Comparative Guide Chile - U.S. FTA and DR - CAFTA - Chapter 3: National Treatment and Market Access for Goods

A Comparative Guide to the Chile-United States Free Trade Agreement and the
Dominican Republic-Central America-United States Free Trade Agreement


Chapter Three: National Treatment and Market Access for Goods


Table of Contents

In both the Chile-U.S. FTA and DR-CAFTA, the issue of national treatment and market access for goods is treated under Chapter 3. There are many structural similarities in both texts, but there are also other distinctive features. Both texts contain the same nine sections:

A. National Treatment
B. Tariff Elimination
C. Special Regimes
D. Non-Tariff Measures
E. Other Measures
F. Agriculture
G. Textiles and Apparel
H. Institutional Provisions
I. Definitions

The Chile-U.S. FTA has twenty-four Articles. DR-CAFTA has thirty-one. Despite substantial differences in the content of many of the Articles, both texts have full Articles on issues related to Scope and Coverage, National Treatment, Tariff Elimination, Waiver of Customs Duties, Temporary Admission of Goods, Goods Re-entered after Repair or Alteration, Duty-Free Entry of Commercial Samples of Negligible Value and Printed Advertising Materials, Import and Export Restrictions, Administrative Fees and Formalities, Export Taxes, Distinctive Products, Agricultural Export Subsidies, Agricultural Safeguard Measures, Textile Safeguards, Rules of Origin and Related Matters (for textiles and apparel), Customs Cooperation (on textiles and apparel matters), Committee on Trade in Goods and Definitions. In spite of similarities in the names and often substance of these common Articles, there are also many substantial differences in their content, as will be detailed below.

In addition, the Chile-U.S. FTA includes Articles on Used Goods, Customs Valuation of Carrier Media, Drawback and Duty Deferral Programs, Luxury Tax, and Agricultural Marketing and Grading Standards.

DR-CAFTA, on the other hand, has Articles on Administration and Implementation of Tariff-Rate Quotas, Import Licensing, Sugar Compensation Mechanism, Consultations on Trade in Chicken, Agriculture Review Commission and Committee on Agricultural Trade. For textiles and apparel only, DR-CAFTA also includes Articles on Refund of Customs Duties, Duty-Free Treatment for Certain Goods, Elimination of Existing Quantitative Restrictions, Most-Favored-Nation Rates of Duty on Certain Goods, Preferential Tariff Treatment for Wool Apparel Goods Assembled in Costa Rica, and Preferential Tariff Treatment for Non-Originating Apparel Goods of Nicaragua.

The Chile-U.S. FTA has three Annexes and two Appendices. DR-CAFTA has eleven Annexes and two Appendices (3.3.6 and

There are important similarities in basic structure in both Agreements. These similarities are more significant than the structural differences. The structure of the sections is identical and most of the Articles have important similarities as well. This analysis will be confirmed when the main issues of substance in the texts are scrutinized below. The tariff elimination programs of both Agreements also have the following structural similarities: they are very comprehensive and, for tariff elimination commitments other than immediate zero tariff, they both follow a residual (as opposed to preferential) approach to phasing out a fixed base tariff over time. DR-CAFTA includes a tariff elimination program to be applied on trade among the Dominican Republic and the five Central American countries. These commitments basically reflect the trade commitments previously agreed upon by those six countries in their free trade agreement of 1998. So, in DR-CAFTA, the six countries consolidated the legal instrument that previously regulated their trade relations. Both Agreements have recourse to tariff-rate quotas, in particular for agricultural products. The Chile-U.S. FTA does not exclude any products from the tariff elimination commitments.  DR-CAFTA has very few exclusions, although this may not be the most appropriate term to use. There are a small number of products subject to tariff-rate quotas where the quantities eligible for duty-free preferential access never truly become unlimited, but rather continue to grow in perpetuity.  These are not true exclusions given that the treatment of these products will be quite restrictive for the foreseeable future as goods entered in excess of the small quotas agreed upon are subject to continued most-favored-nation treatment.  The products subject to this treatment include white corn in the cases of El Salvador, Guatemala, Honduras, and Nicaragua, fresh potatoes and fresh onions in the case of Costa Rica, and sugar in the case of the United States. No similar treatment is granted to specific products by the Dominican Republic.  There are additionally a small number of sensitive products that are excluded from tariff elimination within Central America as well as between Central America and the Dominican Republic.

DR-CAFTA has more extensive commitments on textiles and apparel. The Chile-U.S. FTA includes advanced disciplines on some agricultural issues such as marketing and grading standards and mutual recognition of grading programs for beef. Furthermore, DR-CAFTA has special provisions for the administration and implementation of tariff-rate quotas, sugar compensation, consultations on trade in chicken and an agriculture review commission.  A more detailed analysis below will point out other important differences regarding tariff elimination in both Agreements.

