WORLD TRADE  
ORGANIZATION  WT/REG136/5 
27 August 2004 
 
 (04-3574) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN CHILE AND COSTA RICA 
 
Questions and Replies
 
   
 The following communication, dated 16 August 2004,  is being circulated at the request of the 
Delegation of Costa Rica.   This document reproduces the questions addressed  to the Parties and the responses submitted. 
The questions and replies set out below are or ganized in accordance with document WT/REG136/3 
(Goods aspects) and WT/REG136/4 (Services aspects). 
 
_______________ 
 
GOODS ASPECT
 
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT  
 3. Scope   
 In accordance with the Agreement’s Tari ff Elimination Program, both parties’ 
schedules for eliminating tariffs on the produc ts of the other are contained in Annex 3.04. 
  While many products in the parties’ schedul es were duty-free as of January 1, 2004, the 
phase-out of tariffs on certain other products  will take place over 12 years (with duty-free 
treatment for these products beginning January 1, 2011) or 16 years (with duty-free treatment 
for these products beginning January 1, 2015). 
  Seemingly slow phase-out of certain tariffs
. Although Costa Rica maintains relatively 
low tariffs (just under 5%) on fresh, chilled or froz en beef from Chile, it will not begin to phase 
out these tariffs until January 1, 2006 and will not complete this phase-out until January 1, 
2011. Such beef is subject to tari ff-rate quotas until January 1, 2008. 
 1. Why are tariffs on these products subject to such a lengthy phase-out when they are not 
very high to begin with? 
 Indeed, Costa Rica and Chile have lower tari ffs for beef. The long-term tariff elimination 
responds to the sensibilities from both parties at the time of the negotiation. Nevertheless, with the 
aim to encourage trade between these products, both pa rties agreed to a recipr ocal preferential quota
. 
This reciprocal preferential quota  will begin in the year 2006 and it will arrive to tariff zero the year 
2011.   WT/REG136/5 
Page 2  
 
  Excluded products
. The countries agreed to completely exclude one category of products 
(Category EXCL) from the Tariff Elimination Program; as a result, they may maintain duties on such products from each other.   These products include certain poultry me at, dairy products, fresh or preserved 
vegetables, wheat, fats and oils, prepared meat products, sugar, processed wood, and office 
furniture.  2. What was the parties’ rationale for excluding  significant numbers of products from the 
Tariff Elimination Program? 
 Both Countries excluded products, which have a particular economic and social sensibility. 
Exclusion was considered the best manner to attend such  sensibilities at the time of the negotiation.    
  In any event, the exclusions are not at a ll significant, since both countries only excluded a 
reduced number of products of the tariff elimination, those that represent for both less than 4% of the 
total of products. 
 
3. Under this agreement, do the parties have any plans to identify tariff lines for these 
excluded goods for future for tariff eliminatio n, and if so, when and for what products? 
 To this date the parties do not have any plan  to identify tariff lines in such a way that the 
excluded products are including in the near future in the programs of tariff elimination. However, the 
Free Trade Commission is empowered to address at any time, a petition of inclusion submitted by 
either Party.   
 Price Bands: Article 3.04/Annex 3.04(6)
. The FTA allows Chile to maintain its price 
band system—in which a higher-than-normal may be applied if the price of a product falls 
below a certain price floor—to imports of the following products from Costa Rica: certain 
wheat, meslin and flour, certain oilseed and vegetable oils, and certain sugar.  4. Since this FTA has been in effect, has Ch ile’s price band system ever required the 
application of higher-than-normal tariffs to any of the above products from Costa Rica? If so, 
on how many occasions has this happened? What products were involved? What was the 
duration of the application of higher-than-normal tariffs?  
 Since the agreement enters into force, Chile has not applied the price band system to Costa 
Rica, due to the fact that there were no imports on the products affected by the system from Costa Rica.   5. What is Chile’s rationale for maintaining a price band system to the products of a 
relatively small country like Costa Rica? What is  Chile’s rationale for agreeing in the FTA that 
no other products may be added to the price band system? Why are the above products subject 
to this extra protection while others may not be? 
 The price band system in Chile is applicable by law, which establishes that the system shall 
apply to a small list of products without discrimina tion by origin. This makes it impossible to exempt 
a country from the price band system. Chile maintain s its commitment not to include new products in 
the system.    WT/REG136/5 
 Page 3 
 
