WORLD TRADE  
ORGANIZATION  WT/REG160/5 
1 August 2005 
 
 (05-3459) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN THE UNITED STATES AND CHILE 
 
Questions and Replies
 
 
 The following communication, dated 22 June 2005,  is being circulated at the request of the 
Delegations of United States and Chile. 
  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/REG160/3 
for the goods aspects of the Agreement, and WT/R EG160/4 for the services aspects of the Agreement. 
 
_______________ 
 
GOODS ASPECTS
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT 
 
3. Scope  
 
1. What have been the fill rates since implementation? 
Have these increased in line with increases specified in the text? 
How do these preferential TRQs impact on third parties? 
Is there a process for re-allo cation of unused quotas? 
During 2004, the fill-rates on the US-Chile FTA  preferential TRQs for Chilean agriculture 
products entering the United States ranged from zero percent on products such as beef, tobacco, and 
certain tires to 48.5 percent on other tires, to 100 percent on products such as avocadoes, processed 
artichokes, and copper.  With respect to the fill ra te on Chilean beef TRQ fo r US originating products, 
it has been zero. 
The annual increases in quantities available unde r each FTA preferential TRQ are specified in 
the schedules set out in the Agreement.  The TRQs set out in the US-Chile FTA represent 
opportunities for exports, but are not minimum purchase requirements. 
For products where the United States has TRQs  as part of WTO obligations, the access 
provided by FTA TRQs are additional to the WTO TR Q access.  In such cases, it is possible that 
Chile could use the FTA preferential TRQs for its  exports to the United States rather than access 
allowed on an MFN basis for WTO TRQs.  If this  occurred, additional volumes under WTO TRQs 
could be available to third parties.   
There is no process for re-allocating unused TR Qs to other countries under the US-Chile FTA 
since the FTA TRQs are available only to Chile. WT/REG160/5 
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 2. Regarding the scope of Agreement on goods as pects, as addressed in Paragraph 3, we 
have noted that United States’ liberaliza tion commitments cover non-agricultural goods 
originating in Chile.  According to the chart,  83 per cent of Chilean imports will enjoy zero 
tariff rate after the 12-year phase in period.  We  would appreciate an explanation of how this 
fulfils the “substantially all the trade” requireme nt provided in Article XXIV:8 of the GATT in 
this instance? 
Table 3.1 A describes the liberalization co mmitments for all goods that do not have 
transitional tariff rate quotas (TRQs) (both non-agri cultural and agricultural), while table 3.1 B shows 
the liberalization commitments for those goods with  transitional TRQs.  The percentage column for 
each chart shows the share of total goods – both TR Q and non-TRQ – covered.  Therefore, the chart 
shows that 100% of all duties are eliminated for Chile by year twelve – 83% of the duties are with 
respect to goods that are not subject to TRQs duri ng the interim period and the remaining 17% of the 
duties are with respect to goods that are subject to TRQs during that period. 
3. We are interested in the allocation method  of tariff-rate quotas for beef and poultry 
products.  Is any phase-out plan envisaged for th e elimination of such tariff-rate quotas?  Are 
there different phase-out periods between the in -Quota tariff rates and out-of-Quota tariff 
rates? 
Regarding TRQs for beef and poultry products, the within-quota rate on those TRQs is set at 
zero immediately.  The over-quota rates for beef will be phased-out within 4 years and for poultry 
within 10 years. 
4. According to Paragraph 3 of the Understanding on the Interpretation of Article XXIV 
of the GATT 1994, the recommended time period is ten years.  What is the justification for a 12-
year phase-out period?  Would the 12-year period a pply equally to all produc ts subject to tariff-
rate quotas? 
All transitional, preferential TRQs have within -quota rates of zero.  The elimination of the 
over-quota rates varies by product, as exemplified above  for beef and poultry.  The over-quota rates 
on all goods will be eliminated within 12 years,  and the exact timing for each product subject to 
transitional TRQs was determined as a result of the negotiations.  Overall, 2.4% of Chilean imports 
into the United States and 1.8% of the tariff lines subject to transitional TRQs will not receive zero 
duties within 10 years.  In the case of US exports to Chile subject to transitional TRQs, zero trade and only 0.8% of tariff lines will not receive zero duties within 10 years.  We believe these figures 
demonstrate that “substantially all trade” subject to preferential tariff-rate quotas is duty-free within 
10 years. 
5. The EC would appreciate if the US could ex plain the reasons for making use of  the 
possibility under GATT Article XXIV to go beyo nd 10 years transition periods “only in 
exceptional cases”.  In addition, the EC would like to know exactly what these “exceptional cases” were for each of the products groups th at have been granted the 12 year transition 
period.  Finally, the EC would be intereste d in knowing why the Parties under the FTA 
considered that these “exceptional cases” warranted greater flexibility – in terms of the value of 
trade for the products with 12 years transition period – on the part of the US than on the part of Chile. 
All products that are contained in the 12-year tr ansition period are subject to tariff reductions 
during that transition period.  This means that by year ten, there are significant tariff reductions for 
every one of the items that is in the 12 -year categor y.  Rather than simply stop the tariff liberalization 
process at that point, the United States and Chile agreed  that it would be preferable to take two extra 
years to achieve complete liberalization of all agri cultural products.  Both countries believe complete  WT/REG160/5 
 Page 3 
 
 
 liberalization of all agricultural products is a consid erable achievement, particularly given the partial 
treatment on agriculture contained in many other FTA s.  The products include d in the 12-year staging 
category were determined through negotiation.   
II. TRADE-RELATED PROVISIONS 
 1. Import Restrictions
 
