WORLD TRADE  
ORGANIZATION  WT/REG169/5 
13 March 2006 
 (06-1109) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN THE REPUBLIC OF KOREA AND CHILE 
 
Questions and Replies
 
 
 
 The following communication, dated 3 March 2006, is being circulated at the request of the 
Delegations of the Republic of Korea 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/REG169/3 
for the Goods aspects of the Agreement and WT/REG169/4 for the Services aspects of the 
Agreement. 
_______________ 
 
GOODS
 
 
 
II. TREATY CHARACTERISTIC ELEMENTS 
A. B ACKGROUND INFORMATION  
1. Article 21.6 permits a party to terminate the agreement with six months’ written notice.  
What happens to the agreement’s tariff reductions if the agreement is cancelled? Would the 
reductions remain in force, at the level the last year the agreement was in effect, or would they 
return to the current MFN level, or revert back to some other level? 
 There is no provision on tariff rates in case of termination of the Agreement.  But, in that 
unlikely case, the tariff rates will have to  return to the current MFN level. 
 
2. Similarly for tariff rate quotas, in the even t of an agreement’s cancellation, would the 
agreed reductions remain in force, at the level the last year the agreement was in effect, or 
return to a prior level? 
 There is no provision on tariff rate quotas in the case of termination of the Agreement.  But, 
in that unlikely case, the tariff rate quotas will have to return to the current MFN level. 
 
 
B.  NATIONAL TREATMENT AND MARKET ACCESS PROVISIONS OF THE AGREEMENT  
1. Import duties and charges, and quantitative restrictions 3. With respect to tariff elimination between the parties, we note that Chile has excluded 
96 tariff lines from duty elimination under the Agreement whereas Korea has excluded 21 tariff 
lines from tariff elimination.  We would like to know, on a product-by-product basis, the 
percentage of import (in terms of value) acco unted for by these products for each party. WT/REG169/5 
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   There were no imports of the excluded 21 tariff lines from Chile in 2003, i.e. accounted for 
zero percent of Korea’s 2003 imports from Chile. Im ports of the excluded 96 tariff lines from Korea 
in 2004 accounted for 3% of Chile's imports from Korea   
4. With respect to the schedules for tariff lib eralization under the Agreement, we note that 
transition periods of up to 13 years (for Chile ) and 16 years (for Korea) are foreseen for some 
products (290 tariff lines for Chile and 12 tariff lin es for Korea).  Can the parties explain what 
are the exceptional circumstances justifying a lo ng phase-in period of more than 10 years for 
these products? 
 The 12 tariff lines included in the 16-year st aging category are very sensitive products.  
Despite their sensitivity, the Parties agreed through negotiation that it would be preferable to have 
these products included in the disciplines of the Agre ement and subject to a longer phase-out period, 
rather than excluded from coverage altogether.   
5. Although the Secretariat has done an excellent  job in presenting data from the Parties 
on the trade liberalizing aspects of the Agreem ent, could the Parties please present the trade 
flow and tariff line coverage data in single char t for easy reference.  Th e following table could 
be used as a model (with a parallel chart for Chile): 
A)  LIBERALIZATION THROUGH TARIFF REDUCTION COMMITMENTS: KOREA
 
 
Time Period for 
Duty Elimination Number of Tariff 
Lines Fully 
Liberalized % of Total Lines in 
Korea’s Tariff 
Schedule Value of Korea’s 
Imports from Chile 
(2002, $thousand) % of Total  Imports 
from Chile 
Immediate 9,740 87.2 311,767 41.3 
Year 5 701 6.3 16,578 2.2 
Year 7 41 0.4 397,442 52.7 
Year 9 1 0.0 22 0.0 
Year 10 262 2.3 19,336 2.6 
Year 10S 1 0.0 8,673 1.1 
Year 16 12 0.1 13 0.0 
DDA 391 3.5 0 0.0 
Excluded from 
liberalization 21 0.2 0 0.0 
 Total 11,170 100.0 753,831 100.0 
  WT/REG169/5 
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  LIBERALIZATION THROUGH TARIFF REDUCTION COMMITMENTS: CHILE  
 