Scope and Coverage: in identical terms both texts (Art. 3.1) state that, except as otherwise provided, the Chapter applies to trade in goods of a Party. Both Agreements define “goods of a Party”, under general definitions found in Chapter Two (Art. 2.1), as including originating goods and domestic products as understood in the GATT 1994 or such goods as the Parties may agree.  The Chile-U.S. FTA definition goes further to state that a good of a party may include materials of other countries.  There are some instances in both Chapters where disciplines cover goods that may not be goods of a Party, even regulating therefore trade in goods that do not necessarily have to be originating goods, such as in the Chile-U.S. FTA Arts. 3.7(d), 3.9 and 3.10 or DR-CAFTA Arts. 3.5, 3.6 and 3.7 (respectively, temporary admission, goods re-entered after repair or alteration, and duty-free entry of commercial samples and printed advertising materials).

National Treatment: by making reference to Article III of GATT 1994 and its interpretative notes, both texts have identical approaches to the national treatment clause (Art. 3.2). The only difference is with regard to the different nature of DR-CAFTA as an agreement among multiple Parties therefore using the form “goods of another Party”, as opposed to the bilateral formula “goods of the other Party” used in the Chile-U.S. FTA. This key difference can be observed throughout the Agreements. Both Agreements provide for annexes of exceptions to the national treatment clause. U.S. exceptions are identical in both Agreements as they relate to the exportation of logs of all species, maritime transportation and restrictions on textiles and clothing as allowed by the WTO Agreement on Textiles and Clothing. Chile exempts the importation of used vehicles and any measure authorized by the Dispute Settlement Body of the WTO. The latter exemption was also lodged by all DR-CAFTA countries. Costa Rica exempts the importation of crude oil and its derivatives; the exportation of wood in logs and boards, hydrocarbons and coffee; the importation or exportation of ethanol and crude rums; and minimum export prices for bananas. The Dominican Republic exempts controls on importation of crude oil and oil derivatives, exports of wood in logs and boards, hydrocarbons and coffee, imports and exports of ethanol, and minimum export prices for bananas. El Salvador exempts controls on arms and ammunitions; the importation of motor vehicles older than 8 years and trucks and buses older than 15 years; and the importation of jute sacks and bags and similar textile fabrics, but this exemption is to be phased out 10 years after the date of entry into force of the Agreement. Guatemala exempts controls on the exportation of timber and coffee and the importation of weapons. Honduras exempts the exportation of some woods, and the importation of arms and ammunitions; and motor vehicles older than 7 years and buses older than 10 years. Nicaragua exempts controls on the exportation of basic foodstuff in cases of critical shortage; the importation of motor vehicles older than 7 years; and, for 10 years only, controls on the importation of some used goods (mainly tires, pneumatics, clothing and other textiles).

Tariff Elimination: both Agreements establish a transitional program for the creation of a free trade zone (Art. 3.3). There are similarities in language in both Agreements regarding prohibitions to increase existing customs duties or adoptions of any new customs duties. Both Agreements subject the elimination of tariffs to the schedule of tariff commitments included in Annex 3.3 of each Agreement. Both Agreements provide for the acceleration of the elimination of tariffs with the only difference being derived from the plurilateral nature of DR-CAFTA: any DR-CAFTA Party shall be notified of the terms of acceleration agreed upon by other DR-CAFTA Parties. DR-CAFTA also provides that any Central American Party can provide preferential tariff treatment to another Central American Party in accordance with Central American integration instruments, provided that the good meets the rules of origin under those instruments. Both Agreements contemplate the possibility of raising tariffs to the levels agreed in Annex 3.3 if the tariffs had previously been unilaterally reduced, and of maintaining or increasing a tariff as authorized by the WTO Dispute Settlement Body. In addition, DR-CAFTA incorporates a tariff elimination program applicable only among the Dominican Republic and the five Central American countries. This program fundamentally mirrors the commitments acquired by those six countries in the context of their 1998 free trade agreement. This program provides for basically free trade across the board with the exception of a few sensitive products. DR-CAFTA, in Annex 3.3.6, sets out tariff elimination commitments for most of those products.

Annex 3.1 of this analysis provides a comparative summary of the different tariff elimination categories in DR-CAFTA and the Chile-U.S. FTA.  Annex 3.2 shows tariff elimination staging categories used by the United States for individual wine products in the Chile-U.S. FTA.  The charts in Annex 3.3 illustrate the different trajectories and relative dispersions of the tariff elimination categories in both Agreements.  Trade and the prevalence of tariff lines by tariff elimination category is shown in Annexes 3.4 and 3.5.  The tariff elimination commitments include the opening of tariff-rate quotas (TRQs) in many cases. The tables in Annex 3.6 include the product categories subject to TRQs (Figure 3.3), brief descriptions of the TRQ measures (Figures 3.4 through 3.9), and the number of tariff lines by Chapter of the Harmonized System where TRQs are found as well as the total number of tariff lines subject to TRQs in DR-CAFTA and the Chile-U.S. FTA (Figures 3.10 and 3.11).

