The Chile-U.S. FTA and DR-CAFTA contain three annexes on non-conforming measures: Annex I encompassing Existing Measures with respect to Cross-Border Trade in Services (all services other than financial services) and Investment; Annex II encompassing Future Measures with respect to Cross-Border Trade in Services (all services other than financial services) and Investment; and Annex III on Non-Conforming Measures with respect to Financial Services. The information contained in each of these three Annexes is summarized below for the Parties to the two Agreements. However, as it is impossible to compare the coverage of the non-conforming measures or their impact, no attempt is made in this study to evaluate or compare the incidence or relative restrictiveness of these measures. Likewise, because the Parties to the two Agreements do not necessarily follow the same classification scheme when setting out their measures in the Annexes, no attempt has been made to put either the horizontal or the sectoral measures into comparative tables. Rather, the information is set out in summary form for each individual Party to the relevant Agreement.

In Annex I, the Schedule of a Party sets out that country’s existing non-conforming measures for cross-border trade in services (for all sectors other than financial services) and for investment. These measures are set out according to a negative listing. These non-conforming measures include those that are not subject to some or all of the obligations imposed by:

(a) National Treatment (NT) (Investment and Cross-Border Trade in Services);
(b) Most-Favored-Nation (MFN) Treatment (Investment and Cross-Border Trade in Services);
(c) Local Presence (Cross-Border Trade in Services);
(d) Performance Requirements (PR) (Investment);
(e) Senior Management and Boards of Directors (SM) (Investment); or
(f) Market Access (MA) (Investment in Services and Cross-Border Trade in Services).

Each annex entry sets out the following elements:

(a) Sector refers to the sector for which the entry is made;

(b) Obligations Concerned specifies the obligation(s) that do not apply to the listed measure(s);

(c) Level of Government indicates the level of government maintaining the listed measure(s);

(d) Measures identifies the laws, regulations, or other measures for which the entry is made.

(e) Description provides a general, non-binding, description of the Measures (Chile-U.S. FTA). In DR-CAFTA, this section sets out commitments, if any, for the progressive, future liberalization of the measures.

The non-conforming measures in Annex I are listed at their level of actual application and are supported by references to laws, regulations or other measures. Each Party is bound to apply such measures on a basis not more restrictive than what is indicated in the description of the measure. If a non-conforming measure set out in Annex I is made less restrictive or eliminated after the entry into force of the Agreement, it cannot subsequently be amended by or replaced with a new measure that is more restrictive (“ratcheting”). Thus the new measure is considered to be legally bound and must be applied to all Parties at the more liberalized level.

A.1 CROSS-BORDER TRADE IN SERVICES

The total number of non-conforming measures listed in Annex I by each Party is the following:

The discipline that both Parties invoke most often in their non-conforming measures is that of National Treatment.

Chile applies a greater number of non-conforming measures to mode 1, or cross-border services supply than does the United States, but tends to do this on a sectoral basis. The U.S. applies relatively few non-conforming measures at the sectoral level (other than transport), but does set out measures at the horizontal level that may have a significant impact on services trade of all sectors.

A.1.a Horizontal Measures

At the horizontal level both countries list one measure with respect to cross-border trade in services that affects various obligations of the Agreement.

• Chile : National Treatment / Local Presence

Chile requires that a minimum of 85 percent of employees who work for the same Chilean employer (in a firm of more than 25 employees) must be Chilean natural persons.

• United States : National Treatment / MFN / Local Presence

The United States reserves National Treatment, MFN and Local Presence for all existing non-conforming measures of all states of the United States, the District of Columbia, and Puerto Rico. This measure affects three obligations: National Treatment, MFN and Local Presence. It is the only measure taken at the regional level of government.

A.1.b Sectoral Measures

The non-conforming measures on cross-border trade in services in Annex I are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for Chile are found in Table 1 and those for the United States in Table 2.

A.2 INVESTMENT

The total number of non-conforming measures listed in Annex I by each Party is the following:

The non-conforming measures that affect investment in services with respect to Market Access are included in the tables under Section A.1 on Cross-Border Trade in Services.

The majority of Chile’s existing non-conforming measures pertain to the National Treatment obligation (9 measures). Chile also lists a number of existing non-conforming measures against Senior Management and Boards of Directors (6 measures), and MFN Treatment (5 measures). Chile has 3 existing non-conforming measures that violate the performance requirements obligation.

Most sectoral non-conforming measures listed by the United States are with respect to National Treatment (6 measures), followed by MFN Treatment (3 measures) and Senior Management and Boards of Directors (2 measures). The United States has no sectoral non-conforming measure with regard to the Performance Requirements obligation.

