WORLD TRADE
ORGANIZATIONWT/REG136/3
31 October 2003
(03-5795)
Committee on Regional Trade Agreements Original:  Spanish
FREE TRADE AGREEMENT BETWEEN CHILE AND COSTA RICA
GOODS ASPECTS
Communication from the Parties
I. BACKGROUND INFORMATION ON THE AGREEMENT
During the Second Summit of the Americas held in Santiago de Chile in April 1998, the
Presidents of Costa Rica, El Salvador, Guatemal a, Honduras, Nicaragua and Chile agreed on the need
to strengthen trade relations among their countries inter alia  through a trade agreement.
The government representatives of the Central American countries and Chile accordingly
decided on an organizational framework for the negotiation of a free-trade agreement.  The
framework provided that the legal aspects of the agreement would be jointly negotiated between the
Central American countries and Chile but that its provisions would apply, on a bilateral basis,
between Chile and each individual Central American country.  As regards market access, it was
decided that both the tariff elimination programme and the specific rules of origin would benegotiated bilaterally between each Central American country and Chile.
The Free Trade Agreement between Central America and Chile is divided into seven parts,
sub-divided into 21 chapters:  initial provisions, general definitions, national treatment and market
access for goods, rules of origin, customs procedures, emergency action, unfair trading practices,
sanitary and phytosanitary measures, standards-related measures, metrology and approval procedures,
investment, cross-border trade in services, air transportation, telecommunications, temporary entry forbusiness persons, competition policy, government procurement, transparency, administration of the
Agreement, dispute settlement, exceptions and final provisions.
The Bilateral Protocol to the Agreement conc luded between the Republics of Costa Rica and
Chile contains Annexes pertaining to the tariff elimination programme;  export subsidies onagricultural goods;  specific rules of origin;  a nd matters relating to cross-border trade in services.
1. Membership and dates of signature, ratification and entry into force
The Free Trade Agreement between Central America and Chile and its Bilateral Protocol
signed between the Republics of Costa Rica and Chile form an accord that applies bilaterally betweenCosta Rica and Chile.  Both the Agreement and its Protocol were signed on 18 October 1999.
In Costa Rica, the Agreement is contained in Law No. 8055 of 7 December 2000, published
in the Official Journal La Gaceta  No. 42 of Wednesday, 28 February 2001.
In Chile, the Agreement was enacted by Supreme Decree No. 14, published in the Official
Journal of 14 February 2002.WT/REG136/3
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On 15 January 2002, the Parties exchanged their instruments of ratification certifying the
completion of legal procedures and formalities.  In accordance with its Article 21.03, the Agreement
officially entered into force on 15 February 2002, i.e. 30 days after the exchange of instruments.
2. Type of agreement
In Article 1.01 of the Agreement, the Parties lay the groundwork for establishing and
implementing a free-trade area in conformity w ith Article XXIV of the GATT 1994 and Article V of
the GATS.
3. Scope
The scope of the Agreement extends to trade in goods between each of the Central American
countries and Chile.  The Parties agree to afford national treatment to products originating in the otherParty, in accordance with Article III of the GATT 1994, to which no exceptions are provided.
Each Party undertakes to eliminate customs duties pursuant to the provisions of
Annex 3.04(2) (Tariff Elimination Programme).  In  the case of the bilateral negotiations between
Costa Rica and Chile, the goods are listed in six different staging categories.  Each tariff line underthe Harmonized System for the classification of goods is assigned a category specifying the timetable
and conditions for bringing down customs duties to zero per cent.
Category Tariff elimination schedule
A Immediate elimination upon entry into force of the Agreement
B Phasing out over a period of five years from the date of signature
C Phasing out over a period of 12 years from the date of signature
D Phasing out over a period of 16 years from the date of signature
TC Special treatment/beef
(phasing-out programme extending from 2006 to 2011, with a quota during the
participation period)
TP Special treatment/petroleum products
(applies only to Chile)
As regards Chilean market access for Costa Rican products, the Agreement provides for
immediate, duty free entry into Chile of practically all products (95 per cent) in Costa Rica's Customs
Tariff.  There are, however, certain exceptions to the general principle of symmetry.  A framework for
reciprocity in market access conditions was established for products for which Costa Rica granted
Chile a 16-year phasing-out period (Category D) for the entry of Chilean products.  This concerns
pork and salt, for example.  Lastly, there are specific provisions governing access for some petroleum
products.  Excluded products represent around 3.8 per cent of Chile's tariff lines.