Used Goods: the Chile-U.S. FTA includes a commitment by Chile to immediately eliminate the 50% surcharge applied, with a few exceptions, on the importation of all used goods (Art. 3.4). There is no similar provision under DR-CAFTA, although, as will be described below, other provisions in Chapter 3 of DR-CAFTA eliminate restrictions applied by three Central American countries on the importation of some used goods.

Customs Valuation of Carrier Media: there are only a few provisions in these Chapters regarding Customs Valuation. The Chile-U.S. FTA establishes that carrier media bearing content (CDs, diskettes and other carrier media classified under HS 8523 and 8524) should be valued on the cost or value of the carrier media alone (Art. 3.5). The Chile-U.S. FTA also states in the same Article that the tax basis for the imposition of any internal tax, whether direct or indirect, shall be determined according to the domestic laws of the Parties. There are no similar provisions in DR-CAFTA. The only Customs Valuation provisions in Chapter 3 of DR-CAFTA deal with disciplines on the dutiability of certain textiles and apparel based on value added only (Art. 3.26), as will be described below.

Waiver of Customs Duties: there are important similarities but also important differences in the way both Agreements deal with this issue (Chile-U.S. FTA Art. 3.6 and DR-CAFTA Art. 3.4). In broad terms, both provisions state that the Parties may not adopt any new, or continue or expand any currently existing, waivers of customs duties that are contingent upon the fulfillment of a performance requirement. In the Definitions section (Chile-U.S. FTA Art. 3.24 and DR-CAFTA Art. 3.31), the definitions of performance requirements include requirements that a given percentage of goods or services be exported; that domestic goods be substituted for imported goods upon granting a waiver or issuing a license; that domestic goods, or any level or percentage of domestic content are to be preferred as a condition to grant a waiver or issue an import license; or that relates the volume or value of imports to the volume or value of exports or the amount of foreign exchange inflows. Besides the above, the DR-CAFTA definition outlines what a requirement does not include.  Among those excluded are requirements that an imported good be subsequently exported and that an imported good be used as a material in the production of another good that is subsequently exported. DR-CAFTA also has additional provisions regarding two issues: i) the possibility of Costa Rica, the Dominican Republic, El Salvador and Guatemala maintaining until December 31, 2009, measures that are inconsistent with the aforementioned provisions if they are maintained in accordance with Article 27.4 of the WTO Agreement on Subsidies and Countervailing Measures, and ii) the possibility of Nicaragua and Honduras maintaining measures that are inconsistent with the aforementioned provisions as long as they are provided for under Annex VII of the WTO Agreement on Subsidies and Countervailing Measures (least developed countries or countries with less than $1000 annual GNP per capita).  Thereafter, Nicaragua and Honduras are to maintain any such measures in accordance with Article 27.4 of the WTO Agreement on Subsidies and Countervailing Measures. These provisions have an impact mainly on the ability of Central American countries and the Dominican Republic to maintain some key features of export processing zones, including the possibility of granting some export subsidies at least in the conditions and terms renegotiated during the Doha Ministerial Meeting of WTO in November 2001. The Chile-U.S. FTA text does not contain similar provisions. Instead in Article 3.8, it provides that drawback and duty deferral programs are not subject to disciplines under this Article 3.6.  DR-CAFTA, as will be indicated below, does not contain an Article similar to the Chile-U.S. FTA Article 3.8.

DR-CAFTA contains provisions regarding the treatment of merchandise produced under export processing zones or under another special tax or customs regime for trade among the Dominican Republic and the five Central American countries. These rules provide that such merchandise will receive restrictive treatment in terms of tariff preferences. That treatment will be similar to the treatment that merchandise produced under those regimes in a country is granted when imported into the national territory of that same country. In other words, it is some kind of national treatment: merchandise produced under those regimes in a given country can be imported into another country only and to the extent that this country allows imports into its territory of merchandise produced under its own special regimes.

Temporary Admission of Goods: except for very few minor details in drafting, both the Chile-U.S. FTA and DR-CAFTA texts on this issue (Art. 3.7 and Art. 3.5 respectively) are identical. The texts establish the conditions and limits for the duty free temporary admission for a list of types of goods, including professional equipment, goods intended for display or demonstration, commercial samples, advertising films and recordings, and goods admitted for sports purposes. The Chile-U.S. FTA text states that the origin of those sporting goods is not relevant for purposes of this Article. A similar sentiment is present in DR-CAFTA but applicable to all of the goods subject to temporary admission, not only to sporting goods. Furthermore, both texts contain identical disciplines on temporary admission of vehicles and containers used in international traffic.

