WT/REG342/2  
17 June 2014  
(14-3505)  Page: 1/7  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
  FREE TRADE AGREEMENT BETWEEN COSTA RICA AND PERU 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 11 June 2014,  is being circulated at the request of the 
delegations of Costa Rica and Peru.  
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   This document reproduces the questions addressed to the Parties and the responses 
submitted. 
 Questions from the delegation of Canada 
 1.1.  Paragraph 3.6: The FTA authorizes Peru to maintain specific duties resulting from 
its price band system for certain basic foodstuffs. 
 How are the Parties implementing this pr ovision in the context of Costa Rica's 
potential accession to the Pacific Alliance (P A), in which there is no similar provision 
regarding price band systems?  
The provision that authorizes Peru to maintain the application of the Price Band System 
under the Peru-Costa Rica FTA will not affect Costa Rica's potential accession to the Pacific Alliance because both Agreements will coexist. 
 
1.2.  Paragraph 5.17: Costa Rica currently participates in the Pacific Alliance (PA), 
of which Peru is a full member, as an "Observer State Candidate". 
a. In order to become a full member, is C osta Rica expected to negotiate access 
commitments vis-à-vis  Peru further to the FTA under review? 
The accession of Costa Rica to the Pacific Alliance will encompass a negotiation on market 
access with the four member countries. 
 
b. Were liberalization standards of the PA taken into account during 
the negotiation of the FTA? 
The Free Trade Agreement between Costa Rica an d Peru was negotiated before the Pacific 
Alliance group signed the Additional Protocol to the Framework Agreement. 
 
Questions from the delegation of Chile 
 
Other investment-related provisions 
 
1.3.  In addition to the information presented above, Chapter 12 on investments includes 
provisions dealing with the granting of th e minimum standards of treatment, including 
fair and equitable treatment, to investments of investors of another Party in accordance 
with customary international law (Artic le 12.4); environment-related concerns 
(Article 12.8); compensation for losses (Art icle 12.9); expropriation and compensation WT/REG342/2 
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  (Article 12.10); transfers (Article 12.11 ); special formalities and information 
requirements (Article 12. 13); subrogation (Article 12.14) and a fully-fledged 
investor-State dispute settlement mechanism (Section B, Articles 12.15-12.29). 
 What were the reasons for having a stand-alone chapter on investment? 
 
A chapter on investment was included corresponds to the balance of interests achieved 
as a result of the negotiation. 
 
Relationship with other agreements concluded by the Parties 
 1.4.  Peru is a Party to the Pacific Alliance, a free trade area also comprising Chile, 
Colombia and Mexico. The Pacific Alliance  Framework Agreement and its Additional 
Protocol were signed in June 2012 and Febr uary 2014, respectively; as of March 2014, 
they had not entered into force. The Alliance is  a regional integration area aiming at the 
free movement of goods, services, capital an d persons. There are 30 Observer States 
to the Pacific Alliance, of which Costa Rica - as an "Observer State Candidate".
1 
Comment: It should be noted that Costa Rica has ex pressed its intention to join the Pacific Alliance 
and that, at the most recent Presidential Summit  in Cartagena on 10 February 2014, it signed a 
letter of accession, in which it formally declared its intention to join the PA and the conditions that would form part of this accession (without yet being party to the Alliance). This document is available online at http://www.alianzapacifico.net in the documents section. Furthermore, the FTA 
between Colombia and Costa Rica was signed on 5 May, thereby furthering compliance with the 
Alliance's requirement to have trade agreements in effect with the four countries.  
Questions from the delegation of Colombia 
 
Liberalization schedule 
Safeguard mechanism 
Table 3.3 Peru: Tariff elimination un der the Agreement, by HS section 
1.5.  Given that the average MFN tariff in Peru for the oilseed agricultural sector was 
2.3% in 2013, would Peru please explain wh y it continues to apply a safeguard of 29% 
to fats and oils originating in Colombia. Wo uld Peru also explain why the safeguard has 
not been dismantled, if the measure is of  a temporary nature and Peru has applied 
it to Colombia since 2005. 
In accordance with the Transparency Mechanism for Regional Trade Agreements, Members' 
written questions or comments are to address the RTA under consideration.  
 However, the question raised by Colombia is not related to the FTA between Peru and Costa 
Rica, as it refers to a safeguard procedure developed under the rules of the Andean Community. Peru therefore considers that, in accordance with the Transparency Mechanism for RTAs, it is irrelevant to reply to Colombia's question. 
 
