WT/REG310/2  
 
22 March 2013  
(13-1586)  Page: 1/9  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
 FREE TRADE AGREEMENT BETWEEN CHINA AND COSTA RICA 
(GOODS AND SERVICES) 
 
QUESTIONS AND REPLIES 
 The following communication, dated 15 March 2013, is being circulated at the request of the 
delegations of China and Costa Rica. 
_______________ 
   This document reproduces the questions addressed to the Parties and the responses 
submitted. 
 Questions from the Delegation of Australia 
 Provisions on trade in services 
Scope and definitions 
 1.1.  Paragraph 4.3, Australia notes that Se ction B of the Chapter of the Agreement does 
not apply to financial services.  We also note  that no commitments on financial services 
have been made by China or Costa Rica (p aragraphs 4.24 and 4.27), although partial 
commitments were made in financial services  sub-sectors by each party under the GATS. 
 Could the FTA Parties please explain why fi nancial services were excluded from the 
scope of the Agreement? 
 
 The Parties took the decision to carry out a pragmatic negotiation; therefore, in order to 
facilitate the process it was decided not to undertake financial services commitments. 
Furthermore, the Parties had no commercial interests in negotiating financial services. In that 
respect, the Parties considered sufficient to be covered by the commitments in those sectors in GATS.  
 
Horizontal commitments 
 
1.2.  Paragraph 4.17, Australia notes that  Costa Rica has scheduled 14 horizontal 
limitations, whereas only one horizontal limit ation was scheduled in its GATS schedule. 
 Could Costa Rica please expl ain why it has scheduled more  horizontal limitations in 
the Free Trade Agreement? 
 
 Under the FTA, Costa Rica's horizontal limitations reflect better the domestic legislation than those of GATS. Hence, the commitments in specific sectors and sub-sectors under the FTA are greater than those under GATS and as a result, more horizontal limitations were required.  
 
Sector-specific commitments 
 
1.3.  Paragraph 4.24, Australia notes th at Costa Rica has chosen not to make 
commitments in health and social servic es, although Costa Rica made partial 
commitments under the GATS. WT/REG310/2 
 
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   Could Costa Rica please explain why it has not made any commitments in health 
and social services in the Free Trade Agreement?   The Parties took the decision to carry out a pragmatic negotiation; therefore, in order to 
facilitate the process it was decided not to undertake health and social services commitments. In 
that respect, the Parties considered sufficient to be covered by the commitments in those sectors under GATS. 
 
Questions from the Delegation of Canada 
 1.4.  Paragraph 5.24, (reference to FT A Chapter 11, Article 128 (Mechanisms of 
Cooperation)):  
 What are the current priorities in term s of cooperation areas/activities and are 
these activities funded by both part ies? Is there a pre-defined budget to 
fund cooperation activities or does the Co mmittee seek ad hoc funds from relevant 
authorities?  
 Cooperation under the China-Costa Rica Free Trade Agreement is mainly aimed at enhancing 
the Parties' trade and investment relations, by fostering increased flows and promoting initiatives 
to help broaden the benefits and opportunities derived from more open markets to growing segments of the population. 
 
 Within this framework, cooperation initiatives since the entry into force have focused on building institutional capacities -especially through the exchange of information and experiences- 
in areas related to Sanitary and Phytosanitary Standards (SPS), Technical Barriers to Trade (TBT) 
and customs, where exporters require certainty and solid knowledge of the applicable rules to succeed in acceding markets. Priority has also been assigned to exploring the feasibility of 
establishing a Special Economic Zone in Costa Rica, building on the extensive experience that 
China has accumulated over the years in this area. This initiative has been identified as a strategic project by both Parties, due to its enormous potential to generate investment, new business ventures, jobs and, ultimately, economic yield for both sides. Governments are working closely 
with the Chinese Development Bank as a funding partner in this endeavour. 
  There are no pre-defined budgets to fund cooperation activities under the FTA. China and 
Costa Rica discuss issues of interest as they aris e and, once agreed, plan their implementation -
including funding considerations- accordingly. Parties also decide jointly on the proper financial tools and partners required to carry out projects. 
 
