From: OVERSEAS BUSINESS REPORTS (ICELAND)
University of Missouri-St. Louis
Match 23 DB Rec# - 29,704 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111107494
Title :ICELAND - OVERSEAS BUSINESS REPORT - OBR910600
Data type :TEXT
End year :1992
Date of record:09/17/1992
Keywords 1 :
| EUROPEAN FREE TRADE ASSOCIATION
| ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT
| ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMET
| SCANDINAVIAN COUNTRIES
| WEST EUROPE
| WESTERN EUROPE
| WESTERN EUROPEAN COUNTRIES
ICELAND - OVERSEAS BUSINESS REPORT - OBR910600
This article is derived from a report dated June 1991, prepared by the
International Trade Administration, U.S. Dept. of Commerce. The article
consists of 34 pages and discusses the economic and commercial climate in
Iceland, with emphasis on information useful for potential U.S. sellers and
investors. It includes the following sections:
OVERSEAS BUSINESS REPORT
M A R K E T I N G I N I C E L A N D
Prepared by Maryanne B. Lyons
and Maria H. Rauhala
Office of Western Europe
With Assistance from
The Economic/Commercial Staff
American Embassy, Reykjavik
U.S. Department of Commerce
International Trade Administration
Washington, D.C. 20230
Overview and Trade Outlook
Best Export Prospects
Apparel--Automobiles, Parts, and Accessories--Computers and
Peripherals--Computer Software--Fish Farming Technology, Equipment, and
Supplies--Hand Tools and Other Do-It-Yourself Equipment--Marine
Equipment--Medical and Dental Equipment
--Sporting Goods--Telecommunications Equipment
General--Fishing and Fish Processing--Aluminum Production
--Ferrosilicon Production--Textiles and Apparel--Diatomite
Production--Manufacturing, Other--Agricultural Sector
Exports--Imports--Major Trading Partners--Membership in
Major Marketing Areas--Distribution and Sales Channels--
Government Procurement--Advertising--Trade Organizations
Banking and Credit
Banking System--Sources of Financing--Other Financial
Institutions--Currency and Foreign Exchange
Trade Policy--Tariff Structure--Licensing--Import Restrictions--Customs
Requirements--Marketing and Labeling--Samples and Advertising Matter
Icelandic Investment Policy--U.S. and Other Foreign
Investment in Iceland--Icelandic Investment Abroad--Forms
of Business Organization--Entry and Repatriation of Capital
Intellectual Property Protection................................19
Protection of U.S. Interests--Patents--Trademarks--
Individual--Corporate--VAT and Excise Taxes--Other Taxes
--Tax Treaty with the United States
Transportation and Utilities
Labor and Employment
Labor Force--Wages and Benefits--Labor Organizations
Guidance for Business Visitors
Entrance Requirements--Language, Business Hours, and Holidays--Other
Sources of Economic and Commercial Information
General Information--Publications on Iceland
Useful Names and Addresses
OVERVIEW AND TRADE OUTLOOK
Iceland was first settled in 874, primarily by Norwegians, and was under
Norwegian and Danish control for more than 1,000 years. Since 1944, it has
been an independent nation. The population of 250,000 occupies a land area
about the size of Virginia, more than half of them living in Reykjavik and
its suburbs. Icelanders are a homogeneous people, well-educated and
prosperous, with a per capita GDP income of more than $20,000.
The Icelandic economy is greatly dependent on fishing and fish processing,
making it vulnerable to changes in the catch and fluctuations in the market
for fish worldwide. Fish products account for about 75 percent of Iceland's
exports and earn more than half of the country's foreign exchange.
In recent years, GDP growth has varied widely, from a high of 8.9 percent in
1987, to decreases of 0.8 and 3.4 percent in 1988 and 1989. GDP was flat in
1990, the first time in 20 years that Iceland has had 3 consecutive years
without growth. The public sector has continued to run a deficit, even
during the boom years. Unemployment, traditionally near zero, rose to 3.2
percent in 1990 and is expected to continue to run at about 1.5-2.0
percent--a high level for Iceland. Inflation, as measured by changes in the
consumer price index, was in the double-digits throughout most of the 1980s,
reaching a high annual rate of 70 percent in 1983. The government succeeded
in reducing the level to less than 8 percent in 1990 and hopes to continue
to keep the rate in the single digits in the near future through wage
control and other measures.
There is increasing government interest in exploiting Iceland's abundant
natural energy supplies--both geothermal and hydroelectric--to attract new
industry and reduce the country's vulnerability to downturns in the fish
market. Foreign investment regulations are being revised to meet EC
standards, although there will continue to be restrictions--particularly
with regard to fishing and fish processing. The new regulations will open
the Icelandic market to investment in stages. Large increases in the
current modest level of foreign investment are unlikely, however.
In spite of its economic problems, Iceland offers good opportunities for
U.S. exporters. The country is dependent on imports for most of what it
consumes, with the exception of fish and certain other food products.
Recent sharp reductions in tariffs for goods from non-European sources have
greatly improved the competitiveness of American products. Most tariffs for
products imported from the United States are now in the 5-10 percent range,
and many enter duty free.
BEST EXPORT PROSPECTS
Although current recession has somewhat dampened opportunities for U.S.
exports, the long-term outlook is good. Icelanders form a sophisticated and
prosperous market. They have one of the highest standards of living in
Western Europe and are well-traveled. There is a great deal of interest in
buying U.S. products, particularly those which offer the latest
technological developments and styles. Importers, however, frequently
complain that it is difficult to place small orders with U.S. companies. If
U.S. businesses can adjust the scale of their exporting to meet the needs of
the small market, they will find good opportunities for sales of products
like those discussed below.
Apparel: The apparel market, which has been strong in recent years, has
slowed somewhat due to the economy. Imports of apparel dropped from $84
million in 1987 to $69 million in 1989. Germany is the leading supplier,
with a 13 percent market share, followed by the Netherlands, Italy, France,
Denmark, and the United Kingdom with about 10 percent each. Although the
United States has only a 2 percent share, there is strong and growing
interest in American-made clothing, particularly high fashion goods,
children's clothing, and sportswear.
Automobiles, Parts, and Accessories: Automobile imports nearly doubled from
1986 to 1987 due to tariff reductions and favorable exchange rates, but fell
sharply in 1988 and 1989. The only increase was for vans to be used for
business purposes, as the new Value-added Tax (VAT) of 24.5 percent is
deductible for such vehicles. U.S. market shares for motor vehicles in the
late 1980s ranged from 12 to 17 percent. The increase in U.S. vehicles in
use in Iceland should provide excellent opportunities for sales of part and
accessories over the next few years. Because of the tough weather
conditions and large percentage of unpaved roads outside the Reykjavik area,
products for repair and maintenance of vehicles will also be in demand.
Total imports of automobile parts are about $100 million. Japan supplies
over half of the market, followed by the United States, Germany, and
Sweden. The U.S. market share for road wheels and parts is 40 percent, for
shock absorbers, 33 percent, and for radiators, 30 percent.
Computers and Peripherals: U.S. firms in the personal computer to
microcomputer range have great potential in Iceland. Large businesses and
government offices are all computerized, and smaller businesses are
expanding their use to reduce costs, since the labor market is expensive and
tight. The main area for new growth is now for home computers. Most U.S.
makes of computers are found here, and several of the major producers have
offices in Reykjavik. Exports of computers and parts to Iceland in 1988
were valued at $37 million. Direct imports from the United States accounted
for 25 percent. Since a significant share of imports are from European
subsidiaries of major U.S. companies, the actual U.S. market share is
probably well over 75 percent.
Computer Software: The selection of software available in Iceland is
limited, and there are excellent opportunities for sales of products to
expand the usefulness of the computers already in place. While trade data
suggest that the United States has only a small market share, about 50
percent of the software in the market is American. Several major U.S. firms
import software through their European subsidiaries, particularly those
located in Denmark and the United Kingdom.
Fish Farming Technology, Equipment, and Supplies: Abundant quantities of
pure water and geothermal heat give Iceland an edge over other locations for
fish farming. The pure cold water, when raised to an even temperature with
geothermal heat, is conducive to the rapid growth of fish. Fish farming is
being developed as a way to offset lean years in the natural fish catch, and
to produce more expensive and profitable types of fish. The fish farming
industry has suffered serious losses in the past 2 years, but once the
economy has stabilized there is great potential for U.S. sales of technology
and products. In 1988 there were 63 farms with a total production of 1,233
tons of salmon, valued at $23 million. The United States purchased
two-thirds of the salmon produced. Other significant markets were France,
Germany, and the United Kingdom. Production for 1989 was estimated at 4,000
tons, and growth to over 8,000 tons is forecast for 1990. There is also
some production of fresh water trout and halibut.