 Without prejudice to the above, it must be no ted that Peru responded to the same question 
in the context of the fourth Trade Polic y Review of Peru, as can be observed 
in WT/TPR/M/289/Add.1. 
 Rules of origin 
Customs-related procedures 
1.6.  Does Peru recognize tariff preferences for products from Costa Rica's free zone? 
If so, in line with the MFN principle, would Peru please indicate why it has not recognized preferences for goods orig inating in the Colombian free zone. 
The Free Trade Agreement between Peru and Costa Rica contains no provisions on free 
zones. The preferential tariff treatment is therefore no different for products originating in Costa Rica. 
                                               
1 For additional information on the Pacific Alliance, see http://alianzapacifico.net/en. WT/REG342/2 
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  Rules of origin 
 
1.7.  Section 3.21(c)(iv) states that "for Chapters 27-29, as well as for some apparel 
of Chapters 61-63, specific processing requirements are fulfilled, …". Please explain 
in further detail why specific processing requirements are mentioned only for these 
chapters, when Article 3.1(b) of the Agre ement states that a good produced from 
non-originating materials is originating when it complies with a change in classification, 
a value content or another specific rule of origin. 
Only the chapters referred to in section 3.21(c)(iv)  are mentioned, as they include chapter 
notes that precede the specific rules of orig in. These notes allow for the implementation 
of production processes specific to the goods concerned. For example, Chapters 27-29 include 
the chemical reaction rule, which allows for a good that is the product of a chemical reaction 
to be considered as an originating good, if the chemical reaction occurs in the territory of one or both Parties. Specific reference is made to this in Article 3.1(b), which states that a good 
produced from non-originating materials is originating, when it complies with another specific rule 
of origin established in Annex 3 (Specific Rules of Origin), or in other words, when it complies with the chapter notes. 
 
1.8.  According to section 3.28(a), diagonal cu mulation with El Salvador, Guatemala, 
Honduras or Panama applies, inter alia , if a trade agreement is in force between Peru 
and these countries. In this connection, we should like to know whether the same 
condition applies to Costa Rica. Furthermore, with regard to section 3.28(b), we should 
like to know whether any progress has been made regarding the negotiations on the conditions for applying diagonal cumulation. 
 Section 3.28(a), which refers to the cumulation established in Article 3.6.3, applies to both 
Peru and Costa Rica. This cumulation allows for materials from El Salvador, Guatemala, Honduras or Panama, which are incorporated in a good produced in the territory of Costa Rica or Peru, 
to be considered as originating in Costa Rica or Peru, provided that a trade agreement is in force 
between Peru and the aforementioned countries, and that compliance is demonstrated with the 
specific rules of origin established in the Agreement between Costa Rica and Peru.  
As regards section 3.28(b), to date no cond itions have been established on applying 
cumulation with third countries that have trade agreements with both Parties.  
Subsidies and State aid  
Subsidies 
 
1.9.   How is the allocation of drawback cont rolled so as to ensure that refunds are 
no higher than they should be? Given the effects that Peruvian exports are having 
in Colombia, especially in the paper and plastics sectors, could this incentive 
b e  c o n s i d e r e d  a n  e x p o r t  s u b s i d y ?  W h a t  m e c h a n i s m s  w e r e  a g r e e d  o n  t o  c o u n t e r a c t  
this effect? 
In accordance with the Transparency Mechanism for Regional Trade Agreements, Members' 
written questions or comments are to address the RTA under consideration. 
 