 
 II. TRADE-RELATED PROVISIONS 
1. Import restrictions  
 2. Export restrictions   
 Import and Export Restrictions: Article 3.10/Annex 3.10 (6).
  The FTA allows each 
party to adopt or maintain restrictions on certai n imports from, or exports to, the other party: 
 Chile (imports):  used vehicles  
Costa Rica (imports): the importation, refining and wholesale distribution of crude oil, its 
derived fuels, asphalts and naphthas, as it relates to the government monopoly over such products; retreated  or used automobile tires; used 
sacks, bags and other containers; used  textiles and clothing; certain used 
motor vehicles and components thereof 
 
Costa Rica (exports): logs and square-sawn lumber from forests; hydrocarbons  6. What is each party’s rationale form mainta ining, or reserving the right to adopt, any 
measure that restricts these imports from or exports to the other party? 
 In the case of Chile, the measure on prohib ition of importing used vehicles is based on 
environmental reasons, and as such it has been previously notified. Ch ile, particularly the 
Metropolitan Region in particular, suffers from a hi gh level of environmental pollution, one of the 
most important sources is the automobile.  Chile main tains this prohibition to constantly renovate the 
automobile market as part of a bigger plan to main tain the levels of contamination under control. 
 
 Restrictions on imports and exports establishe d under article 3.10/Annex 3.10(6) are included 
in the FTA due to two fundamental reasons:  i)  The existence of State owned monopolies under the 
Parties domestic law which provides for restric tions regarding the commercialization of such 
products; and ii) Although many of those restri ctions are directly applicable under the WTO 
disciplines, Costa Rica prefers to e xpressly state them into the provisions of the FTA for the benefit of 
transparency between bilateral trade partners. 
 
7. What measures do the parties currently main tain regarding this type of import 
restriction? 
 The measures related to import restrictions de pend on the specific domes tic regulation of the 
product subjected to such restrictions.  For exampl e, in the case of used me rchandise, such as used 
cars or used clothes, specific sanitary regulations n eed to be met.  In other cases, the prohibition of 
importing a given product is absolute; such as it is in the case of slashed wood.  
8. Do the parties have any plans to identify tariff lines for these items for elimination of 
these restrictive measures in the future? If so, when will this identification process begin? What 
products are likely to be candidates for such identification? 
 Up to date the parties do not have any plan to identify tariff lines in such  a way that restrictive 
measures, established under article 3.10/Annex 3.10(6)
, are eliminating in the future.   WT/REG136/5 
Page 4  
 
 2.1 Duties and Charges 
 
 Export Taxes: Article 3.14/Annex 3.14
. Generally, neither party may adopt or maintain 
any duty, tax or other charge on the export of any good to the other pa rty unless it also applies 
to the same good when destined for domestic co nsumption. However, this FTA discipline does 
not apply to Costa Rica with respect to bananas, coffee, beef or live cattle. 
 9. What is Costa Rica’s rationale for not applyi ng the FTA’s discipline on export taxes to 
bananas, coffee, beef or live cattl e (or are the taxes applied at Chile’s request)? What is the level 
of Costa Rica’s export tax on these items? Ar e there market price or other circumstances under 
which the export tax is not applied, or which affect the rate of the export tax?  
10. Does Costa Rica have any plans to subject any export taxes on the above excluded items 
to the FTA’s disciplines on export taxes? 
 The export taxes that Costa Rica applies on ba nanas, coffee and beef are not applied at 
Chile’s request.  Those export taxes represent very si gnificant revenues which have historically play a 
key roll in the constitution and operations of three or ganizations:  the Costa Rican Institute of Coffee 
(ICAFE); the National Banana Corporation (CORB ANA) and; the Corporation for Cattle Promotion 
(CORFOGA).  Thanks to those organizations, tho se sectors are institutionally organized to develop 
programs to guaranty the quality of the exported product, to perform scientific research and to allow 
the introduction of the latest technology related to each sector. 
 