Drawback and Duty Deferral Programs: only the Chile-U.S. FTA has provisions on this issue (Art. 3.8). Central American countries apply drawback and have some duty deferral programs such as export processing zones. As discussed earlier, some aspects of these programs are dealt with under Article 3.4, Waiver of Customs Duties. In general, these provisions prohibit refunds, waivers or reductions of customs duties for a good which are conditioned on the subsequent exportation of that good to the other Party or used in the production of another good that is to be exported to the other Party, or is substituted by an identical or similar good used as input for a good that is to be exported to the other Party. On condition of export, no Party may refund, waive or reduce antidumping or countervailing duties, or a premium collected out of any tendering system used in administration of TRQs or tariff preference levels (TPLs) or customs duties paid or owed on a good imported and further substituted by an identical or similar good used as input for a good that is to be exported to the other Party. The Article also lays out several exceptions. The prohibitions under this Article take effect from the eighth year of entry into force of the Chile-U.S. FTA by progressively phasing out the reductions, waivers or refunds until complete elimination on the twelfth year.

Goods Re-entered after Repair or Alteration: both texts are virtually identical on the issue of re-entry of goods after repair or alteration (Chile-U.S. FTA Art. 3.9 and DR-CAFTA Art. 3.6) with the exception of differences pertinent to the multilateral nature of DR-CAFTA (the Party/Parties question). The Agreements basically provide for the duty-free re-entry of goods into the territory of one Party that had been previously exported to the territory of the other Party for repairs or alteration. For purposes of this re-entry, considerations on both the origin of the good and the fact that such repairs or alterations can be made in the territory of the Party in which the good is re-entered are immaterial.

Duty-Free Entry of Commercial Samples of Negligible Value and Printed Advertising Materials: provisions on this issue in both texts are identical except for the “Party/another Party” question that arises from the multilateral nature of DR-CAFTA (Chile-U.S. FTA Art. 3.10 and DR-CAFTA Art. 3.7). The texts outline the conditions and limitations for granting duty-free treatment to commercial samples of negligible value and printed advertising materials.

Import and Export Restrictions: there are similarities and differences in the way both texts regulate these restrictions (Chile-U.S. FTA Art. 3.11 and DR-CAFTA Art. 3.8). In broad terms, commonalities include the prohibition on Parties to adopt or maintain import or export bans or other restrictions on trade between them except in accordance with Article XI of GATT 1994 and its interpretative notes. Only DR-CAFTA clarifies that such prohibition applies also to remanufactured goods. The texts further clarify that these prohibitions include import/export price requirements with a few exceptions, import licensing conditioned on the fulfillment of a performance requirement (save, in the case of DR-CAFTA, for exceptions regarding administration of TRQs included in the tariff elimination program of Annex 3.3), and WTO-inconsistent voluntary export restraints.  DR-CAFTA specific provisions on import licensing are outlined in Article 3.9.  In addition, both Agreements also regulate situations where a Party maintains trade restrictions (such as trade embargoes) with a non-Party. Both Agreements contemplate exceptions that are lodged in an annex and they mirror the exceptions lodged under the national treatment provisions in Annex 3.2 of each Agreement. DR-CAFTA also has additional provisions that are not in the Chile-U.S. FTA text regarding: i) the prohibition -on the Central American countries and the Dominican Republic only- of requiring a person of another Party to establish or maintain a contractual or other relationship with a dealer in the importing country, and ii) a prohibition, -again on the Central American countries and the Dominican Republic only- to restrict or ban imports from another Party as a remedy for a violation (real or alleged) of any law or regulation regarding importer/dealer relationships.  In DR-CAFTA, the final paragraph of this Article defines what is meant by the terms “dealer” and “remedy”.

Import Licensing: only DR-CAFTA contains an Article on import licensing (Art. 3.9) which involves disciplines for the notification and treatment of import licensing procedures within the parameters of the WTO Agreement on Import Licensing Procedures. 

Administrative Fees and Formalities: texts on these issues are very similar in both Agreements (Chile-U.S. FTA Art. 3.12 and DR-CAFTA Art. 3.10).  In broad terms, it is stated that fees and charges of whatever nature imposed on or in connection with importation or exportation should be limited in cost to the services rendered and that they should not be used as disguised protection or as a source of fiscal revenue. This provision does not apply to custom duties, internal taxes or other internal charges compatible with Article III.2 of GATT 1994. In both texts, all Parties agree to not require consular transactions including related fees and charges in connection with importation. The U.S. is also committed to eliminating its Merchandise Processing Fee on originating goods from Chile and from Central American countries. All the Parties have agreed to make available via Internet (in the case of DR-CAFTA) or via Internet or other comparable computer-based telecommunications network (in the case of the Chile-U.S. FTA) a list of fees and charges imposed in connection with importation.