1.5.   It is our understanding that Costa Ri ca has agreed to eliminate tariffs on several 
agricultural products imported from Ch ina. Specifically, on pork, some will enter 
duty-free immediate to duty-free in ten ye ars; on beef, some will enter duty-free in 
5-15 years; and on potato and onions some w ill enter duty-free in te n years. Considering 
the potential trade effects of these preference s for these sectors, in your consultations 
with your agriculture industry stakeholders, how have they received Costa Rica's move 
to provide China with further market access for these products?  
 As a customary practice in trade negotiations processes, the Ministry of Foreign Trade of 
Costa Rica held internal consultations with its domestic sectors, in order to identify interests and 
sensibilities towards the trading partner, and built a national position. 
  In the case of China, the agricultural sector and its Chamber were important supporters of this Agreement, due to the identification of mark et access opportunities, in sectors such as swine 
and beef. 
  Regarding to the treatment granted to China on potatoes and onions, Costa Rica would like 
to clarify that fresh potatoes and fresh onions are excluded from tariff redu ction within this FTA. 
  
 
  WT/REG310/2 
 
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  Questions from the Delegation of Colombia 
 
1.6.  Paragraph 3.1 contains the following: "National treatment does not apply to measures set out in Annex 1,  which lists for Costa Rica: (…) measures related to the 
protection of the environment and natural re sources pursuant to applicable domestic 
law and the provisions established in Ar ticle 159 (General Exceptions) of the 
Agreement." In this connection, Colombia wo uld like to receive more information on the 
above-mentioned measures, their scope, means of application and purpose. 
 Achieving green economic growth and enviro nmental protection are key objectives of 
Costa Rica's policy agenda. In line with these goals the country has set out a broad legal and policy framework for environmental protection and natural resources conservation. As a result of 
this commitment, over 25% of the country´s terr itory is comprised by protected areas, and the 
country's forest coverage has increased from 21% in 1986 to 53.2% today. In this context, paragraph g) of Costa Rica's Annex 1 intends to reflect the country's will to promote and deepen 
trade liberalization while at the same time strengthening its commitment with environmental 
protection and natural resources conservation.  The aforementioned paragraph aims at providing the appropriate policy space to support the achiev ement of Costa Rica's environmental objectives 
in conformity with the WTO Agreements. 
 1.7.  Paragraph 3.1 contains the following : "Measures listed by China in Annex 1 are 
those related to the protection of the envi ronment and natural resources pursuant to 
applicable domestic law and the provisions established in Article 159 (General 
Exceptions) of the Agreement; and actions au thorized by the Dispute Settlement Body of 
the WTO." In this connection, Colombia would like to receive more information on the 
above-mentioned measures, their scope, means of application and purpose. 
 Promoting ecological progress is a long-term task of vital importance to the people's 
wellbeing and China's future. In recent years, faced with increasingly severe resource and 
environmental pressures, the Chinese government continues to strengthen and improve the 
integrated management of some resource products, especially those high-pollution, high energy consumption products, this not only meets the needs of China's own scientific development but also is an important effort for promoting the global sustainable development. China pursues a 
synchronized management of the export of raw material products and their exploration and 
production at home, and reasonably determines the annual volume of exports to meet the basic needs of the international markets based on an overall consideration of the domestic and foreign 
markets, resources and environment carrying capaci ty.  China's policy goals are in line with WTO 
rules.  
 
1.8.  In paragraph 3.6, it is stated that: "At the end of the implementation period in 
2025, 91% of Costa Rica's tariff lines will be duty free for imports from China, corresponding to 85.1% of its imports from China in 2008-2010". In this connection, Colombia would like to know whether the partie s consider that effect is being given to 
Article XXIV of the GATT 1994 in respect of the substance of trade. 
 Paragraph 8 subsection (b) of Article XXIV of GATT 1994 indicates the following: 
 
 "A free-trade area shall be understood to mean a group of two or more customs territories in 
which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV an d XX) are eliminated on substantially all the trade 
between the constituent territories in products originating in such territories." 
  Even though the WTO has not established a clear definition of "substantially all trade", both Parties consider that preferential treatment established under this Free Trade Agreement (FTA) 
fulfills this condition, while it also allows further growth and respects existing asymmetries 
between Parties.   
 