As to Costa Rican market access for Chilean products, 73 per cent are provided immediate
access and the rest is subject to the staging categories in the Tariff Elimination Programme.
Approximately 48 per cent of Costa Rica's tariff lines enjoyed most-favoured-nation duty-free
treatment at the time of the Agreement's entry into force.  Hence Costa Rica granted Chile immediateWT/REG136/3
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access for those tariff lines.  Chile was also accorded immediate access for products not produced by
Costa Rica and of substantial interest to Chile, which represent around 25.5 per cent of tariff lines.
It should be noted that 9 per cent of Costa Rica's tariff lines are in Category B (phasing-out
over five years), 12.8 per cent in Category C (phasi ng-out over 12 years),  0.9 per cent in Category D
(16 years) and 0.1 per cent in Category TC (special treatment/beef);  3.8 per cent of tariff lines are
excluded from the reduction programme.  In the cas e of Chile, all categories combined (other than
that providing for immediate elimination) represent 1.6 per cent of tariff lines.
Percentage of Tariff Lines
by Staging Category
Category Costa Rica Chile
A 73.4% 94.6%
B 9.0% 0.3%
C 12.8% 0.2%
D 0.9% 0.7%
TC 0.1% 0.1%
TP 0.0% 0.3%
Excluded 3.8% 3.8%
TOTAL 100.0% 100.0%
Both countries agreed to exclude ten types of product from the tariff elimination programme
on account of sensitivities in their production sectors.  Chile excluded goods imports of which were
subject to the price band mechanism, i.e. wheat, wheat flour, edible oils and sugar.  Costa Rica
excluded potatoes, beans, onions, chicken meat and sausages, dairy products, most vegetables, and the
forestry sector (wood and wooden furniture).  It wa s agreed that the exclusions would be common to
both Parties, so each Party's Schedule excludes ten types of product in all.
As regards trade data in relation to the tariff elimination or liberalization process, it has been
determined that over 80 per cent of the total amount of trade between Costa Rica and Chile will be
liberalized within a period of five years following the signing of the Agreement, taking the tradefigures for 1999, when the negotiations were completed.  This is shown in the table and charts below.WT/REG136/3
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Free Trade Agreement (FTA) between Costa Rica and Chile
Bilateral Trade According to Market Access Under the FTA
1999
Category US$ Share (%)
Chilean market access for Costa Rican exports
Immediate free trade 7,153,186 44.2%
5 years 8,924,894 55.2%
16 years 2,891 0.0%
Special treatment/petroleum products 47,064 0.3%
Excluded 50,125 0.3%
Total exports to Chile 16,178,160 100.0%
Costa Rican market access for Chilean exports
Immediate free trade 40,423,144 83.1%
5 years 1,082,936 2.2%
12 years 3,301,097 6.8%
16 years 154,682 0.3%
Special treatment/beef  18,263 0.0%
Excluded 3,678,596 7.6%
Total imports from Chile 48,658,718 100.0%
Source:  Own calculations based on data from the Costa Rican Foreign Trade
Promotion Agency  (PROCOMER) and the Central Bank of Costa Rica (BCCR).
FTA Costa Rica/Chile
Chilean market access for
Costa Rican exports, 1999
16 years
0.0%
Treat./petrol. 
products
0.3%Excluded
0.3%5 years
55.2%
Free trade
44.2%WT/REG136/3
Page 5
FTA Costa Rica/Chile
Costa Rican market access
for Chilean exports, 1999
Free trade
83.1%
5 years
2.2%
Treat./beef
0.0%16 years
0.3%12 years
6.8%
Excluded
7.6%
4. Trade data
Trade between Costa Rica and Chile has intensified since the mid-1990s.  In 1995, the flow of
trade between the two countries amounted to US$30 million.  In 2002, the amount practically doubled
to US$80.8 million.  However, this dynamic trend stemmed mainly from a steady increase in Chilean
imports into Costa Rica.  Over the past seven years, these have grown at an average rate of 28 per centper year, which explains the traditional balance in Chile's favour in trade between the two countries.