Export Taxes: there are similarities and differences in the way both texts deal with this issue (Chile-U.S. FTA Art. 3.13 and DR-CAFTA Art. 3.11). The texts are similar in that export taxes cannot be charged on exports to the other Parties unless such taxes are also imposed on such goods when destined for domestic consumption. DR-CAFTA, however, is more permissive by: i) adding that export taxes on exports of a good to another Party can be applied when the same tax is applied to exports destined to any other Party in the Agreement; and ii) adding the possibility of lodging exceptions to this Article in an Annex 3.11.  This Annex only contemplates export taxes imposed by Costa Rica on bananas, coffee and meat.

Luxury Tax: only the Chile-U.S. FTA has a provision on this issue (Art. 3.14) which eliminates the Luxury Tax in Chile in 4 years according to a phase out mechanism established in Annex 3.14.

Distinctive Products: while the Chile-U.S. FTA text establishes rules for distinctive products as well as a list of distinctive products (Art. 3.15), DR-CAFTA only states the same rules and lists the distinctive products of the U.S., but contemplates the possibility of the Committee on Trade in Goods recommending that the Parties amend the Agreement in order to designate as distinctive other products at the request of a Party (presumably Central American or the Dominican Republic) (DR-CAFTA Art. 3.12). The U.S. designated Bourbon Whisky and Tennessee Whisky as distinctive products. Chile did the same for Pisco Chileno, Pajarete and Vino Asoleado. According to the rules, distinctive products cannot be sold in the territory of a Party unless they have been produced in the other Party pursuant to their specific manufacturing regulations.

Provisions on Agriculture:

As explained before, both DR-CAFTA and the Chile-U.S. FTA have specific sections dealing with provisions on agricultural trade. The two common thematic areas in both Agreements are export subsidies and agricultural safeguards. Beyond these common areas, DR-CAFTA presents provisions dealing with tariff rate quota implementation and administration; a sugar compensation mechanism; consultation on trade in chicken; and an agriculture review commission. The Chile-U.S. FTA presents additional provisions dealing with agriculture marketing and grading standards; mutual recognition of grading programs for marketing of beef; and product lists and trigger prices for agricultural safeguards.

Export Subsidies: the treatment of export subsidies in both Agreements (Chile-U.S. FTA Art. 3.16 and DR-CAFTA Art. 3.14) is similar and is based on the principle that no Party would introduce or maintain any export subsidy on any agricultural good destined for the territory of the other Party except when a non-Party is exporting an agricultural good with the benefit of export subsidies. In the latter case, the importing Party will consult with the exporting Party with a view of agreeing on specific measures that the importing Party may adopt to counter the effect of such subsidized imports. If the importing Party adopts the agreed upon measures, the exporting Party would refrain from applying export subsidies. Beyond this central provision, the Parties also share the objective of the multilateral elimination of export subsidies for agricultural goods.

Agricultural Safeguard Measures: in both Agreements agricultural safeguards are applied on a specific list of products and only during the transition period. In the Chile-U.S. FTA (Art. 3.18), agricultural safeguard measures are price based using trigger price mechanisms.  The product lists[1] and trigger prices are contained in Annex 3.18 and provision is made for the Parties to periodically evaluate and update trigger prices.  The agricultural safeguard measures in DR-CAFTA[2] (Art. 3.15) are based on trigger volumes and are related to the TRQ regime in effect as per the Parties’ Schedules (Annex 3.15).  To determine the duty to be imposed, both Agreements use the lesser of MFN applied rate which is in effect or in effect the date preceding the entry into force of the Agreement. Both DR-CAFTA and the Chile-U.S. FTA also define that at any one time only one safeguard measure may be used on a good, that is, safeguard measures under the Chapter on trade remedies or under Article XIX of the GATT 1994 may not be used simultaneously.  Transparency of the process of imposing any safeguard measure is addressed in both Agreements.  Parties imposing a measure are given 60 days to notify the Party subject to the measure in writing.  Provision is also made for consultation between the Parties concerning the use of agricultural safeguards.  Upon the accession of the Dominican Republic to CAFTA, this country negotiated with the Central American countries new terms for the adoption of agricultural safeguards (Annex 3.15).

Provisions on Tariff-Rate Quotas: in DR-CAFTA and the Chile-U.S. FTA, the vast majority of TRQs are focused on agricultural products. Under both Agreements, the central characteristics of agricultural TRQs are: (i) TRQs are bilateral market access concessions by which a country provides to another country access according to certain quotas which typically have a percentage growth factor over a period of time[3]; (ii) in-quota tariff rates in the U.S.-Central America, and U.S.-Chile TRQs are zero[4], while the in-quota tariff rates for the TRQs between the Dominican Republic and Costa Rica and Nicaragua are non-zero; and (iii) over-quota tariff rates are generally eliminated over a period of time by means of linear, non-linear or back-loading methods, although there are a small number of products where the over-quota tariff rates remain at most favored nation levels.  Under DR-CAFTA, the treatment given to this issue is much more detailed than what is mentioned in the Chile-U.S. FTA reflecting that a much larger set of product groups and tariff lines are subject to TRQs in DR-CAFTA (see tables in Figures 3.3-3.11 in Annex 3.6 of this analysis).  The first Article in the section on agriculture in DR-CAFTA (Art. 3.13) thus deals with how TRQs are to be treated in the schedules as well as in accordance with Article XIII of the GATT 1994 and the WTO Agreement on Import Licensing Procedures.