A.2.a Horizontal Measures

At the horizontal level both countries list one measure with respect to investment that affects various obligations of the Agreement.

• Chile: National Treatment

Chile may only dispose of the ownership or other rights over “State land” to Chilean natural or juridical persons, unless the applicable legal exceptions apply.

• United States: National Treatment / MFN Treatment

The Overseas Private Investment Corporation insurance and loan guarantees are not available to certain aliens, foreign enterprises, or foreign-controlled domestic enterprises.

• United States: National Treatment / MFN Treatment

Foreign firms, except for certain Canadian issuers, may not use the small business registration forms under the Securities Act of 1933 to register public offerings of securities or the small business registration forms under the Securities Exchange Act of 1934 to register a class of securities or file annual reports.

• United States: National Treatment / MFN Treatment / Performance Requirements / Senior Management and Boards of Directors

The United States reserves National Treatment, MFN Treatment, Performance Requirements, and Senior Management and Boards of Directors for all existing non-conforming measures of all states of the United States, the District of Columbia, and Puerto Rico. It is the only measure taken at the regional level of government.

• A.2.b Sectoral Measures

The non-conforming measures on investment in Annex I are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for Chile are found in Table 3 and those for the United States in Table 4.

The total number of non-conforming measures listed in Annex I by each Party is the following:

The obligation that both Parties invoke most often in their non-conforming measures is that of National Treatment.

Honduras lists the greatest number of non-conforming measures to cross-border services supply, with Guatemala listing the fewest measures. The US applies relatively few non-conforming measures at the sectoral level, but sets out a measure at the horizontal level that may have a significant impact on the trade of all service sectors.

B.1.a Horizontal Measures

At the horizontal level the United States lists one measure with respect to cross-border trade in services that affects various obligations of the Agreement. There are no measures listed at the horizontal level by the Central American Parties and the Dominican Republic to the Agreement.

• United States: National Treatment / MFN / Local Presence

The United States reserves all existing non-conforming measures for all states of the United States, the District of Columbia, and Puerto Rico with respect to three obligations: National Treatment, MFN and Local Presence. It is the only measure taken at the regional level of government.

B.1.b Sectoral Measures

The non-conforming measures on cross-border trade in services in Annex I are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for the Central American Parties and the Dominican Republic to the Agreement are found in Tables 5 through 10 and those for the United States in Table 11.

The table below shows the total number of existing non-conforming measures listed by each Party in Annex I.

The non-conforming measures that affect investment in services with respect to Market Access are included in the tables under Section B.1 on Cross-Border Trade in Services.

The obligation that both Parties invoke most often in their non-conforming measures is that of National Treatment.

Costa Rica has 13 non-conforming measures which do not apply to the National Treatment obligation, 6 to MFN Treatment, 3 to Performance Requirements, and 4 to Senior Management and Boards of Directors.

The Dominican Republic has 8 non-conforming measures which do not apply to National Treatment, 3 to Performance Requirements, and 3 to Senior Management and Board of Directors.

El Salvador has 7 non-conforming measures that do not apply to the National Treatment obligation, and 3 to the MFN Treatment obligation.

Guatemala lists 3 measures that do not conform to National Treatment and 1 to Senior Management and Boards of Directors.

Honduras has 12 non-conforming measures which do not apply to National Treatment, 1 to the MFN Treatment, and 5 to Senior Management and Boards of Directors.

Nicaragua has 3 non-conforming measures that do not apply to National Treatment, 2 to Performance Requirements, and 1 to Senior Management and Boards of Directors.

The United States has 6 non-conforming measures with respect to National Treatment, 3 for MFN Treatment, and 2 for Senior Management and Boards of Directors.

B.2.a Horizontal Measures

At the horizontal level both countries list one measure with respect to investment that affects various obligations of the Agreement.

• Dominican Republic: National Treatment

Only Dominican nationals may perform activities related to the disposal of toxic, hazardous, or dangerous or radioactive waste produced outside the Dominican Republic.

• El Salvador: National Treatment / MFN Treatment

Rural land may not be owned by a foreign person, including a branch of a foreign person, if the person is a national of a country or is organized under the law of a country that does not permit Salvadoran persons to own rural land, except in the case of land to be used for industrial plants. An enterprise organized under Salvadoran law, a majority of whose capital is owned by foreign persons, or a majority of whose partners are foreign persons, is subject to the preceding paragraph.

