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U.S. Exporter's Guide to the U.S.-Chile Free Trade Agreement

1. Introduction
2. Explanation of Tariff elimination schedules
3. Impacts of the FTA on Products and Services
4. Rules of origin
5. Documentation requirements
6. Special Issues: IPR, environmental and labor standards
7. Access to Markets
8. Opportunities in the Products and Services Sectors
9. Bilateral Statistics
10. Frequently Asked Questions
11. Resources and useful contacts

Chapter 1: Introduction

Nestled between the Andes mountain range and the Pacific Ocean, Chile is one of Latin America’s most open, stable and attractive markets. Its strengths include sound economic policy-making, a transparent regulatory system, an educated workforce and good basic infrastructure. Prudent economic policies and an open attitude towards trade and investment have provided Chile with stable long-term growth.

The U.S. Chile Free Trade Agreement (FTA) came into force January 1, 2004. Some 90 percent of U.S. goods now enter Chile duty-free. All remaining tariffs on U.S. goods will be phased out by 2015.
The U.S. is Chile’s highest source of imports, comprising 16.8 percent of the market share. Argentina is second at 16.4 percent (Chilean Customs.)
Trade between Chile and the U.S. continues to expand at a rapid pace hitting $11.87 billion in 2005, a 42 percent increase over 2004 and an 85 percent increase over 2003 (U.S. Census Bureau, http://www.census.gov.)
U.S. exports to Chile increased for the second consecutive year, representing 15.8% of the total market in 2005 (U.S. Census Bureau, http://www.census.gov.)
The U.S. is the largest investor in Chile, representing 26.5% of all foreign direct investment. Spain follows closely with 23%, and Canada makes a distant third at 13.9%.
Chile’s economy grew by 6.3 percent in 2005. The Central Bank of Chile projects 2006 GDP growth rates of between 5.25 and 6.25 percent . (Banco Central de Chile, www.bcentral.cl.)

Strong GDP growth, low inflation, macroeconomic stability and growing integration with international capital markets mean Chile’s credit rating remains the best in Latin America, with a long-term foreign currency sovereign credit rating of A (Standard and Poor’s, December 2005.)

Chapter 2: Explanation of Tariff Elimination Schedules

Information in this chapter compiled from “How to Benefit from the U.S.-Chile FTA” on the ITA Trade Information Center website:

The U.S.-Chile FTA will eliminate tariffs on U.S. and Chilean goods and services over a ten-year period for industrial goods and a twelve-year period for agricultural products. Currently over 95 percent have become duty-free as of Spring 2006. To determine when your product can enter Chile duty free, it is first necessary to obtain the appropriate HS number for your product. To determine how the FTA affects your product’s entry to Chile, check the Chilean tariff schedule, which is found in Annex 3.3 to Chapter Three of the FTA. For importing goods from Chile to the United States, check the U.S. tariff schedule, also located in Annex 3.3 to Chapter Three.

The U.S.-Chile FTA tariff schedules code each line item with a letter, indicating the staging by which the current tariff for each item is reduced and ultimately eliminated. The schedules also note the base rate of customs duty, which is used to determine the interim rate at each stage of reduction for an item. For purposes of eliminating duties, interim stage rates shall be rounded down, at least to the nearest tenth of a percentage point.

Staging Categories

Except as otherwise noted in the head notes section to each tariff schedule, the codes are generally defined as follows:


Category A	Goods will be duty-free immediately upon the date that the FTA enters into force (2004).
Category B	Duties will be eliminated in four equal annual stages beginning on the date that the FTA enters into force, and shall be duty-free effective January 1 of year four (2007).
Category C	Duties will be eliminated in eight equal annual stages beginning on the date that the FTA enters into force, and shall be duty-free effective January 1 of year eight (2011).
Category D	Duties will be eliminated in ten equal annual stages beginning on the date that the FTA enters into force, and shall be duty-free effective January 1 of year ten (2013).
Category E	Duties will be eliminated in twelve equal annual stages beginning on the date that the FTA enters into force, and shall be duty-free effective January 1 of year twelve (2015).
Category F	Goods already receiving duty-free treatment shall continue to receive duty-free treatment under the FTA.
Category G	Duties shall remain at their base rates during years one through four. Duties on these goods shall be reduced by 8.3 percent of the base rate on January 1 of year five, and by 8.3 percent of the base rate each year thereafter through year eight. Beginning January 1 of year nine, duties on these goods shall be reduced by 16.7 percent of the base rate annually through year twelve, and shall be duty-free effective January 1 of year twelve (2015).
Category H	Duties shall remain at their base rates during years one and two. Beginning January 1 of year three, duties on these goods shall be removed in eight equal stages, and such goods shall be duty-free effective January 1 of year ten (2013).

Categories J, K, L, M, and N are described in the Headnotes to the U.S. tariff schedule, located in Annex 3.3 of Chapter Three.

Categories O, P, and V are described in the Headnotes to the Chilean tariff schedule, located in Annex 3.3 of Chapter Three.

Tariff Elimination Schedule for Exports to Chile

The following link table summarizes the percent duty for exports of U.S. products to Chile by category and year. For those products still subject to duty and products not of U.S. (or other FTA country) origin, Chile generally applies a uniform 6 percent duty. (Imports from Chile cannot be represented in a table format, since the United States uses different base rates for different products.)

	A	B	C	D	E	G	H	O	P	V
0	6	6	6	6	6	6	6	6	6	6
1	0	4.5	5.2	5.4	5.5	6	6	6	1.2	6
2	0	3	4.5	4.8	5	6	6	6	0.6	6
3	0	1.3	3.7	4.2	4.5	6	5.2	0	0	6
4	0	0	3	3.6	4	6	4.5	0	0	6
5	0	0	2.2	3	3.5	5.5	3.7	0	0	6
6	0	0	1.5	2.4	3	5	3	0	0	6
7	0	0	0.7	1.8	2.5	4.5	2.2	0	0	5.8
8	0	0	0	1.2	2	4	1.5	0	0	4.5
9	0	0	0	0.6	1.5	3	0.7	0	0	2.7
10	0	0	0	0	1	2	0	0	0	1.1
11	0	0	0	0	0.5	1	0	0	0	0.2
12	0	0	0	0	0	0	0	0	0	0

Sample Calculations for Exports to Chile The following examples are expressed in terms of the Customs Tariff Schedule of Chile (SACH), which closely follow the Harmonized Tariff Schedule of the United States (HTSUS), but are not exactly identical.

Tomato Juice or Paste (HS 2002.90.10): According to the Chilean tariff schedule, this product has been designated Category G staging with a base rate of 6 percent. With the entry into force of the FTA, the duty remains at 6 percent until the end of year four. The duty will be reduced by 8.3 percent of the base rate annually from year five through year eight (e.g. 5.5 percent on January 1 of year five, 5 percent on January 1 of year six, 4.5 percent on January 1 of year seven, and 4 percent on January 1 of year eight). The duty will further be reduced by 16.7 percent of the base rate annually from year nine through year twelve (e.g., 3 percent on January 1 of year nine, 2 percent on January 1 of year ten, and 1 percent on January of year eleven). Effective January 1 of year twelve, the product will be duty-free.

Grape Wine, with denomination of origin (HS 2204.21.10): According to the Chilean tariff schedule, this product has been designated Category V staging (as described in the headnotes to the Chilean tariff schedule in Annex 3.3) with a base rate of 6 percent. With the entry into force of the FTA, the duty will remain at 6 percent until the end of year six. Beginning January 1 of year seven, duties will be reduced by 3.3 percent of the base rate, for an effective duty of 5.8 percent. Beginning January 1 of year eight, duties will be reduced by 21.7 percent of the base rate, for an effective duty of 4.5 percent. Beginning January 1 of year nine, duties will be reduced by 40 percent of the base rate, for an effective duty of 2.7 percent. Beginning January 1 of year ten, duties will be reduced by 58.3 percent of the base rate, for an effective duty of 1.1 percent. Beginning January 1 of year eleven, duties will be reduced by 76.7 percent of the base rate, for an effective duty of 0.2 percent. Effective January 1 of year twelve, the product will be duty-free.