The U.S.’ TRQ market access commitments for countries under DR-CAFTA are on beef, dairy products, sugar, peanuts, peanut butter and ethyl alcohol. The product categories that are included in Central American countries´ TRQs for the U.S. are beef, dairy products, pork, chicken, rice (rough and milled), fresh potatoes, fresh onions, frozen french fries, corn (yellow and white) and sorghum.  The product categories and exact number of tariff lines that are subject to TRQs vary by each Central American country regarding both U.S. market access commitments with Central America and vice-versa.  The Dominican Republic additionally applies TRQs on beans, turkey meat, and glucose products from the United States.  The Dominican Republic applies TRQs on chicken breasts and milk powder from Costa Rica as well as beans, chicken breasts, and onions and shallots from Nicaragua.  Costa Rica and Nicaragua each reciprocally apply TRQs on the aforementioned products from the Dominican Republic.  Under the Chile-U.S. FTA, Chile applies TRQs on beef and chicken and turkey.  The products included in the U.S. TRQs for Chile are beef, dairy products, sugar, tobacco, avocados, processed artichokes and poultry [5].  Within these groups of TRQs in DR-CAFTA, countries have reciprocal application of TRQs on some dairy products, while Chile and the U.S. apply reciprocally TRQs on beef and chicken/poultry.

Agricultural Marketing and Grading Standards: classification of agricultural products (Art. 3.17) is found only in the Chile-U.S. FTA as this issue is of particular connotation to Chile-U.S. trade in beef. The Agreement contains a detailed annex on the mutual recognition of grading programs for the purpose of marketing beef (Annex 3.17).  Further details on beef classifications are outlined in Appendix 3.17-A in a comparative beef cut nomenclature table as well as in Appendix 3.17-B on the comparison of Chilean beef norms and USDA beef quality grades.

Sugar Compensation Mechanism: in DR-CAFTA, the United States sugar compensation mechanism (Art. 3.16) provides compensation in the case that, in any year, the United States may decide to compensate in lieu of granting duty-free treatment to some or to all of the duty-free quantity of sugar goods. The compensation would be equivalent to the estimated economic rents that a Party’s exporters would have obtained. Sugar goods are listed in subparagraph 3 (c) of Appendix I to the Schedule of the United States to Annex 3.3.  The Chile-U.S. FTA contains no corresponding mechanism for sugar but makes market access concessions dependent on a status of surplus condition for sugar.

Consultations on Trade in Chicken: under DR-CAFTA (Art. 3.17), the Parties agreed to consult and review the implementation and operation of the Agreement concerning trade in chicken in the ninth year after the date of entry into force of the Agreement.  In the Chile-U.S. FTA, there was an exchange of side letters indicating that both governments had agreed to urge the respective specialized agencies to implement work that would be dedicated to achieving market access in poultry products for the mutual benefit of both Parties.  Under DR-CAFTA, Costa Rica and El Salvador also exchanged similar side letters on this issue with the United States.

Working Groups, Committees and Commissions on Agricultural Trade: DR-CAFTA and the Chile-U.S. FTA have different approaches to deal with institutional issues for trade in agricultural products. In the Chile-U.S. FTA, Article 3.17 establishes a Working Group on Agricultural Trade, which reports to the Committee in Trade in Goods (Art. 3.23), but only for (i) overseeing the operation of agricultural grade and quality standards and programs and (ii) for coordinating with the Committee on Technical Barriers to Trade. Under DR-CAFTA, provisions are made for two bodies.  First, the Agreement provides for the establishment of an Agriculture Review Commission in the 14th year after the date of entry into force of the Agreement to review the implementation and operation of the Agreement (Art. 3.18).  Secondly, a Committee on Agricultural Trade is established in Article 3.19 with wider terms of reference as the mechanism through which Parties would deal with issues of consultation and cooperation. 

Provisions on Textiles and Apparel:

Section G of both texts has special provisions on textiles and apparel. In the Chile-U.S. FTA those provisions deal with safeguards, rules of origin, customs cooperation and definitions. DR-CAFTA contains provisions on those issues as well as provisions on refund of customs duties, duty-free treatment for certain goods, elimination of certain quantitative restrictions, most-favored-nation rates of duty on certain goods, preferential tariff treatment for wool apparel goods assembled in Costa Rica, and preferential tariff treatment for non-originating apparel goods of Nicaragua. These provisions are explained below.