Time Period for 
Duty Elimination Number of Tariff 
Lines Fully 
Liberalized % of Total Lines in 
Chile’s Tariff 
Schedule Value of Chile’s 
Imports from Korea 
(2004, $thousand) % of Total  Imports 
from Korea 
Immediate 3,526 44.6%534,56676.8%
Year 3 10 . 0 %4,4580.6%
Year 5 2,451 31.0%79,03011.4%
Year 7 20 0.3%3,3550.5%
Year 10 1,518 19.2% 35,087 5.0%
Year 13 (5) 290 3.7% 18,019 2.6%
Excluded from 
liberalization 96 1.2% 21,204 3.0%
 Total 7,902 100% 695,719 100%
 
6. Could the Parties provide information on the number and percentage of tariff lines and 
trade in goods covered exclusively by tariff-rate quotas?  For tariff rate quota items, could 
information be provided as to the in-quota ra tes (e.g., are the rates the current applied MFN 
rates, or zero, or some preferential rate), the expansion, if any, of the TRQ over time, and the 
elimination date, if any?  The following table could be used as a model:  
B)  LIBERALIZATION THROUGH PREFERENTIAL TARIFF-RATE QUOTAS: KOREA  
 
Time Period for Duty-
Free, Quota-Free Access Number 
of lines % of 
Total 
Lines Value of 
Korea’s 
Imports 
from Chile, 
(2002, 
$thousand)% of 
Total  
Imports 
from 
Chile Initial In-
quota 
Tariff 
Rates (%)Reduction 
of In-quota 
Tariff 
Rate/time 
Frame, If 
Any Expansion of 
Initial TRQ 
Quantities durin g 
Implementation 
Period (yes/no) 
2011 6 0.05 0 0.0 0% (none) No 
To be Negotiated 18 0.16 104 0.01 0% (none) No 
No Elimination 0 0.0 0 0.0 (none) (none) (none) 
Total 24 0.21 104 0.01    
 
 Chile does not maintain TRQs on imports from Korea. 
 
7. Could similar information be provided on the number and percentage of tariff lines and 
trade flows for goods to be liberalized “after the end of the Doha Development. Agenda 
negotiations of the WTO”.  The following tabl e could be used as a model (modified as 
necessary):  
C)  LIBERALIZATION TO BE DETERMINED 
 
Number of lines in “DDA” category 391 
       % of Total Lines in Korea’s Tariff Schedule 3.47 
Value of Imports in “DDA” ca tegory (2003, $ thousand) 0 
      % of Total Imports from Chile  0.0 
 WT/REG169/5 
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  8. Could the Parties please provide tariff line a nd trade flow information on those products 
not covered by the Agreement.   The following table could be used as a model (modified as 
necessary): 
D)  NOT INCLUDED IN THE AGREEMENT
 
 
Number of lines in “E” category 21 
       % of Total Lines in Korea’s Tariff Schedule 0.19 
Value of Imports in “E” category (2003, $ thousand)  0 
      % of Total Imports from Chile  0.0 
 
Number of lines in “E” category 96 
       % of Total Lines in Chile’s Tariff Schedule 1.2 
Value of Imports in “E” category (2004, $ thousand)  21,204 
      % of Total Imports from Korea  3.0 
 