For the year 2002, around 20 per cent of Costa Rican exports to Chile concerned agricultural
goods and about 80 per cent industrial products, including medicines, petroleum oils and oils obtained
from bituminous minerals, and women's underwear.  The first two products alone account for morethan 50 per cent of total exports to this market.
During the same period, 26.2 per cent of total Chilean imports into Costa Rica concerned
agricultural goods, while goods from the industrial sector accounted for 73.8 per cent.  Key imports
from Chile include copper wire, lumber, preserved tomatoes, apples, wines, and glass.Costa Rica: Trade with Chile
1990 -20021/
-80-60-40-20020406080100
US$
millions
Exports 0.8 2.0 4.4 10.5 13,1 16.9 20,8 27.2 20.2 16.2 4,8 5.5 4.8
Imports 18.6 16.6 18.7 15.5 17.5 13.2 32.7 28.2 29.1 48.7 52.5 55.9 76.1
Balance -17.9 -14.6 -14.4 -5.1 -4.4 3.7 -11.9 -1.0 -8.9 -32.5 -47.6 -50.4 -71.31990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: PROCOMER and BCCR
1/ Preliminary dataWT/REG136/3
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II. TRADE-RELATED PROVISIONS
1. Import restrictions
The Parties undertake to completely and immediately eliminate all non-tariff barriers.  This
implies a commitment to refrain from imposing import restrictions that are not based on Articles XX
and XXI of the GATT 1994 or those regulated in Chapter 8 (Sanitary and Phytosanitary Measures)and Chapter 9 (Standards-Related Measures, Metrology and Approval Procedures) of the Agreement.
1.1 Duties and charges
The Free Trade Agreement between Costa Rica and Chile does establish any import duties or
charges other than those specified in the attached Tariff Elimination Programme.
1.2 Quantitative restrictions
The Agreement stipulates the elimination of import and export restrictions in accordance with
Article XI of the GATT 1994 (General Elimination of Quantitative Restrictions), while allowing the
possibility of incorporating the results of the negotiation of any successor agreement or treatyconcluded by the Parties.  In the case of Costa Rica, the following is excluded from this undertaking:
(a) government monopoly over the importation, refining  and distribution of oil and other types of fuel;
(b) certain used goods such as tyres (including retreaded tyres), sacks, clothing, and certain types of
motor vehicle.
1.3 Common External Tariff
The Agreement does not include among its objectives the establishment of a common external
tariff for third markets.
2. Export restrictions
2.1 Duties and charges
Article 3.14 (Export Taxes) stipulates that no Party may adopt or maintain any duty, tax or
other charge on the export of any good to the territory of another Party, unless such duty, tax or
charge is adopted or maintained on any such good when destined for domestic consumption.  The
foregoing is without prejudice to Annex 3.14 (Export Taxes), which in the case of Costa Ricaspecifies the following exceptions
1:
• Bananas, as provided in Law No. 5515 of 19 April 1974 (see footnote 1) and
amendments thereto, Law No. 5519 of 24 April 1974 and amendments thereto, andLaw No. 4895 of 16 November 1971 and amendments thereto, or under any
equivalent successor legislation;
• coffee, as provided in Law No. 2762 of 21 June 1961 and amendments thereto, and
Law No. 5519 of 24 April 1974 and amendments thereto, or under any equivalent
successor legislation;  and
• beef and live cattle, as provided in Law No. 6247 of 24 May 1978 and amendments
thereto, and Law No. 5519 and amendments thereto, or under any equivalent
successor legislation.
                                                     
1 Chile did not establish any exceptions in this Annex.WT/REG136/3
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2.2 Quantitative restrictions
Notwithstanding the requirement to eliminate import and export restrictions, as commented in
section 1.2, Costa Rica may adopt or maintain measures relating to the export of logs and square-sawn
lumber from forests, as established in Law No. 7575 of 16 April 1996 or any equivalent successorlegislation, and to the export of hydrocarbons, as established in Law No. 7399 of 3 May 1994 or any
equivalent successor legislation.
