III.             trade policies and practices by measure

(1)               Overview

1.                   Since its previous Review in 1997, Chile has continued the progressive liberalization of its trading regime.  This has included the adoption of WTO-based rules on customs valuation, and the unilateral reduction of applied tariffs, resulting in a virtually uniform applied MFN tariff of 6% as of January 2003.  All tariffs lines are bound, most at 25% ad valorem.  For certain agricultural products, Chile maintains a price band system.  Due to the growing number of its preferential trade agreements, MFN imports into Chile have decreased considerably since its previous Review.

2.                   The only tariff rate quota in place was introduced in 2002 and applies to sugar imports.  Chile makes only modest use of contingency measures;  it has taken no anti-dumping or countervailing action since April 2001, nor imposed any related duty as at June 2003.  Since its last Review, Chile has enacted domestic legislation on safeguard measures, which it has used in a small number of cases.

3.                   To promote exports, Chile maintains various schemes involving subsidies;  two public export finance programmes are also in place.  A number of programmes were modified to bring them into line with the WTO Agreement on Subsidies and Countervailing Measures.  Chile has also streamlined export procedures and introduced a single export form.

4.                   Chile has continued its privatization policy, with special emphasis on infrastructure-related activities such as water management and the operation of seaports.  The Chilean Government has made efforts to increase transparency in public procurement, notably through new legislation and the introduction of electronic tendering;  national treatment is granted to foreign suppliers.  New competition legislation currently before Congress is aimed at achieving greater clarity in the definition of anti-competitive conduct and introducing institutional reforms.  Trade-related investment measures in the automotive sector were terminated with the entry in force of the Free Trade Agreement with the European Union in February 2003.  The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights has applied fully to Chile since 1 January 2000;  Chile had taken steps in advance to implement most of the Agreement's provisions.

(2)               Measures Affecting Imports

(i)                 Procedures

5.                   Import procedures have been streamlined since 1997.  This includes in particular the introduction of an electronic processing and payment system, and the abolition of the requirement to submit the import declaration to the Central Bank.

6.                   Chile's customs regime is based on the Customs Law (Decree with Force of Law No. 2/97 of 12 November 1997 of the Ministry of Finance).  All imports must be accompanied by an import declaration approved by the customs authorities.

7.                   The following information is required in the import declaration:  the identity of the exporter, carrier, importer, consignee, and customs broker; a description of the merchandise (weight or quantity, unit price, HS code);  the importer's tax identification number;  and the c.i.f. value for customs purposes.  The declaration must be accompanied by:  the original commercial invoice;  the mandate for the customs broker;  a sworn declaration of the customs value;  a sanitary, phytosanitary, or other certificate, where appropriate (Table III.4);  and a certificate of origin for preferential imports.  The import declaration must be rendered electronically.  Import duties must be paid at an authorized bank.

8.                   The intervention of a customs broker is mandatory for all imports exceeding US$500, except for imports into the free-trade zones.  Customs brokers must be Chilean nationals and be accredited by the National Director of Customs.  No customs service charges are applied.

9.                   Specific import procedures apply to free-trade zones and to goods in transit.  Foreign goods destined for free-trade zones must be accompanied by a Request for Shipment to Free Trade Zones.  The goods may remain in such a zone for resale or further processing or brought into the national customs territory or to an extended free-trade zone (see Chapter IV(4)(iv)).  Goods in transit must be accompanied by a Declaration of Transit and by the International Freight Document – Transit Declaration;  the latter is a LAIA document.

10.               Import procedures apply to all trading partners without exception;  all importers must comply with the same procedures.  Importers are not subject to registration requirements.

11.               Verification of the information provided in the declaration, and physical inspection of the goods to be imported is based on the principle of reasonable doubt.  The authorities indicate that in 2002 about 6.2% of imports were subject to physical inspection.  Imports are usually cleared the same day, provided there are no irregularities.

12.               The National Customs Service, a semi-autonomous public institution, has overall responsibility for the administration of import procedures and the collection of all foreign-trade-related revenue due to the State, including VAT and specific taxes.

13.               Chile has notified WTO Members that it does not have laws or regulations relating to preshipment inspection.[1]  According to the authorities, preshipment inspection firms are not in operation.

14.               Procedures for appeals are laid out in Articles 116 to 129 of Decree with Force of Law No. 2/97.  Decisions of the National Customs Service may be challenged within 60 working days by any interested party.  Appeals must be submitted to the regional director or the administrator of the respective customs office, who decides the case in the first instance.  This decision can be appealed within five working days before the Director of the National Customs Service, who takes a decision in the final instance.  The authorities indicate that 835 decisions on classification and 2,314 on valuation were challenged in first instance in 2002, and 1,501 appeals on classification and 642 on valuation were lodged in second instance.

(ii)               Customs valuation

15.               Chile availed itself of the five-year period allowed for developing countries to apply the Agreement on Customs Valuation.[2]  Since the entry into force of Decree 1.134 of 20 June 2002, establishing the Regulations for the Application of Article VII of the GATT 1994, Chile has been applying a customs valuation system based on the WTO Customs Valuation Agreement.  The regulations have yet to be notified to WTO.  Chile defines transaction value as the c.i.f. value both for MFN and preferential imports.

16.               As part of a broader set of measures to combat tax evasion, Law No. 19.738 of 19 June 2001, also provides for measures against under-invoicing.  These statutes entered into force on 20 June 2002, together with Decree 1.134.  The authorities indicated that it was too early to evaluate the impact of these measures.

17.               Before Decree 1.134 entered into force, Chile's customs valuation was based on the Brussels Definition of Value.  However, Chile started applying WTO rules on customs valuation to imports from Canada and Mercosur countries in 1997 and to imports from Mexico in 1999.

18.               Law No. 19.612 of 31 May 1999 abolished various parts of Law No. 18.525 of 30 June 1986, which empowered the President to establish minimum customs values under specific circumstances.  However, the authorities indicate that no minimum customs values have been applied since 1994.

(iii)             Rules of origin

19.               Chile applies preferential rules of origin as defined in its various trade agreements;  it does not apply any non-preferential rules of origin.[3]  All preferential trade agreements negotiated by Chile contain a specific rules of origin regime.

20.               The main characteristics of the different sets of preferential rules in force are summarized in Table III.1.  Most of Chile's preferential rules of origin define goods as originating if they are wholly obtained or produced in the region;  produced entirely in the territory of its parties exclusively from originating inputs;  produced from non-originating inputs that undergo a change of tariff classification in the region and comply with other requirements, or satisfy a regional value-content requirement.  The rules of origin incorporated in the agreement negotiated with the European Union are based on the principle of "sufficient working or processing";  while they may differ from product to product, criteria for defining whether a good has been sufficiently worked or processed may include change in tariff classification, regional-value-content requirement, as well as production process rules. Rules of origin in the agreement with Canada are based on those of NAFTA;  while for most goods the rules are based on the principle of substantial transformation, specific rules apply for automotive goods, textiles, and footwear.

21.               The rules of origin contained in Chile's various bilateral partial scope agreements (with Bolivia, Colombia, Ecuador, Peru, and Venezuela) were described in detail in the Secretariat Report for the previous Review of Chile.[4]  The basis for Chile's preferential rules of origin applying to other Latin American countries is contained in the 1999 Resolution No. 252 of  the Committee of Representatives of the Latin America Integration Association (LAIA).  These rules of origin are based upon the principle of substantial  transformation (i.e. tariff classification change).  If there is no substantial transformation (i.e. the process of production entails only mounting or assembly), the c.i.f. value of foreign inputs must not exceed 50% of the f.o.b. value of the good produced, or 60% of the f.o.b value for goods produced in countries at a lower stage of development.  In addition, a wide range of products are subject to specific rules of origin.[5]

22.               Preferential imports must be accompanied by a proof of origin.  Self-certification is allowed for imports from Canada, Costa Rica, El Salvador, and Mexico.