9. What is the “base rate” from which tariff reductions begin, for Chile and for Korea?  
 For Korea, the “base rate” is the applied MFN tari ff rate in effect as of January 1, 2003.  For 
Chile, the “base rate” is 6%.  
10. The Secretariat’s Report, at paragraph 20, pr ovides that “the schedule of liberalization 
of 391 tariff lines should be negotiated after th e end of the Doha Development Agenda (DDA) 
negotiations” (emphasis added).  Section A of  Appendix 2 of Annex 3.4 of the Agreement, 
however, defines “DDA” as “tariff eliminatio n schedule shall be negotiated” after Doha 
(emphasis added).  Could the Parties please conf irm that the tariff lines designated as “DDA” 
shall be eliminated following completion of th e Doha Round.  In other words, please confirm 
that the issue to be negotiated is when to elim inate the tariffs, not whether to liberalize them.  
 The issue will be discussed after the comple tion of the DDA negotiations.  Regarding the 
definition of “DDA,” it is to be noted that “tariff elimination schedule” in the Agreement contains several modes of liberalization, which include cat egory “E,” where the customs duties shall not be 
eliminated.  
11. Korea currently has WTO TRQs for some  of the products where TRQ access is 
provided to Chile as part of the Agreement, e.g., bovine meats, poultry meat, whey, and 
mandarins.  What is the relationship betw een the preferential access provided under the 
Agreement using TRQs and the Korea’s WTO TRQ commitments, e.g., is the preferential access in addition to the WTO TRQ commitments?  
 The KCFTA TRQs and the WTO TRQs are le gally separate and independently operating 
schemes: the former is based on the bilateral FTA  and the latter is based on the Agreement on 
Agriculture of the WTO.  Thus, the preferential access under the KCFTA is in addition to the WTO 
TRQ commitments.  
12. For those products subject to TRQs, what duty rate applies to imports exceeding the 
zero-duty volume amount?  
 The applied MFN tariff rate is applied to imports exceeding the duty-free volume amount 
with an exception: for the turkey products subject to  TQ (3), the preferential tariff rate set out in 
Annex 3.4 of the Agreement is applied.   WT/REG169/5 
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  13. Will Korea fully liberalize the turkey products  subject to TQ (3) in seven years under 
the Agreement?  
 Yes.  The turkey products subject to TQ (3 ) will be fully liberalized after 2011 under Annex 
3.4 of the Agreement.   14. Could Korea please explain the auctioning sy stem that it uses for the “TQ” items?  
 The WTO TRQs, as well as the KCFTA TRQs, are administered on the basis of the "Tariff 
Quota Administration" (the Korean Government  Gazette, dated December 31, 2004). According to 
this Gazette, 22 organizations, in cluding the Ministry of Agriculture (MAF), the Agricultural and 
Fishery Marketing Corporation (AFMC), producer gr oups and related associations, can administer the 
allocation of quotas in the following four ways: auctioning system, designation, real-demand allocation and combination thereof.  
 Auctioning system, which is one of the four  methods, is operated as follows: (i) the above-
mentioned administering organizations invite at-lar ge open tender, where an applicant who offers the 
highest price gains the right to import the amount of TRQ at in-quota tariff rates; and (ii) the organizations can levy import mark-up in accordance with Article XVII:4 of GATT 1994.  15. Is it correct that Korea will not provide a ccess to Chile from May 1 through October 31 
for any of the items identified by 10S (“on a seasonal basis”)?   
 No, it is not correct.  For the items under Categor y 10S, the preferential tariffs will be applied 
only to the products imported from November 1 to April 30 of each year as stipulated in Annex 3.4 of the Agreement.  From May 1 to October 31, the MFN tariff rates will be applied. 
 2. Rules of Origin 
 
16. With respect to rules of origin, can the partie s clarify why they consider it necessary to 
prohibit outward processing, and how this is consistent with the provisions of GATT Article 
XXIV para. 4 (purpose of free trade area to facilit ate trade and not to raise barriers to trade of 
non-parties) and para. 5(b) (duties and other re gulations of commerce not to be higher or more 
restrictive than those existing prior to the formation of the free trade area). 
 The main principle underlying origin determinati on is that the country of origin is the last 
country where substantial transformation took place.  Three criteria are widely used in FTAs to establish where such substantial transformation occu rred: a change in tariff heading method, value 
content and technical test rule.  The Agreement has adopted the above-men tioned general rules to 
determine origin.    On the other hand, outward processing, which a llows the value of production in a party prior 
to the outsourcing activity to be counted towards th e local content, is not a commonly used method in 
determining origin. Rather, it is one of the excepti ons to the general preferential and non-preferential 
rules of origin.  Therefore, the prohibition of out ward processing can not be regarded as raising any 
further trade restrictions or as violating pa ragraphs 4 and 5(b) of GATT Article XXIV. 
 