3. Rules of origin
Rules of origin are covered by Chapter 4 (Rules of Origin) of the Agreement.  Broadly
speaking, the main criteria for qualification as originating goods are:
(a) That the goods be wholly obtained or produced entirely in the territory of one or more
Parties belonging to the free-trade area;  this includes, inter alia , live animals born
and raised;  animals obtained by hunting, trapping, fishing, gathering or capturing;
products obtained from such live animals;  plants and plant products harvested,
picked or gathered;  minerals and other naturally occurring substances extracted ortaken;  scrap and waste derived from manuf acturing or processing operations or from
consumption and fit only for disposal or for the recovery of raw materials;  goods
obtained or produced from the goods referred to above;  and marine products taken or
goods extracted from the seabed or marine subsoil outside territorial waters by
vessels flying the flag of a Party and registered or chartered by companies legallyestablished in the free-trade area;
(b) that the imported raw materials used in producing the goods have undergone a change
in tariff classification in accordance with the specific rules of origin in the Annex to
Article 4.03.  Most of the rules of origin are common to the Central American
countries (Costa Rica, Honduras, Nicaragua,  El Salvador and Guatemala) and Chile.
A number of tariff headings are governed by specific rules of origin that apply on a
bilateral basis, for instance only between Costa Rica and Chile.
The Agreement contains a series of provisions to  help enterprises determine the origin of the
goods they produce, including accumulation (Article 4.06),  de minimis  levels (Article 4.08), and sets
and assortments of goods (Article 4.10).  There are also provisions for determining the origin of raw
materials used in producing export goods;  among the key provisions are indirect materials
(Article 4.05), fungible goods (Article 4.09), and accessories, spare parts and tools (Article 4.11).
As regards direct transhipment and shipment and international transit, the Agreement
specifies that goods do not lose their originating status when exported from one country to another
within the free-trade area and in transit through the territory of a country that may or may not be a
Party belonging to the free-trade area, provided that the transit is justified for geographical reasons orinternational transport requirements, or the goods are not destined for trade or use in the country or
countries of transit and do not undergo, during their transport or storage, any operation other than
packaging, packing, repacking, loading, unloading or handling to ensure their conservation.
Otherwise, the goods lose their originating status.
Chapter 5 (Customs Procedures) provides a general reference framework of principles to be
followed by the relevant authorities in the countries belonging to the free-trade area and by users, the
objective being to reduce the burden of customs procedures.
This Chapter basically includes rules regulating customs procedures for the purposes of
determining the origin of goods.  For example, it co ntains provisions relating to certificates of origin,WT/REG136/3
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the obligations of importers and exporters, procedures for verifying the origin of goods, and
cooperation between customs administrations.
4. Standards
4.1 Technical Barriers to Trade
Chapter 9 (Standards-Related Measures, Metrology and Approval Procedures) regulates
national procedures for the preparation, adoption and implementation of measures relating to
standards, metrology and approval procedures so as to ensure that they do not constitute unnecessary
barriers to trade between Costa Rica and Chile.  The Chapter thus contains specific provisions on
basic rights and obligations, harmonization of measures, risk assessment, conformity assessment,
metrological standards, and so forth.  It also provides an institutional framework for discussing thesematters, and specific provisions relating to technical cooperation.
4.2 Sanitary and Phytosanitary Measures
Chapter 8 (Sanitary and Phytosanitary Measures) provides a regulatory framework to
facilitate trade in agricultural products and protect human, animal and plant life and health, under
rules based on the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.  The
Chapter stipulates that sanitary and phytosanitary standards are to be based on scientific information,
risk analysis and the international reference standards of the Office International des Épizooties, the
Codex Alimentarius  and the International Plant Protection Convention.
5. Safeguards
Chapter 6 (Emergency Action) establishes the rules and technical criteria for applying
safeguard measures.  It distinguishes between measures defined as bilateral emergency actions and
global emergency actions.
