International Trade

International Trade: Chile

Álvaro Jana

Jana Charlin Cuevas Wegener Abogados

All questions

1. Is your country a member of the WTO or is it currently negotiating its accession?

Chile

Yes, it is. Chile has been a WTO member since its creation on 1 January 1995 and a member of GATT 1947 since 16 March 1949.

Answer contributed by Álvaro Jana

2. Is your country a participant of the WTO’s Information Technology Agreement (ITA) or seeking to adhere to it? If your country is a participant of the ITA, is your country among those members that concluded an expansion of the ITA at the December 2015 Nairobi Ministerial Conference?

Chile

No, Chile is not a member of ITA and currently, there is no plan to adhere to it.

Answer contributed by Álvaro Jana

3. Is your country a participant in the WTO’s Government Procurement Agreement (GPA) or does it have the formal status of observer of the GPA, seeking to adhere to it?

Chile

No, Chile is not a participant in the WTO’s GPA.

Answer contributed by Álvaro Jana

4. Provided your country has already ratified the Trade Facilitation Agreement (TFA), what is your country’s status with regard to implementation of specific TFA provisions? Are there any for which your country has notified the WTO that it will implement only after a transition period?

Chile

Yes, Chile ratified the TFA on 21 November 2016. The TFA brings many benefits to Chile as it contains provisions to expedite the movement, lifting and customs clearance of goods, including goods in transit. It also establishes measures for effective cooperation between customs, the private sector and other competent authorities in matters related to trade facilitation and compliance with respect to customs procedures. This agreement will certainly help to improve transparency, increase the chances of participating in global value chains and reduce corruption. 

Chile reported the full implementation of the agreement, notifying all the provisions in Category A, therefore, there are no provisions to be implemented in a transition period.

Answer contributed by Álvaro Jana

5. What are the benefits and disadvantages that you expect to flow from the TFA for businesses from your country?

Chile

As mentioned in answer 4, the TFA will bring numerous benefits to Chile’s international trade. The impact of this agreement will be significant, promoting greater transparency and streamlining customs rules and procedures. We do not see disadvantages per se, but what is needed for the agreement to generate the maximum benefits derived from international trade is to have more countries ratifying or implementing it, which will undoubtedly benefit all economies exponentially, including Chile.

Answer contributed by Álvaro Jana

6. Please provide a brief description of the customs duty structure maintained by your country. To what extent is it similar to, or has it been influenced by, that of your main trading partners?

Chile

In general, Chile has a fixed and flat tariff structure for imports, by which almost all imported goods are subject to the same tariff rate of 6 per cent ad valorem applied to CIF value. However, due to the extensive network of free trade agreements the actual or effective tariff for imported goods on 2018 was only 0.81 per cent. This is due to the FTAs that have already entered into force granting preferential market access conditions for goods coming from the European Union, the United States and China, as well as many other economies from all around the world.

In addition, some imported goods have a special tariff treatment, such as:

Answer contributed by Álvaro Jana

7. Does your country maintain an import licensing regime?

Chile

No, Chile does not have any import licensing regime.

Answer contributed by Álvaro Jana

8. Please explain the export control regime in place in your jurisdiction, including whether it applies to dual-use items.

Chile

Chile does not impose any taxes or other export duties. Exports are generally exempt from VAT, as well as domestic raw materials used to manufacture them (Decree Law 825).

Answer contributed by Álvaro Jana

9. Has your country ever renegotiated its scheduled concessions under GATT article XXVIII? If so, could you please provide details?

Chile

Yes, Chile renegotiated its consolidated tariff for sugar from 31.5 per cent to 98 per cent at the beginning of 2000. Due to this negotiation, Chile had to compensate its main sugar suppliers with tariff-free quotas: Argentina, Brazil and Guatemala.

Answer contributed by Álvaro Jana

10. Has your country been involved in any WTO disputes either as a complainant, defendant or third party? Please highlight the most prominent instances of such participation.

Chile

Yes, Chile has participated in the WTO Dispute Settlement Mechanism (DSU): 10 times as complainant; 13 times as defendant; and 49 times as a third interested party.