Hand Tools and Other Do-It-Yourself Equipment: Icelanders are inveterate
do-it-yourselfers and invest a considerable amount of time and money in
building and improving their homes. Interest in U.S. hand tools and other
do-it-yourself products is strong. The United States has only a small share
of the present $1.5 million market for electrical hand tools. About 40
percent of such tools are from Japan, and another 40 percent (including
U.S.-brand equipment) from Europe. The U.S. market share for nonelectrical
tools, however, is strong--about 30 percent for screwdrivers, hammers,
pliers, and tool sets. Data are not available for other equipment and
supplies, which fall into several categories in the trade statistics. U.S.
producers of many pre-packaged products could capture a good market share.
Marine Equipment: Fishing and fish processing are Iceland's primary
industries, employing 17 percent of the labor force. The fishing industry
is a huge potential market for producers of quality modern equipment. A
quota system imposed by the government has encouraged many boat owners to
refurbish or replace their vessels and equipment. In addition to engines
and fishing tackle, shipboard electronic are being updated. Nearly all
Icelandic fishing boats, even small ones, are now equipped with telephones,
and an increasing number are installing computers. The United States
supplies nearly two-thirds of distress signal transmitters and 25 percent of
radio navigational equipment. Japan supplies about 35 percent of the latter
Medical and Dental Equipment: Iceland's state-operated health service is
waging an aggressive campaign against cardiovascular disease, cancer, and
dental problems. Increased emphasis is being put on health care to the
elderly, and dental facilities are being installed in many health care
centers. U.S. state-of-the-art equipment is sought after, particularly by
the major state-run hospitals. Over the past 16 years, the government has
established over 80 health care centers around the country, and another 5 or
6 are to be set up in the Reykjavik area. These are in addition to the
country's 35 hospitals and many nursing homes, which have a total of 4,000
beds. With the decline in the value of the dollar, U.S. suppliers have
begun to capture a larger share of the market previously dominated by
northern European firms. Nearly one-third of medical instrument imports are
from the United States, followed by Germany with 25 percent. Most imports
of medical goods are by the Government Purchasing Department (for state
facilities) or the Reykjavik Purchasing Center (for municipal facilities).
Sporting Goods: The most popular family sport in Iceland is swimming, done
year round in natural hot water pools. Icelanders also enjoy skiing,
horseback riding, and camping. Four areas for downhill and cross country
skiing are open from January through April, and glacier skiing is good
throughout the summer. Team sports played by Icelanders include soccer,
handball, and basketball. Hunting for wildfowl and reindeer, and fishing
for fresh and deep sea fish are also very popular. As in the United States,
there has been considerable interest in physical activity to improve health,
and exercise equipment could also find a market here. The total sporting
equipment market is about $5 million. Norway, with 15 percent of imports,
is the leading supplier, followed by Austria with 12 percent and the United
States with 11 percent. However, major shares of certain items come
primarily from one source. Most skis are from Austria and three-fourths of
fishhooks (including those for commercial use) are from Norway. U.S.
exports are primarily fishing rods, miscellaneous sporting equipment, and
guns and ammunition.
Telecommunications Equipment: The market for telephones, particularly
cellular car phones, is growing. In 1985 there were 525 telephones for
every 1,000 inhabitants in Iceland, compared with 650 in the United States.
Nearly all homes, including isolated farms, have telephone service. Sweden,
Iceland's major supplier of telecommunications equipment, has more than
40 percent of the $11 million market, followed by Italy with 25 percent.
The U.S. share of direct imports is minimal, although a significant amount
of U.S. equipment is exported to Iceland from European subsidiaries.
General: Fishing and fish processing dominate Iceland's industrial picture,
despite private and government interest in diversification. About
three-fourths of the country's exports are fish and fish products, and 17
percent of the work force is employed in fishing or fish processing. The
three main manufacturing industries are an aluminum refinery, a ferrosilicon
producer, and a diatomite plant. All are wholly or partly foreign-owned.
Other goods produced in Iceland include wool textiles and apparel, cheese,
lamb, furniture, cement, fertilizer, plastics, and seaweed meal.
Manufacturing industries account for 16 percent of employment and 25 percent
Fishing and Fish Processing: Iceland's transition from an agricultural
subsistence-level economy to a modern high income society was led by its
fishing industry. The rich fishing grounds around the island, the nautical
skills of the Icelanders, an investment in modern fishing and processing
technology, and favorable world markets have provided Iceland with the
foreign currency earnings necessary for modernization and development.
However, this sector is extremely vulnerable to changes in catches and to
shifts in the value of its product on the world market. In spite of efforts
to develop other industries, Iceland is still very much dependent on its
fisheries sector. Iceland's fishing fleet consists of 900 vessels,
including 106 trawlers. There are only 39 vessels over 300 tons registered
gross weight. Most fishing vessels are modern and well equipped.
The most common fish species caught are capelin and cod, followed by other
demersal fish (haddock, saithe, ling, plaice, and halibut), ocean perch, and
herring. Small quantities of shellfish, primarily shrimp, are also caught.
The annual catch of all types of fish is about 1.7 million tons, of which
more than half is capelin and about 20-25 percent is cod.
The more valuable varieties of seafood are processed and chilled or frozen.
The less expensive species such as capelin are reduced to meal and oil.
Iceland's largest export market for its seafood is the United Kingdom,
followed by the United States, Germany, Portugal, and Japan. Until 1987,
the United States was the largest purchaser of Icelandic fish products.
Several factors have caused a shift to Western Europe. These include
generally better prices in Europe and a preference for less highly processed
fish, which has a higher mark-up.
Because of the importance of the fishing industry to the economy, the
Icelandic Government provided loans after World War II for the construction
of processing facilities. Declines in the catch of the more profitable
species resulted in a record number of bankruptcies of such plants in the
late 1980s. In order to protect this vital sector, the government
established a program in 1987 to assist the industry. Increased capital
flow was offered through special funds, and short-term debts were
restructured into long-term loans. In spite of some improvement, the
situation is still difficult, due largely to an overly large fleet landing
declining quotas of fish. Fish processing plants are also suffering from
underutilization, and the number of them must be reduced. Ownership of fish
processing facilities is mainly private and municipal, although the
Icelandic Government owns about one-fourth of the oil and meal plants.
In 1975, Iceland unilaterally declared that the 200 miles surrounding its
territory was restricted to its own fishing vessels. There was initial
opposition to this declaration, principally from British cod fishermen, but
it has been generally respected over the past decade. The Ministry of
Fisheries sets annual quotas for each species, based on the recommendations
of the Marine Research Institute, to protect against over-fishing.
A new Fisheries Act went into force in 1991. In addition to establishing
quotas, issuing licenses, and otherwise regulating the industry, the act
provides that access of new vessels will be prohibited unless a comparable
vessel is retired from the fleet. The government hopes that such measures
will lead to a one-third reduction in the trawler capacity over the next few
years, thus providing a better economic base for the remaining fleet.
Aluminum Production: The largest manufacturing enterprise in Iceland is the
Icelandic Aluminum Co., Ltd. (ISAL), a wholly owned subsidiary of the Swiss
firm Alusuisse. Located just southwest of Reykjavik at Straumsvik, ISAL
began operations in 1969 and employs about 500 persons. The building of
this smelter marked the first large-scale effort to turn Iceland's energy
resources into exportable goods. The plant produces over 80,000 tons of
aluminum ingots and rolling mill annually, most of which is exported to
extrusion plants in Switzerland, Germany, and the United Kingdom. In 1989
these exports were $180 million, almost 13 percent of total Icelandic
exports. ISAL consumes more than one-third of the total electricity
generated in Iceland.
Atlantal Group, a consortium composed of the U.S. company Alumax and Dutch
and Norwegian partners, is currently negotiating with the Icelandic
Government to build a new aluminum smelter. Chances for approval of this
project in the near future are good.
Ferrosilicon Production: Iceland's second largest manufacturer is Icelandic
Alloys, Ltd., which produces ferrosilicon for use in the steel industry. It
is owned jointly by the Icelandic Government (55 percent), the Norwegian
firm Elkem Spigerverket A/S (30 percent), and the Japanese firm Sumitoma
Corp. (15 percent). The company's plant is located at Hvalfjordur,
northwest of Reykjavik. It began operations in 1979 and produces
approximately 60,000 metric tons of ferrosilicon with a 75 percent silicon
content each year. Exports of ferrosilicon were $53 million in 1989, of
which 36 percent went to Japan, 23 percent to Germany, and 14 percent each
to the United States and the United Kingdom.