 Due to the fact that the aforementioned organi zations depend at a large extent on those export 
taxes, and considering the lack of other financial alternatives, the Government has not intention to 
eliminate them.           Those export taxes are generally applied, not being affected by any circumstance related to 
the market.  
 
11. Does either party currently maintain any duties,  taxes or other charges on products for 
both export and domestic consumption? Are they  imposed by the same agency or department, 
and in exactly the same manner? 
 Costa Rica’s tax system does require the sam e internal taxes to domestic consumption 
products that it requires to products, which are dir ected to international ma rkets, except for products 
elaborated under special tax regimes, such as duty free zones.    
12. Does the FTA require any such duties, taxes or other charges to be imposed at exactly 
the same level for exports as  for domestic consumption? 
 Yes, this obligation is est ablished under article 3.14. 
 
3. Rules Of Origin 
  Instruments of Application and Interpretation: Article 4.02
. The FTA states that two 
years after it enters into force for all parties (Chile and the Central American countries), the 
parties will begin examining the possibility that materials of Chilean origin can be accumulated 
for the purpose of complying with the rules of or igin that apply in trade between the Central 
American countries. 
 
13. Has this FTA entered into force for all parti es? If so, has this issue been addressed?  WT/REG136/5 
 Page 5 
 
 
  The Free Trade Agreement between Costa Rica and Chile enter into force from 14 February 
2002 and with El Salvador from 1 June 2002. The FTA between Chile and the rest of the member 
countries have not yet entered into force.  
14. May materials of Chilean origin now be a ccumulated for purposes of trade between the 
Central American countries? If so, for long has ac cumulation been available, and is it available 
for all Chilean inputs? If not, what has prev ented the countries from agreeing on a mechanism 
for accumulation for such trade? 
 Paragraph 5 of article 4.02 says that: “Two year s after this Agreement comes into force for all 
the Parties, they shall establish a programme of wo rk to examine the possib ility that materials of 
Chilean origin can be accumulated for the purpose of complying with the rules of origin in effect 
among the Central American countries. This sh all apply provided the end good into which the 
materials are incorporated is subject to free trad e between Chile and each Central American country 
and among the latter”.  
 It can be said by the letter of this article, th at the first condition for the accumulation of origin 
has not been fulfills yet. The FTA has only enter in to force for Costa Rica and El Salvador, for this 
reason the article is not applicable until the rest of  countries ratified the agreement. The parties have  
not address this topic.   
 Customs Procedures 
 
 Exceptions from Certificate of Origin Requirements: Article 5.05
. Although the FTA 
generally provides for the use of certificates of origin, it also states that a party may not require a certificate of origin for the importation of a pr oduct from the other party if the product is one 
for which the importing party has waived the requirement for a certificate of origin. 
 
15. For what products has each party waived the requirement for a certificate of origin? 
 Costa Rica has not waived the requirement fo r a Certificate of Origin for any imported 
product from Chile as provided in artic le 5.05 paragraph c).  However, th e Certificate of Origin is not 
required when the conditions established in article  5.05 paragraphs a) and b) are met (namely the 
custom value of the imported goods is less than US$ 1000).              
 
16. For each such product, what is the rationale for waiving such a requirement? 
 Costa Rica has not waived the requirement of  the Certificate of Origin for any imported 
product from Chile in accordance to the provisions of article 5.05 paragraph c).    17. In each case, is an importer still required to substantiate its claim for preferential tariff 
treatment based on the product’s origin? If so, how does the importer substantiate that claim, 
without the use of a certificate of origin? 
 In the case of article 5.05 paragraphs a) and b) although the Certificate of Origin is not 
required, the importer is entitled to the prefer ential tariff negotiated under the FTA. A commercial 
invoice stating the origin of the merchandise is required.        
 