Table III.1

Main characteristics of Chile's preferential rules of origin

Source:    WTO Secretariat.

(iv)             Tariffs

(a)                Structure and levels

23.               Chile grants at least MFN treatment to all its trade partners.

24.               The Chilean tariff classification is based on the Harmonized Commodity Description and Coding System (HS 2002).  In March 2003, Chile's tariff schedule contained 7,903 lines at the eight-digit level.  The average applied MFN tariff is 5.9% (Table III.2).  Agricultural goods (WTO definition), including those subject to the price band system, are levied an average of 6.0%, while non-agricultural products excluding petroleum face an average tariff of 5.9%.

25.               All import duties are applied to the c.i.f. value of goods.  With the exception of 36 tariff lines that are subject to specific duties within a price band system (section (v)), Chile applies only ad valorem tariffs.  It does not apply seasonal tariffs.

26.               Through Law No. 19.589 of 14 November 1998, Chile has been reducing its applied tariffs unilaterally by one percentage point annually since 1999;  since January 2003 it has been applying a uniform tariff of 6%, which applies to more than 98% of tariff lines.  The authorities indicated that currently no further tariff reductions are envisaged.  All changes in the tariff structure must be approved by Congress.

Table III.2

Average tariffs under Chile's main preferential agreements, 2003

a              Using the 2003 tariff rate, applied to the lines in the 2000 tariff (in HS1996).

b              EU preferential rates were provided in HS2002 classification using the lines in the 2003 tariff;  consequently, the number of lines in the first column of this table do not apply for the EU.

Source:    WTO Secretariat estimates, based on data from Chilean authorities.

27.               With the exception of the agricultural goods subject to the price band system, the only applied rates are 6% and 0%.  Since Chile's last Review in 1997, the number of goods entering duty-free has increased, from 21 to 95 tariff lines at the eight-digit level.  Goods that enter at a zero tariff include fire-fighting vehicles, helicopters, aircraft, cargo and fishing vessels, various computer products, and books.

28.               Used goods bear a surcharge of 50% above the relevant import duty, resulting in a combined duty of 9%.  Goods exempt from this additional duty include used ambulances, armoured cars, public-road-cleaning vehicles, mobile homes, prison vans, and cement-making vehicles.

29.               The customs duty payable on goods admitted under the temporary admission system is based on the number of days for which the merchandise is admitted.  For temporary admission of 1 to 15 days the duty is 2.5% of the normal duty, for 16 to 30 days 5%, for 31 to 60 days 10%, for 61 to 90 days 15%, for 91 to 120 days 20% and for more than 121 days 100%.  An additional tax of 10% on the customs value is levied upon application for an extension of the period.

30.               Government revenue from import tariffs decreased from US$1.6 billion in 1997 to US$0.7 billion in 2002 (Table I.4).  Fiscal revenue from foreign trade (tariffs plus VAT and specific taxes on imports) fell from over 40% in 1996 to just over 31% in 2001, increasing again to 35% in 2002.

(b)                Tariff bindings

31.               In the Uruguay Round, Chile bound all its tariff lines contained in Chapter 1 to 97 of the Harmonized System at a uniform rate of 25%, with the exception of various agricultural products and of six tariff lines that already had lower bound rates as a result of pre-Uruguay Round Commitments.  A number of agricultural products are subject to a bound rate of 31.5% at the end of the implementation period;  this list, in Section 1 of Chile's Schedule, includes:  dairy products, wheat and wheat flour, oil-seeds and oleaginous fruit, vegetable fats and oils, and beet or cane sugar.  Six tariff lines carry bound rates lower than 25%:  one line is bound at 0% (bone ashes), one at 3% (ships over 3,500 tons or 120 metres in length), and one at 15% (various worked carving material);  and three lines (various types of turbines) are bound at 23%.  As at March 2003, all applied tariffs were below or equal to bound levels.

32.               After the conclusion of the Uruguay Round, Chile pursued Article XXVIII renegotiations for sugar to allow it to amend its Schedule of Commitments.  In September 2001, Chile notified that it had completed the process of renegotiation concerning the rectification of its Schedule, resulting in an increase in the final bound rate for sugar to 98%, up from 31.5%, together with the introduction of a 60,000 ton tariff quota with a zero tariff (section (iv)).[6]

33.               Chile has on three occasions reserved the right under Article XXVIII:5 of GATT 1994 to modify its Schedule of Commitments;  the most recent communication refers to the three-year period commencing 1 January 2003.[7]

(c)                Tariff preferences

34.               Since the previous Trade Policy Review of Chile, the importance of preferential tariffs in Chile's trade regime has continued to increase.  As at June 2003, Chile granted preferential tariff treatment under free-trade agreements to imports from Canada, Costa Rica, El Salvador, the European Union, and Mexico (Table III.2).  Furthermore, under LAIA partial scope agreements preferential treatment is granted to imports from Bolivia, Colombia, Ecuador, the members of MERCOSUR, Peru, and Venezuela.  Chile gives preferential treatment to imports within the Global System of Trade Preferences among Developing Countries (GSTP).

35.               Applied tariffs vary significantly across preferential agreements and sectors, generally as a result of the specific schedules of tariff reductions and the dates of entry in force of each agreement.  Tariff phase-outs for sensitive products, which are in most cases agricultural products, should be completed by 2013 for products from the EU;  2014 for goods from Canada and El Salvador, and MERCOSUR;  and 2015 for products from Costa Rica.  No phase-outs are pending in Chile's agreement with  Mexico or in its partial scope agreements.

(d)                Tariff concessions

36.               Section 0 of Chile's tariff establishes tariff concessions for, inter alia, public entities, benevolent and educational institutions, religious communities, maritime and air transportation companies, and automotive parts. 

37.               Imports entering under the regulations establishing drawback and processing procedures also benefit from tariff concessions (section 3(iv) below).

(v)               Price band system

38.               Chile maintains a price band system (PBS) for various edible vegetable oils, sugar, wheat, and wheat flour.  The system was established in 1985 and is intended to reduce the impact of international price fluctuations on internal prices of these goods.  Chile's regulations on its PBS are contained in Law No. 18.525.  In particular, Article 12 of the law provides the methodology for the calculation of the price bands.

39.               Under the PBS, specific duties based on reference prices are added to the ad valorem rate to bring the import price up to the reference price.  If the import price exceeds the reference price, rebates lead to a reduction of the applied tariff.  Price bands are established once a year, by Presidential Decree, taking into account average international prices of the respective goods at major commodity marketplaces (Box III.1).  In the context of preparations for this Review the authorities indicated that the PBS was under revision.

40.               Despite the gradual reduction of Chile's ad valorem tariffs over recent years, specific duties can effectively keep tariffs on these agricultural products quite high.  As a result of low international sugar prices, for example, effective tariff rates rose as high as 72% in 1999 and 61% in 2000, well above Chile's then bound rate of 31.5%.  In March 2003, average tariffs were 6.0% for wheat, 4.2% for vegetable oils, and 40.63% for sugar.