 
6. We understand that Chile has agreed to pha se out the Price band mechanism with 
regard to the United States.  How will the four products (wheat, wheat flour, edible oil and 
sugar) now be treated?  How will this appl y to other trading partners, FTA partners? 
These goods were negotiated to be in category G,  which means that duties shall remain at 
base rates during years one through four.  After that duties shall be reduced by 8.3 percent of the base 
rate on January 1 of year five, and by an additional 8.3 percent of the base rate each year thereafter 
though year eight.  Beginning January 1 of year nine, duties on these goods shall be reduced by an 
additional 16.7 percent of the base rate annually th rough year twelve and shall be duty-free effective 
January 1 of year twelve. 
In the case of sugar, to access to the previ ous schedule the United States needs to present a 
trade surplus on the HS heading 1701.  The quantit y of sugar benefited by the tariff elimination 
program shall be equal to the surplus previously mentioned. 
As for how this mechanism will apply to other partners of Chile, the US-Chile FTA does not 
say anything, thus the effect on other partners will depend on the commitments Chile has previously 
negotiated in its different trade agreements. 
7. Under the FTA, the US will eliminate it s merchandise processing  fee for Chilean 
products.  For the EC, this raises additional co ncerns with the existing regime for the MPF, due 
to its element of discriminatory treatment.  In particular, the EC would be interested in 
knowing in what way the US considers that the elimination of the MFP for Chilean products 
fulfils the requirement under GATT Art XXIV wi th respect to “neutrality”, more specifically 
that other regulations of commerce should not be  higher or more restrictive for third parties? 
Article XXIV:5(b) provides that, with respect to a free trade area, the “duties and other 
regulations of commerce maintained in each of th e constituent territories” applicable to contracting 
parties not included in such area, “shall not be high er or more restrictive than the corresponding duties 
and regulations of commerce existing in the same c onstituent territories prior to the formation the free 
trade area.” 
The merchandise processing fee (MPF) is a charge associated with the importation of goods.  
In providing for the eventual duty-free preferen tial access of goods, the United States agree to 
eliminate both the existing duty and the MPF.  Ne ither duties nor the MPF have been increased or 
made more restrictive for other contracting parties. 
8. Under the FTA, Chile will eliminate its Luxury Tax of 1974 according to a specific 
schedule (Annex 3.14 of the FTA).  Does Chile intend to eliminate this tax on MFN-basis? 
Law 19.914 eliminates the luxury tax according to a specific schedule.  This tax was an 
internal levy, hence its elimination applies to all nationals and foreigners, w ithout discrimination.   
 WT/REG160/5 
Page 4  
 
 3. Rules Of Origin
 
 
9. Article 3.20(6) provides for a more restricted de minimis  threshold for products 
containing elastomeric yarn to be recognized as originating goods, would the Parties please 
explain the rationale? 
Elastomeric yarn is a particularly sensitive pr oduct for the U.S. textile industry.  Currently, 
there are multiple suppliers of such yarns in the do mestic market.  Therefore, in negotiating the text 
regarding the rules of origin for elastomeric yarn s, the U.S. Government strove to retain the 
competitiveness of these products when entering into the free trade agreement with Chile. 
10. The EC would appreciate if the Parties co uld explain the differences between Article 
4.1.1.a and c of the agreement, i.e. “a. the good is  wholly obtained or produced entirely in the 
territory of one or both of the Parties” and “c. the good is produced entirely in the territory of 
one or both of the Parties”. 
Article 4.1.1(a) and 4.1.1(c) set forth two very  different criteria to establish that a good is an 
“originating good, eligible for preferential tariff treat ment.”  Goods that are originating under Article 
4.1.1(a) are limited to those goods listed in the Artic le 4.18 definition of “Goods Wholly Obtained or 
Produced Entirely in the Territory of  One or Both of the Parties.”   
By contrast, Article 4.1.1(c), requires that the good must be produced in the territory of the 
Parties exclusively from originating materials.  An originating material is simply an originating good 
that is an input (see the definition of “material” in  Article 4.18).  Therefore, an originating material 
may contain non-originating components, provide d any non-originating component undergoes an 
applicable tariff shift or satisfies an applicab le regional value content requirement, or is de minimis , 
where applicable. 
5. Safeguards  
 