Textiles and Apparel: Iceland's textile industry began in the 1960s with
the marketing of "cottage industry" hand-knit woolen sweaters and
accessories to shops in the United States. In addition to hand-knit
garments, wool yarn and fabric, and woven wool garments and blankets are now
produced. In 1989 exports of about $16 million were shipped to the Soviet
Union, the United States, and Western Europe. Professionally designed and
factory produced goods are produced in addition to the home-knit apparel,
which formed the basis of this industry.
Diatomite Production: Kisilidjan Ltd., jointly owned by the Icelandic
Government and the U.S. Manville Corp., processes diatomite from deposits
found at the bottom of Lake Myvatn in northeastern Iceland. The
manufacturing process uses geothermal steam available in large quantities in
the area. Diatomite is exported primarily to Europe for use as an
industrial filtration agent and abrasive. Annual production is about 25,000
tons and the value of exports around $7 million. The main export markets
are Germany, Italy, and the United Kingdom.
Manufacturing, Other: Other manufacturing enterprises in Iceland are small
in scale and generally dependent on imported raw materials and components.
They produce fishing gear, packaging, building components, soap and
associated chemical products, liquor, soft drinks, paint, furniture, cement,
fertilizer, plastics, and seaweed meal. About 50,000 tons of fertilizer and
120,000 tons of cement for domestic consumption are produced annually,
making these industries significant in size by Icelandic standards. The
fertilizer plant is one of the largest consumers of electrical power in the
Agricultural Sector: Only about 20 percent of Iceland's land area is
suitable for agriculture, and that land is devoted almost entirely to the
production of hay and silage for the sheep and dairy cattle that are the
mainstay of the farming sector. In addition to meat and dairy products
consumed locally, small quantities of cheese and lamb are exported. The
main markets for lamb are Scandinavia and Japan; the United States purchases
most of Iceland's cheese exports. There is also a small poultry industry.
Iceland is self-sufficient in meat, dairy products, and eggs. Small
quantities of vegetables and flowers for domestic consumption are cultivated
in geothermally heated greenhouses . The agricultural sector accounts for
3.5 percent of GDP, 2 percent of exports, and 6 percent of the labor force.
Exports: Total Icelandic exports were valued at $1,684 million in 1990.
The fishing industry continues to be the major export earner, accounting for
75 percent of total exports. Power-intensive industries are another main
source of exports. The biggest of these industries is the Swiss-owned
aluminum smelter, whose products account for 13 percent of total exports and
over half of all manufactured exports. Other products exported include
ferrosilicon, diatomite, wool and woolen products, skins, hides and leather,
frozen lamb, skins and hides, and cheese.
Imports: Iceland is self-sufficient for fish, meat, and dairy products, but
must import almost everything else it consumes. Icelandic imports were
valued at $1,618 million in 1990. The principal products imported were
aircraft and parts, automobiles and other motor vehicles, industrial
machinery and equipment, petroleum and products, clothing and shoes,
electrical and electronic equipment, food products, and consumer goods.
Major Trading Partners: In 1987 the United Kingdom replaced the United
States as Iceland's main export market. The United States, Germany,
Portugal, Japan, and France are other leading export markets. Fish and
other seafood products are their primary imports from Iceland. The rise in
exports to Japan was particularly large, increasing from 2.8 percent of
total exports in 1983 to 7.6 percent in 1989, but dropping to 5.4 percent in
1990. Iceland's imports in 1990 were mainly from the United States,
Germany, the Netherlands, Denmark, and the United Kingdom.
Membership in Trade Organizations: Iceland became a member of the European
Free Trade Association (EFTA) in 1970, and agreed to dismantle its
protective duties on industrial products originating in the other EFTA
countries (Austria, Finland, Norway, Portugal, Sweden, and Switzerland).
In 1973 Iceland ratified a free trade agreement with the European Community
(EC). Iceland has not joined the EC and is not likely to apply for
membership in the near future. Although a 1989 opinion poll showed 54
percent of the population in favor of joining the Community, such a move is
unlikely if it means EC access to Icelandic fishing zones. Fiscal
structures and industrial standards, however, are being brought into line
with EC regulations in preparation for 1992. Iceland has been an active
participant in EFTA negotiations with the EC to form a European Economic
Area (EEA), which would provide for the free movement of goods, services,
capital, and persons among member countries.
Iceland is also a member of the Nordic Council, which was established in
1953 as an advisory body to the governments of the five Nordic countries.
The council deals with questions concerning cooperation in the fields of
economics, legislation, social and cultural affairs, environmental
protection, and communications.
Iceland joined the General Agreement on Tariffs and Trade (GATT) in 1968.
Import liberalization since then has reached over 90 percent of total
imports. Iceland actively supports organizations working for free trade.
Iceland is also a member of the Organization for Economic Cooperation and
Development (OECD), the International Monetary Fund (IMF), and the
International Bank for Reconstruction and Development (IBRD).
Major Marketing Areas: An island in the north Atlantic about the size of
Virginia, Iceland has a population of only 252,000. Almost half of those
people live in the capital city of Reykjavik and its suburbs, located on a
peninsula at the southwest coast of the island. Iceland's principal
industries are also located in the region. The country's main port is at
Reykjavik, and the only airport serving international flights is at
Keflavik, a few miles southwest of the capital.
The remaining population is mostly in villages and farms around the
perimeter of the island. The larger towns, with populations of
10,000-15,000, are Kopavogur (a suburb of Reykjavik), Hafnarfjordur, and
Akureyri. The North Atlantic Treaty Organization (NATO) Base at Keflavik,
with 5,600 Americans (of whom 3,000 are military personnel and the rest
dependents) and 1,100 Icelandic employees, is also an economically important
Distribution and Sales Channels: Distribution methods vary with the product
and with the individual situation and must be adjusted accordingly.
Consumer goods are distributed most effectively through an importer
maintaining inventory, while industrial goods are better handled through
U.S. exporters should provide literature, samples, and other promotional
materials to their agents. In the case of large orders, it is also
advisable to send a company representative to Iceland to provide pertinent
information and to help resolve any serious problems which may arise. Since
Iceland is a compact market, firms generally appoint one exclusive
representative for the entire country. Payment may be by salary,
commission, or a combination.
It is advisable for U.S. companies to transact business through established
representatives in Iceland, and not through agents in Europe. Costs are
usually increased substantially if goods are first shipped to Europe, then
reshipped halfway back across the Atlantic to Iceland. Such a supply route
can also cause delays, since European agents may serve customers closer to
their home base before those in Iceland.
There are about 300 wholesalers and importers in Iceland, most of whom are
members of one or more of the business associations listed in the Useful
Names and Addresses section at the end of this report. Government
purchasing offices are also listed in that section.
Government Procurement: Most government procurement is made by the
purchasing departments of the national government and the city of
Reykjavik. Products accounting for the largest share of government imports
are medical equipment, drugs, ground cables and electrical wire, hoisting
and lifting machinery, asphalt, sewer pipes, paper products, lumber, and
A new act on government procurement, covering all central purchases for
government agencies except those with their own purchasing departments,
became effective in 1988. Independent purchasing offices are operated by
the Post and Telegraph Administration, the National Power Company, and the
City of Reykjavik. Iceland is not a signatory to the Agreement on
Government Procurement of the General Agreement on Tariffs and Trade.
However, as an EFTA member, Iceland is committed to follow a policy of
nondiscrimination in its government purchases, and in fact adheres to the
basic provisions of the GATT Government Procurement Code.
Advertising: Statistics on advertising are not readily available, but it is
estimated that gross advertising expenditures for newspapers, magazines,
radio, and television amount to 1.5 percent of GNP, or around $300 million
Although they are relatively new businesses in Iceland, most advertising
firms offer complete services, including market analysis, opinion research,
specialized trade or industry surveys, creative designs, and translations or
adaptations of foreign materials. The majority of Iceland's advertising
agencies are members of the Society of Advertising Agencies (see Useful
Names and Addresses section.)
Under the provisions of a law which went into effect in 1986, commercial
radio and television broadcasting are now allowed in Iceland. Broadcasting
had previously been a government monopoly. Commercial stations may charge
user rates and accept advertising. A private television station began
broadcasting in 1986. Primarily a pay TV system, it also broadcasts to the
general public for 2 hours each evening, reaching over 90 percent of the
population. Two private radio stations reach about 85 percent of the
population and depend totally on advertising for their revenues.
The State Broadcasting System (SBS) has two daily schedules of radio
programs and a 6-day schedule of television. SBS is funded by a combination
of users' fees, import duties on equipment, and advertising. There are
about 350 televisions per 1,000 inhabitants in Iceland, compared with 650 in
the United States.