Shampoo (HS 3305.10.00): According to the Chilean tariff schedule, this product has been designated Category C (eight-year) staging with a base rate of 6 percent. With the entry into force of the FTA, the duty has dropped from 6 percent to 5.2 percent. (Note: Because interim duties are rounded down to the nearest tenth of a percent, 5.25 will become 5.2) The duty continued to drop incrementally, to 4.5 percent on January 1 of year two, 3.7 percent on January 1 of year three, 3 percent on January 1 of year four, etc., until the product become duty-free on January 1 of year eight.

Firetrucks (HS 8705.30.00): According to the Chilean tariff schedule, this product has been designated Category A staging with a base rate of 6 percent. With the entry into force of the FTA, the 6 percent duty has been eliminated and the product became immediately duty-free.

Chapter 3: Impacts of the FTA on Products and Services

The United States and Chile trade environment has been open with relatively low tariffs, prior to the U.S.-Chile Free Trade Agreement. Important FTA commitments in non-tariff areas will provide some of the greatest impact to overall trade relations. These commitments have been made in important areas, such as intellectual property, services, investment, temporary entry of businesspersons, and telecommunications. The most important provisions affecting marketing of products and services include:

The Chile-US FTA commits Chile to maintain a competition law that prohibits anti-competitive business conduct, and a competition agency to enforce that law. The Agreement also requires that Chile control and regulate state enterprises and officially designated monopolies. These types of companies cannot abuse their official status to discriminate in the sale of goods or services to the detriment of U.S. business interests.
The Agreement contains provisions that provide for both countries to allow business visitors and investors, intra-company transferees and professionals. U.S. professionals will be able to enter Chile without numerical limit. In the United States, a special FTA professional visa will be granted to a limited number of individuals holding four-year degrees.
Important new protections have been negotiated for U.S. investors through the Agreement. U.S. investors will enjoy in almost all circumstances the right to establish, acquire and operate investments in Chile on an equal footing with Chilean investors, and with investors of other countries. These investor rights are backed by an effective, impartial procedure for dispute settlement that is fully transparent. Source: “How to Benefit from the U.S.-Chile FTA” on the ITA Trade Information Center website:

Additional details are provided in the Chile Country Commercial Guide FY 2004 on http://www.usembassy.cl/

Distribution and Sales Channels

Establishing a local subsidiary or branch office in Chile offers would-be exporters the best guarantee of efficient service and appropriate product promotion. Any corporation legally constituted abroad may form, under its own name, an authorized branch (agencia) in Chile. This method of market penetration involves a considerable investment, but is justified if sales are large in volume or when local service support and/or inventory are key to success.

Another practical and more common market entry strategy, especially for new-to-market exporters, is appointing an agent or representative with good access to relevant buyers and with solid technical expertise. Most manufacturing, trade and service activities in Chile are managed from Santiago, the capital. However, Chile’s distances are great, so larger representatives often have branch offices in different regions as well.

Seaports are the most important points of entry for merchandise entering Chile. Approximately 97 percent of exports and 59 percent of imports go though seaports, of which the most important are San Antonio and Valparaiso. Remaining trade enters/exits the country via airports and by surface transportation (Argentina, Brazil, and Bolivia, mainly). From point of entry, merchandise is distributed to final destinations mostly by surface transportation. Chile’s train network is limited, although there are plans to modernize and expand it. Logistics operations have been modernized, and many new distribution centers and warehouses have been built (especially by large retailers such as department stores, supermarket chains, and distribution companies.) Courier and transportation companies operate efficiently throughout the country.