41.               In October 2000, Argentina requested consultations with Chile on the PBS;  these were held without reaching a mutually satisfactory solution.  At the request of Argentina, a WTO dispute settlement panel was established;  it concluded that the PBS was inconsistent with Chile's obligations under Article II of GATT 1994 (on import tax limits) and with Article 4.2 of the Agreement on Agriculture (on market access).[8]  The panel's decision was subsequently challenged by Chile;  the Appellate Body upheld the panel's finding that the PBS was inconsistent with Article 4.2 of the Agreement on Agriculture, but reversed its finding that the PBS was inconsistent with Article II of GATT 1994.[9]  In November 2001, Chile amended Article 12 of Law No. 18.525 so that applied rates resulting from the application of the PBS may not exceed Chile's bound rates.

(vi)             Tariff quotas

42.               Chile maintains MFN tariff quotas only on refined sugar, with an out-of quota rate of 40% (as at March 2003) and an in-quota rate of 0%.  The quota of 60,000 tons annually, is allocated on a first-come, first-served basis:  21,000 tons are reserved for Argentina, 16,700 tons for Guatemala, 9,700 tons for Brazil, and 12,600 tons for other countries.  No single importer may import more than 12,000 tons.  The tariff quota was introduced as a result of Chile's Article XXVIII renegotiations and entered into force in January 2002.  No tariff quota was in place before that date.  The authorities indicate that in both 2002 and 2003 the quota was filled within a few days.

43.               In addition, Chile applies tariff quotas to certain imports under its preferential trade agreements.  The respective bilateral contingents are defined in the agreements with Canada, Costa Rica, the European Union, and Mexico as well as in its partial scope agreements.  The goods usually affected by tariff quotas under these agreements are meat products, oils, and vehicles.  No preferential tariff quotas are used for sugar.

(vii)           Other charges affecting imports

44.               Chile's value-added tax is levied at a rate of 18% and applies to all goods and services unless otherwise specified.  The VAT is calculated on the basis of the c.i.f. value plus the import duty. While the VAT has remained unchanged since 1997, the level of various specific taxes has been modified (Table III.3).

45.               Imports of capital goods, for investment purposes, may be exempted from the VAT if they are imported under Chile's Foreign Investment Statute (Decree Law 600) of 1974, or if there is no local production or "insufficient" local production of the imported goods.

Table III.3

Taxes levied on imports and domestic goods, April 2003

a              This threshold is updated annually.

Source:    Government of Chile.

46.               An additional airport tax of 2 % of the applied duty applies to all imports transported by air (i.e. the tax is currently 0.12 %).  However, goods originating in Canada, Costa Rica, El Salvador, and Mexico are exempt from this tax, as provided by their free-trade agreements with Chile.

47.               As established by Article 190 of Law No. 16,464 of 25 April 1966, a dispatch tax of 5 % on the customs value applies to merchandise that has been partially exempt from duties.  The dispatch tax is not levied on goods originating in countries with which Chile has trade agreements.  The authorities indicate that due to numerous additional exceptions the tax is of little practical importance and that a draft law for its abolition is before Congress.

48.               In June 1997, the European Union requested consultations on Chile's taxation regime on alcoholic beverages.  As the consultations did not lead to a mutually satisfactory solution, a WTO dispute settlement panel was set up at the request of the European Union;  it concluded that Chile acted inconsistently with Article III:2 of GATT 1994 (on national treatment) by according a preferential tax treatment to pisco vis-à-vis certain other alcoholic beverages.[10]  Law No. 19.716 of 9 February 2001 established a gradual adjustment of tax rates for various alcoholic beverages for a transitional period ending in March 2003;  since then all spirits have been subject to the same rate of 27%.

(viii)         Import prohibitions, restrictions, and licensing

(a)                Import prohibitions

49.               The Constitutional Organic Law of the Central Bank of 10 October 1989 establishes freedom of importation.  However, Chile operates import prohibitions for the protection of human health, animal and plant life, and the environment, in compliance with domestic legislation or international commitments.  Chile's import prohibitions apply equally to all its trading partners.

50.               Pursuant to Article 21 of Law No. 18.483 of 28 December 1985, Chile prohibits the import of used vehicles;  according to the authorities, this is for environmental reasons.  Exceptions to this include used ambulances, cement-making and fire-fighting vehicles, armored cars, mobile homes, street-and highway-cleaning vehicles, and prison vans.

51.               In accordance with the Convention on International Trade in Endangered Species (CITES), Chile prohibits imports of plants and animals in danger of extinction.  Nevertheless, these goods may be imported with a special import permit of the National Commission of Technological and Scientific Research.  Chile prohibits the importation of hazardous waste in accordance with the Basle Convention and of products containing CFC in accordance with the Montreal Protocol.

52.               Article 88 of Law No. 18.840 empowers the Ministry of Finance to prohibit the importation of merchandise from countries that have imposed trade restrictions on Chile.  However, according to the authorities this measure had never been imposed.

(b)                Other import restrictions and licensing

53.               Chile does not make use of any kind of quantitative restrictions on imports.  No import licensing system exists in Chile.[11]  Pursuant to the Constitutional Organic Law of the Central Bank, Chile's import system is based on the principle that all goods may be freely imported and anyone may engage freely in international trade transactions.

54.               No import licences are required, but the importation of certain products is subject to administrative formalities (Table III.4).  There is no difference between trading partners and there are no exceptions under Chile's preferential trade agreements.

Table III.4

Products subject to administrative formalities

Source:    Chilean authorities.

(ix)             Contingency measures

(a)                Anti-dumping and countervailing measures

55.               The Agreement on Implementation of Article VI of the GATT 1994,  the Agreement on Subsidies and Countervailing Duties, Article VI of GATT 1994, and the WTO Agriculture Agreement, all apply with the force of law in Chile since the enactment of the Marrakesh Agreement by Supreme Decree No. 16 of the Ministry of Foreign Affairs of 5 January 1995 (Chapter II), Law No. 18.525 of 30 June 1986 and its further amendments, Decree No. 575 of the Ministry of Finance containing the Regulations on Article 11 of Law No. 18.525, as does the Chile-Canada Free-Trade Agreement. [12]

56.               Chile's legislation on anti-dumping and countervailing measures was reviewed in the WTO Committee on Anti-Dumping Practices and Committee on Subsidies and Countervailing Measures.  Argentina and Brazil asked questions to which Chile provided answers.[13]

57.               The various definitions contained in the WTO Agreements on Anti-Dumping and on Subsidies and Countervailing Duties apply fully, as these Agreements are an integral part of the Chilean legislation.  Chile's legislation lacks a system for a prompt refund, upon request, of any duty paid in excess of the actual margin of dumping, according to Article 9.3.2. of the Agreement on Implementation of Article VI of the GATT 1994.

58.               Article 10 of Law No. 18.525 allows the imposition of anti-dumping and countervailing duties for imports of goods "of which the entry into the country causes or threatens to cause serious injury to the domestic industry by entering at reduced prices as a result of artificial conditions in the respective home markets of the exporters."

59.               The National Commission for Investigations on Price Distortions through Imports, created by Article 11 of Law No. 18.525, carries out investigations related to all aspects of anti-dumping and countervailing measures.  The Commission is composed of:  the National Economic Prosecutor's Office, who chairs it;  two representatives of the Central Bank of Chile, one representative respectively of the Ministries of Finance, Agriculture, Foreign Relations, and the Economy;  and the National Director of Customs.  The Central Bank provides the Technical Secretariat for the Commission.