According to a recent survey by the Association of Icelandic Advertising
Agencies, between two-thirds and three-fourths of the population reads
newspapers on a regular basis. Most newspapers and magazines in Iceland
Most motion pictures accept advertising, and the rates are low. Outdoor
advertising is limited, but billboards may be put up at sports stadiums, and
busses accept posters.
While there is no government control of advertising, agencies operate in
accordance with the International Code of Advertising Practice of the
International Chamber of Commerce. Advertising is prohibited or restricted
for certain products, including wine and alcohol, pharmaceuticals and
medicines, margarine, and tobacco products. There are restrictions on ads
involving premiums or lotteries, and on outdoor advertising. In general,
promotions must be factual, informative, and truthful.
Trade Organizations: Several Icelandic trade organizations serve the
general interests of exporters, importers, and domestic businesses. Brief
descriptions of the major ones follow. The addresses and telephone numbers
for these organizations and those of several associations for specific
industries, trades, and professions can be found in the Useful Names and
Association of Icelandic Importers, Exporters, and Wholesale Merchants: The
association deals with all aspects of trade in Iceland and acts as a
spokesman for the interests of Icelandic businesses. It publishes a
directory in Icelandic with an English glossary which lists over 300 company
members by product area.
Export Council of Iceland: Founded in 1986, the council promotes increased
cooperation between companies, organizations, and government in
strengthening export trade. Members include representatives of industries,
unions and associations, and the Ministries of Trade, Foreign Affairs,
Fisheries, Agriculture, and Transport. Consultant and other services are
provided to members.
Federation of Icelandic Industries: Founded in 1933, the federation is
composed of manufacturing firms in Iceland, and promotes Icelandic
industrial goods for both export and domestic consumption. It also provides
marketing and other services to its member companies and publishes a variety
of reports, some of which are in English.
Federation of Icelandic Cooperative Societies (Samband): Samband is the
most important commercial concern in the country, with interests in banking,
insurance, shipping, the importation and distribution of oil, and the
manufacture and distribution of food, building materials, clothing,
machinery, and automobiles. Its fisheries division is heavily involved in
fishing, fish processing, and marketing.
Iceland Chamber of Commerce: Founded in 1917, the chamber is a voluntary
organization with over 500 members from all branches of industry. It is
totally supported by membership dues and revenue-generating activities. The
chamber's mission is to promote the interests of the Icelandic business
community, with the objective of improving the welfare of the Icelandic
Icelandic-American Chamber of Commerce (IACC): Founded in 1986, the IACC
promotes trade and goodwill between the United States and Iceland. It
provides members with advertising, public relations, accounting, legal,
financial, and other business services. Affiliated with the Icelandic
Chamber of Commerce in Reykjavik, the IACC is headquartered in New York
City. The Chamber holds an annual meeting each fall, usually in the United
BANKING AND CREDIT
Banking System: Up to 1989, Iceland's banking system consisted of seven
commercial banks, a large number of savings banks, and some deposit
departments run by cooperatives. Three of the seven commercial banks were
wholly state owned until 1988. These were the National Bank (Landsbanki
Islands), the Agricultural Bank (Bunadarbanki Islands), and the Fisheries
Bank (Utvegsbanki Islands). After the bankruptcy of one of its major
creditors, the Fisheries Bank ran into difficulties and was made into a
private shareholder's bank in May 1988, with its majority holdings
temporarily assumed by the National Bank.
On January 1, 1990, the Fisheries Bank, the Industrial Bank, the Commercial
Bank, and the Peoples Bank merged to form the Bank of Island
(Islandsbanki). It is second in size only to the National Bank, which has
acquired a majority share of the Cooperative Bank. The three commercial
banks in Iceland are now the National Bank, with 49 percent of the country's
banking business, the Bank of Iceland, with 29 percent, and the Agricultural
Bank with 22 percent. There are also a small number of savings banks, whose
combined size is smaller than the Agricultural Bank.
A new law on banking was enacted in 1986. Its major provisions, which
expanded the range of banking services and made the Icelandic system more
compatible with developments in the international financial market, are as
o Deregulation of interest rates, allowing banks to set their own rates
for deposits and loans.
o Minimum capital-ratio requirement of 5 percent.
o Maximum fixed-asset ratio of 65 percent of capital and reserves.
o Right to establish new branches without official approval.
o Right to own shares in other financial companies.
o Permission for foreign banks to set up representative offices in Iceland.
Notes are issued by Iceland's Central Bank, which has all the traditional
central banking functions. As the principal monetary authority in the
country, it also serves as the bank of the Treasury and other banks. The
Central Bank was established in 1961. Before that its functions were
handled by the National Bank, currently the largest commercial bank in
Iceland. Its Board of Directors is elected by the Icelandic Parliament
(Althing) for a term of 4 years. The Governors of the Bank are appointed by
the Minister of Commerce and Banking.
Sources of Financing: Public investment funds play an important role in
supplying long-term financing for the Icelandic economy; they are the most
important source of financing of private fixed investment. The three main
funds are the Fisheries Loan Fund, the Agricultural Loan Fund, and the
Industrial Loan Fund. Their capital is mainly from government grants,
earmarked taxes, the unemployment fund, compulsory savings by young people,
a proportion of incremental bank deposits, and domestic borrowing. Other
important funds are the Development Fund of Iceland, which channels
long-term financing to the various investment credit funds and to major
public investment projects, and the Export Loan Fund and Export Credit
Guarantee Fund, which help to finance exports. The Icelandic Investment
Corporation was founded under joint, private, and government sponsorship.
Its functions include equity participation in businesses (including joint
ventures with foreign partners), as well as financial support for innovative
Other Financial Institutions: Iceland also has an insurance system that
includes private insurance companies, private pension funds, and a
comprehensive system of social insurance. The pension funds and social
insurance system are operated privately by labor unions, but come under the
financial regime of the government. The major Icelandic banking and
financial institutions, including public agencies as well as private
commercial and savings banks, are listed under Financial Institutions in the
Useful Names and Addresses Addresses Section.
Currency and Foreign Exchange: The Icelandic currency is the krona. In
1981 the krona was revalued, with one new krona equaling 100 old kroner. At
the time this change was implemented, the new krona was equivalent to 16
U.S. cents. The krona is now worth about 1.8 U.S. cents; $1 is equivalent
to about 55 kroner. The Central Bank determines the exchange rate subject
to government approval and quotes buying and selling rates of foreign
exchange. For goods dutiable on value, foreign exchange is converted into
Icelandic currency. The krona was devalued three times in 1988, resulting
in a 21.85 percent rise in the trade weighted average exchange rate of
Trade Policy: Iceland is heavily dependent on foreign trade and maintains
an open policy aimed at the long-term liberalization and expansion of
international commerce. Iceland's effort to reduce tariff barriers and
trade restrictions took on added momentum at the time of its accession to
the GATT in 1968. Import liberalization since then has reached over 90
percent of total imports. Licenses now are required for relatively few
commodities and about 90 percent of imports enter duty free.
Iceland actively supports organizations working for free trade, as seen by
its membership in GATT, the Organization for Economic Cooperation and
Development (OECD), the International Monetary Fund (IMF), the International
Bank for Reconstruction and Development (IBRD), and the European Free Trade
Association (EFTA). Iceland participated in the Tokyo Round of Multilateral
Trade Negotiations held under the GATT in the 1970s, but only joined the
industrial tariff agreement. It was implemented without any staging on
January 1, 1980.
Tariff Structure: Iceland adopted the Customs Cooperation Council
Nomenclature (CCCN) in 1963, simplifying its own tariff structure and
eliminating certain very high duties. In January 1988 Iceland's tariff
system was entirely reformed, lowering or abolishing many duties. The
present tariff schedule has two columns. The first lists the general duty
rates. The second lists preferential rates applied to imports from other
EFTA countries and from EC countries. Where no figure appears in the second
column, the rate in the first applies to all countries.
Current duty rates range from zero to 30 percent ad valorem. Products with
high rates of 30 percent include telecommunications equipment, military
equipment, motor vehicles, electrical equipment, automatic goods vending
machines, potatoes and vegetables, plants, and miscellaneous consumer
goods. Some goods which now have no duties are meat products, fish, cereal,
fruits, nuts, dairy products, coffee, tea, ores, minerals, chemical and
pharmaceutical products, plastics, rubber, wood, paper, books, glass, iron
and steel, tools, nuclear reactors, electrical machinery and aircraft. For
further information on specific tariff rates, contact the Department of
Commerce Iceland Desk Officer at the number listed in the Sources of
Economic and Commercial Information section.
Licensing: Most goods may be imported without license. The Ministry of
Commerce, after consulting the Central Bank, makes the ultimate decision on
matters concerning import licensing for goods on the restricted list.
