or similar 
stamps of current or new issue in the 
country in which they have, or will have, a 
recognized face value; stamp -impressed 
paper; banknotes; cheque forms; stock, 
share or bond certificates and similar 
documents of title.  0.7 0.0 3   
030223  Sole (solea spp.)  0.6 0.0 1   
Total of above  94.2  216 10 10 
Source:  WTO estimates based on data provided by the Iceland and UNSD, Comtrade data.  
4. Table A 1.4 shows market access opportunities for Iceland's  top 25 exports in the Faeroe 
Islands over the period 2003 -2005, which accounted for 86.2% of its global exports.  Before the 
entry into force of the Agreement, 2 5 lines wer e duty-free on a MFN basis  while 158 were subject 
to duty . Over three -quarters of the lines subject to duty consiste d of fish and shellfish products. All 
the lines subject to duty were liberalized when the Agreement entered into force in 2006.  
Table A1. 4 Faroe Islands: Market access opportunities under the agreement for 
Iceland's top 25 expor ts to the world  
Iceland's top export products in 2003 -2005  Access Conditions to Faroe 
Islands' import markets  
Applied  (2006)  Duty -
free in 
2006  HS number and description of the product  Share in 
global 
exports 
(%) Average 
applied 
rate 
(%) No. of 
lines  Duty -free 
Dutiable  
760110  Alumin ium, not alloyed  18.4 6.0  1 1 
030420  Frozen fillets  15.9 9.4 2 33 33 
030562  Cod (gadus morhua, gadus ogac, gadus 
macrocephalus)  6.4 10.0  3 3 
030410  Fresh or chilled  5.7 9.5 1 21 21 
230120  Flours, meals and pellets,  of fish or of 
crustaceans, molluscs or other aquatic 
invertebrates  5.6 0.0 1   
160520  Shrimps and prawns  5.1 10.0 1 1 1 
030379  Frozen freshwater and saltwater fish (excl. 
salmonidae, flat fish, tunas, skipjack or stripe -
bellied bonito, herrings, cod, sa rdines, 
sardinella, brisling or sprats, haddock, coalfish, 
mackerel, dogfish and other sharks, eels, sea 
bass and hake)  3.5 9.4 1 15 15 
720221  Containing by weight more than 55% of silicon  3.1 0.0 1   
030530  Fish fillets, dried, salted or in brine, but n ot 
smoked  2.8 10.0  17 17 WT/REG243/1  
 
- 25 - 
 
  Iceland's top export products in 2003 -2005  Access Conditions to Faroe 
Islands' import markets  
Applied  (2006)  Duty -
free in 
2006  HS number and description of the product  Share in 
global 
exports 
(%) Average 
applied 
rate 
(%) No. of 
lines  Duty -free 
Dutiable  
300490  Medicaments consisting of mixed or unmixed 
products for therapeutic or prophylactic 
purposes, put up in measured doses "incl. those 
in the form of transdermal administration" or in 
forms or packings for retail sale (excl. 
medicaments containing antibiotics, 
medicaments containing hormones or steroids 
used as hormones, but not containing 
antibiotics, medicaments containing alkaloids or 
derivates thereof but not containing hormones 
or antibiotics and medicaments containing  
provitamins, vitamins or derivates thereof used 
as vitamins)  2.1 0.0 1   
030490  Frozen fish meat, whether or not minced (excl. 
fillets)  2.0 9.3 1 14 14 
150420  Fats and oils and their fractions, of fish, other 
than liver oils  1.8 0.0 1   
030331  Halibut (re inhardtius hippoglossoides, 
hippoglossus hippoglossus, hippoglossus 
stenolepis)  1.7 7.0 1 7 7 
880240  Airplanes and other aircraft, of an unladen 
weight exceeding 15,000 kg  1.4 0.0 1   
030551  Cod (gadus morhua, gadus ogac, gadus 
macrocephalus)  1.3 7.5 1 3 3 
300390  Medicaments consisting of two or more 
constituents mixed together for therapeutic or 
prophylactic uses, not in measured doses or put 
up for retail sale (excl. antibiotics containing 
hormones or steroids used as hormones, but 
not containing antib iotics, alkaloids or 
derivatives thereof, hormones or antibiotics, or 
goods of heading 3002, 3005 or 3006)  1.3 0.0 1   
030269  Fresh or chilled freshwater and saltwater fish 
(excl. salmonidae, flat fish, tunas, skipjack or 
stripe -bellied bonito, herrings, cod, sardines, 
sardinella, brisling or sprats, haddock, coalfish, 
mackerel, sharks and eels)  1.3 13.0  17 17 
902139  Artificial parts of the body (excl. artificial teeth 
and dental fittings and artificial joints)  1.2 0.0 1   
030380  Livers and roes  1.1 10.0  1 1 
030250  Cod (gadus morhua, gadus ogac, gadus 
macrocephalus), excluding livers and roes  0.9 12.0  2 2 
030262  Haddock (melanogrammus aeglefinus)  0.9 7.5  1 1 
890200  Fishing vessels; factory ships and other vessels 
for processing or preserving fisher y products.  0.7 0.0 10   
842320  Scales for continuous weighing of goods on 
conveyors  0.7 1.7  1 1 
843850  Machinery for the preparation of meat or 
poultry  0.7 1.7  1 1 
271019  Medium oils and preparations, of petroleum or 
bituminous minerals, n.e.s.  0.6 3.9  20 20 
Total of above  86.2  25 158 158 
Note:  Based on the HS 20 02 nomenclature.  
Source:  WTO estimates based on data constructed by the WTO Secretariat as provided by Faroe Islands  and 
UNSD, Comtrade data base.  
__________