11. Chapter 8 Trade Remedies, Section A Safeguards of the US - Chile FTA provides 
safeguards measures. 
• Have any safeguard measures been invoked?  
• What are the significant differences between the safeguard provisions in the 
agreement and the WTO Safeguards Agreement? 
No safeguard measures have been invoked.  The provisions in the US-Chile FTA maintain the 
rights and obligations of the Parties regarding Gl obal Safeguards (the WTO Safeguards Agreement).  
It also includes Bilateral and Textile Safeguard s (Chapter 8 and Article 3.19, respectively).  
Significant differences from the WTO Safeguard s Agreement regarding Bilateral and Textile 
Safeguards included in the US-Chile FTA are: 
• The US-Chile FTA foresees only increases in tariff rates, and not other types of 
measures such as quotas; 
• Notification requirements are simpler; 
• The maximum time period that a safeguard measure may remain in place is three years, 
which is shorter than under the WTO Safeguards Agreement;  WT/REG160/5 
 Page 5 
 
 
 • Measures may not be imposed twice on the sa me good or after the end of the transition 
period; 
• If the Party applying a safeguard measure do es not provide adequate compensation, the 
other Party is not required to wait three years to take action;  and 
• The use of the “substantial cause” standard gives greater clarity to the analysis of 
whether increased imports cause serious inju ry or the threat of serious injury. 
The measures in the US-Chile FTA ha ve a ceiling equal to the MFN rate. 
In addition, the US-Chile FTA includes an agricultural safeguard measure for selected 
products and that applies automatically on the basis of prices. 
8. Sector Specific Provisions  
  Agriculture
 
 12. Regarding the issue of agricultural goods, Paragraph 8 of WT/REG160/3 states that the 
Parties had agreed not to introduce or maintain export subsidies on agricultural goods destined 
for the other Party unless one Party believes that  a non-party will be subsidizing agricultural 
exports to the territory of the other Party.  In such a situation, “the Parties may agree upon 
measures to be taken by the importing Party.”  We would appreciate further clarification of this 
phrase. 
The exact measures to be taken would be determin ed if such a situation occurred.  Thus far, 
no situation has arisen that would require the use of this provision. 
13. In the Standard Format, page 9, it states: 
“The Parties agreed to the use of an automa tic and transitional “agricultural safeguard 
mechanism” for specified products if the unit import price of the good enters the Party’s 
customs territory at a level below a trigger price for that good as set out in the Annex 3.18 to the 
Agreement.  The mechanism allows the possibility of adding additional import charges to the 
preferential tariff but never above MFN rates.  The ability to use this mechanism disappears 
once the tariffs are at zero.” 
• Has the agricultural safeguard mechanism been invoked? On what products? 
• How are the additional import charges determined? Is it the difference between 
the unit import price and the trigger price? 
No.  The agricultural safeguard has not  been invoked by either Party. 
The additional duties to be charged under the ag ricultural safeguard are determined according 
to the schedule established in Article 3.18(3). 
14. Sector specific safeguards are allowe d in agriculture (“agricultural safeguard 
mechanism”) and textiles and apparel (“Bilatera l Emergency Actions”), beyond the possibility 
of applying general safeguards (Chapter 8, Section A of the FTA).  The EC would like to ask the 
following questions with respect to these different measures: WT/REG160/5 
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 • How do the requirements for the applic ation of these three different measures 
compare? 
The agricultural safeguard mechanism is applied if the unit import value of a product is below 
the trigger price for that good as set out in that Party’s section of Annex 3.18.  If the agricultural 
safeguard mechanism is triggered, the actual amoun t of additional duties is computed based on the 
schedule contained in Article 3.18, paragr aph 3 (repeated below for transparency): 
(a) if the difference between the unit import price of the item expressed in terms of 
domestic currency (the “import price”) and the trigger price as is less than or equal to 10 per cent of the trigger price, no additional duty shall be imposed; 
(b) if the difference between the import price and the trigger price (the “difference”) is 
greater than 10 per cent but less than or equa l to 40 per cent of the trigger price, the 
additional duty shall equal 30 per cent of th e difference between the MFN rate and the 
preferential tariff rate; 
(c) if the difference is greater than 40 per cen t but less than or equal to 60 per cent of the 
trigger price, the additional duty shall equa l 50 per cent of the difference between the 
MFN rate and the preferential tariff rate; 
(d) if the difference is greater than 60 per cen t but less than or equal to 75 per cent, the 
additional duty shall equal 70 per cent of th e difference between the MFN rate and the 
preferential tariff rate;  and 
(e) if the difference is greater than 75 per cent of the trigger price, the additional duty shall 
equal 100 per cent of the difference between the MFN rate and the preferential tariff 
rate. 
For the purpose of these calculations, the sum of any such additional duty and any 
import duties or other charges shall not exceed the lesser of: 
(i) the prevailing most-favored-nation (MFN) applied rate;  or (ii) the MFN applied rate of duty in e ffect on the day immediately preceding the 
date of entry into force of this Agreement. 
The provisions in the US-Chile FTA maintain  the rights and obligations of the Parties 
regarding Global Safeguards (the WTO Safeguards Agreement).  The US-Chile FTA also includes 
Bilateral and Textile Safeguards (C hapter 8 and Article 3.19, respectively).  Significant differences 
from the WTO Safeguards Agreement regarding Bilate ral and Textile Safeguards included in the FTA 
are: 
(a) The US-Chile FTA foresees only increases in tariff rates, and not other types of 
measures such as quotas; 
(b) Notification requirements are simpler; (c) The maximum time period that a safeguard measure may remain in place is three years, 
which is shorter than under the WTO Safeguards Agreement; 
(d) Measures may not be imposed twice on the same good or after the end of the transition 
period;  WT/REG160/5 
 Page 7 
 