Import licenses are issued by Iceland's two largest privately owned banks,
the National Bank of Iceland and the Fisheries Bank, and are valid for 3-16
Import Restrictions: Restricted commodities are live animals; meat and
edible offals; dairy products and eggs; cut flowers; coffee; lard and other
animal fats; margarine; grape must; crude bituminous or petroleum oils;
non-aviation gasoline; distillate and residual fuel oils; and paint brushes,
plastic-mounted brushes, brooms, squeeges, and mops.
Importation of certain items, though not quantitatively restricted, is
limited in other ways. Fertilizers are imported only by the State
Fertilizer Plant under the general supervision of the Ministry of
Agriculture; alcoholic beverages, tobacco, industrial alcohol, and matches
by the Liquor and Wine Authority under the Ministry of Finance; electrical
line, telephonic, and telegraphic apparatus by the Post and
Telecommunications Administration; tree seedlings by the State Forestry
Agency; and fresh vegetables by the Agricultural Production Board. A number
of products must be tested or inspected before entry into Iceland. Agencies
responsible for technical regulations on specific goods are listed in the
Useful Names and Addresses section of this report.
Customs Requirements: For customs clearance, shipments to Iceland must be
accompanied by the original invoice or a copy covering the imported goods or
consignment. The original or the copy is retained by the customs
authorities. Regulations on the preparation of the commercial invoice must
be carefully followed to avoid a possible fine of 10 percent of the duty.
Copies of these regulations may be obtained by writing to the Customs
The commercial invoice must include the following information: a careful
description of the goods; name and address of the consignor and consignee;
location and date of issue; date of delivery of the consignment to Iceland
and the transportation method used; number of packages and their gross
weight; net weight of each article and number of articles; and types of
packages and number of both inner and outer packings of packages. Should a
consignment consist of more than one container of different kinds of
products, the invoice must indicate the products in each container and
specify gross weight.
The invoice must also state the country of origin of the goods, the selling
price of each individual product, and the unit price and aggregate price.
All amounts on the invoice must be added up and a total amount clearly
stated. The number of articles, discounts, and other reductions must also
be included. Other information required includes date of sale and terms of
delivery (f.o.b., c.i.f., etc.); currency in which the invoice price is
specified; terms and conditions of payment; and the seller's statement that
only one invoice has been issued to cover all the goods found in a
particular consignment. It must also be shown that the goods are entered at
the price for which they are sold and that to the seller's knowledge the
price stated is not lower than the market price of identical or similar
goods for export at the time and place of purchases. When the market price
is lower, it must be given in the invoice along with the sale price.
Consignees of imported goods must submit a bill of lading or waybill for
customs clearance. Documents are also required for charges and other
matters not covered in the commercial invoice, bill of lading, or waybill,
such as commissions and agent's fees, packing expenses, a packing list, and
a certificate of chemical analysis, if appropriate. Customs authorities may
require documents or data to provide verification of statements specified in
the customs declaration and invoices, such as information on the type of
product, its composition, quantity, and price. These papers may be required
Marking and Labeling: Special labeling requirements must be met for certain
items at the retail level, including food, processed meat products, and
other consumer goods. Margarine must be labeled and include the name of the
producer and the word "Utlent" (i.e., "foreign"). The shipper should make
sure that packing has sufficient strength to withstand not only the sea
voyage but also possible transshipment over Iceland's rough roads and
between its ports. Occasionally, because of a shortage of warehousing
facilities, packages are exposed to rain and wind in open and unsheltered
storage areas. Special care should be taken in wrapping and waterproofing
all shipments to Iceland that might be damaged by exposure to moisture.
The quantity and contents of packages must be marked clearly to conform with
the commercial invoice, with materials durable enough to withstand rain and
rough handling. The mark of the country of origin on imported merchandise
is not required, but the use of markings which might mislead the purchaser
as to its origin or identity is forbidden.
U.S Senate Concurrent Resolution 40, adopted in 1953, invites U.S. exporters
to inscribe on the external shipping containers in indelible print of a
suitable size, insofar as practicable, "United States of America." While
such marking is not compulsory, U.S. shippers are urged to cooperate in thus
publicizing American made goods.
Samples and Advertising Matter: Unsaleable samples are free from duties,
but those of commercial value are subject to the same duty as a commercial
shipment of the same product. Samples carried into Iceland in a traveler's
luggage may, upon request, be exempted from duty for a specified period, not
to exceed 1 year. When entering Iceland, the traveler must submit a list of
samples and post a deposit to cover the duties. The list and samples are
reexamined by the customs authorities and the deposited money returned when
he or she leaves. The traveler is responsible for duties on any
Simplified procedures for temporary importation of samples is available to
U.S. traders as a result of Iceland's accession in 1970 to the Customs
Convention of the A.T.A. Carnet for the Temporary Importation of Goods.
Under its provisions, commercial samples of goods accompanied by a carnet
can be entered into various foreign countries, including Iceland, without
posting bond at each border. Carnets are issued in the United States by the
U.S. Council of the International Chamber of Commerce, 1212 Avenue of the
Americas, New York, NY 10036.
As a signatory to the International Convention to Facilitate the Importation
of Commercial Samples and Advertising Material, Iceland permits advertising
matter printed in a foreign language to enter duty free. Advertising matter
printed in Icelandic and imported from EFTA or EC member countries is also
duty free, but is dutiable at 15 percent if imported from any other country.
Icelandic Investment Policy: Because Iceland's investment policies has
favored local investors, foreign investment in Iceland is minimal. However,
the government is now interested in cooperation with international
corporations to further develop the country's power-intensive industries and
is revising its investment regulations to meet EC standards. Details on the
new regulations are not yet available, but restrictions on investment in the
fisheries sector will remain. The new regulations will be phased in over
One of the more important current regulations on foreign investment in
Iceland is the requirement that the majority of the founders of a company
have had residency in Iceland for the last 2 years. The directors of
Icelandic branches must also be nationals and have residency in the
country. If the company owns Icelandic real estate, the nationality
requirements are even stricter. Special requirements for Icelandic majority
ownership of equity capital and total Icelandic board membership govern
trading companies and industrial enterprises. Foreigners may not buy land
without permission, and foreign service companies are not permitted.
While commercial transactions in Iceland are for the most part free of
control, capital movements are not. They are under the direct supervision
of the Ministry of Commerce and the Central Bank. Borrowing to finance
imports of consumer goods is severely limited, but some allowances are made
for long-term credit financing of imported capital goods
There are no standard incentives or guidelines for foreign investment in
Iceland. Major investment projects are negotiated individually between the
contracting parties. Taxation, deliveries, capital transfers, ownership,
and all significant issues are negotiated as part of the comprehensive
U.S. and Other Foreign Investment in Iceland: The aluminum smelter in
Straumsvik, owned by Icelandic Aluminum Co. Ltd. (ISAL), with a net
investment of over $150 million, is the largest foreign investment in
Iceland. It is a wholly owned subsidiary of Alusuisse and produces more
than 80,000 tons of aluminum per year.
The second largest foreign investment is a ferrosilicon plant,
Jarnblendifelagid (Icelandic Alloys Ltd.). Located at Hvalfjordur on
Iceland's west coast, it is owned 30 percent by Elkem A/S of Norway, 15
percent by Sumitomo Corporation of Japan, and the rest by the Icelandic
Government. Total net investment is about $20 million. Annual production
is about 60,000 tons.
The only U.S. investment in Iceland is Kisilidjan Ltd., a diatomite plant
owned jointly by the Icelandic Government and Manville Corporation. In
1989, the U.S. investment rose from 40 percent to 48.6 percent following the
purchase of additional shares from the Icelandic Government. The U.S. share
is valued at about $2.2 million. Industrial filters and abrasives are made
from diatomite deposits found at the bottom of Lake Myvatn in northern
Iceland. The manufacturing process uses geothermal steam available in the
area. Most of the production is exported to Europe. Total sales for 1989
were about $8 million.
A consortium composed of the U.S. company Alumax and Dutch and Norwegian
partners is currently negotiating with the Icelandic Government to build a
new aluminum smelter. This project is expected to be approved in the near
Icelandic Investment Abroad: Iceland's direct investment in the United
States is also relatively low. Two U.S. subsidiaries of Icelandic firms are
engaged in preparation, packaging, and distribution of Icelandic fish
(especially cod). Icelandic investment in the United States is estimated at
about $26 million, around 85 percent of total Icelandic foreign investment.
Iceland also has a fish processing facility in the United Kingdom.