Refund of Customs Duties: paragraph 1 of this provision (Art. 3.20), present in DR-CAFTA only, provides for refunds of excess customs duties paid in connection with the importation of an originating textile or apparel good between January 1, 2004 and the date of entry into force of the Agreement, that is, retroactively.  Paragraphs 2 and 3 outline the conditions and timeframes affecting compliance with paragraph 1, each stating respectively that, (a) paragraph 1 shall not apply if by no later than 90 days before the date of entry into force of the Agreement for the Party concerned, written notice is provided to the other Parties informing that it will not comply with paragraph 1; and (b) notwithstanding paragraph 2, paragraph 1 shall apply if by no later than 90 days before the date of entry into force of the Agreement for the Party concerned, written notice is provided to the other Parties with respect to a benefit that has been agreed to by the Parties as equivalent to the benefit provided for in paragraph 1.  Paragraph 4 further states that this Article shall not apply to a textile or apparel good that qualifies for preferential tariff treatment under Articles 3.21, 3.27, or 3.28.

Duty-Free Treatment for Certain Goods: DR-CAFTA Article 3.21 provides that the Parties will, at any time, grant duty-free access to certified goods that fall within the following categories: hand-loomed fabrics of a cottage industry, hand-made cottage industry goods made of such hand-loomed fabrics, and traditional folklore handicraft goods.

Elimination of Existing Quantitative Restrictions: DR-CAFTA Article 3.22 provides for the elimination in the U.S. of any quantitative restrictions this country maintains under the WTO Agreement on Textiles and Clothing that affect exports of textiles and apparel from Costa Rica, the Dominican Republic, El Salvador and Guatemala. The specific products that benefit from this provision are contained in Annex 3.22.

Safeguard Measures for Textiles and Apparel: both the Chile-U.S. FTA (Art. 3.19) and DR-CAFTA (Art. 3.23) provide for emergency import relief in specific cases and under certain conditions. In DR-CAFTA, a safeguard measure can be imposed only during the transition period (defined as a period of 5 years beginning on the date the Agreement enters into force). In the Chile-U.S. FTA text, no measure can be maintained beyond the eighth year after the tariff for that product has reached the zero level. According to both texts, any importing Party may impose a safeguard measure, after carrying out an investigation, if the importation is causing serious damage or actual threat thereof to the domestic production of like or directly competitive products. The safeguard measure shall consist of a tariff raised up to the lesser of the MFN level at the time the Agreement entered into force or the MFN level at the time the measure is imposed. The measure can be in effect for a maximum period of 3 years. Both texts state the elements that must be observed in order to determine whether serious damage or actual threat thereof does indeed exist. These elements include changes in output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domestic prices, profits and investment, but cannot include changes in technology or in consumer preferences. Both texts establish rules for notification and consultation, but DR-CAFTA is more detailed in this regard. Both texts establish that a safeguard on a given product can be imposed only once. There is a difference regarding the level to which the tariff should return on termination of the safeguard measure: in the Chile-U.S. FTA text, such level is zero, duty-free treatment; in DR-CAFTA, the level is the rate set out in the tariff elimination program of the Party imposing the measure as if the safeguard measure had never been applied. Both texts then go on to establish compensation and retaliation rights. Compensation may consist of concessions having substantially equivalent trade effects, or equivalent to the value of the additional duties expected to result from the safeguard measure. If (in DR-CAFTA, after 30 days) the Parties cannot agree on compensation, the affected Party may retaliate by taking tariff action having trade effects substantially equivalent to the trade effect of the safeguard measure. Such retaliation can be imposed on any goods of the Party applying the measure. Albeit with different language, both texts state that the Parties maintain their rights and obligations under WTO to impose GATT Article XIX safeguards. The Chile-U.S. FTA, but not DR-CAFTA, also includes the possibility of applying safeguards under the Agreement on Textiles and Clothing. Finally, both texts also establish that the Parties cannot apply, with respect to the same good at the same time, a textile safeguard measure and any WTO safeguard, and in the case of DR-CAFTA, another safeguard measure under DR-CAFTA.

Customs Cooperation: (Chile-U.S. FTA Art. 3.21 and DR-CAFTA Art. 3.24) see analysis for Chapter 5 on Customs Administration.

Rules of Origin and Related Matters for Textiles and Apparel: (Chile-U.S. FTA Art. 3.20 and DR-CAFTA Art. 3.25) see analysis for Chapter 4 on Rules of Origin and Origin Procedures.

Most-Favored-Nation Rates of Duty on Certain Goods: DR-CAFTA provides that in the case of products in HS Chapters 61 through 63 that is not an originating good, the U.S. will apply the MFN rate of duty only to the value of the assembled goods minus the value of the fabrics formed in the U.S., the components knit-to-shape in the U.S., and any other materials of U.S. origin used in the production of such a good (Art. 3.26).