 
 (e) If the Party applying a safeguard measure does not provide adequate compensation, the 
other Party is not required to wait three years to take action;  and 
(f) The use of the “substantial cause” standard gives greater clarity to the analysis of 
whether increased imports cause serious inju ry or the threat of serious injury. 
(g) The measures in the US-Chile FTA have a ceiling equal to the MFN rate. 
• Are there any requirements on injury or threat of injury, or alike, for the 
application of agricultural safeguards under the mechanism? 
No.  Like the price-based element of the speci al safeguard mechanism established in the WTO 
Agreement on Agriculture, the agricultural safeguard  in the US-Chile FTA is implemented if the 
import price is lower than a trigger price.  
• How have the trigger prices been calculated? More specifically, what historical 
reference periods have been used, have any “buffers” – in terms of differences 
between the historical prices and the trigger prices – been applied, and to what 
extent, if at all, have the calculations of  trigger prices taken into account potential 
reductions in terms of trade over time for the products in question? 
Historical unit import values were used to establish the trigger prices – no “buffers” were used 
nor were other adjustments made to the actual historic data. 
• How much bilateral trade between the part ies is taking place for the products 
listed in Annex 3.18 in absolute terms and as  a percentage of total imports, as well 
as of total agricultural imports, by each of the Parties? 
US imports from Chile of the products listed in  Annex 3.18 amounted to $7 million in 2003, 
or 0.2 percent of total imports and 0. 6 percent of total agricultural imports. 
Chilean imports from the United States of the products listed in Annex 3.18 amounted to $2.3 
million in 2003, or 0.09 percent of total imports  and 1.5 percent of total agricultural imports. 
• What was the reason for applying the sa feguard mechanism to a total number of 
52 products for the US and only 15 products for Chile? 
The list of items subject to the safeguard m echanism was subject to negotiation between the 
two parties. 
9. Other  
 
Customs Administration  
 
15. On the subject of “drawback and duty referral program”, as set out in Article 3.8, we 
would like to know the reasoning behind the abo lition of drawback and duty referral and its 
implications for foreign companies doing business in the territories of the Parties. 
The US-Chile FTA eliminates drawback to en sure that neither party becomes an export 
platform for materials produced in countries outside the free trade area.  With respect to the effects on 
“foreign companies doing business in the territories of the parties,” the elimination of drawback 
applies equally to all companies, regardless of whet her they are incorporated in the free trade area or 
in other countries. WT/REG160/5 
Page 8  
 
 Intellectual Property Rights (IPR)
 
 
16. Is there any WTO plus, that is TRIPS plus element in Chapter 17 of the US-Chile FTA? 
It was not the Parties’ intention to simply r eaffirm the TRIPS Agreement.  Many elements in 
the chapter provide more clarity and specificity  regarding TRIPS commitments, and some are in 
addition to or go beyond what the TRIPS Agreem ent requires.  For instance, the US-Chile FTA 
requires either ratification or reasonable efforts to ratify a number of intellectual property agreements 
administered by WIPO, which is something not addressed by the TRIPS Agreement.  Similarly, whereas the TRIPS Agreement requires a minimum copy right term based on “life of the author” plus 
50 years, the FTA provides for a minimum term of “life of the author” plus 70 years.  As a final 
example, the enforcement provisions establish specifi c obligations that are not detailed in the TRIPS 
Agreement.  Consistent with Article 1.1 of the TRIPS Agreement, none of these various protections 
contravene the provisions of the TRIPS Agreement. 
17. Please answer the following question as well, regardless of the answer in the previous 
question:  The WTO TRIPS does not have an RTA provision as exists in GATT and GATS.  If 
there is a preferential treatment in IPR protection  between the parties, will the parties extend it 
to other WTO Members under the MFN principle of the TRIPS? 
The US-Chile FTA does not affect the rights and obligations the Parties have vis-à-vis other 
WTO Members, including the MFN obligation under Ar ticle 4 of the TRIPS Agreement.  Therefore, 
the Parties did not reach any understanding concer ning such rights and obligations, and they will 
continue to meet their MFN obligation under Article 4 of the TRIPS Agreement.   
18. Paragraph 5 of Article 17.1 of the US-Chile FTA provides only for the rights and 
obligations of the parties under TRIPS.  Is there any understanding or result of discussion 
during the FTA negotiations regarding the rights and obligations of other WTO members under the TRIPS? 
As this FTA does not affect the rights and obligations of other WTO Members under the 
WTO Agreement, the Parties did not reach any unde rstanding concerning such rights and obligations.  
Moreover, this non-derogation clause, similar to TRI PS Article 2.2, applies not only with respect of 
TRIPS, but also with respect to other multilatera l intellectual property agreements concluded or 
administered under the auspices of the World Intellectual Property Organization. 
III. GENERAL PROVISIONS OF THE AGREEMENT 
 2. Accession
 
