WORLD TRADE  
ORGANIZATION  WT/REG196/4 
15 September 2008 
 
 (08-4249) 
Committee on Regional Trade Agreements Original:   English/ 
 Spanish 
 
 
 
FREE TRADE AGREEMENT BETWEEN PANAMA AND EL SALVADOR 
 
Questions and Replies  
 
 
 The following communication, dated 9 September 2008, is being circulated at the request of the delegations of Panama and El Salvador.   This document reproduces the questions addressed to the Parties and the responses submitted. 
 
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Questions from the delegation of Chinese Taipei
 
 
B. TRADE IN GOODS 
 
2. Provisions regulating trade in goods  (c) Safeguard measures 
 
1. As regards bilateral safeguard measures, Paragraph 63 of the WTO Secretariat's 
Factual Presentation (WT/REG196/3) and Articl e 6.02 of this Protocol state that " … Two 
safeguard measures may be applied to the same good, subject to conditions." 
(i) Could the Parties explain which conditions need to be met? 
 In accordance with the provision in question,  the relevant discipline establishes that the 
Parties may apply a second safeguard measure to a good originating in their territories, provided that 
at least one (1) period equivalent to half of that  during which the measure was applied for the first 
time has elapsed. 
 
 In this connection, we would specify that  the provision does not grant the Parties the 
possibility of simultaneously applying a double safeguard to the same product. 
 
(ii) In addition, does this Article violate the principle of "Ne bis in idem," 
i.e. prohibition of double jeopardy?  
 See response to the previous question. 
 
2. As regards global safeguard measures, a ccording to Paragraph 66 of the Factual 
Presentation and Article 6.03 of this Protocol wh ich state that "a Party applying a measure of 
this type shall exclude from its application im ports of goods from the other Party, unless they 
account for a substantial share
 of total imports and the imports from the other Party WT/REG196/4 
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  contribute significantly to
 the serious injury or threat thereo f caused by total imports," we 
note that under this Protocol, the goods originating from each Party are excluded from the application of safeguard measures, unless they i ndividually account for a substantial share of 
total imports, and it is shown that they make a significant contribution to serious injury.  Thus, 
we have the following questions: 
(i) Why do the Parties choose to use the phrase "contribute significantly
 to the 
serious injury" in the global safeguard measures?  
 Pursuant to the principles of Article XI X of the GATT 1994, the Agreement on Safeguards 
and the respective trade policies, the Parties agr eed on this provision in order to guarantee, among 
themselves, their commitments derived from the aforementioned Agreement.  
 Notwithstanding the above, we consider it im portant to mention that the wording of the 
Spanish version of the provision in question is " contribuyan de manera importante
" and not 
"contribuyan significativamente " [contribute significantly]. 
 
(ii) Could you provide the definition of and justifying criteria for this phrase instead 
of the phrase "as to cause  a serious injury" as in Article 2 of the Agreement on 
Safeguards?  Further, are there any differences between them? 
 By serious injury the Parties mean significan t overall impairment of the situation of a 
domestic industry. 
 
(iii) Additionally, in accordance with footnote 23 on Page 23, we would like to learn 
in more detail about how the investigatin g organs determine whether the import 
share is a "substantial share" of the to tality and whether such importation is a 
"significant contribution" to serious inju ry or threat thereof to the domestic 
industry of each Party in practice. 
 El Salvador and Panama  have not used this mechanism to date, but Article 6.03(3) of the FTA 
establishes the parameters to be applied by the authorities in determining the issues to which the 
question refers. 
 
(iv) Finally, when one Party excludes the originating goods of the other Party from 
the application of global safeguard measu res, through investigation, is import of 
the originating goods of the other Part y excluded from the total increase of 
imports? 
 The above situation is governed by Article 6.03 of the FTA. 
 