60.               The Commission conducts an investigation if the complainant can provide evidence of a distortion (dumping or the existence of a subsidy) and the manner in which it causes or threatens material injury to the Chilean industry.  Complaints can be submitted by any industry group or in the name of any industry group.  The Commission may also conduct investigations on its own initiative when it possesses information that justifies so doing.  The authorities indicate that this has not occurred since 1995.

61.               After a complaint has been lodged the Commission must publish a notice of the opening and subject of an investigation in the Official Gazette.  Within thirty days from the date of this notice, the Commission shall receive all information interested parties wish to submit, and request any reports it considers necessary.  Before reaching a decision, it must also hear the arguments of interested parties, at their request.  If the Commission considers that, on the basis of available information, it is possible to establish the existence of price distortions and that these distortions cause or threaten to cause material injury to the affected domestic industry, this is stated in its decision recommending the establishment of anti-dumping or countervailing duties. 

62.               The anti-dumping and countervailing duty proposed by the Commission must not exceed the margin of distortion, which is calculated by comparing dumped with non-dumped imports.  The Commission may also recommend to the President the application of provisional duties.  Anti-dumping and countervailing duties can be imposed for a maximum of one year.  However, a new investigation can be initiated if the Commission considers that there is evidence for the duty to be maintained.

63.               Chile does not apply its anti-dumping legislation to imports from Canada:  as established by Chapter M of the Chile-Canada Agreement, all imports are excluded from anti-dumping measures since January 2003.

64.               Since 1997, Chile has imposed provisional and definitive anti-dumping measures in four cases, out of nine investigations initiated, against imports from Russia and the Ukraine (Table III.5).  The products affected were base metals and articles thereof.  The last anti-dumping investigation ended in September 2001;  no investigations or measures are currently effective (June 2003).

65.               In the context of preparations for the 1999 Ministerial Conference, Chile stated that the imposition of anti-dumping duties should be exceptional, and called for a revision of various aspects of the Anti-Dumping Agreement.[14]  Since then, together with other Members, Chile has submitted several contributions to the Negotiating Group on Rules.[15]  Against the background of increasing use of ant-dumping measures, these contributions seek to clarify and improve various provisions of the Anti-Dumping Agreement.  They cover, inter alia:  duration of anti-dumping measures, facts available, constructed value, zeroing, assessment of injury, price-undertakings, lesser duty, and review of anti-dumping orders.

66.               Since 1997, Chile has initiated four countervailing actions, all of which concerned powdered milk and led to the imposition of provisional measures;  final countervailing measures were imposed in two cases, against the United States and the European Community (Table III.5).  Both measures were in force until July 2000.  No countervailing investigations or measures are currently effective (June 2003).

67.               Chapter 7 of Chile's Agreement with Costa Rica and El Salvador, Article 78 of the Agreement with the EU, and Article 15 of the Agreement with MERCOSUR confirm the parties' rights and obligations under the WTO Agreement on Anti-dumping and Countervailing Measures.

Table III.5

Countervailing, anti-dumping, and safeguard measures classified by category of product, 1997-02

Source:    Government of Chile.

(b)                Safeguard measures

68.               Chile's legal framework for safeguard measures comprises: Article XIX of GATT 1994, the WTO Agreement on Safeguards, Law No. 19.612 (amending Law No. 18.525) of 31 May 1999, and the Regulations on the Application of Safeguard Measures issued by the Ministry of Finance in Decree No. 909 of 17 June 1999.  Law No. 19.612, Chile's first law on safeguard measures, establishes the National Commission (mentioned in Law No. 18.525) as the authority to initiate and conduct investigations relating to safeguard measures and to propose the imposition of safeguard measures. [16] 

69.               Pursuant to Article 9 of the revised Law No. 18.525, the President of the Republic may apply ad valorem tariff surcharges through a Supreme Decree of the Ministry of Finance, subject to a favourable report by the National Commission.  At the written request of the domestic industry or on its own initiative, the National Commission may initiate investigations to determine serious injury to the domestic industry or the threat thereof.

70.               As established by the Regulations on the Application of Safeguard Measures, serious injury is understood to mean a significant impairment in the position of a domestic industry.  In determining the existence of injury or threat thereof, the Commission must evaluate all relevant objective and quantifiable factors.

71.               Within ninety days from the initiation of the investigation, the Commission must decide whether, the available information leads to the conclusion that imports of a product have increased in such volume and under such conditions as to cause or threaten to cause serious injury to domestic producers of like or directly competitive products.  If this is the case, it must adopt a Resolution recommending the application of tariff surcharges:  the Resolution, together with the background information and conclusions of the investigation, are transmitted to the President of the Republic, who takes a final decision through a Decree of the Ministry of Finance.  Where, the available information does not permit the establishment of a safeguard measure, the Commission must take a resolution to end the investigation and transmit the decision to the Minister for Finance for summary and publication in the Official Gazette.

72.               In critical circumstances where delay would cause damage that would be difficult to repair, the Commission may request the President of the Republic to apply provisional tariff surcharges within a period of thirty days from the initiation of the investigation.  The Commission's decision must be based on a preliminary determination of the existence of clear evidence that the increase in imports has caused or threatens to cause serious injury.

73.               The surcharges may not be applied for more than one year, including the period of provisional application of the measure.  This period may be extended by the President for one further period not exceeding one year, subject to a favourable report by the Commission.  The Commission may at any time recommend that the application of the tariff surcharges in effect should be modified or abolished before their expiry date.  The Law does not provide for the imposition of quotas.  Commission decisions are by majority of the votes cast.  The approval of three quarters of the members of the Commission is required if the application of a surcharge increases the tariff in place above the bound tariff. 

74.               Since its adoption of legislation on safeguard measures, Chile has imposed seven definitive safeguard measures, out of eleven investigations (Table III.5).  None of the measures taken is still in force.

75.               Chile's imposition of safeguard measures has led to a number of consultations in the Dispute Settlement Body (Chapter II(4)(i)).  Argentina requested consultations on the provisional safeguard measure on mixtures of edible oils[17];  Columbia, later joined by Cuba, Guatemala, Nicaragua, and El Salvador, requested consultations regarding Chile's definitive safeguard measure on sugar[18];  and Argentina requested consultations on the definitive safeguard measure on fructose[19].  The main issues raised by the complainants include the lack of a precise definition either of the like or directly competitive product and the lack of evidence of the existence of a causal link between increased imports and serious injury or threat thereof.  None of these consultations has led to the establishment of a panel or a mutually satisfactory solution so far (June 2003).

76.               As a consequence of preferential agreements concluded with Canada, Mexico, and Peru.  Chile has forgone the use of safeguard measures on imports from these countries.  Specific provisions on safeguard measures are also contained in Article 92 of the agreement with the EU and Chapter 6 of the agreements with Costa Rica and El Salvador. 

77.               As a member of LAIA, Chile may apply transitional and non-discriminatory safeguard measures.  Procedures for the application of these measures are stipulated in each partial scope agreement concluded by Chile.  The authorities indicated, however, that Chile has not taken any safeguard measures in the context of these agreements since 1997.

(x)               Standards and other technical requirements

(a)                Standards and technical regulations

78.               Chilean standards and technical regulations do not distinguish between foreign and domestic goods.  According to the authorities, Chile's policy for the elaboration and application of standards is based on non-interference with the free operation of markets, including foreign trade, and the use of international standards as a basis for national standards.  Chile's standards and technical regulations apply equally in its free-trade zones.