  
 
 WT/REG310/2 
 
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  Response from Costa Rica 
 
 For instance, ten years after implementation, 88.5% of Costa Rica's tariff and 82.1% of 
Costa Rica's imports from China (under 2008-2010 parameters) would be covered by the FTA. 
Note that, trade in 2012 has already increased substantially compared to the aforesaid period. At 
the end of the implementation period, Costa Rica would grant free access to 91% of its tariff, and 
85.2% of its imports from China, which would bring new commercial opportunities and will enable 
the expansion of trade, both in products already imported, as in potential goods.  
 Response from China 
 
 In the process of implementation, Costa Rica  also provided the opportunity of unilateral 
tariff concession for some products, such as sweet corn imported from China under the framework of the China-Costa Rica FTA. 
 
1.9.   In Table 3.1 it is indicated that 14 .9% of Costa Rica's imports from China remain 
dutiable. In this connection, Colombia wo uld like to know the arguments used by 
Costa Rica to justify the inclusion of 14.9% of  trade (591 lines) in the "Remain dutiable" 
category. 
 Costa Rica will keep a 9% of its tariff lines  as dutiable (14.9% of its imports by 2008-2010 
parameters), in order to respect real sensitivities presented by productive sectors, due to the high 
competitiveness of certain products originating in China. It must be taken into account that this 
decision was balanced trough preferential access in all productive sectors and by covering the main products exported by China to Costa Rica. This includes products such as mobile phones, 
computers, certain types of footwear, fresh garlic, dried onions, green tea, canned mushrooms and 
canned tomatoes, vulcanized rubber tubes, tires and certain types of plywood, among others. In the case of beans and pork, which are relevant products for China and of high sensitivity for 
Costa Rica, requests were met through tariff quotas that will guarantee preferential access to 
Chinese products.  1.10.  In paragraph 3.10, in relation to Chart 3.1, it is indicated that "Average remaining 
preferential rates exceed 30% in five HS Chapters - 1, 4, 7, 10 and 16", but the chart 
makes no reference to Chapter 1. In this co nnection, Colombia requests clarification of 
the chapters for which average preferential rates exceed 30%. 
 Under the Agreement, all products imported from China included in Chapter 1 will be duty 
free. Therefore, chapters where remaining preferen tial rates exceed 30% are 2, 4, 7, 10 and 16. 
 
1.11.  In paragraph 3.11, it is stated in re spect of Table 3.5 that: "In the case of China, 
those lines subject to liberalization ten or more years after the Agreement's entry into 
force fall in HS Sections I, II and IV, wh ile the 259 lines not liberalized under the 
Agreement fall in Sections II-IV, VI, and IX -XI." However, the table shows that the 
259 lines in question are also included in Sections XVI and XVIII. In this connection, 
Colombia requests clarification of the sections  subject to liberalization after ten or more 
years.  
 The 259 lines not liberalized under the Agreement fall in Sections II-IV, VI, IX-XI, XVI and 
XVIII.   
 In the case of those lines subject to liberali zation ten or more years after the Agreement's 
entry into force, they add up a total of 210 lin es and fall in Sections I, II, IV and VIII. 
 1.12.  In paragraph 3.19, reference is made to specific rules of origin. In this connection, 
Colombia would like to know whether: 
a. Each of the production processes used as alternative criteria for determining 
origin applies to all products under Chapters 27 to 40? 
 
 WT/REG310/2 
 
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   The alternative criteria apply according to Section Note for chapters 27 to 40 in Annex 3. 
This note indicates that the alternative criteria on chemical reaction, change in particular size, standards materials and isomer separation apply fo r the chapters 27 to 40; however, in the case 
of mixtures, blends and purification criteria, it only applies to certain products in these chapters. 
 
b. Is there a procedure for notification of  certifying bodies that reduces the 
possibility for the competent authority of the importing party to deny 
preferential treatment in the absence of notification? 
 As indicated in Article 38, paragraph 2 of the FTA, for the notification of authorized bodies, 
no additional procedures have been established. This Article states that the competent authority of the exporting Party (The National Customs Service in the case of Costa Rica and the 
Administration of Quality Supervision, Inspection and Quarantine in case of China) shall inform the 
competent authority of the importing Party the name of each authorized body, as well as the relevant contact information and shall provide details of any security features for the Certificate of 
Origin. Any change in the information provided shall be informed promptly to the competent 
authority of the other Party; otherwise, in accordance with article 45 subparagraph c), this should be a causal to deny preferential tariff treatment. 
 
c. In case of errors of form in the certific ate of origin, i.e. errors not affecting the 
condition of goods covered by the certificate as originating goods, will preferential tariff treatment be denied? 
 Article 45 of the FTA establishes the cases in which the customs authority may deny 
preferential treatment to a good; therefore, the customs authority may have to asses if the error 
in the certificate of origin complies or not with the provision included in this article. 
 