Forms of Business Organization: The standard forms of business organization
in Iceland are: (a) partnerships or single proprietorships; (b) limited
liability companies (stock companies); and (c) cooperative societies. The
limited liability company is the usual form taken by a business
organization. Under Icelandic law, a limited liability company is one in
which the shareholders, individually, are not responsible for any act or
liability of the company beyond the paid-in portion of their respective
shares in the capital stock of the company.
A company may be established by five or more persons with a minimum share
capital of 20,000 kroner (about $500). A minimum of about $250 must be paid
before a company can be registered. Foreign limited liability companies may
be registered in Iceland with the Limited Liabilities Registration Office,
provided they are legal concerns in their own country and obtain the
necessary license for doing business in Iceland. A company can normally be
organized in a short time by an Icelandic lawyer. Registration requires
filing of the following documents:
o Copies of the Memorandum of Association and bylaws of the company.
o An official certificate, endorsed by a consul in the country of
incorporation, signifying the legality of the company and its address.
o A certification from the board of directors, verified by a notary
public, stating that the company will adhere to Icelandic law and that
its representative in Iceland will be authorized to act for the company
in Icelandic courts.
o An exclusive power of attorney executed in favor of the representative,
which the company is required to appoint for purposes of its business in
Any subsequent change in the data required above also must be reported. The
company may be required to submit its accounts to the Registrar within 90
days after the end of the fiscal year.
Entry and Repatriation of Capital: While commercial transactions in Iceland
are for the most part free of control, capital movements are not. They are
under the direct supervision of the Ministry of Commerce and the Central
Bank. Borrowing to finance imports of consumer goods is severely limited,
but some allowances are made for long-term credit financing of imported
INTELLECTUAL PROPERTY PROTECTION
Protection of U.S. Interests: Iceland is a signatory of the 1934 revision
of the Paris Convention for the Protection of Industrial Property (patents,
trademarks, commercial names, and industrial designs), to which the United
States and 92 other countries adhere. Under its provisions, U.S. business
representatives and inventors are entitled to receive national treatment in
Iceland, that is, treatment equal to that accorded Icelandic citizens.
Patents: Under Icelandic Law, patents are granted for a period of 15 years
from the issue date. Applications are examined for technical adequacy and
eligibility, based on relevance to other patents in force. If a
corresponding patent application has been filed abroad, the Icelandic patent
will not be granted before the foreign patent is granted. If foreign
application is filed, a novelty examination will be made by the Ministry of
Applications are open for public inspection for 12 weeks, during which
oppositions can be filed. Beginning 5 years after the date of issue, the
owner of the patent must make it available to interested parties if it is
inadequately worked. If the patent is needed to work another patent,
compulsory licensing is mandatory after 3 years from the date of issuance.
U.S. nationals are entitled to the protection of patents against arbitrary
forfeiture for nonworking. After first filing a patent application in the
United States, they have a 1 year "right of priority," in which to file a
corresponding application in Iceland and receive in that country the benefit
of the first U.S. application filing date. Matters pertaining to patents
should be addressed to the Secretary General, Ministry of Industries.
Trademarks: Trademarks are protected under the Icelandic Trademarks Act No.
47 of May 2, 1968. Iceland has adopted the Nice International
Classification System for registration purposes (34 products and 8 service
classes). Trademark registrations are valid for 10 years from the date of
registration and are renewable for like periods. The "right of priority"
period for trademark applications is 6 months. The first applicant for a
trademark is entitled to registration and exclusive ownership rights.
However, if another party can prove prior use within 5 years of the
registration date, that party may have the mark cancelled and reregistered.
After 5 years, a registration becomes incontestable on grounds of prior
use. After examination, any application found acceptable is published. It
may then be contested during a 2-month period before it enters into force.
Icelandic or foreign official emblems or words, or markings contrary to
public order or good morals, cannot be registered as trademarks. Use of a
mark is not compulsory. Foreign registrants must appoint an agent in
Iceland. For some foreign registrants, there is a prior home registration
requirement, but this does not apply to U.S. applicants. Trademark
applications should be sent to the Office of the Chief Magistrate, Trade
Copyrights: Iceland is a member of the Universal Copyright Convention, to
which the United States and 79 other countries adhere. Works of American
authors, first copyrighted in the United States, are thereby entitled to
automatic protection in Iceland. The author need only show the year of
and the symbol "c" in a circle to obtain copyright protection on such
works. Iceland is also a member of the "Berne Union" Copyright Convention.
Although the United States is not a member of this convention, U.S. authors
may obtain protection in Berne Union countries by publishing a work in a
member country at the time it is first published and copyrighted in the
Protection of copyrights in Iceland is governed by the Copyright Statute of
May 29, 1972. Protection is for the life of the author plus 50 years. It
covers all literary, dramatic, musical, and artistic work, and includes the
sole right to produce and reproduce the work or a translation of it, to
perform it in public, and to authorize others to do so.
The Icelandic Government initiated an overall tax reform in 1988, which is
to be fully implemented by the end of 1991. This reform was undertaken to
streamline a system which had become cumbersome due to a series of tax
concessions introduced during the 1980s, and to stabilize and broaden the
Individual: All persons who are residents of Iceland are subject to
taxation on all income and property on a worldwide basis. Nonresidents of
Iceland are subjected only to limited taxation on income from sources in
Iceland and on property from which such income is derived.
In 1988 the government introduced a single tax rate applicable to everyone
regardless of income. A rate of 39.5 percent was set in 1990, and includes
both state and local income taxes. It is on a pay-as-you-earn basis, with
adjustments at the end of the calendar year. Interest income is not subject
to taxation. While dividend income and capital gains are taxable, they are
deductible for most taxpayers. Other exemptions and allowances include a
personal allowance of about $4,400; a child allowance; and housing subsidies
depending on income, mortgage interest, and net worth. There is also a
special exemption for fishermen.
Corporate: The tax base for all resident corporations and taxable entities
is their worldwide income after deduction of business expenses.
Corporations, cooperatives, partnerships, and other entities registered,
chartered, or having their place of effective management in Iceland, are
residents of Iceland for tax purposes. Nonresident companies are taxed on
income from Icelandic sources. The corporate tax rate is 50 percent of
taxable income, which is net income less paid out dividends up to 15 percent
of total shares and contributions to an investment fund up to 15 percent of
net income less deductible dividends. The reserve fund contribution is
taxed at 20 percent normal rates, unless used to meet operating losses at
some time before being dissolved.
Permissible deductions from gross income include operating losses carryover
from previous years, rent, wages and salaries, interest on borrowed money or
bonds, maintenance and repair charges, and royalty payments for the use of a
patent or copyright. Depreciation allowances vary with the type of asset.
The rates are ships and aircraft, 8 percent; manufacturing machinery, 12
percent; automobiles, 8 to 15 percent; office equipment, 20 percent; and
buildings, 2 percent. Depreciation is made on the basis of the purchase
prices, which is index-regulated once a year.
Value-Added Tax (VAT) and Excise Taxes: An Icelandic VAT of 24.5 percent,
levied on a broad base of goods and services, went into effect in July
1989. It replaced a general sales tax of 25 percent, which had been levied
on the value of both imported goods and domestic goods. Some services,
admission charges, utilities, license fees, and subscriptions are exempt
from the VAT. The VAT on milk, fish, meat, and fresh domestic vegetables
will be refunded to reduce the effective rate to 14 percent.
In addition, there are excise taxes on the following imported and locally
produced items: sugar and chocolate confectionery, 7 percent; soft drinks,
and preparations for making soft drinks and beer, 17 percent; potatoes, 50
percent; goods made from potatoes, 40 percent; and motor vehicles and motor
cycles, 7 to 37 percent.
Other Taxes: Property tax is assessed on the net wealth of all taxable
individuals, corporations, and other entities, based on the property's cost
of acquisition calculated according to its valuation on December 1 of every
year. Nonresidents are taxed the net worth of their assets as well,
provided that they are connected to derivation of taxable income in
Iceland. A special property tax of 1.5 percent is levied on all office
buildings and commercial buildings used for wholesale and retail business.
A capital tax of 1.6 percent plus a surcharge of 0.016 percent is levied on
the net wealth of individuals, corporations, and other entities. Net wealth
in most cases is the normal or cost price of property, less indebtedness,
such as mortgages. For individuals, the rate is 1.2 percent plus 0.012
percent on net wealth less specified exemptions of from 114,000 to 171,000
kroner (about $2,000-$3,000).
A municipal tax of 0.5 to 1 percent (the rate varies from one municipality
to another) may be levied on all business operating expenditures of
individuals, corporations, and other taxable entities.
Nonresidents dwelling temporarily in Iceland and deriving income from
Icelandic sources for employment during their stay are subject to taxation
on such income. Icelandic income sources derived from employment,
directors' fees, committees' fees, pensions, grants, independent personal
services, and artists performances are subject to taxation. The rates
applicable are the same as for residents, but tax credit and children's
benefits are not granted.