However, the question raised by Colombia is not related to the FTA between Peru and 
Costa Rica, as it refers to the duty drawback scheme applied by Peru. Peru therefore considers 
that, in accordance with the Transparency Mechanism for RTAs, it is irrelevant to reply 
to Colombia's question.   Without prejudice to the above, it must be  pointed out that Peru replied to the same 
question in the fourth Trade Policy Review of Peru, as can be observed in WT/TPR/M/289/Add.1. 
 WT/REG342/2 
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  Questions from the delegation of the European Union 
 
Trade in services and investment 
 
Comments on FDI's figures 
 
1.10.  According to the report: "While their bilateral stocks of FDI are small, it is worth 
noting the importance of Peru as a destin ation for Costa Rica's outward flows of FDI 
(more than 10% in 2010 and 2011)." Indeed the tables 1.1 and 1.2 indicate in 2010 Costa Rica FDI flows to Peru amounted to  US$3.2 billion (out of US$8.4 billion inflows 
from all countries to Peru). 
It is the EU's view that this represen ts 38% of all FDI flows to Peru in 2010. 
For 2011 the figures are US$3.9 billion ou t of US$8.2 billion – 47%. Therefore, 
in the EU's view, the report should be changed – instead of "10%" it should probably 
read "around 40%". Alternatively, if you take the FDI stocks for those years 
the percentage ratios are 12% for 2010 and 15.4% for 2011.  
In Table 1.2, there is a mistake on the la belling of Costa Rica's outward and inward 
FDI data. The figures indicated as "outward" are "inward", and the ones shown as "inward" are "outward". Costa Rica has requested the Secretariat to modify this in its revised document after the meeting of the CRTA which corrects these kinds of mistakes. As to the specific comment 
from the EU, please note that the unit used for the figures are millions, not billions. 
 Performance requirements 
 1.11.  Paragraph 4.31: The report mentions that  paragraph 2 of Article 12.6 of the FTA 
makes clear that the mandatory use of techno logy for complying with health, security 
or environment requirements is not prohibited. The report does not mention that 
paragraph 9 of Article 12.6 foresees that the subparagraphs 1(b),(c),(f) and 5(a) 
and (b) are not applied for measures concerning the environmental nature (specified in 9(a)-(c)). 
a. What is the difference between paragrap h 2 of Article 12.6 and the mentioning 
of paragraph 1(f) in paragraph 9? 
Paragraph 2 and paragraph 9 have different objectives. Paragraph 2 refers to measures that 
require the use of a specific type of technology. Paragraph 2 is not about the technology transfer 
requirement covered by subparagraph 1(f).  
 Thus, paragraph 2 seeks to clarify that measur es requiring the use of a technology are not 
covered by Article 1(f), since 1(f) establishes the commitment of the Parties to abstain from requiring technology transfers.  
 While 1(f) does not prohibit the requirement to use a specific technology, paragraph 2 aims 
to avoid this possible interpretation.  
 Moreover, the reference to 1(f) in paragraph 9 has a different purpose. In this case, 
the provision is about requirements that potentially involve a transfer of technology. Paragraph 9 establishes that a Party may apply these legitimate requirements if the measures are necessary 
to comply with the objectives set out in paragraph 9. 
 
b. Why do the Parties see a need to refer to the use of technology for certain 
legitimate reasons tw ice instead of once? 
As explained in the previous answer, paragraphs 2 and 9 have different objectives 
and therefore it is not a double reference to "legitimate reasons". It refers to two provisions with a different content. 
 WT/REG342/2 
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  c. Furthermore, how do Costa Rica and Peru see the relationship between 
paragraph 9 of Article 12.6 of th e FTA with Article 12.8 (Medidas 
Medioambientales) which already covers "not lowering standards" and "right 
to regulate"? 
There is a relationship between the two provisions; however, they are not the same. 
  Paragraph 9 of 12.6 establishes the right of the Parties to implement any legitimately 
necessary measure, which could include environmental measures. However, paragraph 9 provides 
for cases when such obligations might be considered inconsistent with certain obligations in the chapter, such as the obligation not to require a transfer of technology.  
 Also, Article 12.8 is clearly linked to environmental topics and, unlike paragraph 9, it does 
not establish an exception. Article 12.8 clarifies that a Party may maintain measures to regulate the environment; provided they are not inconsistent with the Chapter. 
 