Questions from the Delegation of the European Union 
 
Provisions on trade in goods 
Liberalization schedule by product  
Costa Rica 
 1.13.  Table 3.3 shows China's top 25 import s from Costa Rica. However, the Factual 
Presentation does not contain an analogue ta ble for Costa Rica's top imports from China. 
 Could Costa Rica submit a comparable table for its top imports from China?  
 
Rank Tariff line 
(HS 2007) Product 
Description Value of Costa Rica's imports 
from China (million US$) Share %  
(of total) Costa 
Rica's 
MFN 
Tariff 
2011 Year of 
Liberalization 2008 2009 2010 Total 
1 85171200 - - Mobile phones 
(cellular phones) 
and those of other 
wireless networks 4,3 16,9 52,0 73,2 2,8% 0 2011 
2 07133310 - - - Black 29,8 6,0 15,7 51,5 2,0% 31 10.000 MT 
duty-free quota 
3 64029990 - - - Other 14,3 14,7 18,2 47,2 1,8% 15 2020 
4 87112090 - - Other 25,6 10,3 10,7 46,7 1,8% 1 2011 
5 52105990 - - - Other 16,8 15,0 11,6 43,4 1,7% 10 2011 
6 85423130 - - - Hybrid 
integrated circuits: 0,1 1,4 38,4 39,9 1,5% 0 2011 
7 72091800 - - Of a thickness 
of less than 0.5 
mm 33,5 1,3 1,3 36,2 1,4% 1 2011 
8 84713000 Portable digital 
automatic data 
processing 
machines, 
weighing not more 
than 10 kg, 4,5 10,2 15,0 29,7 1,1% 0 2011 WT/REG310/2 
 
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Rank Tariff line 
(HS 2007) Product 
Description Value of Costa Rica's imports 
from China (million US$) Share %  
(of total) Costa 
Rica's 
MFN 
Tariff 
2011 Year of 
Liberalization 2008 2009 2010 Total 
consisting of at 
least a central 
processing unit, a 
keyboard and a 
display 
9 64041100 - Sports footwear; 
tennis shoes, 
basketball shoes, 
gym shoes, training shoes and 
the like: 8,2 9,7 9,1 26,9 1,0% 15 2011 
10 85287290 - - - Other 10,2 6,4 9,6 26,2 1,0% 15 2011 
11 40111000 - Of a kind used on 
motor cars (including familiar 
type (break or 
station wagons) and racing cars) 7,0 7,0 10,9 24,9 1,0% 6 Exempted from 
tariff reduction 
12 40112010 - - Radial 7,4 6,8 9,1 23,3 0,9% 6 Exempted from 
tariff reduction 
13 69089000 - Other 10,0 4,7 6,3 21,1 0,8% 15 2020 
14 85167900 - - Other 7,1 6,6 7,1 20,8 0,8% 15 2011 
15 72091600 - - Of a thickness 
exceeding 1 mm but less than 3 mm 20,1 0,1 0,5 20,7 0,8% 1 2011 
16 95030090 - Other 6,2 6,0 8,3 20,6 0,8% 15 2011 
17 85423111 - - - - Metal oxide 
semiconductors (MOS technology) 11,6 5,4 0,0 17,0 0,7% 0 2011 
18 29310000 Other organo-
inorganic 
compounds 7,0 4,6 5,3 16,8 0,6% 1 2011 
19 85258020 - Still image digital 
cameras and video cameras 5,6 3,8 6,5 15,9 0,6% 0 2011 
20 62046200 - - Of cotton 5,4 4,2 5,7 15,3 0,6% 15 2020 
21 94032000 - Other metal 
furniture: 4,5 4,6 6,0 15,1 0,6% 15 2025 
22 64039990 - - - Other 5,2 3,6 5,9 14,7 0,6% 15 Exempted from 
tariff reduction 
23 85165000 - Microwave ovens 5,2 4,2 5,4 14,7 0,6% 6 2011 
24 64022000 - Footwear with 
upper straps or 
thongs assembled 
to the sole by 
means of plugs: 4,5 4,4 5,8 14,7 0,6% 15 2020 
25 84502000 - Machines, each of 
a dry linen capacity exceeding 10 kg: 2,4 5,6 6,5 14,5 0,6% 1 2011 
  Total Top 25 256,3 163,7 271,0 691,0 26,7%   
  TOTAL 887,8 711,6 989,1 2.588,5 100,0%   
 