As the most prominent instances, the following disputes can be mentioned:

Taxes on alcoholic beverages (Pisco-Whisky case): complaint from the European Community due to Chilean tax measures that imposed a special sales tax on spirits with different rates depending on the type of product (pisco, whiskey, etc) under the "Transitional System" and the alcohol content under the "New System" – Additional Tax on Alcoholic Beverages (ILA). According to the EC, the Transitional System and the ILA involved discriminatory treatment on imported spirits violating article III: 2 of GATT 1994: National Treatment – taxes and charges. The Panel – and then the Appellate Body (AB) reports favoured EC's claims finding that the Transitional System and the ILA were inconsistent with article III: 2 of GATT 1994.

Price Band System (PBS case): complaint from Argentina due to the Chilean price band system established by Law 18.525 (subsequently modified by Law 18.591 and Law 19.546), as well as by the regulatory standards and the complementary and/or amending provisions by which this system was applied. In addition, they also complained about certain provisional safeguard measures imposed by Chile on imports of wheat, wheat flour and edible vegetable oils. Argentina claimed that the price system was inconsistent with article II of GATT 1994 and article 4 of the Agreement on Agriculture and that the safeguard measures were inconsistent with articles 2, 3, 4, 5, 6 and 12 of the Agreement on Safeguards and paragraph 1(a) of article XIX of GATT 1994. At the end, Chile had to modify its legislation to comply with the conclusions and recommendations of the panel and the AB that considered the PBS as a non-tariff system similar to a minimum import prices mechanism (not an ordinary customs duty). This disputed included an article 21.5 of the DSU Arbitration, Panel and AB implementation reports.

Answer contributed by Álvaro Jana

11. How would you evaluate the compliance record of your country with WTO dispute settlement reports? To the extent that you identify a track record of delayed or incomplete implementation, what are the main factors explaining this feature?

Chile

As Chile has been subject of complaints only in a few cases, we would say that our level of compliance is satisfactory. On the one hand, in the Pisco-Whisky case, Chile duly implemented the panel report making the taxation discriminatory regime consistent with the National Treatment standard. In the PBS case, on the other hand, Chile implemented deep amendments to the mechanism in terms of transparency and predictability. In practice, the PBS is not operating given the high international prices of the goods subject to the system. In some FTAs, such as the one with the US, Chile agreed not to apply the PBS. In others, like the one with MERCOSUR, it was agreed not to modify it in terms of making the mechanism more trade restrictive.

Answer contributed by Álvaro Jana

12. Are you aware of any ongoing or planned revisions of the rules on anti-dumping, countervailing and safeguard duty investigations in your jurisdiction?

Chile

According to my understanding, there are not ongoing neither planned revisions.

Answer contributed by Álvaro Jana

13. Do you anticipate any forthcoming legal action before the WTO involving your country as a defendant or complainant with respect to one or more of the three types of trade remedies?

Chile

According to our understanding, we do not anticipate any forthcoming legal action before the WTO involving Chile as a defendant or complainant with respect to one or more of the three types of trade remedies.

Answer contributed by Álvaro Jana

14. What are the main agricultural subsidies maintained by your country? Are they being phased out?

Chile

Chile does not maintain any agricultural subsidies subject to phasing out commitments or inconsistent with its international trade obligations.

Answer contributed by Álvaro Jana

15. Which are the bilateral trade agreements your country is currently a party to or which it is in the process of negotiating?

Chile

Chile is currently a party to 29 free trade agreements in force that involve 64 economies, namely: Argentina; Australia; Austria; Belgium; Bolivia; Brazil; Brunei; Bulgaria; Canada; China; Colombia; Costa Rica; Croatia; Cuba; Cyprus; Czech Republic; Denmark; Ecuador; El Salvador; Estonia; Finland; France; Germany; Greece; Guatemala; Holland; Honduras; Hong Kong; Hungary; Iceland; India; Indonesia; Ireland; Italy; Japan; Latvia; Liechtenstein; Lithuania; Luxembourg; Malaysia; Malta; Mexico; New Zealand; Nicaragua; Norway; Panama; Paraguay; Peru; Poland; Portugal; Romania; Singapore; Slovakia; Slovenia; South Korea; Spain; Sweden; Switzerland; Thailand; Turkey; United Kingdom; United States; Uruguay; Venezuela; and Vietnam. 