A special pollution tax, levied by weight, is levied on all automobiles in
Tax Treaty with the United States: Iceland and the United States concluded
a double taxation treaty in 1975. It applies to both national and municipal
taxes in Iceland, but only to federal taxes in the United States. The law
provides that a U.S. citizen with income earned in Iceland shall receive a
credit in the amount of his Icelandic tax against his U.S. tax liability.
The credit shall not exceed the limits provided under U.S. law for that tax
year. Similar provisions are given to Icelandic citizens on income earned
in the United States.
TRANSPORTATION AND UTILITIES
Airlines: Airline operations are comparatively more important to Iceland
than to other countries in Europe, accounting for about 4 percent of total
GNP. The country's two international airlines are Icelandair (Flugleidir)
and Eagle Air (Arnarflug), both of which operate out of Keflavik
International Airport. Icelandair, the largest private company in the
country, maintains daily flights to 12 European destinations and to Chicago,
New York, Boston, Baltimore, and Orlando in the United States. Eagle Air
provides island service and flies to the Netherlands year round and to
Switzerland and Germany in the summer season. Icelandair uses primarily
U.S.-made aircraft on its North Atlantic and European routes. Five Fokker
aircraft are used for domestic flights.
Road System: Iceland has neither railways nor inland waterways. Most land
transportation is by motor vehicle. Truck and bus services are available to
all major towns and districts, although traffic is disrupted at times in the
winter. There are over 12,000 kilometers (8,000 miles) of roads in Iceland,
of which close to 4,000 kilometers are main roads. Iceland has one of the
highest rates of car ownership per capita in the world, with approximately
450 automobiles per 1,000 inhabitants, compared with about 550 for the
Ports: The main port at Reykjavik handles 90 percent of Iceland's imports
and exports. There are also a number of small ports around the country, all
of which are regulated by the Icelandic State Shipping Authority. There are
no free ports in Iceland, but adequate docks as well as refrigerated and
bulk liquid storage facilities are available at most ports.
An American shipping company provides service between the United States and
Iceland. Its single vessel sails every 21 days from east coast ports to
Keflavik and Njardvik. Sailing time is about 1 week each way. The largest
shipping line in Iceland, Eimskip, operates 17 vessels which provide weekly
service to major northern European ports, service every 2 weeks to North
America, and monthly service to Baltic ports. Samband Line, the other major
shipping line, has regular weekly services to most northern European ports,
and also makes three call per week to Baltic and to U.S. ports. Iceland's
other shipping lines provide mainly domestic service.
Utilities: All the Icelandic population has access to electricity. It is
conservatively estimated that harnessable electrical power from rivers and
geothermal sources in Iceland is 50,000 GWh per year. The present use of
electrical energy, however, is only about 8 percent of the minimum
potential, or 4,000 GWh. Hydro and geothermal reserves are vast in relation
to the size and population, making power potential one of the country's
principal natural resources and a crucial factor in the future development
of Icelandic industry.
Power is produced and transmitted to industrial customers at a negotiated
price which is lower than the standard rate. Because of the very small
general power market in Iceland, each new industry requiring a substantial
block of power must be associated with a new hydroelectric development.
Geothermal heat, an important source of energy in Iceland, occurs in about
250 low-temperature thermal areas characterized by natural steam. The
capacity of each area can be found only by considerable research and
drilling. Aggregate natural heat dissipation has been roughly estimated at
1 million kilocalories per second. From 1 to 10 percent is recoverable,
providing a heat resource equivalent to several hundred million tons of oil.
Geothermal energy is distributed fairly evenly throughout the country.
Several of Iceland's geothermal areas lend themselves to industrial
exploitation and various other direct uses because they are near population
centers and transportation lines. Those in remote areas are more suitable
for power generation. Three electric generating plants, with installed
capacity of 40 mW, are driven by geothermal steam. The largest plant, with
a capacity of 30 mW, is located at Krafla and began operation in 1979.
Geothermal heating is used to heat most Icelander's homes directly,
including all 115,000 inhabitants of the Reykjavik area.
Nearly all of Iceland's households have telephone service. There are 525
telephones per 1,000 inhabitants, a rate comparable to the United Kingdom,
but lower than the United States, which has 760 per 1,000 inhabitants.
The country's two television stations transmit to approximately 80,000
television receivers. Video cassette use has also become popular over the
past few years. Over $500,000 worth of such cassettes are imported each
year, mainly from the United States and the United Kingdom.
LABOR AND EMPLOYMENT
Labor Force: Iceland has a labor force of 127,000 adults (ages 15 to 74)
out of a population of 252,000, roughly 51 percent of the total population.
The overall employment participation rate has increased considerably in
recent years, with 82 percent of women now working outside the home and
making up almost 40 percent of the labor force. The participation rate for
the elderly is also quite high, with 50 percent of Icelanders between 65 and
Unemployment has traditionally been very low, generally in the 1 to 1.5
percent range. Government efforts in recent years to reduce inflation have
resulted in an escalation of the unemployment rate, however, and it now
stands at about 3 percent.
The majority of the labor force is concentrated in the southwest region,
with Reykjavik and its surrounding areas having 55 percent of the
population. The remaining 45 percent live mainly along the coast.
Agriculture, fisheries, fish processing, and other manufacturing account for
over 50 percent of the labor force outside of Reykjavik. In the nation's
capital, 70 percent of the labor force is engaged in commerce,
communications, or other services.
Employment by industry as a percent of the total labor force is as follows:
Commerce and finance, 22; public services, 17; construction, 9; fish
processing, 8; private services, 7; communications, 7; agriculture, 6;
fisheries, 5; other manufacturing, 14; and other activities, 5.
Wages and Benefits: Salaries and wages have increased in real terms in
recent years, but with several fluctuations. Nominal wage rates rose 1,000
percent from 1987 to 1980, but when deflated by the cost-of-living index,
the real increase was from 4 to 29 percent. Due to Iceland's high inflation
rates, wages were previously linked to the cost-of-living index, but this
practice was abolished in 1983.
Wage rates vary according to the industry. Males working in fish processing
earn $5.79 per hour and females $5.99. The higher rate for women is due to
the fact that they are more often in jobs which earn bonuses. Men generally
work longer hours, however, and therefore have a higher average weekly
wage. Base pay without bonuses is $4.60 for men and $4.31 for women. Male
office workers earn $10.56 and females $7.47. Skilled male workers earn
$8.69 and skilled females $5.96.
The regular workweek is 40 hours, 8 hours a day, 5 days a week. However,
actual work time is approximately 37.5 to 38 hours a week. Overtime work is
also common, but Icelandic law ensures 10 hours of rest for every 24 hours
worked. The minimum vacation is 24 working days per year, but many workers
have 30 working days or 6 weeks.
To receive unemployment insurance allowances, a wage earner must be a member
of a trade union, have worked 425 daytime hours in the past 12 months, and
be registered as unemployed. Unemployment insurance is financed by the
employers, the municipalities, and the Icelandic Government. Allowances are
paid 5 days a week for a maximum of 180 days.
Labor Organizations: Labor unions are extremely active in Iceland and have
substantial power in negotiating wages and terms of work under the law. All
branches of work have trade unions to which most employees belong.
Private-sector trade unions are primarily affiliated with the Icelandic
Federation of Labor (ASI), which was founded in 1916 and now has over 200
divisions. Two of its largest divisions are the Federation of General
Workers Union and the Icelandic Shop and Office Workers Federation.
The biggest private sector unions outside of the ASI are the Union of
Icelandic Bank Employees and the Icelandic Federation of Merchant Navy and
Fishing Vessel Officers. Public sector employees belong to one of three
unions--the Federation of State and Municipal Employees, the Association of
University Graduates, or the Icelandic Teachers Association.
Labor negotiations usually take place between the Confederation of Icelandic
Employers and the Icelandic Federation of Labor. However, in 1988 the
Federation of Labor left each union to negotiate wages instead of having
national negotiations for a master wage plan. A compromise was not achieved
and all the unions in the National Association of Office and Store Workers
chose to strike rather than accept the new contract.
Wage disputes were rampant in 1988, which had a very negative effect on an
economy already suffering from problems in its fisheries sector. The
government finally intervened, passing a ban on further strikes and
prohibiting labor agreements which asked for higher wages and benefits than
in the contracts already negotiated. In June 1989, however, the Icelandic
Federation of Labor and the Federation of Government and Municipal Employees
held mass demonstrations against the government for allowing price increases
on necessities such as heating, fuel, and electricity, which nullified the
effect of the wage increases workers had obtained the month before.