Source: Ministry of Foreign Trade of Costa Rica, based on Costa Rica Central Bank data.  WT/REG310/2 
 
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  China  
 
1.14.  Table 3.5 of the Factual Presentation  shows China's Tariff elimination under the 
Agreement, by HS section.  
a. Could China clarify which are the three tariff lines under HS Section VI that 
remains dutiable (50%)?  
 31021000  Urea  whether or not in aqueous solution. 
 31052000  Mineral or chemical fertilizers containing the three fertilizing elements, 
   nitrogen, phosphorus & potassium. 
 31053000  Diammonium hydrogenorthophosphate (diammonium phosphate).  
b. Could China clarify as well which is the value of China's exports to Costa Rica 
for those products? 
 No export for those products to Costa Rica in 2012. 
 
Provisions on trade in services 
Scope and definitions   
 1.15.  According to the Factual Presentati on, the Parties reaffirm their commitments 
under the Agreement between the Government of the People's Republic of China and the Government of the Republic of Costa Rica  on the Promotion and the Protection of 
Investments, signed on 24 October 2007.  
a. Could the Parties clarify whether the above-mentioned investment Agreement 
contains provisions on liber alizations of investments? 
 The Agreement does not contain provisions on liberalization of investments. 
 
b. In case of positive reply, could the Part ies clarify: what is the scope of such 
provisions, what is their connection with the liberalization commitments under 
the FTA and what are the applicable ex ceptions and reservations, if any?  
 There are no liberalization commitments; each Contracting Party shall admit investments in 
accordance with its laws and regulations. 
 
c. Could the Parties also clarify whethe r the market access commitments on 
establishment subject to investor to state dispute settlement (Article 89)? 
 The Chapter on Investment, Trade in Services and Temporary Entry of Business Persons 
does not contain investor-State dispute settlement provisions; therefore the commitments on establishment are subject only to the State-Stat e one. This does not undermine the right of 
Chinese investors to use the investor-State mechanism in the Agreement on the Promotion and 
the Protection of Investments, when they meet the criteria to claim jurisdiction for the violation of 
a provision of such agreement.  
National and MFN treatment 
 
1.16.  According to point 4.11 of the Factua l Presentation, there are no provisions on 
MFN treatment for trade in services. 
 Could the Parties clarify for which reasons is the MFN treatment excluded?  
 
 The Parties took the decision to carry out a pragmatic negotiation; hence, in order to 
facilitate the process it was decided neither to undertake MFN commitments, nor elaborate MFN lists in the FTA. In that respect, the Parties cons idered sufficient to be covered by the MFN clause 
in GATS.  WT/REG310/2 
 
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  General provisions of the Agreement 
Current payments and capital movements    
 
1.17.  According to the Factual Presentation , the Parties permit transfers and payments 
for current transactions relating to specific commitments under the Agreement to be 
made freely, and in a freely usable currency at the market rate of exchange prevailing 
on the date of transfer. However, a Party may prevent or delay a transfer or payment 
through the equitable, non-discriminatory and good faith application of its laws relating 
to: bankruptcy, insolvency or the protection of the rights of creditors; issuing, trading or 
dealing in securities, futures, options, or derivatives; financial reporting or record 
keeping of transfers when necessary to assi st law enforcement or financial regulatory 
authorities; criminal or pena l offences; or ensuring compliance with orders or judgments 
in judicial or administrative proceedings (Article 98).  
 Could the Parties explain which laws/regulat ions applying to futures, options and 
derivatives in general may restrict the transfers and payments abroad and how? 
(Article 98.3)  
 Paragraph 4 of Article 98 also refers to Article 163 of the FTA which mandates that 
restriction of transfer and payments may be in accordance with the IMF Agreement and WTO Agreements, including Article XII of GATS on Restrictions to Safeguard the Balance of Payments.  
Response from Costa Rica  
 