 
19. On the issue of accession to this Agreement, we are particularly interested in knowing 
whether the Agreement would be open to accessi on by other third countries, with a view of 
encouraging deeper and broader trade liberalizati on covering more participates.  Would the 
Parties consider the possibility of affording the op portunity for other interested third countries 
to negotiate their accession to such an Agreement  when a certain transitional period of time (for 
instance ten years) has expired, for the purpose of  promoting further trade liberalization within 
the internal market of the FTA? 
While the US-Chile FTA does not contemplate th ird country accessions, the Parties are free to 
consider such accessions and any necessary modifi cations to the FTA should they so desire. 
  WT/REG160/5 
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 3. Dispute Settlement Procedures  
 
20. In recognition of the broad commitments undert aken by the Parties of the FTA and the 
extensive provisions on dispute settlement in Ch apter 22 of the agreement, the EC would like to 
seek clarifications on a number of technical aspects: 
• Article 22.14(3) refers to the possibility of  the Parties agreeing on a “mutually 
satisfactory action plan to resolve the dispute, which normally  shall conform with 
the determinations and recommendations (of the Panel)”.  Does this mean that such action plan could eventually envisage a result inconsistent with the Panel recommendations (e.g. non compliance with the Panel recommendation against payment of compensation)? Also, are there any conditions for recourse by the 
Parties to “compensation”? Is such compensa tion of “temporary nature”, as it is 
the case under the WTO DSU? (Articles 3.7 and 22 WTO DSU state that compensation should be resorted to only if the immediate withdrawal of the measure is impracticable and as a tempor ary measure pending the withdrawal of 
the measure which is inconsistent with a covered agreement”).  In other words, 
would an agreement on a definitive compensation (that would remove the 
obligation of the respondent to comply with the Panel recommendations) be 
consistent with the provisions of the FTA? 
The goal of the US-Chile FTA dispute settlement  mechanism is to promote compliance.  The 
Parties have 45 days, or such other period as they may agree, to reach a mutually satisfactory 
resolution, through an action plan or otherwise.  In  normal circumstances, the Parties are expected to 
agree to a resolution that is in conformity with  the panel’s determination and recommendations, if 
any.  It should be noted that panels only make recommendations for how to resolve the dispute if both 
Parties have requested them.  See Article 22.12(3 )(c).  The mechanism recognizes that there may be 
some disputes where the Parties cannot agree to a mutually satisfactory resolution.  Therefore, the 
mechanism provides for the possibility of agreeing to  trade compensation or, eventually, resorting to 
suspension of benefits.  Footnote 1 to Article 22.14(2) makes clear that compensation, the payment of 
monetary assessments, and the suspension of benefits are intended as temporary measures pending the elimination of any non-conformity or nullifica tion or impairment that the panel has found. 
• Article 22.15(5) foresees the possibility that  the Parties agree on the payment by 
the respondent Party of an annual mone tary assessment.  In the absence of an 
agreement on the amount of such assessment, this will be set a 50% of the level of 
the benefits the panel has determined or , if no panel was established for this 
purpose, 50% of the level that the complaining Party had proposed to suspend.  What is the reasoning behind this option? 
The US-Chile FTA dispute settlement mechanis m is designed to promote compliance, but 
also to avoid, where possible, harming interests not involved in the dispute.  The mechanism in 
Article 22.15(5) provides the opportunity for the respondent Party to avoid the harm to those 
industries that otherwise would be subject to the su spension of benefits by paying an annual monetary 
assessment.  This step would be undertaken at the discretion of the Party complained against.  The 
assessment would be paid in quarterly instalments unt il the non-conformity is eliminated.  In addition, 
Article 22.15(6) provides that where the circ umstances warrant, the Free Trade Commission may 
decide that an assessment will be paid into a fund an d used for appropriate initiatives to facilitate trade 
between the Parties, including by further reducing unreasonable trade barriers or by assisting a Party 
in carrying out its obligations under the US-Chile  FTA.  This is an innovative way of further 
promoting compliance.   WT/REG160/5 
Page 10  
 