Provision is made for bilateral emergency actions (i.e. between the importing and the
exporting country) where imports of the other Party have undergone a significant increase and are the
main cause of injury or threat of injury resulting from the reduction or elimination of a duty provided
for in the Agreement.  In this case the affected Party may, during a transitional period, either suspend
the further reduction of the rate of duty provided for under the Agreement, or increase the rate of duty
to a level not exceeding the lesser of the most-favoured-nation rate of duty at the time the action istaken and the most-favoured-nation rate of duty in effect on the day immediately preceding the entry
into force of the Agreement.  The Chapter also specifies conditions concerning notification,
time-frames for implementation, possible extension and compensation for the other Party, inter alia ,
in regard to the application of such measures.
As regards global emergency actions, each Party retains its rights and obligations under
Article XIX of the GATT 1994 and the WTO Agreement on Safeguards, except those regarding
compensation or retaliation and exclusion from such an action to the extent that such rights or
obligations are inconsistent with this Chapter.  A Party taking such an action may not do so in respect
of the other Party except where imports from the other Party account for a substantial share of totalimports and imports from the other Party contribute significantly to the serious injury caused by total
imports.  The Party taking global action is required to provide to the other Party mutually agreed trade
liberalizing compensation in the form of concessions  having substantially equivalent trade effects or
equivalent to the value of the additional duties expected to result from the action.
The Chapter includes provisions governing the administration of emergency action
proceedings in general.  These refer to the consistent, transparent, equitable and impartial
administration of domestic legislation and requirements to be met, in accordance with the WTOWT/REG136/3
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provisions, regarding the institution of proceedings, the contents of a petition, consultations, notice of
determinations, public hearings, handling of confidential information, evidence of injury or threat of
injury, and deliberation and report.  It is also expressly stated that, in the case of global actions, a
Party is to deliver written notice, without delay, to the other Party of the institution of proceedings that
may result in a global emergency action.  Moreover, a Party may not impose restrictions on goods in aglobal action without notifying the Free Trade Commission established under the Agreement and
providing adequate opportunity for consultation with the other Party.
As far as dispute settlement is concerned, no Party may request the establishment of an
arbitral panel under the Agreement regarding an emergency action that has simply been proposed.
Emergency measures are also covered in the rules relating to exceptions, as explained below
under Section III.1.
6. Anti-dumping and countervailing measures
Chapter 7 (Unfair Trading Practices) regulates unfair trade practices.
Its main purpose is to state the commitment of the Parties to avoid any unfair international
trade practice that causes or threatens to cause trade distortions and to define the conditions under
which an anti-dumping or countervailing duty – as the case may be – may be imposed, as well as the
procedure for applying such a duty.
The Chapter consists of two Articles stipulating that the rules on anti-dumping and
countervailing duties applicable for the purposes of the Agreement are to be based on the standards
and disciplines of the WTO Agreement on Subsidies and Countervailing Measures and the Agreement
on Implementation of Article VI of the GATT 1994.
As regards scope and coverage, the Chapter establishes that each Party may initiate an
investigation and apply countervailing or anti-dumping duties, in accordance with the WTO
Agreement on Subsidies and Countervailing Measures and the Agreement on Implementation of
Article VI of the GATT 1994, and any other relevant legislation of each Party.
The Chapter further states that the Parties share the objective of promoting significant reforms
in this field in order to prevent measures of this kind from becoming disguised barriers to trade.  TheParties undertake to cooperate in the effort to achieve such reforms in the frameworks of the WTO
Agreement and the Free Trade Area of the Americas.
7. Subsidies and State aid
The Free Trade Agreement between Central America and Chile does not provide for any
subsidies or State aid.
8. Sector-specific provisions
There are no specific provisions regarding trade in goods in any particular sector, other than
those contained in each Party's Tariff Elimination Programme and other Annexes.