5. Safeguards  
  Global Emergency Actions: Article 6.03. 
The FTA requires each party imposing global 
emergency actions consistent with WTO disciplines to exclude imports of subject products from  
the other party unless imports of that product from  the other party (1) account for a substantial WT/REG136/5 
Page 6  
 
 share of total imports and (2) contribute impo rtantly to the serious injury to a domestic 
industry.   18. Other than the other party being among the top five suppliers of the product, what 
factors would cause the other party to be consider ed the supplier of a “substantial share” of the 
total imports of the product? 
 The Agreement doesn't define the factors that would determine that the imports from the other 
Party would be considered representative of a substan tial participation in the total imports, even when 
the other Party is not one of the five main supplie rs of a given product subject to the procedure. In 
consequence, usually in this case the imports won't be considered in such a category, unless in opinion 
of the investigating authority of the Party special or  particular circumstances exist that gives merit to 
it.   
19. Could a party by ranked among the top five s uppliers of the product and still not be the 
source of a substantial share of total imports? 
 The Agreement determines that if the growth rate of imports from a Party during the period in 
which the injurious surge in imports occurred is a ppreciably lower than the growth rate of total 
imports from all sources over the same period, this Pa rt even when it is a substantial part of the total 
imports, to be one of the main five suppliers, it w on't usually be considered as important source of the 
serious damage or it threatens to cause damage. In th is case, the Party exporter won't be affected by 
the measure 
 
6. Anti-dumping and countervailing measures 
   Future Work Program: Article 7.02
.  The FTA provides that two years after it comes 
into force for all parties, the parties will establis h a work program to examine the possibility of 
introducing reforms to mechanisms for unfair trad ing practices to prevent them from becoming 
concealed barriers to trade. 
 
20. Have the parties established a work program  for reforming unfair trading practices 
mechanisms? 
 The work program referred to in article 7.02 has not been established since the Treaty has not 
entered into force for all parties yet.   However,  it does not prevent Costa Rica and Chile to start 
conversation towards the establishment of such pr ogram, if it is consider convenient.    
 
21. What reforms have been recommended or proposed? 
 The work program referred to in ar ticle 7.02 has not been established yet. 
 
22. Is there a timeframe for implementing any changes? Are private companies—
particularly foreign-owned companies—involved in the work program? 
 The work program referred to in ar ticle 7.02 has not been established yet. 
  IV. OTHER   Geographical Indications
: Article 3.12. Each party recognizes and protects the 
geographical indications and appellations of origin of the other party. 
  WT/REG136/5 
 Page 7 
 
 
 23. Will each party provide a complete list of pro ducts of other party that it recognizes and 
protects under Article 3.12? 
 In accordance to article 3.12 paragraph 3,  each Party shall notify the other Party the 
geographical indications that should be  considered subject to protection. 
 
 The protection will only be given to those produc ts with geographical indications protected in 
the other Party that have been elaborated and certifie d in that Party in conformity with its applicable 
legislation to that product.  
24. Does either party not recognize or protect any products of the other party that meet the 
definition of Article 22(1) of the TRIPS Agreement? 
 As provided in article 3.12 paragraph 3, th e parties recognize a geographical indication 
protected under their domestic legislation provi ded that its definition matches the definition 
established under article 22 (1) of the TRIPS Agreem ent. None of the geographical indication notified 
has been rejected under this agreement.  
 
25. Does this FTA call for any dialogue between th e parties for the purpose of modifying the 
list of products each recognizes and protects under Article 3.12? 
 The FTA provides a framework for the parties to engage in conversations oriented to modify 
the list of products that is recognized by each Pa rty as protected under article 3.12 of the FTA.   
 