 • Concerning Article 22.15 (Suspension of Benefits), are there any criteria on which 
kind of benefits can be suspended in case of failure to implement the Panel recommendations or a compensation deal equivalent to those established under Article 22.3 of the WTO DSU? Is the complaining Party allowed to suspend 
benefits under any of the Chapters of the FTA, regardless of its relation to the 
dispute? 
There are no criteria with respect to which kind of benefits can be suspended, except with 
respect to financial services.  Article 12.17(6) pr ovides that where a panel finds a measure to be 
inconsistent with the obligations  of the US-Chile FTA and the m easure affects only the financial 
services sector, the complaining Party may suspend be nefits only in the financial services sector.  If 
the measure affects the financial services sector and any other sector, the complaining Party may 
suspend benefits in the financial service sector that have an equivalent effect to the effect of the 
measure on the financial services sector.  And, if th e measure affects only a sector other than financial 
services, the complaining Party cannot suspend benefits in the financial services sector. 
• According to Article 22.17 (Compliance review), in case of disagreement on the 
elimination of the non-conformity that the panel has found, it is the Party complaint against that has to request a panel to review such conformity.  On 
which Party would be the burden of proof in the context of such compliance 
review? Also, the wording of the provision seems to imply that the review would be limited to the inconsistencies found by the Panel.  What would happen if the new measures adopted by the responde nt are consistent with the Panel's 
recommendations but introduce new inconsistencies with the FTA provisions? 
Chile and the United States have not had any experience with the implementation of these 
procedures so we are not able to provide a definitive answer. 
• [1] Articles 10.19 (10) and Articles 10.25 (Appellate review), of Chapter X- Section 
B:  Investor-State Dispute Settlement, seems to foresee the relationship between 
the dispute settlement provisions of the FTA with those foreseen in an eventual multilateral investment agreement.  Could you clarify this provision? [2] Does this 
provision mean that US and Chile should  work to ensure that for arbitrations 
started under the rules of the FTA, only the rules for review of awards foreseen 
therein (not the DS mechanism of the mu ltilateral agreement) would be applied? 
Which are those rules? [3] Also, Anne x 10-H foresees the eventual establishment 
of an Appellate Body or similar mechan ism for review of investment awards.  
Would this mechanism replace the use of ICSIC/UNCITRAL review? [4] 
Moreover, Annex 10-E (Submission of a Cl aim to Arbitration) seems to limit 
access for US investors to investor-state  arbitration under the FTA for claims 
under Section A (Investment) and/or th e specific commitments under Annex 1-F 
(on Chilean legislation DL 600).  Submitting such a claim before a Chilean court or administrative tribunal would impede  the US investor to have recourse to 
arbitration under the FTA for the same allegations.  A similar provision does not 
exist for Chilean investors in the US.  Do es this mean that Chilean investors can 
proceed in parallel at the domestic and ar bitration level or chose to have recourse 
to the domestic courts and, if not satisfied with the outcome, still request arbitration under the FTA?  [5] Are they subject to the three-year timeframe established in Article 10.17 (the exhaustion of domestic remedies and the request 
for arbitration under the FTA would have to be made before the end of that 
deadline)?  What is the reasoning behind the limitation introduced for US investors in Chile?  WT/REG160/5 
 Page 11 
 
 
 [1] Appellate procedures, such as those that  exist in the WTO, provide coherence and 
predictability to the interpretati on of agreements.  However, no su ch procedures currently exist for 
investor-state dispute settlement.  The Chile-U.S. FTA  foresees the possibility of a larger multilateral 
international agreement eventually establishing an  appellate body or similar mechanism to review 
investment awards, and requires the Parties to seek to have that appellate body or similar mechanism 
review investment awards rendered under Section B.  In other words, if and when a multilateral 
appellate mechanism for investor-state disputes is  established, the provisions at issue express the 
intent of the United States and Chile to make awar ds in investor-state disputes under the US-Chile 
FTA eligible for review by that mechanism.   
However, to further the Parties’ objective of providing coherence and predictability to the 
interpretation of the US-Chile FTA in the absence  of a multilateral appellate mechanism, Article 
10.19.9(a) establishes the right of the disputing Partie s, within 60 days after the tribunal transmits its 
proposed award, to submit written comments to the tribunal concerning any aspect of the proposed award. 
[2] Article 10.25.6 contemplates the possibility of an award being reviewed under certain 
specified grounds.  For example, an award rende red under ICSID rules may be subject to an 
annulment proceeding before an ICSID ad hoc  committee.  An award rendered under UNCITRAL or 
other rules may be reviewable by a national court in a set-aside proceeding.  If  the Parties decide to negotiate a bilateral appellate body  or similar mechanism for the review of awards, rendered under 
Article 10.25, the Parties may determine, how the a ppellate rules contemplated in  ICSID,  ICSID 
Additional Facility Rules and UNCITRAL, would be included.   
Moreover, Articles 10.19.(10) and Annex 10-H do not pre-judge the outcome of such 
reconsideration. 
[3] See response to the preceding question. [4] Under Chilean domestic law, a U.S. investor may submit to a domestic court a claim that 
the Government of Chile has breached an obliga tion under the US-Chile FTA.  Annex 10-E protects 
Chile from having to defend against successive proceed ings for the same claims under the FTA.  The 
United States does not need this protection because no  such domestic right of action exists under U.S. 
law.  In fact, section 102(c) of the Act implemen ting the US-Chile FTA in the United States expressly 
precludes private rights of action in U.S. courts for breaches of the FTA.  Therefore, a claim by a Chilean investor that the U.S. Government has breached an obligation of the FTA’s Investment 
Chapter may be reviewed only by a tribuna l established pursuant to that chapter. 
[5] The three-year period for commencing investor -State arbitration, referred to in Article 
10.17, applies to all requests for arbitration under Section B, Chapter 10 of the FTA. 
• Why does the FTA provide for special dispute settlement rules in the Financial 
services sector, as contained in Articles 12. 16, 12.17 and 12.18 (Dispute Settlement 
in Financial services), e.g. different dead lines, special panellists, participation of 
officials from the Financial Services Commi ttee, etc.?  Also, according to Article 
12.18, the arbitral tribunal established to rule on a case where the respondent 
invokes the exceptions under Article 12.10 “shall” refer the matter to the Financial Services Committee for a decision within 60 days.  Why is the Financial Services Committee given such an importan t role? How are the decisions taken in 
this Committee? Moreover, why does the FTA allow the complainant to request a 
“second” arbitral panel to be established to decide on the application of Article 
12.10 to the case where the Financial Serv ices Committee fails to take a decision WT/REG160/5 
Page 12  
 