These include some regional agreements such as those with the EU, P4 and the Pacific Alliance. In addition, Chile is in the process of negotiating an FTA with Ecuador (currently an economic comprehensive agreement is in place); updating the FTAs with the EU and South Korea. Also, as part of the Pacific Alliance is involved in accession negotiations with some associated countries like Australia, Canada, New Zealand and Singapore.

Answer contributed by Álvaro Jana

16. To what extent do you expect that Brexit will affect trade between your country and the United Kingdom and the European Union? Is your country negotiating or planning to negotiate a bilateral trade agreement with the UK?

Chile

 Since the announcement of its exit from the EU, the United Kingdom has been seeking a new agreement with a number of other countries. For this reason, in January 2019, Chile became the first country in the world to negotiate an FTA with the UK with the aim of preserving the preferential treatment and other trade benefits concerning the British market already in place under the agreement with the EU.

In addition, Chile has excellent economic relations with large commercial exchanges with both partners and the terms of the bilateral agreement with UK in no way interferes with the long-standing agreement with the EU. Thus, we do not expect that Brexit will affect the normal trade flows between Chile and the EU or the UK.

Answer contributed by Álvaro Jana

17. Is your country party to any regional trade agreements or in the process of negotiating its accession to one?

Chile

Yes, Chile is a party to the P4, the CPTPP and the Pacific Alliance. As a member of the Pacific Alliance, as mentioned before, we are in negotiations with Australia, Canada, New Zealand and Singapore for their accession. In addition, the Pacific Alliance has held several meetings with ASEAN looking for cooperative agreements.

Answer contributed by Álvaro Jana

18. If your country is a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), has your country ratified, and, if not, when do you expect it to do so?

Chile

Yes, Chile is a member of the CPTPP. In fact, it was in Chile and under Chilean government leadership that the agreement was relaunched and signed after US withdrawal from TPP. The ratification process of the treaty has satisfactorily concluded in the lower chamber of the Chilean Congress (Camara de Diputados) and now it is in the Senate for its final approval expected to come to an end in the next months.

Answer contributed by Álvaro Jana

19. What are the benefits and disadvantages that you expect to flow from the future entry into force of the CPTPP for businesses from your country?

Chile

There are multiple benefits of being part of the CPTPP. At the outset, more than 3,000 new products will have free access to the markets of the CPTPP countries. These new opportunities for Chilean products are mainly on agricultural, forestry, fisheries, dairy and meat sectors. The main markets that will offer these advantages are Japan, Vietnam and Canada. CPTPP also improves market access for the services sector and will also allow our goods and services suppliers to provide the government procurement markets with those members with which we did not have a GP chapter in our bilateral FTAs.

The decision of the US on TPP withdrawal was certainly a big disappointment at the time. Nevertheless, the decision is already internalised and all the CPTPP members are successfully moving ahead with the TPP11 ratification processes. In fact, we already achieved the required quorum for putting the agreement into force. Regarding the possibility of having the US coming back, given the messages of the new administration this seems unlikely to happen in the near term. Having said that, the basis of the CPTPP is the TPP12 less the 20 most troublesome, controversial or resisted provisions that were suspended by the remaining parties in absence of the US (they primarily are the ones sought by the US and accepted by other countries in return for accessing the US market (provisions such as the ones on express shipments; investment agreements and investment authorisations; investor-state disputes arbitrations; patentable subject matters; patent term adjustment for unreasonable granting authority delays; protection of undisclosed test or other data; biologic products; term of protection for copyrights and other related rights; technological protection measures; measures to combat trade under conservation purposes and transparency and procedural fairness for pharmaceutical products and medical devices). Having the US coming back to the TPP will be a complex process given most of the CPTPP countries will be in a position to renegotiate these provisions, and certainly some of their internal approval decisions will again face an open opposition from some congressmen as well as stakeholders.

Answer contributed by Álvaro Jana

20. If your country is not a member of the CPTPP, do you expect any trade currently enjoyed by your industries to be negatively impacted by increased trade in those products among members of the CPTPP?

Chile

Not applicable as Chile is part of CPTPP.

Answer contributed by Álvaro Jana

21. Does your jurisdiction benefit from the Generalised System of Preferences maintained by the European Union and the United States and other developed economies? Does your jurisdiction maintain a similar system with respect to third countries?