 Competition Policy 
  Monopolies and State Enterprises: Article 15.02.
  The FTA does not prevent a party 
from designating a monopoly (i.e., a sole pr ovider or purchaser of a good or service) under its 
own law. 
 
26. What monopolies has each party designated, and how much trade between the parties is 
affected by each monopoly? What is the rational e of each party for designating such monopoly? 
 Since the Chile - Costa Rica FTA enter into fo rce, Chile has not designated any monopoly.  In 
the event of considering the possibility to d esignate a monopoly, the authority will have in 
consideration, as central element, the public interest. 
 
 Costa Rica has not designated any monopoly under the Costa Rica-Chile FTA.  In such a case Costa Rica shall consider that, by Constitution, private monopolies as well  as any act, even if 
originated by virtue of law, which may threaten or restrict freedom of trade, agriculture or industry, 
are prohibited.  In that sense, only State monopolies may be designated. 
 
 Government Procurement 
  Covered Entities: Annex 16.01.
  This Annex to the FTA lists 14 Chilean entities and 13 
Costa Rican entities that are covered by these disciplines. 
 
27. For the most recent fiscal year, what percentage  of the value of all government contracts 
are subject to the disciplines in this FTA? 
 The entities listed in the Annex 16.01, contrarily to that pointed out in the question, are those 
excepted entities in the Government Procurement Chapter.    WT/REG136/5 
Page 8  
 
  Exact figures don't exist, these vary according to  the definition of what is considered public 
entities, as well as to the definition of procurement  under the scope of application of the chapter.  
However, the estimate of the total government pr ocurement for the Chilean Government is around 7 
billion dollars.   
 In the case of Costa Rica, data and other statisti c information is not available to answer this 
question.   
SERVICES ASPECT
 
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT  
 3. Scope  
 
 In the Communication from the Parti es (WT/REG136/4), the structure of the 
reservations to the articles on national trea tment, MFN treatment, and local presence is 
explained.  This structure indicates a separation of reservations into two categories: reservations for measures presently in existence are listed in Annex I, whereas reservations for 
possible future measures are listed in Annex II.  With respect to Annex II, both Costa Rica and 
Chile list several important sectors, including telecommunications, education, construction, 
energy, and environmental services.  These secto rs are among the most critical to a strong 
infrastructure that can support economic development.  Since it would seem that Annex II reservations essentially carve out certain activiti es from coverage under the agreement, could 
the parties explain further the nature of these re servations and what their practical effect is on 
the meaningfulness of the agreement?  Why wa s it considered necessary to exclude such 
important activities? 
 
 Indeed, as you point out, the structure of the agreement between Chile and Costa Rica allows 
for reservations for existing non-conforming measures (Annex I) and future measures (Annex II).  In 
fact, both countries have very few reservations under Annex II.  In the case of Chile, seven sectors are 
involved:  minorities, indigenous populations, basi c telecommunications services, education services, 
environmental services, construction, and activities re lating to fishing;  in the case of Costa Rica, 
there are nine sectors:  petroleum, minorities, alcohol production, telecommunications, electricity, railway, berth and airport services, and natural re sources.  The coverage of these non-conforming 
measures is determined by the description of the me asures that may be adopted, which reduces their 
scope of application.  At the same time, they ar e sectors for which most countries make reservations 
in their trade agreements.  In fact, if we were to  analyse regional agreements prior to this one (and 
which were used as models) we would find that a number of these sectors were subject to reservations, in addition to other sectors whic h are not listed by Chile and Costa Rica. 
  In order to clarify the scope of the reservations  made by Chile and Cost a Rica in Annex II, we 
note that they only limit "cross-border" trade in ser vices, i.e. modes 1, 2 and 4 of the GATS.  As 
regards investment in services (mode 3), the ag reement between Chile and Costa Rica on the 
promotion and protection of investme nt, under which each party undertakes, inter alia , to protect 
within its territory investments made in conformity with its laws and regulations by investors from the 
other party, remains fully in force. 
 
__________