Questions from the delegation of the European Communities  
 
B. TRADE IN GOODS  1. National treatment and market access for goods  
(a) Import duties and charges and quantitative restrictions 
 3. Table II.2 in pages 14-15 of the Factual P resentation shows the composition of the 
8-digit tariff line liberalization undertaken by Pana ma, classified by HS section and by year of 
liberalization. As regards HS Section XI, Textiles a nd textile articles, it is indicated that 1,127 
out of 1,253 tariff lines falling under that Sect ion, are excluded from the tariff elimination  WT/REG196/4 
 Page 3 
 
 
  commitments.  Therefore, 90% of textiles and textiles articles' tariff lines remain actually 
dutiable under this Agreement. 
Could Panama explain the reasons for having  liberalized only 10% of tariff lines falling 
under HS Section XI – Textile and textile products? 
 See response to Question 5. 
 4. In turn, Table II.3 in pages 16-17 presents the tariff liberalization undertaken by 
El Salvador by sectors.  Again, as regards Text iles sector (HS Section XI), the table indicates 
that only 19 out of 891 tariff lines falling under this section are liberalized by the Agreement. 
 Could El Salvador describe the reasons for having liberalized only 2% of tariff lines 
falling under HS Section XI – Textile and textile products in addition to the 105 tariff lines 
which were already duty-free before th e entry into force of the Agreement? 
 
See response to Question 5. 
5. On what basis do the Parties consider that  this Agreement complies with Article XXIV 
provisions, in particular, with respect to  the no elimination of a major sector? 
 On the basis of the fact that this Agreemen t eliminates customs duties on substantially all 
trade in products originating in the territories of  El Salvador and Panama, in accordance with the 
Article in question.   The elimination of customs duties resulted from a negotiating process in which the Parties 
failed to reach consensus on the tariff lines falling u nder the Section in question and hence decided to 
exclude a few specific lines.  
(b) Rules of origin 
 
6. According to paragraph 34(d), goods are consider ed as originating if they are produced 
in the territory of one or more of the Parti es even if one or more of the non-originating 
materials do not undergo a change in tariff cla ssification for one of the three reasons described 
in Article 4.03 (d) provided that the RVC is not less than 30%. 
 Could the Parties indicate what these three reasons of Article 4.03 (d) are? 
 
 The three requisite criteria in Article 4.03 (d) for goods to be considered as originating when 
they are produced in the territory of one or more of  the Parties with non-originating materials, even if 
one or more of the non-originating materials used  in production do not undergo a change in tariff 
classification, are as follows:  
(1) The good was imported into the territory of a Party in an unassembled or a 
disassembled form but was classified as an  assembled good pursuant to Rule 2(a) of 
the General Rules of Interpreta tion of the Harmonized System; 
(2) the heading for the good provides for and specifically describes both the good itself 
and its parts, provided the heading is  not divided into subheadings;  or 
(3) the subheading provides for and specifica lly describes the good and its parts. WT/REG196/4 
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   All the above conditions are subject to th e regional value content of the good (RCV), 
determined in accordance with Article 4.07, being not  less than thirty (30) per cent and the good being 
in conformity with the other applicable provisions of this Chapter, unless the specific applicable rule 
of origin in Annex 4.03 under which it is classified  specifies a different percentage of RCV, in which 
case the RCV established in that specific rule of orig in must be applied.  The provisions in question 
do not apply to the goods included in Chap ters 61 to 63 of the Harmonized System. 
 
7. Though this provision is defined as "a basic requirement for a good to be considered as 
originating" together with the rules defined in paragraph 34 (a), (b), and (c), it seems more an exception (a type of tolerance rule) to those rules conferring originating status. 
 Could this be clarified? 
 
 Article 4.03 of the FTA establishes the requis ite criteria for a good to be considered as 
originating.  All of the criteria are based on the pr emise that the good must be obtained or produced in 
the territory of one or more of the Parties.  Pa ragraph (d) sets out a criterion/condition to be met for 
the good to be considered as originating in the ev ent that it is produced from non-originating materials 
and one or more of the non-originating materials do not undergo a change in tariff classification.  On 
no account should this criterion/condition on which the premise is based be understood as an 
exception, for it does not obviate the requireme nt to meet the basic criteria/conditions. 
 
8. Paragraph 39 states that if a good does not m eet the change of tariff classification, it 
may be still considered as originating if the value of all non-originating materials does not 
exceed 10% of the value of the good. 
What is the relationship between this provision and the one described in 
paragraph 34 (d)?  Could they apply simultaneously? 
 The two methods could not apply simultaneously, because the de minimis  rule applies when 
the non-originating inputs do not undergo a change in  tariff classification but do not exceed 10 per 
cent of the value of the good.  In the case of the RVC, paragraph 34(d), it is a matter of the RVC being applied when the conditions set forth in the three subparagraphs of the relevant provision are 
met, since non-originating materials must fulfil the percentage requirement established in this 
paragraph in order for the good to be considered as originating.  
 When the RVC applies the de minimis  rule cannot be used, since the RVC does not address 
whether or not non-originating materials undergo a change of tariff classification. 
 