79.               Chile has accepted the WTO Code of Good Practice for the Preparation, Adoption and Application of Standards.[20]  The TBT national enquiry point for technical regulations, notified to Members is the Department of Foreign Trade in the Ministry of Economy, which is also responsible for the implementation of the WTO Agreement on Technical Barriers to Trade.  The National Institute for Standardization (INN) is in charge of other standards-related issues.[21]  Chile is a member of the Pan-American Standards Commission (COPANT), the International Organization for Standardization (ISO), the Inter-American Metrology System (SIM), and the Interamerican Accreditation Cooperation (IAAC).

80.               INN, a private foundation and affiliate of CORFO, has overall responsibility for the elaboration of (voluntary) standards.  One of its stated objectives is to promote and facilitate the use of international norms at the national level.  INN has a voluntary system of accreditation of laboratories, certification bodies, and certification auditors.  Other institutions, such as the Superintendency for Electricity and Fuels (SEC), the Agricultural and Livestock Service (SAG) of the Ministry of Agriculture, and the National Fisheries Service (SERNAPESCA), are also involved in the process of certification.

81.               Standards are adopted through consensus among parties from both the public and private sectors who are invited to participate in the consultations.  The public consultation process is announced in one of the major newspapers and the text of draft standards is available to anyone upon request.  Once a standard has been approved by the INN Council, it is given official status by the relevant ministry, by means of decree or resolution, and is published in one of the principal newspapers. Chile's standards cover, in particular, issues relating to health and personal safety.  Chile has adopted 2,600 standards, up from 1,976 force at the time of Chile's previous Review in 1997.  INN also accredits organizations that issue quality certificates attesting that export products comply with international norms.

82.               According to the authorities, about 70% of Chilean standards are equivalent to international standards.  Chile considers various international standards as inadequate for national application.[22]  These include standards and definitions regarding the age of live bovine animals to be slaughtered;  seismic designs and structures, because of local seismic conditions;  the sampling of water quality;  and soil analysis methods.

83.               Technical regulations (mandatory) are issued by government institutions with competence in the specific area to be regulated, such as SEC, the Ministries of Health and Agriculture, the Subsecretary of Telecommunications, and SERNAPESCA.  Such regulations take the form of laws, decrees or resolutions and are published in the Official Gazette.  The authorities noted that although INN only elaborates standards, these are often taken as reference by other government institutions for the elaboration of technical regulations.  Compliance with technical regulations is verified in the market.

84.               According to the authorities, Chile has more than 1,500 technical regulations in force.  Between July 1997 and July 2003, Chile made 107 notifications of technical regulations to the WTO Committee on Technical Barriers to Trade.  Most measures are for health or safety grounds, and concern largely food, household appliances, petroleum products, drugs, and motor vehicles.[23]

85.               A National Commission on Technical Barriers to Trade was set up in the Ministry of Economy in 1997 in order to increase transparency and improve coordination in the area of technical regulations.  The authorities indicate that the Commission is currently discussing statutes to define criteria for the elaboration of technical regulations and procedures for conformity assessments (mid 2003).

86.               Chile's preferential agreements with Costa Rica, El Salvador, the EU, Mexico, and MERCOSUR confirm the parties' rights and obligations under the WTO Agreement on Technical Barriers to Trade;  they also provide for the establishment of a committee to discuss issues related to technical barriers to trade.  Chile has not concluded any mutual recognition agreements on technical regulations.

(b)                Marking, labelling, and packaging

87.               Chile has more than 20 individual legal statutes in force on marking, labelling, and packaging;  most have been issued by the Ministries of Agriculture and Health and the Superintendency of Electricity and Combustibles.  The various supreme decrees, decrees, and resolutions cover in particular the labelling and packaging of food products, pharmaceuticals, seeds, plants, combustibles, electric products, and pesticides.

88.               The labelling of food products is regulated by Decree No. 977/1996 of the Ministry of Health and Supreme Decree No. 297/1992 of the Ministry of Economy.  Imported food products for sale in Chile must display the country of origin.  Packaged food must be marked to show the quality, purity, ingredients or mixture, as well as the net weight or measure of the contents.  Canned or packaged foodstuffs must bear labels in Spanish for all ingredients, including additives, manufacture and expiry dates, and the name of the producer or importer.  All sizes and weights of the net contents must be converted into metric units;  goods that do not comply with these measurements may be imported but may not be sold to consumers until the conversion is made.

89.               The authorities are in the process of amending Decree No. 977/1996.  The draft decree provides, inter alia, for the mandatory labelling of food products modified by biotechnological measures.

(c)                Sanitary and phytosanitary measures

90.               The Ministries of Agriculture, Health, and Economy, are responsible, within their own spheres of competence, for of fulfilling Chile's obligations and exercising its rights laid down in the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.  The Ministry of Agriculture, through the Agriculture and Livestock Service (SAG), is responsible for all issues relating to animal and plant health, including the certification of primary export products, and has also been notified as Chile's national SPS enquiry point.[24]  The Ministry of Health, through the Environmental Programme Department, is in charge of regulations pertaining to human health.  The Ministry of Economy, through the National Fisheries Service (SERNAPESCA), is responsible for measures relating to hydro-biological resources.  The National Commission for the Coordination of SPS Measures was established in March 2001 to meet growing demands for information and better compliance with international obligations.

91.               All imports of animals and products thereof must be accompanied by a sanitary certificate from a competent authority in the country of origin.  The certificate must contain information on the origin, destination, and state of health of the animals or products thereof in order to ensure that they are in good health and free of contagious diseases.  A phytosanitary certificate issued by the competent authorities of the exporting country is required for plants or any part of a plant in its natural state or processed, capable of carrying plant pests or of being a pest in itself, as well as products that may be dangerous to plants (including plant products, living organisms, containers, agricultural equipment, and soil).  Products destined for human consumption must also be accompanied by a sanitary certificate.

92.               The authorities indicated that all imported animals are quarantined, regardless of their country of origin.  Plants and seeds may be quarantined depending on the phytosanitary condition in their country of origin;  the decision is based on a risk analysis following the procedures laid down in the International Convention on Phytosanitary Protection.

93.               The Ministries of Agriculture and Health accept certificates issued by the official sanitary service in countries that follow the guidelines of international scientific organizations such as the FAO, Codex Alimentarius, the International Plant Protection Convention (IPPC), and the World Organization for Animal Health.

94.               All imports of hydro-biological resources must be accompanied by a sanitary certificate.  According to the authorities, SERNAPESCA recognizes all official test results and certificates provided by Denmark, Iceland, Ireland, Scotland, and the United States.  Imports from other countries are quarantined.

95.               Compliance with SPS regulations is verified at the border by the relevant technical institution.  Chile's sanitary and phytosanitary regulations apply equally to all trading partners;  no distinction is made between domestically produced and imported products.

96.               Between July 1997 and June 2003, Chile notified 153 SPS regulations and emergency measures to the WTO Committee on Sanitary and Phytosanitary Measures (SPS Committee).[25]  Most measures were for animal health reasons.  Furthermore, Chile is an active participant in the WTO SPS Committee.

97.               The SAG has signed institutional cooperation agreements on SPS measures with:  Argentina, Australia, Brazil, Bolivia, Canada, China, Columbia, Costa Rica, Cuba, the Czech Republic, the Dominican Republic, Ecuador, France, India, Mexico, New Zealand, Nicaragua, Paraguay, Peru, the Philippines, the United States, Uruguay, Venezuela, and Viet Nam. SERNAPESCA has signed memoranda of understanding with Argentina, Brazil, the United States, and Uruguay;  it is also acknowledged by the European Union as competent authority for the control and certification of exports.