GUIDANCE FOR BUSINESS VISITORS
Entrance Requirements: With the exception of citizens of Denmark, Finland,
Norway, and Sweden arriving from a Nordic country, foreigners entering
Iceland must have a valid passport. U.S. citizens may enter without an
Icelandic visa, provided they do not take employment or stay in the Nordic
countries for a total of more than 3 months. A visa, obtainable from
Icelandic embassies or consulates, is required for a longer stay.
Employment of foreigners in the local economy is governed by a work permit
system. The Icelandic employer must obtain a permit from the Ministry of
Social Affairs for the prospective employee. The availability of such
permits depends on the needs and levels of employment from year to year. As
a rule, there is very little demand for foreign workers.
Language, Business Hours, and Holidays: English is the language of
international commerce in Iceland. The Scandinavian languages (and to a
lesser extent German) may also be used.
Customary hours of business in Iceland are 9 a.m. to noon, and
1 p.m. to 5 p.m. Some businesses are open Saturday mornings, except in the
summer; many close an hour earlier in the summer.
The following holidays are observed by all Icelandic banks and businesses:
New Year's Day (Jan. 1)
Maundy Thursday (1991: March 28)
Good Friday (1991: March 29)
Easter Monday (1991: April 1)
First Day of Summer (1991: April 25)
International Labor Day (May 1)
Ascension Day (1991: May 9)
Whit Monday (1991: May 20)
Icelandic National Day (June 17)
Bank Holiday (August 5)
Christmas Eve (December 24, 1/2 day)
Christmas Day (December 25)
Boxing Day (December 26)
New Year's Eve (December 31, 1/2 day)
Other Information: Most hotels, restaurants, and shops honor the major
international credit cards. Local time is 2 hours behind Greenwich Mean
Time, or 4 hours ahead of U.S. Eastern Standard Time. Iceland uses the
metric system. Electric current is 220 volts, 50 cycle, single-phase, AC.
Wall sockets are the two-pronged tubular European type.
Direct dialing service from the United States to Iceland is available to
U.S. subscribers whose central offices have been integrated into the
international direct dialing system. After dialing the international access
code (011) and the country code for Iceland (354), the caller should dial
the city code and the local telephone number. The city code for Reykjavik
SOURCES OF ECONOMIC AND COMMERCIAL INFORMATION
General Information: The Department of Commerce and its district offices in
major cities throughout the United States provide assistance to U.S. firms
interested in exporting their products or services. General information
concerning the Icelandic market, including economic trends, commercial
developments, production, trade, etc., may be obtained from the Iceland
Desk, Office of Western Europe, Room 3043, U.S. Department of Commerce,
Washington, DC 20230, (202) 377-3254, or from any of the Department's
The American Embassy in Iceland is at Laufasvegur 21, Reykjavik. Mail from
the United States may be sent with American postage to American Embassy
Reykjavik, FPO NY 09571-0001. The telephone number is 354-1-29100, and the
telefax number is 354-1-29139. An economic/commercial officer is available
to assist U.S. business visitors to Iceland.
A booklet entitled Key Officers of Foreign Service Posts, Guide for Business
Representatives, available from the U.S. Government Printing Office, lists
key officers for U.S. embassies and missions throughout the world.
Iceland's Embassy in Washington and Consulate in New York primarily serve
the interests of Icelandic exporters to the United States. Their addresses
and telephone numbers follow in the Useful Names and Addresses section.
Other U.S. agencies which provide services for American exporters are the
National Institute of Standards and Technology (NIST, Building W1, A629,
Gaithersburg, MD 20899, 301-975-4040); the Foreign Agricultural Service's
High-Value Products Division (Room 4951 South Building, 14th St. &
Independence Ave., SW., Washington, DC 20250, 202-475-6343); and the
National Marine Fisheries Service, Room 26249, Metro Building 1, 1335 East
West Highway, Silver Spring, MD 20910, 301-427-2379.
Information on Icelandic standards is also available from the American
National Standards Institute (ANSI), 1430 Broadway, New York, NY 10018,
Publications on Iceland: The following publications are available for
reference at the U.S. Department of Commerce's Iceland Desk. They are in
English except as noted.
Icelandic Government Publications
Economic Statistics (Quarterly): Financial, economic, and commercial
The Economy of Iceland (Annual): Overview of Iceland's economy, plus data
on national expenditures, foreign trade, public finance, prices, etc.
[Central Bank of Iceland]
Verslunarskyrslur Arid/External Trade (Annual): Trade statistics, commodity
by country, 6-digit HS level with some summary tables. Product descriptions
in English. [Statistical Bureau of Iceland]
Other Icelandic Publications
Heildverslanner/Wholesalers (1988): List of Importers, exporters, and
distributors. [Federation of Icelandic Wholesalers]
Iceland Review (Quarterly): General interest articles on Iceland. [Iceland
Iceland Yearbook of Trade & Industry (Annual): Articles on Icelandic
Industry, including trade statistic and comprehensive list of businesses,
organizations, and government agencies concerned with production and trade.
Modern Iceland (Quarterly): Articles on trade, industry, and
transportation, published in collaboration with Icelandic companies and
associations. [Forskot Publishing Co.]
News From Iceland (Monthly): General articles on Iceland, including
economic and commercial news, topical items, and cultural affairs. [Iceland
Profiles of Icelandic Companies (1988): Short descriptions of Icelandic
firms, including products and services, size, and date founded. [Federation
of Icelandic Industries]
Nordisk Handels Kalender (Annual): Names, addresses, and telephone numbers
of firms in five Nordic countries, listed by industry or product area.
English index. [Scan-Inform A/S]
OECD Economic Surveys/Iceland (Annual): Review of recent trends and short-
to medium-term outlook for the Icelandic economy, including statistical
annex. [Organisation for Economic Co-operation and Development, Paris]
USEFUL NAMES AND ADDRESSES
Addresses for organizations mentioned in this report and others which may be
of interest to U.S. businesses are listed below.
Advertising and Media
Newspapers & Magazines:
Frjalst Framtak Ltd.
Radio & Television:
Stod 2 Television Station
Bylgjan/Stjarnan Radio Station
Adalstodin Radio Station
Agricultural Bank of Iceland
Central Bank of Iceland
of Iceland Ltd.
P.O. Box 130
Engineering Savings Bank
Fisheries Bank of
Icelandic Savings Bank Assn.
Industrial Bank of Iceland
Natl. Bank of Iceland
Savings Bank of Reykjavik
In the United States
437 Madison Avenue
New York, NY 10022
Scandinavian Bank Limited
600 Wilshire Blvd.
Los Angeles, CA 90017
Embassies and Consulates
Embassy of Iceland
2022 Connecticut Ave., NW
Washington, DC 20008
Consulate General of Iceland
370 Lexington Avenue
New York, NY 10017
Ministry of Agriculture
Ministry of Communications
Ministry of Culture
Ministry of the Environment
Ministry of Finance
Ministry of Fisheries
Ministry of Foreign Affairs
Ministry of Health
& Social Security
Ministry of Industry
Ministry of Justice &
Office of the Prime Minister
Government Agencies, Other
Agricultural Research Institute
Directorate of Civil Aviation
Directorate of Shipping
Govt. Vehicles Inspectorate
Office of the Chief Magistrate
Trade Mark Secretary
Ministry of Industry
State Directorate of Shipping
State Electrical Inspectorate
State Fire Inspectorate
State Printing Works
Statistical Bureau of Iceland
State Purchasing Offices
Government Purchasing Dept.
National Power Company
Reykjavik Purchasing Center
Post & Telecommunications Admin.
State Fertilizer Plant
Wine Spirit & Tobacco Authority
Iceland Steamship Co., Ltd.
Iceland Tourist Board
655 Third Avenue
New York, NY 10017
P.O. Box 290
Trade and Professional Associations
Agricultural Society of Iceland
Assn. of Fish Farmers
Assn. of Trawler Operators
Assn. of Woollens Manufacturers
Dairy Produce Marketing Assn.
Fed. of Icelandic
Fishing Vessel Owners
Freezing Plants Corp.
Icelandic Assn. of
Fish Meal Manufacturers
Wholesale, Retail, Importers
& Other General Business Assns.
Assn. of Icelandic
& Wholesale Merchants
Export Board of
Export Council of Iceland
Iceland Chamber of Commerce
Chamber of Commerce
370 Lexington Ave., Suite 505
New York, NY 10017
Icelandic Management Assn.
Samband of Iceland
(Federation of Icelandic
This file extracted from Dept. of Commerce National Trade Data Bank (NTDB)
CD-ROM SuDoc No. C 1.88:993/12. Processed 12/01/1994 by software developed
by RCM (UM-St. Louis Libraries) / OBR_0022