Preferential Tariff Treatment for Wool Apparel Goods Assembled in Costa Rica: DR-CAFTA provides a 50% preference of the duty rate of column 1 of the Harmonized Tariff Schedule of the U.S. to men’s, boys’, women’s and girls’ tailored wool apparel that are both cut and sewn or otherwise assembled in Costa Rica from fabric produced outside the DR-CAFTA territory (Article and Annex 3.27).  The preferential treatments on non-originating goods are quantitatively restricted to 500,000 square meter equivalents (SME) during each of the first 2 years after the date of entry into force of the Agreement. Both Costa Rica and the U.S. agreed to consult after 18 months after the date of entry into force on the Agreement regarding the operation of this Annex and the availability of wool in the region. 

Preferential Tariff Treatment for Non-Originating Apparel Goods of Nicaragua: DR-CAFTA provides to some non-originating goods from Nicaragua the same treatment that it provides to the same originating goods. This treatment is limited to cotton and man-made fiber apparel in HS Chapters 61 and 62 (Article and Annex 3.28).  The preferential treatments on non-originating goods are quantitatively restricted to 100,000,000 square meter equivalents (SME) during each of the first 5 years; and then subject to progressive and linear reductions until the ninth year, at which time the quota amounts to 20,000,000 SME. The Annex ceases to apply beginning the tenth year after the date of entry into force of the Agreement.

Definitions for the provisions on textiles and apparel: both the Chile-U.S. FTA and DR-CAFTA provide for definitions for this Section of Chapter 3. There are similarities and differences in the definitions (Chile-U.S. FTA Art. 3.22 and DR-CAFTA Art. 3.29). The Chile-U.S. FTA defines claim of origin, exporting Party, importing Party, square meter equivalents, and textile or apparel good. DR-CAFTA defines claim of origin, exporting Party, importing Party, interested entity, textile or apparel good, textile safeguard measure and transition period.

Institutional Provisions: both Agreements establish a Committee on Trade in Goods (Chile-U.S. FTA Art. 3.23 and DR-CAFTA Art. 3.30) comprising representatives of each Party. It can meet at the request of either Party or of the cabinet-level Free Trade Commission to consider matters arising under this Chapter or the Chapters on Rules of Origin and Customs Administration. The main functions relate to trade promotion and addressing barriers to trade, in particular non-tariff barriers. DR-CAFTA also includes functions on providing advice and recommendations to the Committee on Trade Capacity Building on technical assistance needs in areas related to market access, rules of origin and customs administration.

Definitions: there are similar definitions in the texts for the following terms: AD Agreement, advertising films and recordings, Agreement on Textiles and Clothing, agricultural goods, commercial samples of negligible value, consular transactions, consumed, duty-free, export subsidies, goods intended for display or demonstration, goods temporarily admitted for sports purposes, import licensing, performance requirement, printed advertising materials, and SCM Agreement (Chile-U.S. FTA Art. 3.24 and DR-CAFTA Art. 3.31). The Chile-U.S. FTA also has definitions for Articles eligible for duty free treatment under the U.S. Generalized System of Preferences, carrier media, and duty deferral program. DR-CAFTA includes a definition for Import Licensing Agreement.


[1] Chilean products on which the U.S. may use agricultural safeguards include vegetables (among others, broccoli, carrots, celery, spinach, sweet corn, Chinese water chestnuts, brussels sprouts, asparagus, artichokes), mushrooms, onion powder or flour, dried onions, garlic powder or flour, dried garlic, avocados, melons, cherries (sweet and tart), pears, apricots, fruit and fruit mixtures, nuts, tomatoes (whole, pieces, puree, paste, sauce), and orange juice and pulp. U.S. products on the safeguard product list for Chile include meat (of primates, whales, dolphins, porpoises, reptiles and other such meat), birds’ eggs in shell (fresh, preserved or cooked), rice (rough, milled and broken), rice flour, wheat, wheat starch and wheat gluten.

[2] Central American countries and the Dominican Republic list the following U.S. products on which agricultural safeguards may be applied: garlic, glucose, dairy products (cheese, butter, milk powder, ice cream, liquid dairy and other dairy); chicken (leg quarters); rice (rough and milled); sweet peppers; tomatoes; carrots; onions; potatoes; beans; corn (white and yellow); high fructose corn syrup; vegetable oil; pork; beef; sorghum; meat (canned and processed); and wheat flour.  Products from Central America and the Dominican Republic on which the U.S. may use agricultural safeguards include dairy products (cheese, butter, ice cream, fluid fresh and sour cream and other dairy), peanuts and peanut butter.

[3] Different growth factors include, for example, linear and compounded growth, fixed quantities, and variable quantities.

[4] The Dominican Republic’s TRQ on milk powder from the United States has a non-zero in-quota rate.

[5] In addition to these agricultural products, the United States applies TRQs on some non-agricultural products such as tires, copper, and hotel or restaurant chinaware.  

Chapter 2 Annex 3.1 to Chapter 3

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