Use of Agent and Distributor

In general, foreign suppliers enter the Chilean market by appointing an agent, distributor or wholesaler. Most are small-to-medium size firms. Several large firms handle different product lines and operate as wholesalers. Almost all the firms have their main offices in Santiago. The larger ones have branch offices throughout the country, including the free-trade zones of Iquique and Punta Arenas. Agent/representative commissions normally range from 5 to 10 percent, depending on the product. For contract requirements, see Local Professional Services in this chapter.

Chile is a relatively small market where relationships in the business community are a key to success. The selection of a Chilean agent or representation is an extremely important decision for U.S. exporters that merits a thorough review of possible candidates, their qualifications and capabilities. U.S. companies are invited to make full use of the wide range of market entry and partner search services offered by the Commerce Department’s U.S. Commercial Service (www.buyusa.gov/chile/en) or for agricultural exports, the Department of Agriculture’s Foreign Agricultural Service (www.fas.usda.gov.) Please see Guide to Our Services

Franchising

Franchises began to develop significantly in Chile in the early 1990s. As of January 2006, there were 113 franchises operating in Chile. The sector provides direct employment for 35,000 employees and accounts for sales reaching $210 million.

Chile has no special laws on franchises. Franchise companies operating in Chile are subject to regular trade laws. The withholding tax on royalties ranges from 15 to 35 percent and the value-added tax (VAT) is 19 percent.

Most franchises currently operating in Chile belong to the fast-food sector, including McDonald's, Domino's Pizza, Pizza Hut, KFC, Burger King, Taco Bell and Subway. A few service-oriented franchises have opened, including Mailboxes Etc., Powerhouse Gym, Manpower and Curves. However, the market for franchising in full-service restaurants, nightclubs, amusement parks, automotive services, cosmetics, repair and rental services, cleaning (home and industrial), clothes, fitness centers, real estate business, education and training, childcare, hotels/motels, supermarkets and others remains largely unexplored in Chile. For more information, please see the report on franchising in Leading Sectors for U.S. Export and Investment.

Direct Marketing

Direct marketing is well established in the services sector, especially in banking/finance and telecommunications services, etc. Catalog and online sales are not commonplace with the average Chilean consumer, but are growing rapidly among the middle to upper classes, young teens and Internet savvy professionals. The more traditional Chilean consumer generally prefers to browse in shops rather than to purchase through catalogs.

This consumer type will diminish over time. Customers do want to know there is a store that can provide after sales service or address any problem that might arise. Exchange of products in Chile is made more complicated due to value added tax (VAT) considerations. Most store policies will provide store credit, rather than cash refunds with exchanges. The larger department and grocery store chains do provide cash refunds. Credit card penetration is lower in Chile than in the United States, but growing.

Joint Ventures/Licensing

In Chile, joint ventures and licensing arrangements require the participation of a legally established local partner who can be responsible for Chilean legal and tax obligations. The various administrative, commercial, profit distribution and other issues involved in the association are established in contracts drawn up between the partners in accordance with Chilean law and tax regulations.

Steps to Establishing an Office

Incorporating in Chile is not expensive (approximately $1,000) and takes about two months. Chile has no minimum local participation requirement, and the inclusion of local partners is guided only by commercial considerations.

The first step for a U.S. citizen, corporation or entity wishing to establish a business in Chile is to present a declaration of intent to invest in Chile to a Chilean Consulate, stating the nature of the business and the capital to be invested, simultaneously requesting a Permanent Residence Visa. This confers official residence status on the company, without which it will be barred from conducting commercial activities in Chile.

Within the framework of Chilean law, business entities can choose to set up in a variety of different corporate forms, each with different legal and tax implications. Since Chilean tax treatment of the various forms of businesses is similar, the choice of entity type is often guided by U.S. tax considerations. See Investment Climate.