9. Furthermore, it is explained that in the case of machinery and optical apparatus the 
RVC supplements the change of tariff classification. 
Does this mean that both rules (change in  the tariff classification and RVC) apply 
cumulatively for these products? 
 No, this rule does not apply cumulatively.  These products are subject to a specific rule of 
origin, which allows them to be considered as origin ating only where they meet one of the two criteria 
below:  
(1) There is a change in tariff classification;  or 
(2) there is no change in tariff classification, provided that the RVC is not less than 
30 per cent.  WT/REG196/4 
 Page 5 
 
 
  Hence, in this case it would be necessary to examin e the specific rule of origin that applies to 
machinery and optical apparatus. 
C. TRADE IN SERVICES 
2. General provisions on trade in services  
 
10. Chapter 11 on cross-border supply of services covers GATS Mode 4.  A different 
Chapter, which contains provisions relating to the temporary entry of business persons, refers only to business visitors, traders, inve stors and intracorporate transfers. 
 Is it correct to interpret that the supply of services in Mode 4 by other categories of 
natural persons, such as cont ractual services suppliers and indepe ndent professionals, has been 
completely liberalised through Chapter 11 subject  to the reservations contained in the relevant 
Annexes?  
 The categories of natural persons entitled to te mporary entry are those included in Chapter 14, 
with due consideration to the reser vations contained in the Annexes. 
 
D. COMMON PROVISIONS GOVERNING TRADE IN GOODS AND IN SERVICES 
 8. Relation to other agreements signed by the Parties  11. According to Table II.8, both El Salvador and Panama have not notified a good number 
of RTAs which have been concluded. 
 Could Panama indicate the reasons for not having notified yet its RTAs with 
Chinese Taipei, Colombia, Dominican Republic, Co sta Rica, Guatemala, Honduras, Mexico and 
Nicaragua?  
 The information on RTAs pre-dating Panama's date of accession was notified during the 
country's process of accession to the WTO and is contained in document WT/ACC/PAN/19 and in the 
Secretariat Report concerning Panama's  Trade Policy Review (WT/TPR/S/186). 
  We are consulting with the WTO Secretariat so as to proceed with the notification of these 
agreements to the Committee on Regional Trade Agreements. 
 
12. Could El Salvador confirm whether its RTAs  with Colombia, Venezuela and Dominican 
Republic have entered into force, and the rea sons for not having notified them yet? 
 Consultations are under way with the relevant aut horities so as to ensure that the notifications 
are made according to requirements. 
 
Question from the delegation of Japan
 
 D. COMMON PROVISIONS GOVERNING TRADE IN GOODS AND IN SERVICES  2. Government procurement 
 
13. With respect to Paragraph 144 of the Factual Presentation (WT/REG196/3), could the 
Parties inform us if the meeting of the Committ ee on Government Procurement has been held?  
Could the Parties also inform us about the content of the meeting, if it has already taken place? WT/REG196/4 
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   The Parties have not yet held meetings of this Committee. 
 
Questions from the delegation of Mexico
 
 
C. TRADE IN SERVICES 
 2 General provisions on trade in services  
(h) Temporary entry of business persons 
14. The Parties have agreed to exchange informat ion on measures applied in regard to the 
temporary entry of business persons and have und ertaken to prepare a consolidated document 
containing the requirements for temporary entry.  As at April 2008, the consolidated document 
had not been prepared. 
 Has any date been set for the preparatio n of the consolidated document regarding 
requirements for temporary entry? 
 
 No date has yet been set for the preparation and consolidation of the document provided for in 
Article 14.05 of the Agreement.  The drafti ng of the document is therefore still pending. 
 
3. Provisions relating to specific sectors of trade in services 
15. What is foreseen for the liberalization of land and maritime transport services under the 
Agreement? 
 The Parties have not yet considered it n ecessary to extend their undertakings under the 
Chapter on Cross-Border Trade in Services.  
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