17. Article 4.5 permits bilateral cumulation be tween the Parties in determining whether a 
good is an “originating good.”  Does the Agreement allow cumulation with goods from any 
other country (i.e., non-Party)?  Do the Partie s envision expanding cumulation to include 
products from other countries in the future?  WT/REG169/5 
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   Article 4.5 of the Agreement does not allow cumulation with goods from non-Parties.  The 
Parties do not envision expanding cumulation in or der to include products from non-Parties in the 
future, either.   C. R
EGULATORY PROVISIONS OF THE AGREEMENT  
1. Standards 
 (a) Standards-related measures  
18. Will the TBT measures adopted under this Agreement be applied on an MFN basis?  
 The KCFTA is a bilateral agreement app lied only to Korea and Chile, not necessarily 
extended to non-Parties. However, Chapter 9 (Sta ndard-Related Measures) of the Agreement was 
concluded on the basis of the WTO/TBT Agreement, and thus has a structure and principles similar to 
the WTO/TBT Agreement.  
19. Article 9.10 provides for the establishment of a Committee on Standards-Related 
Measures.  Has this Committee been created? If so, what actions have been taken by it?  
 The Committee was set up on November 19, 2004, and the first meeting was held on the date 
of its formation, where both Parties exchanged in formation on their respective regulatory initiatives.  
At the second meeting, which was held on Septembe r 8, 2005, both Parties noted that no bilateral 
TBT issue has been raised.  They  also exchanged information on the institutions in charge of 
standards and regulations and th eir conformity assessment system. 
 
(b) Sanitary and phytosanitary measures
 
20. Will the SPS measures adopted pursuant to th is Agreement be adopted on an MFN 
basis?  
 Basically, the KCFTA is a bilateral agreement applied only to the two Parties, not necessarily 
extended to non-Parties.  However, with regard to Chapter 8 (Sanitary and Phytosanitary Measures) of 
the KCFTA, the Chapter was negotiated and conclu ded on the basis of the WTO/SPS Agreement and 
thus has a structure and principles similar to those of the WTO/SPS Agreement.  
21. Article 8.11 provides for the establishm ent of a Committee on Sanitary and 
Phytosanitary Measures.   
o Has this Committee been created? If so, wh at actions have been taken by it?  
 
 The Committee was set up on April 18, 2005, and th e first meeting was held on the date of its 
formation.  The Parties noted that there was no sp ecific bilateral issue on SPS measures and agreed to 
hold the next meeting in 2007.  
 
22. Regarding the Committee’s mandated function, described in Article 8.11.5(b), to 
“conclude[e] specific agreements on matters of interest, involving higher technological operating details…”, could the Parties describe what is me ant by “higher technological operating details”?  
 It should be noted that the exact wording in  Article 8.11.5(b) is not “higher technological 
operating details,” but “higher technical operatin g details,” which means operational details of 
subcommittees, such as their meeti ng schedules and operating procedures.  WT/REG169/5 
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2. Safeguard mechanisms 
23. Article 3.12 provides that either Party may take “appropriate measures” in the event 
that imports “cause or threaten to cause serious in jury or disturbance in the markets of like or 
directly competitive [agricultural] products of the other Party.”    
o How is “serious disturbance” defined, and how does it differ from the “serious 
injury” standard in the WTO Safeguards Agreement? 
 
 There is no definition of “disturbance”.  
o Are the measures described in Article 3.12.2 the only safeguard measures that a 
Party may take?  
 
 Those are the only safeguards that a Party may take within the framework of the agreement. 
However, the Parties can also take actions unde r Article XIX of GATT and the WTO Agreement on 
Safeguards and the Article 5 of the WTO Agreement on Agriculture. 
 
o What is the maximum time frame that such actions may remain in place?  
 
 There is no explicit maximum time frame for such  actions.  However the Parties, when taking 
such actions, should limit them to “what is necessary to remedy the difficulties that have arisen” as 
provided for in Article 3.12.5. 
 
o How many times and under what circumstances has the emergency clause been 
used to suspend further reduction of customs duties, or resulted in increase of the customs duty to MFN or basic customs duty levels?  
 
