AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS

between the European Community, of the one part, and the Republic of Iceland, of the other part, on Protocol 2 to the Agreement between the European Economic Community and the Republic of Iceland

A. Letter from the Community

Brussels, 15 July 1999

Sir,

I have the honour to confirm the agreement of the European Community to the "Agreed Minutes" annexed hereto concerning Protocol 2 to the Agreement between the European Economic Community and the Republic of Iceland.

I should be grateful if you would confirm the agreement of the Government of the Republic of Iceland with the content of this letter.

Please accept, Sir, the assurance of my highest consideration.

For the European Community

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B. Letter from Iceland

Brussels, 15 July 1999

Sir,

I have the honour to acknowledge receipt of your letter of today worded as follows: "I have the honour to confirm the agreement of the European Community to the 'Agreed Minutes' annexed hereto concerning Protocol 2 to the Agreement between the European Economic Community and the Republic of Iceland

I should be grateful if you would confirm the agreement of the Government of the Republic of Iceland with the content of this letter."

I have the honour to confirm the agreement of my Government with the content of your letter and to the date proposed for the entry into force of the adjustments.

Please accept, Sir, the assurance of my highest consideration.

For the Government of the Republic of Iceland

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AGREED MINUTES

I. INTRODUCTION

1) Following a number of meeting held between officials from the Commission of the EC and Iceland it was agreed to submit to their respective authorities for approval a series of adjustments to the import regimes applied respectively by the Community and Iceland for processed agricultural products falling within the scope of Protocol 2 to the 1972 Free Trade Agreement.

These adjustments should enter into force on August 1999.

2) Both parties agreed that implementation of the Uruguay Round Settlement by both sides required an adaptation of the duties applied in bilateral trade between the Community and Iceland. To this end it was agreed to apply the duties set out below.

3) Both parties agreed to examine on a regular basis the functioning of this Agreement and the possibility of improving it.

II. ICELANDIC IMPORT REGIME

The duties (ISK/kg) applicable to the processed agricultural products covered by Protocol 2 of the Agreement are as follows:

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III. COMMUNITY IMPORT REGIME

1) The following basic amounts shall be used for the calculation of the agricultural components and the additional duties:

- Cereals (common wheat, durum wheat, rye, barley and maize): EUR 7,817/100 kg

- Long grain husked rice: EUR 28,910/100 kg

- Whole milk powder: EUR 142,660/100 kg

- Skimmed-milk powder: EUR 118,800/100 kg

- Butter: EUR 207,333/100 kg

- Sugar: EUR 43,675/100 kg

2) The basic amounts laid down in point 1 may not be higher than those applied to third countries.

3) Annual quotas of 300, 400 and 500 tonnes will be opened by the Community respectively for 1999, 2000 and 2001 and the following years, for imports of:

- sugar confectionery products (including white chocolate) not containing cocoa falling within CN code 1704 90

and

- chocolate and other food preparations containing cocoa falling within CN codes 1806 32, 1806 90 and 1905 30.

The duties applicable to this quota will be the erga omnes duties reduced by 50 % with a maximum of EUR 35,15/100 kg.

IV. SPIRITS

Both parties agreed to apply a duty free regime from the entry into force of this Agreement for goods falling within CN codes 2208 50, 2208 60 and 2208 90.