 Law No. 1644 of 26 September 1953, "Ley Orgánica del Sistema Bancario Nacional" and Law 
No. 7732 of 17 December 1997, "Ley Reguladora del Mercado de Valores" contain the prudential 
measures that monetary and financial authorities may take regarding all items listed in Article 98, including futures, options and derivatives.  
 
Response from China 
  Regarding the law/regulations applying to futures, options and derivatives, China is still in 
the process of collecting the information.  
 Intellectual property rights 
 
1.18.  Article 110, paragraph 3 of the Agreem ent states that "the Parties will prevent 
practices which constitute an abuse of intelle ctual property rights by right holders, or 
unreasonable restrain competition, or that may unreasonably impede or limit technology 
transfer". 
 Article 109, paragraph 2 of the Agreement states that "the Parties recognize the 
need to achieve a balance between the rights  of right holders of intellectual property 
rights and the legitimate interest of users and society with regard to protected subject 
matter".  
 Could the Parties clarify how they w ill reconcile in practice the potential 
contradiction?   
 Potential contradictions should be analysed and reconciled on a case-by-case basis. The 
International Intellectual Property Regime has recognized and developed tools which aid such endeavour.   
Response from Costa Rica 
 
 For instance, the use of exceptions, in accordance with international commitments and in 
line with national law, is a feasible approach to address potential contradictions. For example, in 
the area of copyrights, national law establishes th at informative news are exempt from protection, 
but when they are transmitted or reproduced, refe rence to the original source must be included. 
The reference in patent law to the possibility to issue compulsory licenses, as long as they are in 
line with the TRIPS Agreement, is another example.  WT/REG310/2 
 
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  Response from China   
 
 Article 55 of Anti-trust Law of China states that, this law is not applicable to undertakings 
who exercise their intellectual property rights in accordance with the laws and administrative 
regulations on intellectual property rights; however this law shall be applicable to the undertakings 
who eliminate or restrict market competition by abusing their intellectual property rights. This shows that China's anti-trust law clearly make legitimate IPR practice an exception but strongly 
opposes abusing IPR to eliminate and restrict market competition.  
 Questions from the Delegation of Japan 
 
General provisions of the Agreement 
Intellectual Property rights 
 1.19.  Paragraph 5.21, is Article 114 on border measures ex officio or upon initiation by 
a right holder applicable to imported/exp orted goods as well as goods in transit? 
 No, Article 114 only applies to goods being im ported, or destined for export. It does not 
apply to goods in transit. 
 Intellectual Property rights 
 
1.20.  Paragraph 5.19, has there been any spec ific development or further discussion on 
the second sentence of Paragraph 2 of Article 113? 
 There has not been any specific development or discussion on incentives to promote and 
encourage technology transfer. 
 Question from the Delegation of Panama 
 1.21.  Taking into account the fact that Costa Rica, in other trade agreements, has accepted provisions recognizing goods transi t via a third country, thereby at the same 
time enabling goods to be re-exported subs equently without losing their originating 
character, could Costa Rica explain how Ar ticle 35(2)(d) of the Free Trade Agreement 
between China and Costa Rica, on "Direct Co nsignment" applies to goods originating 
from China, when these are re-exporte d from a third country like Panama? 
 As established in Article 35 subparagraph d) of the Free Trade Agreement (FTA), in cases 
where the goods are temporarily stored in the territo ry of a non-Party, or stay in a non-Party, the 
length of the stay shall not exceed 3 months from th e date of its entry. In this sense, according to 
paragraph 3 of this Article, the customs authorit y of the importing Party may request additional 
documentary evidence to verify that the merchandis e complies with the provisions of the literal d). 
For example, in the specific case of Panama, the authority could request the "Declaración de 
Movimiento Comercial de Entrada y Salida" or any other document that certifies the compliance of 
the said period, issued by the customs authority. 
 
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