• El Salvador: National Treatment / MFN Treatment

Only the following persons may engage in small scale commerce, industry, and the supply of services in El Salvador: (a) Salvadoran nationals born in El Salvador; and (b) nationals of Central American Parties. An enterprise organized under Salvadoran law, a majority of whose capital is owned by foreign persons, or a majority of whose partners are foreign persons, may not establish a small scale enterprise to engage in small scale commerce, industry, and the supply of services (“small scale enterprise”). For purposes of this entry, a small scale enterprise is an enterprise with a capitalization not greater than 200,000 U.S. dollars.

• Guatemala: National Treatment

Only the following persons may be granted title to, rent, or use state-owned lands in the Department of El Petén: (1) Guatemalan nationals who do not own rural real estate anywhere in the country that exceeds 45 hectares; and (2) Guatemalan nationals who do not own industrial, mining or commercial enterprises. Enterprises owned 100 percent by Guatemalan nationals that meet the requirements set out in the preceding paragraph may be granted title to, rent, or use state-owned lands in the Department of El Petén.

• Guatemala: National Treatment

Only Guatemalan nationals and enterprises that are majority owned by Guatemalan nationals may take adverse possession of real estate.

• Guatemala: National Treatment

Foreign nationals require an authorization from the Oficina de Control de Areas de Reserva del Estado to acquire ownership of the following state-owned land:

(a) real estate located in urban zones; and
(b) real estate for which rights were registered in the General Property Registry before March 1, 1956 in the following locations:

(i) a 3-kilometer-long strip of land along the ocean;
(ii) 200 meters around the lakeshores;
(iii) 100 meters on either side of the navigable rivers; and
(iv) 50 meters around any spring that serves as a source of water for the population.

Only the Government may rent state-owned land described above to enterprises organized under Guatemalan law.

• Guatemala: National Treatment

Only Guatemalan nationals by birth and enterprises 100 percent owned by Guatemalan nationals may own or possess real property located within 15 kilometers of the borders. Foreign nationals may, however, own or possess urban real estate and real estate for which rights were registered in the General Property Registry before March 1, 1956 within the 15 kilometer area.

• Guatemala: National Treatment

For an enterprise organized under foreign law to be established in Guatemala, in any form, it must allocate an assigned amount of capital for its operations in Guatemala, and execute a guarantee in favor of third Parties in an amount not less than the equivalent in quetzales of US$ 50,000, which must remain in effect for the duration of the enterprise’s operations in Guatemala. The exact amount of the guarantee shall be determined by the Registro Mercantil, based on, among other factors, the amount of the investment. For greater certainty, the requirement of a bond is not to be construed to prevent an enterprise organized under the laws of a foreign country from establishing in Guatemala.

• Honduras: National Treatment

State land, common land, and private land within 40 kilometers of the borders and coastlines, and such land on islands, keys, coral reefs, breakwaters, rocks, and sand shoals in Honduras, can only be acquired, possessed, or held under any title by Honduran nationals by birth, by enterprises fully owned by Honduran nationals, and by state institutions. Notwithstanding the preceding paragraph, any person may acquire, possess, hold, or lease for up to 40 years (which may be renewed) urban lands in such areas provided that it is certified and approved for tourist purposes, economic or social development, or for the public interest by the Secretaría de Estado en los Despachos de Turismo. Any person that acquires, possesses, or holds such urban land may transfer that land only after prior authorization by the Secretaría de Estado en los Despachos de Turismo.

• Honduras: National Treatment / MFN Treatment

Small-scale industry and trade are reserved to Honduran persons. Foreign investors cannot engage in small-scale industry or trade unless they are naturalized citizens and their country of origin grants reciprocity. “Small-scale industry and trade” means an enterprise with capital, excluding land, buildings, and vehicles, of less than 150,000 Lempiras.

• Honduras: National Treatment / MFN Treatment

Non-Honduran cooperatives may establish in Honduras if they receive authorization from the Instituto Hondureño de Cooperativas. Authorization will be granted if: (a) reciprocity exists in the country of origin; and (b) the non-Honduran cooperative has at least one permanent legal representative in Honduras.

• United States: National Treatment / MFN Treatment

The Overseas Private Investment Corporation insurance and loan guarantees are not available to certain aliens, foreign enterprises, or foreign-controlled domestic enterprises.

• United States: National Treatment / MFN Treatment

Foreign firms, except for certain Canadian issuers, may not use the small business registration forms under the Securities Act of 1933 to register public offerings of securities or the small business registration forms under the Securities Exchange Act of 1934 to register a class of securities or file annual reports.

• United States: National Treatment / MFN Treatment / Performance Requirements / Senior Management and Boards of Directors

The United States reserves National Treatment, MFN Treatment, Performance Requirements, and Senior Management and Boards of Directors for all existing non-conforming measures of all states of the United States, the District of Columbia, and Puerto Rico. It is the only measure taken at the regional level of government.