 within the timeframe prescribed? Why have the Parties not envisaged leaving this 
issue to the arbitral Panel originally established to rule on the case? 
The US-Chile FTA financial services chapter in cludes some modifications to the investor-
state and state-to-state dispute settlement provisi ons of the FTA.  Financial services is a sensitive 
sector that can have economy-wide impacts.  The mo difications generally are intended to ensure that 
relevant financial services expertise is included in dispute settlement proceedings. 
Article 12.16 provides for the inclusion of the Party’s financial experts in any consultations 
over matters involving financial services, including pot ential disputes, because of their expertise on 
prudential, monetary and other exceptions.  Article  12.17 provides for consultations under Article 
12.16 in a state-to-state context, unless the Parties ot herwise agree.  Article 12.17 also provides for the 
use of financial experts as arbitrators, again b ecause of their expertise regarding the Chapter’s 
exceptions. 
Article 12.18 provides for referral to the Financial Services Committee (FSC) of disputes 
arising in the investor-state context where, am ong others, the monetary or prudential exception is 
invoked.  The purpose of referral to the FSC is to take advantage of the expertise of the financial 
experts comprising the FSC to provide maximum oppor tunities for the dispute to be settled.  Where 
the FSC fails to reach consensus a nd thereby resolve the relevant dispute, either the respondent or the 
Party of the investor may request a state-to-state panel.  Such a panel ensures that both governments 
are involved in the determination as to whether a cite d exception applies.  This approach ensures there 
is sufficient flexibility to deal with a sensitiv e sector and minimizes the likelihood of unnecessary 
claims.   
• Article 14.6 in Chapter XIV (Temporary entry for business persons) of the 
Agreement limits recourse to dispute settl ement in relation to refusals to grant 
temporary entry to cases of “pattern of  practice” where the domestic remedies 
have been exhausted.  What do the Parties understand for “pattern of practice”? Would that be decided solely by the arbitrators on a case-by-case basis? 
The US-Chile FTA does not define “pattern of practice”.  Depending on the purpose for entry, 
the process of gaining admission into the United St ates and Chile could involve a number of steps, 
including submitting a petition, applying for a visa, a nd applying for admission at the port of entry.  
The provisions of Article 14.6 are intended to av oid disputes based on a single incident in the 
processing of an application for an individual business person. 
• Could the Parties please clarify the relati onship between the procedural steps foreseen 
in Article 18.6(4) and 19.6(4) of Chapters XVIII and XIX, in case of dispute settlement 
in the areas of labour and environment, and the general Dispute Settlement 
procedures established in Chapter XXII? Also , what is the sequence of steps provided 
under Article 18.6 (4), (5) and (6), as well as  19.6(4), (5) and (6),  where a dispute over 
the non-enforcement of the labo ur/environmental laws of a Party to the FTA cannot 
be solved through consulta tions? Moreover, does the co mplaining Party have the 
option to either request consul tations after 60 days from the request for consultations 
(or alternatively request a meeting of the Commission) or to put the dispute to the 
Council? Finally, can the respondent avoid rec ourse to DS by putting the issue before 
the Council? Or is the 60-day period also ap plicable to discussion of the matter before 
the Council? 
The provisions in Articles 18.6(1)-(6) and 19.6(1)-(6) effectively parallel those in Article 22.4.  
They are designed to enable a complaining Party to request consultations through the national points of 
contact and put the issue to the Co uncil and/or request a meeting of the Commission (and, subsequently,  WT/REG160/5 
 Page 13 
 
 
 the formation of a dispute settlement panel) if the di sputed matter is not resolved within 60 days of a 
request for consultations.  Once the sixty days ha ve run, a complaining Party that has requested 
consultations under Article 18.6(1) or 19.6(1) would have the choice of requesting consultations under Article 22.4 (if it believes such a step would be u seful) or requesting a meeting of the Commission under 
Article 22.5 (if it wants to move the dispute forward as quickly as possible).  The complaining Party may 
also choose not to immediately exercise its right to pursue the case under Chapter Twenty-Two.  The 
provisions are designed to allow a complaining Party to move the dispute forward on the same time frame 
as that which applies in other disput es of the US-Chile FTA.  The provis ions are designed to ensure that 
the Party complained against cannot prevent the complaining Party from moving the dispute forward on the same time frame as that which applies in all other disputes. 
 