Relationship with other agreements concluded by the Parties 
 
1.12.  Paragraph 5.17: The Pacific Alliance has no t yet entered into force. While Peru 
is part of the Agreement, Costa Rica  is an "Observer State Candidate". 
a. Could the Parties clarify whether the C osta Rica – Peru Agreement will remain 
in force once the Pacific Alliance protocol  will be ratified by both Parties? 
Costa Rica participates in the Pacific Alliance as an Observer State Candidate. In this regard, 
once the Additional Protocol to the Framework Agr eement of the Pacific Alliance enters into force 
and Costa Rica had finalized its accession process to this initiative, the Free Trade Agreement 
between Peru and Costa Rica will remain in force, in accordance with the provisions of Article 8 
of the Framework Agreement of the Pacific Alliance  concerning the relation with other agreements. 
 
b. Could the Parties clarify whether there ar e any areas better covered by bilateral 
FTAs than by the Pacific Alliance Agreement? 
The Pacific Alliance is an area of regional integration that seeks, among other objectives, 
to advance towards the free circulation of goods, services, capitals and people. In this sense, 
it beholds some additional provisions to those established in the free trade agreements. 
 It is important to point out that being Costa Rica an Observer State Candidate, it has not 
carried out negotiations within the framework of  the Pacific Alliance. The Free Trade Agreement 
between Costa Rica and Peru was agreed prior to the Pacific Alliance countries signed the Framework Agreement and the Additional Protocol to the Framework Agreement. 
 
Questions from the delegation of Mexico 
 Services 
 Provisions on trade in services 
Scope and definitions 
 1.13.  The Report by the Secretariat states that trade in services is governed 
by Chapter 13 (Cross-Border Trade in Servic es); section 4.4, however, states that 
financial services under a ll modes of supply are excluded from the Agreement's 
coverage. Mexico would like to know whether there are plans for negotiations at a later 
stage on the inclusion of financial services in the Agreement. 
Costa Rica and Peru have not considered initiating negotiations to expand the scope of the 
Agreement to include financial services. Nevertheless, the Parties have not dismissed 
the possibility. If they wish to begin negotiatio ns, they may use Article 13.14, which states that 
the Parties may consider trade in services matters that are of mutual interest. 
 WT/REG342/2 
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  Recognition 
 
1.14.  The chapter on cross-border trade in serv ices has as an aim mutual recognition 
of education or experience obtained, requir ements met, or licences or certifications 
granted in one of the Parties for the licensing  or certification of professional services 
suppliers in the territory of another Party. The chapter does not, however, set a time-frame or a specific plan or schedule to achieve such an objective. 
Mexico would like to know whether the countries have entered into negotiations 
on an agreement or convention on mutual recognition in this area. 
The chapter on cross-border trade in services  does not expressly state that one of its 
objectives is to recognize academic degrees or licences. 
 
 Although recognition is a key element for encouraging and enabling the provision of services, it is a highly complex issue, due to the fact that licences are issued and regulated by 
professional associations. 
  So far, professional associations have not taken any steps in this regard or established 
a joint work agenda. 
 Questions from the delegation of Thailand 
 
1.15.  Paragraph 3.23: A "softer" rule of origin  - allowing the use of non-originating 
mechanically de-boned fowl meat - appl y for imports up to a 100 metric tonnes 
of sausages, food preparations and other prepared or preserved meat of HS 1601 
and 1602; imports above this quantity are subj ect to the normal, stricter rule. In the 
case of Costa Rica, MFN 2013 rates for these products vary from 14% to 150%, 
with liberalization to be complete either  within 10 or 15 years, except prepared 
or preserved meat and offal of poultry othe r than fowls, which are duty-free as from 
the Agreement's entry into force. For Peru, MFN 2013 rates for these products vary from 6% to 11%, with liberalization expe cted either within 10 or 15 years, 
except prepared or preserved meat and offa l of poultry other than fowls, which are 
duty-free as from the Agreement's entry into force. During 2010-2012, no bilateral 
imports of these products were recorded. 
 Please provide the rationale and mechan ism to apply the softer rules of origin 
to certain products under the Agreement. 
 