9. Other provisions
Article 5.13 (Cooperation) sets out a number of pr ovisions concerning cooperation in customs
administration, aimed at speeding up and facilitating the flow of goods within the free-trade area.  In a
commitment under Article 3.08, the countries belonging to the free-trade area agree that customsvaluation is to be governed by the rules of the relevant WTO Agreement.WT/REG136/3
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III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and reservations
Chapter 20 (Exceptions) contains the rules relating to exceptions.  Their purpose is to identify
specific situations in which the provisions of the Agreement would not apply for any the following
reasons:  public interest, national security, balance-of-payments difficulties or tax measures.
General exceptions
As regards general exceptions, Article XX of the GATT 1994 and its interpretative notes are
incorporated into and made part of the Agreement for the purposes of:
• Part Two (Trade in Goods);
• Part Three (Technical Barriers to Trade), except to the extent that any provision of
that Part applies to services or investment;  and
• the Chapters on Competition Policy and Government Procurement, to the extent that
any provision of those Chapters applies to goods.
Article XIV (a), (b) and (c) of the GATS is al so incorporated into and made part of the
Agreement for the purposes of:
• Part Two (Trade in Goods), to the extent that any provision of that Part applies to
services;
• Part Three (Technical Barriers to Trade);
• the Chapters on Cross-Border Trade in Services, Air Transportation Services, and
Temporary Entry for Business Persons;  and
• the Chapters on Competition Policy and Government Procurement, to the extent that
any provision of those Chapters applies to services.
National security
As far as national security is concerned, the Parties may provide for exceptions in order to
protect their essential security interests or take action in pursuance of their obligations under the
United Nations Charter for the maintenance of international peace and security.
Balance of payments
The Parties may establish exceptions in order to adopt or maintain measures that restrict
transfers where a Party faces serious balance-of-payments difficulties or the threat thereof, providedthat such restrictions are consistent with certain requirements under the relevant Article.  As soon as
practicable after a Party imposes a measure restricting transfers, in pursuance of its international
obligations the Party is required to submit all restrictions on current account operations for review by
the International Monetary Fund (IMF) under Article VII of the IMF Articles of Agreement;  to enter
into good faith consultations with the IMF on economic adjustment measures to address theunderlying economic problems;  and to adopt or maintain economic policies consistent with such
consultations.WT/REG136/3
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The measures applied or maintained must also avoid unnecessary damage to the commercial,
economic or financial interests of the other Party, not be more burdensome than necessary to deal with
the balance-of-payments difficulties, be of a temporary nature and be progressively phased out as the
situation improves.
A Party may adopt or maintain a measure that gives priority to services that are essential to its
economic programme, provided that the measure is not imposed for the purpose of protecting a
specific industry or sector, unless the measure is consistent with the provisions of the IMF Articles of
Agreement.
The Article further stipulates that restrictions on transfers imposed on payments for current
international transactions must be consistent with Article VIII(3) of the IMF Articles of Agreement;
must be consistent with Article VI of the IMF Articles of Agreement and be applied only in
conjunction with measures imposed on payments fo r current international transactions;  and may not
take the form of tariff surcharges, quotas, licences or similar measures.
Disclosure of information
Concerning disclosure of information, the Parties may establish exceptions as regards the
supply or access to information the disclosure of  which could impede compliance with or would be
contrary to their respective Constitutions or laws.
Taxation
None of the provisions of the Agreement applies to tax measures or affects the rights and
obligations of the Parties under tax conventions.  In the event of inconsistency between theAgreement and any such convention, that convention prevails to the extent of the inconsistency.
Notwithstanding the above, the national treatment provisions apply to tax measures to the
same extent as does Article III of the GATT 1994 and the export tax provisions to tax measures.
Reservations
The Parties made no reservations to the Agreement, since Article 21.02 (Reservations) states
that the Agreement may not be subject to reservatio ns or interpretative statements on the occasion of
its ratification.
2. Accession
There is no specific provision for other countries to accede to the Agreement.
3. Dispute settlement procedures
The dispute settlement mechanism is established in Chapter 19 of the Agreement. This
Chapter applies to the settlement of any disput e that arises between the Parties regarding the
application or interpretation of the Agreement or wherever a Party considers that an existing or
proposed measure of the other Party is liable to prove inconsistent with the obligations of the
Agreement or cause nullification or impairment (Annex to Article 19.03).
