Free trade agreements apply only between the countries that are parties to the agreement. Countries that are not parties to a particular agreement are referred to as third countries in relation to that agreement.

The free trade agreements to which Iceland is a party can be divided into two categories:

• Multilateral agreements
  Multilateral agreements involve more than two parties. Several multilateral agreements have been concluded between the EFTA States and individual countries. Agreements between the EFTA States and Türkiye, Latvia, Lithuania, and others are examples of multilateral agreements.

• Bilateral agreements
  A bilateral agreement is an agreement between two countries. An example is the free trade agreement between Iceland and Greenland, which entered into force in 1985.

Both bilateral and multilateral free trade agreements are based on the principle of reciprocity. All parties to the agreement benefit from preferential tariff treatment when exporting goods to another party.

However, agreements may be asymmetrical. For example, one party may grant duty-free access (0% customs duty) to a particular product from the date the agreement enters into force, while another party reduces customs duties on the same product gradually over a transitional period.

The Iceland–China Free Trade Agreement

The free trade agreement between Iceland and China entered into force on 1 July 2014. It is a bilateral agreement covering three main areas:

• Trade in goods, including tariff reductions and the elimination of customs duties on many products

• Trade in services

• Investment

China introduced tariff preferences for various Icelandic products. In return, Iceland granted zero customs duties on all Chinese industrial products and seafood products.

To benefit from the tariff preferences available under the agreement, goods must comply with the applicable rules of origin. Importers and exporters must provide appropriate proof of origin to claim preferential tariff treatment.

Other Free Trade Agreements

Further information about the Iceland–China Free Trade Agreement and Iceland’s other free trade agreements is available on the website of the Icelandic Government.