98.               SPS provisions are also part of Chile's preferential trade agreements.  Pursuant to Chapter 7 of the agreement with Mexico, Chapter 8 of the agreement with Costa Rica and El Salvador, and to an SPS agreement annexed to the agreement with the European Union, sanitary and phytosanitary measures should be based on scientific principles and not have the objective or effect of creating unnecessary barriers to trade.  The agreement with MERCOSUR confirms the parties' rights and obligations under the WTO Agreement on sanitary and phytosanitary measures.

(xi)             Other measures

99.               Chile does not have any countertrade arrangements.  Chile has no import restrictions in place to deal with balance-of-payments problems and has never invoked Article XVIII:B of GATT.  There are no export restraint agreements limiting exports from foreign countries to the Chilean market.  No import cartels, monopolies or sole distributors exist in Chile.  Chile maintains no import surveillance mechanisms.

(3)               Measures Affecting Exports

(i)                 Registration and documentation

100.            Procedures for exports are laid down in the Customs Law (Decree Law No. 2/97 of 12 November 1997 of the Ministry of Finance).  For every product to be exported, exporters must fill out a single export form (DUS), which replaces the three documents previously required, and requires the following information:  address of exporter and consignee;  description of the merchandise (tariff line, unit price, quantity or weight) and its f.o.b. value;  code and name of the customs broker.  In addition to the DUS, exporters must submit:  the customs broker's mandate;  transport documents;  a copy of the commercial invoice;  and a quality certificate, as appropriate.  Since March 2001, the Central Bank no longer keeps an exporters' register, but exports above US$10,000 must be notified.

101.            The DUS must be submitted electronically by a customs broker.  Once the form has been accepted by the customs authorities, exports must be shipped within 25 days.

102.            The intervention of a customs broker is mandatory for all exports, except for exports from the free-trade zones.  Exports may be subject to physical inspection based on the principle of reasonable doubt;  according to the authorities, 6.3% of exports were physically inspected in 2002.

(ii)               Export taxes, charges, and levies

103.            Chile does not apply any taxes, charges or levies on exports.

(iii)             Export prohibitions and other restrictions

104.            Law No. 18.840 establishes that all commodities can be exported freely.  Chile does not have an export licensing regime.  No Chilean exports are subject to export quotas, which are prohibited by Law No. 18.840.

105.            Export prohibitions or controls apply to goods whose trade is regulated by the Convention on International Trade in Endangered Species (CITES).  Goods included in Appendices I, II, and III of the Convention require an export permit.  This permit is granted by the National Forestry Corporation (CONAF), which follows the guidelines laid down by CITES. 

106.            Chile also prohibits exports of goods such as:  (i) anthropological, archaeological, ethnic, historic, and paleontological objects and their parts;  (ii) Chilean pine (botanical name araucaria araucana) and larch;  and (iii) psychotropic substances and other chemicals.

(iv)             Subsidies, free-trade zones, and similar arrangements

107.            Chile has notified to the WTO six individual support programmes as providing subsidies[26]:  (a) tax credits for investment in certain provinces;  (b) customs and tax exemptions in two free-trade zones;  (c) a regional development fund;  (d) a simplified drawback system;  (e) a system of deferred payment of customs duties and tax benefits;  and (f) the Motor Vehicle Statute.  Due to their mainly regional development objective, programmes (a), (b) and (c) are described in section 4(iv) of this Chapter, while the Motor Vehicle Statute is covered in section 3(vii).  Both export promotion programmes described below were modified, most notably through Law No. 19.589 of 14 November 1998, in order to bring them in line with Chile's WTO commitments.

108.            Chile's legislation on subsidies was reviewed in the WTO Committee on Subsidies and Countervailing Measures.  Chile provided answers to questions from Canada, Japan, Korea, Mexico, and the United States.[27]

109.            Chile does not provide agricultural export subsidies.

Duty drawbacks

110.            Chile operates a general drawback system, which is available to all exporters who have used imported inputs.  The legal provisions for this regime are contained in Law No. 18.708 of 11 May 1988.  Exporters are reimbursed for import duties paid on all imports incorporated or consumed during the production process.  Payments of surcharges and countervailing duties are not reimbursed.  According to the authorities, reimbursements under this scheme amounted to US$46 million in 2002.

111.            Under Law No. 18.480 of 19 December 1985, Chile also maintains a simplified duty drawback system.  The Law established a simplified refund of a percentage of the f.o.b. value of exports, depending on the enterprise's export values;  until recently, these percentages and maximum export values were updated every year.  Law No. 19.589 of 14 November 1998 amended Law No. 18.480 with a view to bring Chile's duty drawback system into line with the provisions of the WTO Agreement on Subsidies and Countervailing Measures.  In particular, Law No. 19.589 progressively reduced the refund to a single rate of 3%.  Since January 2003, the refund is granted exclusively on exports that include at least 50% of imported inputs.  According to the authorities, the total amount refunded in 2002 was US$86 million.

Deferred payment of customs duties and tax benefits

112.            With a view to promoting technological innovation and stimulating the purchase of capital goods, Law No. 18.634 of 5 August 1987 and its Regulations allowed for the deferment of customs duties on imports of capital goods for up to seven years, payable in three instalments;  purchasers of Chilean-made capital goods were entitled to a tax credit equivalent to 73% of the customs duty on the net invoice value of the goods.  In both cases, the debt was subject to a market-based interest rate established by the Central Bank.  The tax authorities forgave, partly or wholly, amounts due for deferred payment when the enterprise had used the capital goods to produce exports;  the debt was written off at 2.5 times the export percentage of total sales on expiry of the period of the first instalment (i.e. 100%, if 40% or more of sales had been exported).  For the two remaining instalments, the debt was written off at 1.66 times the export percentage of total sales (i.e. 100%, if 60% or more of sales had been exported).  According to the authorities, the debt reduction for deferred payment of tariffs was US$178 million in 2000, and the reduction for tax credits amounted to US$15 million.

113.            Law No. 19.589 of 14 November 1998 gradually eliminated the debt reductions granted under Law No. 18.634.  However, under a transitional article the law retained the possibility of debt reductions for companies that requested the deferred payment of tariffs and taxes before November 1998.  Further transitional provisions allowed companies to take advantage of deferred payment of tariffs or tax credits until December 2002.  Under this regime, only instalments with expiry dates up to December 2005 are eligible for debt reduction.

(v)               Export promotion and marketing assistance

114.            The Directorate of Export Promotion and Marketing Assistance (ProChile), part of the Ministry of Foreign Affairs, was created in November 1974.  ProChile operates various programmes aimed at broadening Chile's export base and increasing the competitiveness of exports.[28]  It has 69 commercial offices and trade representations world-wide.  Its activities include organizing export-related congresses, seminars, and commercial events, as well as providing specific trade information and market studies upon demand.

115.            Various private-sector organizations, such as the Association of Chilean Exporters (ASOEX) and the Association of Exporters of Manufactured Goods (ASEXMA), have also developed export promotion capacity-building measures for their members.  In addition, Chile has a Trade Point under the Global Trade Point Network.

(vi)             Export finance, insurance and guarantees

116.            According to the authorities, Chile has no publicly sponsored export finance programmes with preferential conditions.  The Production Promotion Corporation (CORFO), acting as second-tier bank, operates two credit programmes (credit lines B.21 and B.22) at market rates with a view to promoting Chilean exports.  Under both programmes, funds are channelled through Chilean and foreign commercial banks, which establish the specific conditions of the credit contract.