The Agreement stipulates that the complaining Party may opt for the procedure provided by
the WTO or that established by the Agreement.  Once a forum has been selected, it must be used to
the exclusion of the other (Article 19.04).WT/REG136/3
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If the mechanism established by the Agreement is chosen, it first provides for consultations
between the Parties.  If this fails to resolve the dispute in a mutually satisfactory manner, either Party
may refer the matter to the Free Trade Commission, which then initiates a conciliation or mediation
phase.
If, within a specified period of time, the Parties still fail to agree, either Party may request in
writing the establishment of an arbitral panel made up of three members, acting in conformity with
rules of procedure to be laid down by the Commission .  Panellists are normally selected from a roster,
drawn up by the Parties, of persons with international expertise and experience.  Each Party selects
one panellist who is a citizen of the other Party.  The chair is designated jointly by the Parties;  should
they prove unable to reach consensus, one of the Parties, chosen by lot, selects as chair an individual
from the roster who is not a citizen of either Party.
The Agreement provides for the right of third Parties to attend the hearings, to be heard by the
arbitral panel, and to make and receive written communications to and from the panel.  Third-party
communications must be reflected in the final report of the arbitral panel.
Within a period of 90 days after the arbitral panel has been established, the panel issues its
initial report containing findings of fact, a determination as to whether the measure imposed by the
respondent Party is inconsistent with the Agreement, and a recommendation.  Once the Parties have
submitted their comments on the initial report, the panel issues its final report, which is binding on the
Parties.  The measure found to be inconsistent should be repealed wherever possible.  If the Partiesfail to reach a mutually satisfactory settlement, the complaining Party may suspend the application of
benefits of equivalent effect to the respondent Party, as far as possible in the sector affected by the
measure.  Where the respondent Party deems the benefits suspended by the complaining Party to be
excessive, it may request the establishment of an arbitral panel to rule on the matter.
4. Relation with other trade agreements
The provisions of the Agreement prevail in the event of any inconsistency with other
international agreements.  Nevertheless, it should be emphasized that obligations deriving from the
Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Montreal
Protocol on Substances that Deplete the Ozone Layer and the Basel Convention on the Control of
Transboundary Movements of Hazardous Wastes and Their Disposal prevail in the event of any
inconsistency with the Agreement.
5. Institutional framework
The Agreement establishes a series of rules for its administration and for the settlement of
disputes stemming from its implementation.
Administrative bodies:
The Free Trade Commission (at ministerial level) supervises the proper implementation of
the Agreement;  evaluates the results of such implem entation;  settles disputes regarding interpretation
or implementation of the Agreement;  and considers any other matter that may affect the operation ofthe Agreement.
The Commission may also seek the advice of individuals or groups;  amend the specific rules
of origin, the Tariff Elimination Programme and the Uniform Regulations;  prepare and approve the
regulations needed for implementation of the Agreement;  and take any other action within its sphereof competence.WT/REG136/3
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Although the Commission comprises Chile and th e five Central American countries, the
Commission may meet with a smaller quorum, that is , when Chile and one or more Central American
countries meet to deal with matters of exclusive interest to those Parties (e.g. to accelerate tariff
elimination, dispute settlement).
The Free Trade Sub-Commission  provides the Commission with technical advice;  follows
up on the decisions of the Commission;  and, at the request of any Party, examines any other matter
that could affect the operation of the Agreement.
The Secretariat  carries out administrative functions and provides support for the
Commission.
The Committees, Sub-Committees or Groups of Experts  deal with matters relating to trade in
goods, sanitary and phytosanitary measures, standards-related, metrology and approval procedures,
investment, cross-border trade in services, and the Advisory Committee on Private Commercial
Disputes.
IV. OTHER
1. Final provisions
Chapter 21 (Final Provisions) contains the final provisions of the Agreement.  These rules
regulate procedures ranging from amendments to withdrawal.  It is important to note that the
Agreement has an indefinite duration.
The full text of the Agreement is available on the following websites:In Chile:  www.direcon.cl
In Costa Rica:  www.comex.gov.cr
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