Chile

No, Chile does not benefit from any of those systems of preferences. However, Chile maintains a similar system with respect to third countries under Law 20.690 published on 28 September 2013. With this legislation Chile voluntarily adopted and implemented the WTO commitment on duty free quota free for the so called LDC countries (least developed members). Chile unilaterally eliminated its import tariffs for every good originating from an LDC country excluding wheat, wheat flour and sugar.

Answer contributed by Álvaro Jana

22. How has the bilateral trading relationship between your country and the United States been affected during the first three years of the Trump administration in the United States? Which sectors have been particularly affected and why?

Chile

Despite the negative effects of the trade war between the United States and China (described in our previous report) and notwithstanding the world crisis generated by covid-19, the bilateral trading relationship between Chile and the United States has not been affected during the first three years of President Trump's administration. In fact, the United States continues to be:

  • 1st destination of non-copper exports (amount: US$7.010 million / 19.3% of non-copper exports to the world);
  • 1st destination of our exports of non-traditional services (amount: US$363 million / 28% of the total exported intangibles);
  • 1st destination of our food exports (amount: US$4,285 million / 24% of our food exports to the world);
  • 1st destination of our exporting SMEs (18% of the exports made by Chilean SMEs go to the US market); and
  • the largest foreign investor in Chile (US$36,848 million in 2018).

In 2019, total trade between the two countries reached US$23,293 million.

Moreover, since the entry into force of the Free Trade Agreement (FTA) between Chile and the USA, our exports have grown at an average annual rate of 9%, reaching shipments of US$13,451 million in 2019, practically five times the amount exported in 2003 before the entry into force of the FTA.

In 2020, the United States continues to lead the country's non-copper exports, with operations for US$4,227 million in the analysed period, despite a 6.2% contraction in exports to this destination (-US$280 million). Thus, 20.3% of Chile's non-copper exports go to the United States.

Answer contributed by Álvaro Jana

23. To what extent has your country been affected by the United States’ decision, in March 2018, to impose tariffs on steel and aluminium? Has your country negotiated with the US government to obtain an exemption from the tariffs or to implement a quota on exports? In reaction to the US tariffs, has your country imposed any retaliatory tariffs against imports from the United States?

Chile

It should be remembered that since 1 January 2015, all bilateral trade between Chile and the United States, including steel and aluminum products, is free of tariffs because of the FTA. However, the measures announced by the United States prevail over the agreement according to article 23.2(b) based on the waiver that they involve protection of its essential security interests. With respect to Chilean exports, minor amounts exported of these products has been detected with no significant impacts so far. However, there is concern about the possible trade diversion of our competitors so both the public and the private sectors are continuously monitoring the situation. With respect to Chile’s request of being exempted from this measure, our understanding is that it was not approved. Nevertheless, United States has an available submission procedure for importers to request an exemption of tariffs on steel and aluminum.

Chile has not imposed retaliatory tariffs against imports from the United States.

Answer contributed by Álvaro Jana

24. What is the position of your country as well as that of businesses from your country on the long-standing debate on currency manipulation? Are you aware of any legislative proposals in your country similar to those recently concluded in the US that would allow the investigating authority to take into account the devaluation of a foreign currency in anti-subsidy investigations to address the issue via unilateral trade remedies? Do you believe that this is an issue the WTO should become more actively engaged in?

Chile

Different from the United States, in Chile there is no official position on the currency manipulation issue nor a legislative proposal for addressing it.

In Chile, the exchange rate is flexible because it is a buffer against external shocks. The exchange rate is freely set by the market.

Certainly, this is an issue in the WTO for its impact on the balances of payments among its members.

Answer contributed by Álvaro Jana

25. How are trademarks and geographical indications protected in your jurisdiction? What are the main steps for registration of trademarks and geographical indications? Has the protection of trademarks and geographical indications in your jurisdiction changed since the WTO came into being?

Chile

Trademarks and geographical indications (GIs) are protected under Law 19.039 on Industrial Property. Trademarks are protected upon registration. Registration has an extent of 10 years and it can be renewed indefinitely. The protection of GIs and appellations of origin (AOs) is unlimited. Therefore, there is no need for renewal. 

