In 1995, the U.S. trade surplus with Chile reached $1.7 billion, $728 million
greater than the bilateral surplus in 1994. U.S. merchandise exports to Chile
were $3.6 billion, up $837 million or 30.2 percent from 1994. Chile was the
United States' twenty-eighth largest export market in 1995. U.S. imports from
Chile were $1.9 billion, six percent more than in 1994.
The stock of U.S. foreign direct investment in Chile was $4.5 billion in
1994, 56.6 percent larger than that in 1993. U.S. direct investment in Chile is
concentrated largely in mining, services and manufacturing.
Chile has a generally open trade regime, particularly in the area of
traditional border measures such as tariffs and quantitative restrictions. Chile
applies a uniform 11 percent ad valorem tariff on imports. Chile's tariffs are
WTO-bound at 25 percent ad valorem. However, significant barriers do exist.
Chile's major border measure barriers are in the agricultural sector. Chile
maintains a price band system for wheat, wheat flour, edible oils and sugar.
This variable tariff system is designed to maintain domestic prices for these
commodities within a predetermined band, which delays the impact of changes in
international market prices on Chilean producers. Chile also maintains minimum
customs value requirements for imports on occasion, in response to low world
prices. These are currently applied only to wheat flour. The United States has
indicated its opposition to Chile's price band system for certain agricultural
STANDARDS, TESTING, CERTIFICATION AND LABELING
Chile uses animal health and phytosanitary requirements to prevent some
imports. Even though Chile is a member of the WTO, announcements of proposed
rule changes, notification of proposasl to other members via the WTO
Secretariat, and the opportunity for public comment often have not preceded the
promulgation of new requirements. U.S. exports of poultry are effectively
blocked from the Chilean market through a sanitary requirement that the United
States considers unjustified and discriminatory. The U.S. Government has
protested this requirement to the Chilean Government. U.S. fruit exporters have
found it extremely difficult to penetrate the Chilean market due to
phytosanitary barriers. U.S. beef exports have been restricted by Chilean
labeling and grading regulations. Chile does not permit U.S. beef in consumer
cuts to enter the market without being graded to Chilean grading standards.
Because meat grades originate from carcass grades at the time of slaughter, this
requirement effectively blocks U.S. produced beef from the market. Meat that
will undergo further processing is not affected by this law. The United States
will continue to pursue WTO-consistent and scientifically-based sanitary and
phytosanitary requirements in Chile.
In general, Chile does not subsidize exports. However, Chile has several
export promotion measures to help
non-traditional exports. These measures are primarily intended to expedite
and simplify the paper work involved in the export process. The Government of
Chile also provides exporters with quicker returns of value-added taxes than it
provides to other producers.
One such export promotion measure lets all exporters defer import duties for
up to seven years on imported capital equipment, or receive an equivalent
subsidy for domestically-produced capital goods. Chile also provides a
simplified duty drawback program for small exporters, which does not reflect
actual duties paid on imported components. This program has been determined to
be countervailable under U.S. countervailing duty laws. Chile also is expected
to spend $7 million in 1996 from an agricultural export promotion fund, half of
which is made up of government funds and the other half composed of industry
LACK OF INTELLECTUAL PROPERTY PROTECTION
Chile implemented a new patent, trademark, and industrial design law in 1991.
This law provides product patent protection for pharmaceuticals. However,
deficiencies exist in the law, including: a term of protection that is
relatively short (fifteen years from the date of the grant); lack of protection
for plant and animal varieties; lack of "product by process" protection; lack of
provisions for extending patent terms for delays due to regulatory approval
processes; inadequate industrial design provisions; and a lack of transition, or
pipeline, protection for pharmaceutical products patented in other countries
prior to the time product patent protection became available in Chile. In
addition, Chile's registration procedures for marketing new pharmaceuticals are
more onerous for first-to-register innovators, which tend to be foreign
Chile's copyright law was revised in 1992. The term of protection in Chile is
now the author's life plus 50 years -- the Berne Convention standard. Chile's
law does not protect computer software as "literary works" as required by TRIPs.
Chile's copyright law also has some deficiencies, including: unclear rental and
importation rights; inadequate penalties; lack of provision for ex parte civil
searches; unclear provision for injunctions and temporary restraining orders; no
provision for "works for hire"; and unnecessary constraints on contractual
rights. Piracy of computer software is significant, estimated by industry
sources at 64 percent, and piracy of video and audio tapes also exists.
Chile's trademark law also contains deficiencies, including: no requirement
of use to maintain trademark protection, as required by TRIPs; a "novelty"
requirement for trademark registrations; no provision for trademarking
configuration marks, color or packaging or for collective marks; and no
provisions for protection of "well-known" marks.
Chile does not provide protection for semiconductor mask works or for
encrypted program-carrying satellite signals, nor does it provide comprehensive
protection for trade secrets.
Chile officially welcomes foreign investment. However, restrictions exist.
Under the law that regulates nearly all foreign direct investment, profits may
be repatriated immediately, but capital may not be repatriated for one year.
Foreign direct investment is also subject to pro forma screening by the
Government of Chile. Royalty contracts must be approved by the Central Bank.
Contracts may set fees and royalties only as a percentage of sales. Payments are
usually limited to one percent of sales for the use of trademarks, three percent
for the use of trade secrets and proprietary processes, and five percent for the
use of patents. Remittances above these levels may be denied access to the
inter-bank foreign exchange market and may be disallowed as expenses by the tax
authorities. Trade-related investment measures are also applied in the
automobile industry, involving tax benefits in return for meeting local content
requirements and for exporting. Oil and gas deposits are reserved for the state.
However, private investors, be they foreign or Chilean, are allowed concessions
in this area.
Chile maintains a tax structure that discriminates against spirits that are
usually imported and in favor of a locally produced spirit, pisco. Whiskey is
taxed at 70 percent ad valorem, but pisco is taxed at just 25 percent. The
United States has urged Chile to adopt a more equitable distilled spirits tax