B.2.b Sectoral Measures

The non-conforming measures on investment in Annex I are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for the Central American Parties and the Dominican Republic to the Agreement are found in Tables 12 through17 and those for the United States in Table 18.

In Annex II, the Schedule of a Party sets out the specific sectors, sub-sectors, or activities for which that Party may maintain existing, or adopt new or more restrictive, measures for cross-border trade in services (for all sectors other than financial services) and for investment. For the sector and sub-sectors included in this Annex, the respective Governments thus remain free to regulate in a discriminatory manner in any way felt desirable, without constraint. Measures are set out according to a negative listing. These non-conforming measures include those that are not subject to some or all of the obligations imposed by:

(a) National Treatment (NT) (Investment and Cross-Border Trade in Services);
(b) Most-Favored-Nation (MFN) Treatment (Investment and Cross-Border Trade in Services);
(c) Local Presence (Cross-Border Trade in Services);
(d) Performance Requirements (PR) (Investment);
(e) Senior Management and Boards of Directors (SM) (Investment); or
(f) Market Access (MA) (Investment in Services and Cross-Border Trade in Services).

Each annex entry sets out the following elements:

(a) Sector refers to the sector for which the entry is made;

(b) Obligations Concerned specifies the obligation(s) that do not apply to the sectors, sub-sectors, or activities listed in the entry;

(c) Description sets out the scope of the sectors, sub-sectors, or activities covered by the entry;

(d) Existing Measures identifies, for transparency purposes, existing measures that apply to the sectors, sub-sectors, or activities covered by the entry.

C. CHILE–U.S. FTA

C.1 CROSS-BORDER TRADE IN SERVICES

The total number of non-conforming measures listed in Annex II by each Party is the following:

The obligation that both Parties invoke most often in their non-conforming measures is that of National Treatment.

Chile lists a greater number of measures with respect to cross-border services supply than does the United States. At the horizontal level both Parties list one identical measure on MFN and one measure each on Market Access. The measures affecting Market Access are comprehensive and may have a significant impact on services trade of all sectors.

C.1.a Horizontal Measures

• United States / Chile / MFN

At the horizontal level both Parties to the Agreement list an identical measure affecting MFN treatment. The measure has two components that should be read separately.

The first part of the measure preserves any pre-existing bilateral or multilateral international Agreement from falling under the purview of the Chile-U.S. FTA. Each of the Parties is given the right to adopt or maintain any measures that accord differential treatment to countries under any bilateral or multilateral international Agreement in force or signed prior to the date of entry into force of the Agreement.

The second part of the measure allows each of the Parties to adopt or maintain any measure involving differential treatment to countries under any bilateral or multilateral international Agreement in force or signed after the date of entry into force of the Agreement with respect to three specific activities, namely:

(a) aviation;
(b) fisheries; or
(c) maritime matters, including salvage.

• United States: Market Access

The US reserves the right to adopt or maintain any measure that is not inconsistent with the United States’ obligations under Article XVI of the WTO General Agreement on Trade in Services. (Note: This Article contains six measures affecting Market Access, of which four of these are non-discriminatory quantitative restrictions.)

• Chile: Market Access

Chile reserves the right to adopt or maintain any measure affecting Market Access except those which it sets out explicitly in Annex II with respect to various sub-sectors and four modes of service supply, as defined in the text of the non-conforming measure. These sub-sectors include: legal services; accounting, auditing and bookkeeping services; taxation services; architectural services; engineering services; veterinary services; services provided by midwives, nurses, physiotherapists and paramedical personnel; computer and related services; real estate services; rental/leasing services related to vessels, aircraft, and any other transport equipment; advertising services, market research and public opinion polling services, management consulting services; services related to agriculture, hunting and forestry; services related to mining, placement and supply services of personnel, investigation, and security services; maintenance and repair of equipment, cleaning services, photographic services, packing services and convention services; printing and publishing services; national or international long-distance telecommunications services; local basic telecommunication services and networks; commission agents services, wholesale trade services, retailing services, franchising and other distribution; hotels and restaurants, travel agencies and tour operators services, entertainment services, news agencies services, libraries, archives, and other cultural services; sporting and other recreational services; road transport, services auxiliary to all transport, pipeline transport and transportation of fuels and other goods; and aircraft repair and maintenance services.

Chile also agrees to set out any existing non-conforming measures on energy-related services and adult education within one year of the date of entry into force of the Agreement.

C.1.b Sectoral Measures

The non-conforming measures on cross-border trade in services in Annex II are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for Chile are found in Table 19 and those for the United States in Table 20.