SERVICES ASPECTS
 
 
II. PROVISIONS AFFECTING TRADE IN SERVICES 
 1. Elimination Of Discriminatory Restrictions
 
 
21. Part II.1 of the Standard Format provides th at each Party maintains a limited schedule 
of “non-conforming measures”. 
What are the intentions with respect to the liberalization of these non-conforming 
measures being liberalized? 
The Parties do not have any particular pl ans regarding the liberalization of the non-
conforming measures set out in the re levant annexes.  That said, the chapters on cross-border services, 
investment and financial services include a mechanism (a “ratchet”) to automatically bind certain of 
the measures found in the annexes. 
22. According to Articles 10.7, 11.7 and 12.9, the liberalization provisions concerning 
investment and cross-border trade in services do not apply to non-conforming measures 
maintained by a Party at local level of gov ernment in all circumstances and at central and 
regional levels of government, when they are listed in specific schedules.   
Taking into account that: (a) Many services are normally regulated  at local or regional level.   
(b) Any reallocation of competences between the different levels of government in the 
context of a decentralisation process may have an impact on the level 
liberalization committed and on the legal predictability of those commitments.   
(c) As regards measures at the regional level of government, the United States has 
listed in its schedules all existing non-co nforming measures of all States, DC and 
Puerto Rico.   
Could the Parties and, in particular the USA, indicate exhaustively which are the 
discriminatory measures that they can impose on services suppliers from other WTO members 
in accordance with their current GATS commitments and that can no longer be imposed on the 
services suppliers from the other Party of the FTA? 
The cited “Non-conforming Measures” articles do not exclude measures at the local or at the 
regional level of government.  Instead, certain liste d obligations do not apply to local level measures 
existing upon entry into force of the US-Chile FTA.   WT/REG160/5 
Page 14  
 
 Existing non-conforming measures at the regional level of government are included in the 
relevant annexes.  Within these annexes, th e United States includes a specific non-conforming 
measure related to the U.S. states, the District  of Columbia and Puerto Rico.  Certain listed 
obligations do not apply to measures existing upon en try into force of the FTA.  Given the relative 
openness of the U.S. states to foreign service supplie rs, this was a good means to guarantee existing 
access opportunities. 
The scope of the US-Chile FTA is very broa d (“negative listing” -- everything liberalized 
unless a specific non-conforming measure is taken).  It seems somewhat difficult to draw specific 
comparisons with the GATS since the GATS schedul es are structured on a positive listing basis. 
23. In accordance with its GATS commitments on  Mode 4, the USA has committed to allow 
the entry and temporary stay of up to 65 000 fash ion models and specialty occupations annually 
on an MFN basis.  In appendix 14.3(D)(6) of the FTA, the USA commits to annually approve as many as 1.400 applications of business persons of  Chile seeking temporary entry to engage in a 
business activity at a professional level. 
Could the Parties confirm that fashion mode ls and specialty occupations of other WTO 
Members can still make full use of the 65.000 MFN quota on a “first come, first served” basis 
and that their applications will not be rejected on the grounds that 1.400 permits have been 
reserved for Chilean nationals? 
The United States confirms that it continues to  grant at least 65,000 visas under the referenced 
category to WTO Member nationals. 
3. Standards/Recognition
 
 
24. Regarding the recognition provisions specified  in paragraph 3 of Section II of the 
document regarding services aspects, our con cern is whether the stipulation of mutual 
recognition for licensing, certification and requi rements in professional services would have 
negative effects on the competitiveness of third countries.  Would the Parties consider affording 
the opportunity for other interested third count ries to negotiate their accession to such a 
recognition Agreement pursuant to Article 7 of the GATS? 
WTO Members’ rights under GATS VII.2 are preserved. 
5. Subsidies And State-Aid  
 
25. Part II.5 of the Standard Format - Services provides 
“The financial services chapter includes subsidies or grants within its scope although it 
excludes certain activities or services when no t provided under a situation of competition.” 
Can the parties give examples of activities or  services not provided under a situation of 
competition? 
Let us clarify the language included in the standard format.  The US-Chile FTA financial 
services chapter does not apply to activities or services conducted for the account or with the guarantee 
or using the financial resources of the Party, incl uding its public entities.  However, the chapter does 
apply if a Party allows any of these activities or servic es to be conducted by its financial institutions in 
competition with a public entity or a financial instituti on.  The chapter does not define further what types 
of activities or services might fall under the exclusion. 
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