 This mechanism has been never used to date.  
5. Other regulations  
(a) Customs-related procedures
 
24. Article 3.10 creates parameters for the establishment of customs user fees.  Will Parties 
to this Agreement enjoy different customs users fees than those applied to non-Parties?  If so, 
please describe the differences.  
 No, the Parties to this Agreement do not enjo y different customs user fees from those applied 
to non-Parties.  25. The Agreement simplifies various administrative aspects of Customs procedure (e.g., 
Articles 5.2, 5.5, 5.9 and 5.13).  Will those si mplified procedures be available to non-Parties as 
well?  
 Basically the KCFTA is a bilateral agreemen t applied only to two Parties, not necessarily 
extended to non-Parties.  However, in accordance  with domestic laws and regulations, certain 
simplified procedures are available to non-Parties.  For example, pursuant to the relevant domestic 
provisions, non-Parties may benefit from the simplifie d procedures with regard to exemptions of the 
certificate of origin and advanced rulings on determinations of origin.  
(c) Government procurement
 WT/REG169/5 
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  26. How do the substance and scope of the FTA government procurement commitments in 
Title III compare to those provided for in the plurilateral Agreement on Government 
Procurement?  Are the current opportunities for third country supply diminished?   
(Since there is no Title III in Chapter 15 (Government Procurement) of the Agr eement, it is assumed 
that the question refers to Appendix 3 of Chapter 15.) 
 
 Under the Korea’s FTA with Chile, which is not a party to the WTO Government 
Procurement Agreement (GPA), Korea allows Chil ean suppliers to participate in tendering on a 
reciprocal basis.  The substance and scope of  Korea’s government procurement commitments under 
the KCFTA are mostly identical to those under the WTO GPA except for the followings: (i) in regard 
to supplies and services covered by Appendix 1 (E ntities at Central Level), Korea reduced its 
thresholds to 50,000 SDRs, instead of 130,00 0 SDRs of the WTO GPA; and (ii) Appendix 5 
(Services) and Appendix 6 (Construction Services) of Chapter 15 do not set any limit on sub-sectors, 
while Korea’s commitments on services and construction services under the GPA, which is based on a positive list system, exclude certain sub-sectors. 
 
27. Do the government procurement bid challeng e procedures for Chile and South Korea 
allow for rapid interim measures to correct breaches of the Agreement and to preserve 
commercial opportunities?  Can the procurem ent process be suspended, if appropriate? 
 The Agreement does not have provisions related to “rapid interim measures” or “suspension 
of procurement.”  Instead, Article 15.13.2 stipulat es that each Party shall provide non-discriminatory, 
timely, transparent and effective procedures enab ling suppliers to challenge alleged breaches of 
Chapter 15 (Government Procurement) of the Agreem ent.  Nevertheless, no provision in the Chapter 
stops a Party from taking such measures, which shall be a matter of each Party’s domestic legislation. 
  (d) Intellectual property
 
28. The Parties have provided for protection of ge ographical indications in Article 16.4, and 
exchanged lists of protected GIs.  Based on the recent WTO Panel Report in European Communities - Protection of Trademarks and Geographical Indications for Agricultural 
Products and Foodstuffs (WT/DS174/R, 15 March 2005), it is clear that WTO Members must provide for a system for foreign nationals to a pply directly for GI protection in WTO Member 
countries if such application is available for their own nationals.   
 
o Do the Parties extend the protections fo r GIs provided in this agreement to non-
parties’ GIs? 
 
o Do the Parties provide a mechanism for the registration and protection for 
foreign GIs to the extent you provide that for your own GIs?  
 
(The following is the answer to the above two questions.) 
 
 In accordance with the Parti es’ NMF obligations (TRIPS Article 4) any advantage, favour, 
privilege or immunity agreed by the Parties sha ll be accorded immediately and unconditionally to 
non-parties. Both Parties provide a system for forei gn nationals to directly apply for GI protection in 
their territories. Therefore, full national treatment is given non-parties’ GIs.   Both countries, Chile and Korea provide for the recognition and protection of foreign geographical indications through a general procedure, which in deed is open for third parties. In the 
case of Korea, foreign GIs are protected as collective ma rks. To obtain protection in Chile or in Korea  WT/REG169/5 
 Page 9 
 
 
  applicants must certify that the foreign GI is protected  in the country of origin. If foreign GIs prove its 
suitability to be recognized as a GI those terms will be registered and protected as collective marks in 
Korea or as GI in Chile.  
o What opportunities are provided to third-party nationals to object to the 
protection of a GI on the lists in Annexes 16.4.3-16.4.5?  
 
