Textile Trade Guide for the China-Iceland Free Trade Zone

On July 1, 2014, the China-Iceland Free Trade Agreement (hereinafter referred to as the “Agreement”) was officially implemented.
​Tax reduction model
According to the provisions of the agreement, Iceland will implement zero tariffs on all industrial products and aquatic products imported from China from the date of entry into force of the agreement. These products account for 99.77% of China’s total exports to Iceland; at the same time, China will impose zero tariffs on all industrial products and aquatic products imported from China. 7,830 products with tax codes imported from Iceland are subject to zero tariffs. These products account for 81.56% of China’s total imports from Iceland, including aquatic products that are abundant in Iceland. The products that both parties finally achieved zero tariffs (the maximum tax reduction transition period is 10 years) are close to 96% in terms of the number of tax items, and close to 100% in terms of trade volume.
China’s tariff concessions for products originating in Iceland are divided into four forms: the first is Category A, where tariffs will be eliminated after the agreement comes into effect; the second is Category B, which has a 5-year transition period and tariffs in the 6th year after the agreement comes into effect. The third category is Category C, which has a 10-year transition period, and the tariff will be reduced to zero in the 11th year after the agreement takes effect; the fourth category is Category D, which has no tax reduction.
Iceland’s tariff concessions for Chinese-origin products are mainly divided into two forms: the first is Category A, which will cancel tariffs after the agreement takes effect; the second is Category D, which does not reduce taxes and is applicable to most-favored nation preferential tariffs and is levied. Ad valorem and specific compound tariffs stipulate the amount of Icelandic krona collected per kilogram (per piece) of ad valorem and specific taxes, but the tax rate does not exceed 65% of the unit price per kilogram.
​Detailed rules for tariff reductions on originating textiles
In the agreement, China has included Iceland’s 15 8-digit tax code products (mainly wool and products) originating textiles in Category D, without tax reduction, while all other products have been included in Category A. After the agreement comes into effect, all tariffs will be reduced to zero.
According to the agreement, Iceland has classified all textiles and clothing originating from China into Category A, which means that they will enjoy zero tariff treatment after the agreement comes into effect.
​Rules of Origin
The rules of origin of the China-Iceland Free Trade Zone are also divided into two types: fully acquired products and incompletely acquired products. Simply put, fully obtained products refer to products obtained in the territory of a contracting party or processed and produced using self-produced raw materials. Incompletely obtained products refer to products processed and produced in the territory of a contracting party using non-originating materials. Partially acquired products are subject to specific rules of origin. Annex 4 of the Agreement stipulates applicable special standards for each tax code product, which are divided into changes in tariff classification, regional value content, process requirements and other requirements.
Products under headings 5101~5105 in Chapter 51 (main types of wool and wool raw materials) must be fully obtained, and the incomplete acquisition standard does not apply.
For other products using non-original materials, Chapters 50 to 60 are required to meet the tariff classification change standards after substantial processing. Products under Chapters 61 to 63 are required to have a regional value content that cannot be less than 40% of the product’s port delivery price.
Question: What documents are required to apply for zero-tariff treatment?
Answer: When handling import customs clearance, the China-Iceland Free Trade Zone Certificate of Origin (formI) issued by the exporting party’s licensing authority or the declaration of origin issued by a qualified exporter should be provided to the importing party’s customs. The Chinese issuing units are the branches of the General Administration of Quality Supervision, Inspection and Quarantine, and the Icelandic side is the Customs Bureau.
Question: What are the special requirements for cargo transportation in the China-Iceland Free Trade Zone?
Answer: The agreement stipulates that only goods transported directly between the two parties can enjoy preferential tariff rates. If the goods are transported through a non-Party Party, certification documents issued by the customs office of the non-Party Party through which the goods pass, or other certification documents recognized by the customs office of the importing Party, shall be submitted to the customs office of the importing Party to prove that the goods have not entered the trade or consumption field in the territory of the non-Party Party. , and except for unloading, transloading, logistics separation or necessary processing to keep the goods in good condition, the goods have not been processed or otherwise handled, and the goods are under customs supervision during their domestic transshipment.