117.            CORFO's credit line B.21 is geared at importers of Chilean exports of capital goods, "durable consumption" goods, and engineering and consulting services.  Goods must have a local content of at least 40%;  services exports must be confirmed by the National Customs Service.  There is no upper limit for credits, which are denominated in U.S. dollars.  The producer is paid at the moment of export without any direct involvement in the credit contract.  This scheme is mainly used for exports to Cuba, Ecuador, and Peru;  disbursements under this credit line amounted to US$5.9 million in 2002.

118.            Credit line B.22 provides financing for exporters of non-traditional goods, defined as all exports except for cellulose, copper, fish flour, fruits, and iron.  The programme, which is confined to enterprises with annual sales of less than US$30 million, finances credits of up to US$3 million for the provision of inputs or the establishment of a commercialization infrastructure abroad.  Disbursements under this credit line amounted to US$2.4 million in 2002.

119.            The Guarantee Fund for Small Enterprises provides credit guarantees for investment projects and exports by enterprises with net annual sales below 25,000 U.F. (14,000 U.F. for agricultural enterprises).  The Fund guarantees up to 80% of outstanding debts up to a maximum of 3,000 U.F. per credit and  4,810 U.F. per enterprise.[29]  Public budget allocation to this fund amounted to US$240 million in 2002.

120.            Exporting enterprises with net annual sales below US$10 million have access to a credit insurance scheme, Cover of Bank Loans for Exporters (COBEX).  This scheme, which is also operated by CORFO through commercial banks, covers up to 40% of the export credit against the risk of non-payment.  The fee is US$50 plus 0.4% of the amount to be covered.

(vii)           Trade-related investment measures (TRIMs)

121.            In January 1996, Chile notified to the WTO the application of trade-related investment measures in the automotive sector.[30]  The notification concerned the Chilean Automotive Statute (Law No. 18.483 of 1985) which, in Article 3, allows exemption from customs duties for imports of CKD (completely knocked-down) and SKD (semi-knocked-down) units for vehicle assembly, to the extent that they are offset by exports of domestic components of an equivalent value, within a period of twelve months, in accordance with a programme approved by the Motor Vehicle Commission.  According to the authorities, the tariff exemptions amounted to a total of US$2.5 million in 2000.  Article 9 of Law No. 18.483 also entitled end-processors (assemblers) to a tax credit in respect of the local content of vehicles produced and sold within the country to offset exports, or other exports of local components, with a ceiling of 35% of the customs value of the corresponding finished vehicle.

122.            While the possibility for tax credits provided for in Article 9 of the Law expired automatically in December 1998, the Chilean Government requested an extension of the provisions contained in Article 3 until 31 December 2000 in order to complete the legislative process for dismantling this measure.[31]  Chile provided written replies to subsequent questions posed by the United States and Japan.[32]  In July 2001, the Council for Trade In Goods took a draft decision to extend Chile's transition period under the TRIMs Agreement until 31 December 2001.[33]  In the context of this Review, the authorities indicated that the provisions have not been applied since the entry into force of the preferential trade agreement with the European Union in February 2003, and such provisions would be formally abolished with the entry into force of the draft law on miscellaneous WTO-related matters (Chapter II(2)(iii)).

(viii)         Measures applied in foreign markets

123.            Chile is a beneficiary of the Generalized System of Preferences schemes of Bulgaria, Hungary, Japan, and New Zealand.

124.            Chilean exports have been subject to various trade defence measures, imposed mainly by Argentina, Peru, and the United States.  Since 1997, 17 anti-dumping actions have been initiated against Chile, of which nine led to the imposition of final anti-dumping duties.  Of the three initiations of countervailing actions against Chile, none ended with an affirmative determination.

125.            The authorities are not aware of other countries granting less than MFN treatment to Chilean exports or any export-restraint agreements limiting exports from foreign countries to the Chilean market.

(4)               Other Measures Affecting Production And Trade

(i)                 Competition policy

126.            Chile has presented the principles of its competition policy to the Working Group on the Interaction between Trade and Competition Policy.[34] 

127.            Chile's main legal instrument of competition policy is the Competition Law (Decree Law No. 211 of 1973, as revised and published as Supreme Decree No. 511 of 27 October 1980).  Moreover, Article 19 of Chile's Constitution guarantees everyone the right to carry out any economic activity that is not contrary to morals or public or national security, and is in compliance with the legal rules.  It also establishes that no arbitrary discrimination may be accorded by the State and its agencies in economic matters.

128.            The Competition Law sets out the practices that are to be considered anti-competitive.  These are described in its Article 1 as:  any act that tends to hinder, or is aimed at eliminating, restricting or obstructing competition.  The Law's provisions on freedom of competition apply to nationals, foreigners, and the State itself, and include activities related to foreign trade insofar they affect free competition within Chile.  The State may, however, exercise monopoly control of certain activities on the basis of specific laws, but is barred from granting monopoly activity to private firms.  Exceptions to these rules may apply on "national interest" grounds or under specific laws.

129.            Various bodies are involved in implementing the Law and preventing and punishing infringements of free competition.  The Resolutory Commission is Chile's competition court and is entitled to deal, ex officio or in response to requests by the National Economic Prosecutor's Office, with any situation it deems incompatible with free competition.  The National Economic Prosecutor's Office is responsible for conducting investigations into infringements of free competition.  The Central Preventive Commission, together with eleven Regional Preventive Commissions, has mostly consultative and preventive functions;  it may instruct the Prosecutor's Office to investigate anti-competitive conduct and propose measures to sanction such practices.

130.            The authorities have carried out several investigations in recent years, most notably in telecommunications;  water and waste management;  and generation, transmission, and distribution of electric energy.  Particular emphasis was put on mergers and acquisitions and on the activities of formerly state-owned enterprises that had operated under monopoly conditions before their privatization.

131.            Without restricting the competence of the competition authorities, financial services, telecommunications, water supply, and electricity are regulated by their respective supervisory agencies:  the Superintendency of Banks and Financial Institutions, the Superintendency of Securities and Insurance, the Sub-secretary for Telecommunications, the Superintendency of Water Management, and the Superintendency of Electricity and Fuels.

132.            The authorities indicate that new competition legislation is before Congress.  In particular, the draft law seeks to change the definition of anti-competitive conduct as well as an institutional reform involving the replacement of the Resolutory Commission by a Tribunal for the Defence of Free Competition. 

133.            Competition provisions are also contained in Articles 172 to 180 of Chile's PTA with the European Union, Article 14 of the PTA with Mexico, Chapter 15 of the PTAs with Costa Rica and El Salvador, Chapter J of the PTA with Canada, and a Memorandum of Understanding with Canada's Commissioner of Competition.  The purpose of these provisions is to promote cooperation and coordination between the parties and to reduce the effect of potential differences in the application of competition law.  The parties agree to cooperate and share information and, when pursuing enforcement activities with regard to the same or related matters, coordinate their efforts where appropriate and practicable.

(ii)               Government procurement

134.            Chile is not party to the plurilateral Agreement on Government Procurement.  It has participated actively in the Working Group on Transparency in Government Procurement.

135.            The Government Procurement Law (Law No. 19.886), of 30 July 2003, lays down the principles of public procurement for all governmental and other public institutions, including regional governments and municipalities.  The provisions of the Law do not apply to public works and state-owned enterprises.  The authorities outlined that the objectives of the new law were to achieve maximum transparency in public procurement, to reach significant savings for the State, and to give impetus to the use of e-commerce.  Before the new law entered into force, public institutions made their purchases directly according to their own rules and procedures.