In the FTA a "softer" rule of origin, apply into the quota for sausages, food preparations 
and other prepared or preserved meat of HS 1601 and 1602, allowing the use of non-originating 
mechanically de-boned fowl  meat of heading 02.07. 
  The softer rules of origin are requirements of  the productive sectors and apply when either 
Party is not enough the local production and therefore will require to import some raw materials 
from third countries.  
1.16.  Paragraph 3.48: Section B of Chapter 8 addresses global safeguard measures 
(Article 8.8) . The Agreement stipulates that Parties retain their rights and obligations 
under the WTO Agreement on Safeguards and Article XIX of the GATT 1994
. 
The Agreement does not confer new rights or obligations in respect of global safeguard 
actions, except that the Party taking the global safeguard measure may exclude 
the other Party's originating imports if such  imports are not the "substantial cause" 
of the serious injury or threat thereof. 
In relation to the application of global safeguards, the FTA allows imports from the 
other Party to be excluded from the applicat ion of global safeguard measures if such 
imports are not the substantial cause of th e serious injury or the threat thereof. 
 
a. Does it mean that imports from the FTA partner will be included in the 
determination of whether "serious injury  or threat thereof" exists, and then 
excluded from the application of global safeguards if such imports are not the 
substantial cause of the serious injury? WT/REG342/2 
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  The application of provisions on global safegu ards of the FTA between Peru and Costa Rica 
will be made in accordance with Article XIX of the GATT and the Agreement on Safeguards, as interpreted by the jurisprudence of the Appella te Body. Accordingly, taking into consideration 
the jurisprudence regarding the principle or re quirement of "parallelism", the possibility 
of exclusion of regional impo rts of the application of safeguard measures, contemplated 
in the abovementioned agreement, would also  imply the exclusion of such imports from 
the determination of the increase on imports and serious injury (or threat of serious injury). 
 
Nevertheless, Peru and Costa Rica note that, in accordance with the Appellate Body in the 
case United States – Safeguards on Certain Steel Products (paragraphs 446-474), there is a right to exclude of the application of a safeguard measure imports from one Party in a regional 
agreement, without excluding such imports from th e determination of the increase on imports and 
serious injury. This would only be appropriate if the competent authorities explicitly establish, by providing a reasoned and adequate explanation, that imports from sources outside the free 
trade zone created by the FTA between Peru and Co sta Rica satisfy, by themselves, the conditions 
for the application of a safeguard measure, in a ccordance with paragraph 1 of Article 2 of the 
Safeguard Agreement, and as described in para graph 2 of Article 4 of the same Agreement. 
 
b. If the answer is yes, how can such se lective application of global safeguard 
measures be reconciled with Article 2.2 of the Agreement on Safeguards, which 
requires safeguard measures to be applie d to an imported product "irrespective 
of its source"? Noting also that the Appellate Body in Argentina - Footwear 
(EC), US - Wheat Gluten  and US - Line Pipe  has stated that if imports from all 
sources are included in the determinat ion of serious injury or the threat 
thereof, the safeguard measures must, correspondingly, be applied to imports 
from all sources. 
In the hypothetical case that a Party in the Agreement decides to exclude the imports of the 
other Party, without excluding them of the determ ination of the increase on imports and serious 
injury, the Party shall take into consideration what was described in the last paragraph of the reply to the previous question. 
 
1.17.  Paragraph 3.58: Proof of origin is grante d either by a Certificate of Origin 19 
or a Declaration of Origin 20 both of which are valid for one year (Articles 3.16 and 3.17, 
respectively). While the former is to be fi lled in by the exporter and submitted to the 
entity competent to issue it, the latter is a se lf-declaration by an "authorized exporter"; 
the conditions and requirements  for being designated as such by the exporting Parties' 
competent authority or, when applicable, by its authorized entity are included 
in Article 3.18. Future use of digital certificates of origin are envisaged; 
as of March 2014, progress had not been achieved in this respect. 
Please provide information regarding "aut horized exporter," especially on the 
criteria and requirements to be approved as authorized exporter. 
 
The conditions and requirements to be approv ed as an authorized exporter are included 
in Article 3.18 of the FTA. In this sense,  the competent authority or when applicable, 
the authorized entity of the exporting Party ma y authorize any exporter to be as authorized 
exporter, if:  
 makes frequent shipments of originating products of the exporting Party; 
 
 has sufficient knowledge and ability to issue Declarations of Origin properly and comply 
with the conditions established in the laws and regulations of the exporting Party; and 
 
 submit to the competent or authorized authority of the exporting Party, a written 
undertaking that he accepts full responsibility for any Declaration of Origin, which 
identifies him as if it has been signed in manuscript by him. 
The competent or authorized authority of the exporting Party shall monitor the use of the 
authorization by the authorized exporter.  
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