 Once the GIs listed in Annexes 16.4.3 to 16.4.5  of the Agreement come into a national phase 
for the national registration, in both countri es any person may claim its objections during the 
administrative phase of granting the register or once th e GI has been registered. In the first situation, 
after the publication of the application any pers on may filed an opposition. In the other case, once 
granted the GI, any interested person may suit before Courts asking for the invalidation of a registered 
collective mark/GI or for the cancellation of the registration. .  
29. Annex 16.4.5 contains a list of Chilean GIs fo r wine that will be protected in Korea.   
o Would wines from recognized viticultural areas in the United States that have 
the same, or similar, name be exclude d from Korea and/or Chile under this 
agreement?   
 
 Article 23.3 of the TRIPS Agreement exp licitly accepts the co-existence of homonymous 
terms for GI. Terms which are similar to GIs reco gnized in the bilateral agreement could be used 
provided that measures to avoid false representation to th e public in relation with the real origin of the 
products were taken.   
o For instance, “Vallo del Claro” is a protected GI included in Annex 16.4.5, 
and “Santa Clara Valley” is a recognized Viticultural Area in the United States.   
Would wines labeled with this viticult ural area under U.S. wine appellation 
rules be excluded from Korea and/or Chile under this Agreement?   
 
 The US viticultural terms that are similar to  those listed in the Chile-Korea Agreement as 
Chilean GIs could be registered and protected in Korea where appropriate if its registration do not 
cause confusion in relation with the origin of the goods. Under the Korean  collective trademark 
system, the likely of confusion will be determin ed taking into account its meaning, external 
appearance and appellation in compar ison with “Valle del Claro”.  
   E. G
ENERAL PROVISIONS OF THE AGREEMENT  
5. Relationship with other agreements concluded by the Parties 30. It seems that the Agreement does not co ntain any reference which deals with the 
relationship between the Agreement and other RTAs to which either Chile or Korea are 
presently parties.  Please explain how the Agree ment will affect other RTAs which Chile or 
Korea has concluded with other countries. 
 Article 1.3(1) deals with the relationship between the Agreement and other international 
agreements including other RTAs which Chile or Korea have concluded with other countries. As 
stipulated in this Article, the Agreement reaffi rms the existing rights and obligations under other 
agreements.  The Parties reserve the right to adop t or maintain measures that accord preferential 
treatment pursuant to other agreements in force or si gned prior to entry into force of the Agreement.  
 
 WT/REG169/5 
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SERVICES
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT 
3. Scope 
 
31. Both parties have scheduled financial servic es commitments under the GATS.  Why are 
financial services excluded from this agreement? 
 Financial services were not excluded from the sc ope of the Agreement per se.  However, the 
Parties could not reach satisfactory results in the c ourse of the negotiations.  Consequently, the Parties 
have included in the Agreement a specific clause referring to a “work progr am on financial services” 
(Article 21.5) which provides, “Unless otherwise agr eed by the Parties, the authorities responsible for 
financial services will meet four years after the entr y into force of this Agreement, to discuss the 
viability and convenience of incorporating financial services into this Agreement.” 
 32. Given the exclusion of financial services, a nd the number of reservations undertaken by 
both parties, does this agreement meet the condi tions set forth in GATS Article V.1 (a)?  Can 
the Parties please comment on the large number of reservations undertaken by Chile and Korea 
despite the negative list nature of this agreement?  
 As the Agreement adopts a negative list appro ach, meaning that all sectors are liberalized 
unless a Party takes specific reservations, all servic es sectors but financial services, air services and 
services provided in the exercise of governmental authority (with the exception of those supplied on 
commercial basis or in competition conditions) ar e included in the scope and coverage of the 
Agreement.  In the case of financial services, Artic le 21.5 provides that the authorities responsible for 
financial services meet four years after the entry in to force of the Agreemen t to discuss the viability 
and convenience of incorporating financial services in to the Agreement.  Similarly, the Article 11.7 
regarding Future Liberalization provides for further deeper  liberalization with a view to reaching the 
elimination of the remaining restrictions.  Ther efore, the Agreement fulfils the conditions of 
“substantial sectoral coverage” and “the elimination of substantially all discrimination” set forth in 
Article V:1(a) of GATS.   Regarding the question on the large number of reservations, Chile and Korea would like to 
draw the attention over the quality of the entries rather  than the number of them. Similarly, their scope 
is mostly limited to specific sub sectors and to a specific discipline. 
 
__________