According to the Chilean Industrial Law, there are four key stages for a trademark application: filing, preliminary examination, publication and substantive examination.

Source: https://www.inapi.cl/en/frequently-asked-questions/trademarks

In the case of GIs and AOs, any natural or legal person can apply for its registration if they represent a significant group of producers, manufacturers or handcrafters, independently of their legal status. The registration procedure is equivalent to the one for trademarks. Therefore, a third party may submit oppositions, and the Industrial Property National Institute (INAPI) may make observations. 

The Chilean Industrial Property Law has been amended several times (2005, 2007 and 2012) to comply with international standards.

Answer contributed by Álvaro Jana

26. How are other intellectual property rights enforced in your jurisdiction?

Chile

Intellectual property rights can be defended through civil and penal proceedings. Moreover, the law establishes specific means so as to prevent products infringing intellectual property legislation from entering the market or to be removed from it.

The Industrial Property Law also contemplates the possibility of obtaining all kinds of precautionary measures in these proceedings.

Criminal sanctions for the infringement of Intellectual property rights are established by the Chilean Criminal Code, Law No. 19.039 on Industrial Property, Law No. 17.736 on Copyright and Law No. 18.455 that regulates production, processing and trade of ethyl alcohol, alcoholic beverages and vinegars. 

Chilean National Customs Service is the body responsible for imposing border measures  to prevent the entry or exit of products that infringe intellectual property rights under Law No. 19.912.

Answer contributed by Álvaro Jana

27. Has your country ever imposed restrictions on trade in services or trade in goods due to balance-of-payments and external financial difficulties? Please explain the related provisions under domestic law.

Chile

No. Chile does not apply any type of restriction to foreign trade of goods or services due to balance of payments or external financial difficulties. Although restrictions on foreign trade have been applied in the past for balance-of-payments reasons, the current legal framework (and the international commitments assumed by Chile) have severely restricted that possibility.

Answer contributed by Álvaro Jana

28. What effect in very general terms is the covid-19 pandemic likely to have in this practice area in your jurisdiction in the medium term, specifically regarding sectoral impacts; trade levels with major trading partners; restrictions on exportation/importation of PPE, pharmaceuticals and other goods and commodities; and the availability of short- and medium-term export credit insurance?

Chile

The total mandatory shut down of non-essential industries, as well as restrictions on travel between countries and the multiple measures of social distancing implemented throughout the planet, weakened the international demand for intermediate goods and raw materials used in production processes. In the same way, we have seen unemployment rates growing strongly and a lower disposable income in the world's households, on a scale never seen before, also affecting the purchase of consumer goods and services.

All these factors have affected the performance of our exports during the first seven months of 2020, which face an uncertain scenario with ups and downs in their external demand as the countries have begun to lift containment measures.

However, the impact on our exports has been asymmetrical. On the one hand, the main export sectors, such as copper, salmon, cellulose, lithium, wine and sawn wood have shown negative figures in their shipments to the world in the seven months of 2020. While on the other, 947 national products reached their maximum export value in 2020, at least as compared with the last five years, including iodine, cardboard, fish meal, nectarines, corn for sowing, tomato puree, fish oil, flakes oatmeal, wooden doors, inulin, fresh garlic, glass bottles, gouda cheese, carrot seeds, quillay extract, lupines, unroasted malt, chicken pate, fresh sarsaparillas, wooden vats, chestnuts, tangerines, bulbs of lilies, hazelnuts, medicines, baby food and yogurt with fruit, representative products of the exportable offer of all the regions of the country.

Thus, despite the difficult international outlook, more than a thousand of Chilean companies exported for the first time in 2020, contributing close to US$130 million to the country's exports.

As for the incoming months, we expect the unprecedented fiscal stimulus packages implemented by our main trade partners (the EU, China, the United States and Canada), together with the fiscal stimulus implemented by the Chilean government, which is one of the largest in the region, will contribute to achieve a faster recovery of economic activity in key sectors such as manufacturing, a sector that has shown positive signs in these same economies according to the Manufacturing Purchasing Managers' Index (PMI). This will stimulate an increase in imports by their industries, helping to regain market shares that were lost as a result of the pandemic.

Answer contributed by Álvaro Jana

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