136.            Law No. 19.886 makes public tendering compulsory for all contracts exceeding U.T.M. 1,000, currently equivalent to about US$40,000 (mid-2003).  The call for tender is published electronically in the Procurement Information System maintained by the Department of Public Procurement of the Ministry of Finance.  In addition, it may be published in a newspaper of national circulation.

137.            Pursuant to the law, public procurement takes one of three modalities, depending on the amount of the purchase:  public tendering, private tendering, and direct contracting.  National and foreign bidders must inscribe in the electronic Register of Suppliers of the Department of Public Procurement.  The specific procedures and thresholds for the various modalities, which will be published separately in Regulations to the Law, are under elaboration.  The Regulations will also specify the technical and financial criteria that suppliers have to meet.  The law does not provide for different treatment of national and foreign goods, services, or suppliers. 

138.            The procurement information system became operational in 2002.[35]  Chile provided information on this system in the WTO Working Group on Transparency in Government Procurement.[36]  It was excepted that by December 2004, 10,000 enterprises would be participating in the electronic procurement system, which would lead to a saving of US$30 million of public expenses.

139.            The law has also establishes a tribunal for public procurement, which deals with infringements of procurement procedures, including for public works.  The tribunal is composed of three lawyers designated by the President of the Republic upon suggestion of the Supreme Court.

140.            Government procurement in Chile is decentralized.  Each public-sector entity carries out its own planning and makes purchases based on such planning and financial resources in line with the Government Procurement Law.  According to the authorities, about 600 governmental institutions engage in public procurement, of which about 200 belong to the Central Government, about 340 to municipalities, and about 60 to state-owned enterprises and other public institutions.  The authorities further estimate that around 30,000 national and foreign enterprises have so far sold goods or services to the Chilean State.

141.            Infrastructure-related public works are implemented by the Ministry of Public Works.  Enterprises that wish to be considered for public works projects must be registered with the Ministry. The authorities indicate that public bidding is the most common method for public works contracts.

142.            Three of Chile's PTAs also contain provisions on public procurement.  Chapter 16 of the agreements with Costa Rica and El Salvador, and Articles 136 to 162 of the agreement with the EU establish the principle of national treatment for public procurement.

(iii)             State-trading companies, state-owned enterprises, and privatization

143.            Chile has notified one enterprise, Comercializadora de Trigo (COTRISA), as a state trading company.[37]  Although COTRISA is authorized to deal in various cereals, it has in practice dealt almost entirely in wheat.  It purchases wheat from Chilean producers on a non-discriminatory basis and does not usually engage in import or export transactions.  According to the authorities, COTRISA bought 9,210 tons of wheat in 2001, equivalent to 0.5% of national production, and 50 tons in 2002.

144.            Despite Chile's long-lasting privatization policy, a number of important enterprises remain state-owned, most notably Chile's National Copper Corporation (CODELCO), the National Mining Company (ENAMI), and the Banco Estado (see Chapter IV(3) and (6)).

145.            With most sectors already in private hands in 1997, including telecommunications and electricity, since then Chile's privatization process has concentrated on water management and seaports (Table III.6). 

Table III.6

Privatization of state-owned enterprises since 1997

Source:    Chilean authorities.

(iv)             Regional assistance

146.            Chile maintains a number of regional assistance programmes to encourage balanced growth throughout the country.  The regional assistance measures in place focus on its extreme northern and southern provinces.  As noted in section (3)(iv) above, three of the six programmes notified by Chile as incorporating subsidies have the objective of supporting the development of specific regions[38]:  (a) tax credits for investments in certain provinces, (b) tax exemptions in the free-trade zones, and (c) the Fund for the Promotion and Development of Remote Areas.  Additional programmes provide for wage subsidies and tax credits for enterprises in specific areas.

Tax incentives

147.            To promote development in the provinces of Arica and Parinacota (Region I), Law No. 19.669 of 5 May 2000, modifying and amending various previous laws, provides for tax incentives for enterprises investing in these provinces.  Taxpayers with investment projects amounting to more than 2,000 Chilean monthly tax units (equivalent to about US$91,000) for projects in the province of Arica and more than 1,000 tax units for projects in the province of Parinacota are eligible for a tax credit of up to 40% of the value of certain non-convertible assets, i.e., buildings, machinery, and equipment.  Credits must be paid back by the year 2030.  In 2001, the use of the tax credit totalled Ch$4,630 million, equivalent to about US$7.5 million.

148.            Law No. 19.606 of 30 March 1999 establishes tax credits for infrastructure and construction investments undertaken in Regions XI and XII and the province of Palena.  Depending on the type and volume of investment, investors are eligible for tax credits of up to 40%.  Credit reimbursement is until 2030.

Direct financial assistance

149.            The Fund for the Promotion and Development of Remote Areas, instituted in 1980, has as an objective to contribute to the development of various provinces in Chile's extreme north and south by providing assistance to small- and medium-sized enterprises investing there.  Funds are accorded only to producers of goods and services in the construction, machinery, equipment, special animal feed, and small-scale fishing industries.  Annual individual investment must not exceed U.F. 50,000, equivalent to US$1.3 million.  Funds granted under this programme may not be accepted together with any other public benefit granted for the same goods or services.  Pursuant to Law No. 19.606 of 30 March 1999 the Fund contributes 20% of the cost of the investment or reinvestment in projects carried out until 31 December 2007.  The amount paid out in 2002 was Ch$1,422 million, equivalent to US$2.3 million.

150.            Wage subsidies are available to employers in certain industries in Regions I and XI, northern and central Region XII, and the Province of Chiloé.  The subsidy is equivalent to 17% of monthly taxable income up to a maximum of Ch$147,000.  These wage subsidies have been regularly prolonged in the past;  Law No. 19.853 of 11 February 2003 prolongs these subsidies until December 2006.

Free-trade zones

151.            In order to promote exports and regional development, Chile established two free-trade zones (FTZs) in 1975:  Iquique in Region I in the North, and Punta Arenas in Region XII in the South.  Benefits granted to industries established in the FTZs include:  (i) exemption from payment of tariffs, charges, surcharges, VAT, and other additional taxes on imports (sales and service tax, income tax on financial transactions);  (ii) exemption from other import requirements (e.g. intervention of a customs broker);  (iii) a duty drawback on inputs incorporated in domestically manufactured merchandise that is later exported to a free zone;  (iv) exemption from payment of VAT on operations undertaken within the zone;  and (v) exemption from payment of the first category income tax on capital returns.

152.            The legal basis for Chile's FTZs is contained in Decree No. 341 of 8 June 1977 of the Ministry of Finance, amended on 5 May 2000.  The FTZs are not considered part of Chile's customs territory.  However, Chile's labour laws and environmental regulations apply equally in its FTZs.  The Ministry of Finance is in charge of monitoring the fiscal regime of Chile's FTZs.  With the exception of mining and fishing, all types of activities may be undertaken in the FTZs.

153.            Both FTZs are administered by public-private joint ventures.  As at March 2003, there were about 1,800 enterprises established in Iquique.  Total exports of the Iquique FTZ decreased from more than US$2 billion in 1997 and 1998 to US$1.2 billion in 2002, of which US$311 million were sold to Region I and US$274 million to the rest of Chile's territory. More than 90% of the enterprises established in the Iquique FTZ are sales and marketing companies.  No figures were available for the Punta Arenas FTZ.