Selling Factors/Techniques

Depending on the product or service, price can be the key sales factor in Chile. Price-competitive products from places such as Taiwan or South Korea often outsell more expensive European or North American products, especially in consumer product categories such as electronics, appliances and automobiles.

Where dependability becomes more important, products such as advanced electronics or heavy machinery; Chilean customers often prefer more expensive North American or European products. While price remains a factor in purchasing decisions, considerations of quality, durability, technology, customer support and availability of service will also influence the purchase decision, with the order of importance depending on the industry, the customer and the application.

Pricing Products

Pricing starts with a fairly straightforward formula based on CIF costs plus generally constant ship-to-warehouse expenses. Gross margins for consumer goods are generally 30-50 percent (or more for direct sales to consumers) or 20-30 percent each for the importer/distributor and the retailer when a distribution chain is in place. The final price for mass-distributed U.S. items should be competitive with imports from Asia and countries like Brazil. Higher-priced items must identify niche market segments to prosper. More specialized products are sold by stocking distributors or by commissioned agents who generally earn margins of 5 to 10 percent on their sales.

Under the U.S.-Chile FTA, tariffs were eliminated on most goods imported from the U.S. However, Chile’s value added tax (called IVA or Impuesto al Valor Agregado) is at 19 percent as of Spring 2006. Any tariff and value added tax is usually paid by the importer and not by the supplier. There are some exceptions: government entities do not pay these taxes, and some luxury goods have higher tariffs.

Sales Service/Customer Support

Customer service and support are fundamental to successfully penetrating and retaining market segments for most products and services. Any product that requires operator training or needs after sales technical service must have, in effect, a qualified local company ready and able to assist the customer. Due to Chile’s relatively close-knit market, company reputations can be made or lost in a fairly short period of time.

Selling to the Government

The U.S.-Chile FTA calls for open tendering in public procurement. Tenders must be in writing and winning bids published, including the name of the supplier and the value of the contract. The FTA provisions cover procurements by twenty Chilean central government entities for non-construction purchases over $56,000. It also covers local government non-construction procurements over $460,000. In both cases, higher limits apply for construction work. The agreement also calls for non-discriminatory “national treatment” for either country’s suppliers. Tender opportunities should be published at least thirty days in advance and technical specifications or requirements should be performance-based. The agreement further establishes an impartial authority to review any challenges lodged against specific procurement awards.

A government of Chile procurement website [www.chilecompra.cl] was established in March 2000 to increase transparency, enhance opportunities and reduce government procurement costs. The site serves as a central source for all Chilean government procurement. Foreign and local bidders on government tenders must register with the Chilean Direccion de Provisionamiento del Estado (Bureau of Government Procurement Supplies.) They must also post a bank and/or guarantee bond, usually equivalent to ten percent of the total bid, to ensure compliance with specifications and delivery dates. Bidding is best done through a local agent who is registered, well connected and familiar with Chilean government bidding procedures.

Advertising and Trade Promotion

Television, radio, newspaper and magazine advertising are used heavily to reinforce in-store-merchandising methods. Private agencies handle most advertising. Most of these agencies belong to the Chilean Association of Advertising Agencies (ACHAP). ACHAP estimates that about $602 million was spent on advertising in Chile in 2004. Non-cable television accounted for 49.2 percent of all spending on advertising, followed by newspapers (29.4 percent), radio (8.3 percent), billboards/posters (6.6 percent), magazines (3.5 percent), cable TV (1.7 percent), the Internet (1.0 percent) and films (0.3 percent). See [www.achap.cl].

Chile has five national broadcast television networks. All of them are self-supporting through advertising. TV broadcasting stations in Santiago are: Channel 2, Telecanal; Channel 4, La Red; Channel 5, Universidad Católica Valparaíso (UCV); Channel 7, Televisión Nacional (TVN); Channel 9, Mega; Channel 11, Chilevisión; Channel 13, Corporación de Televisión de la Universidad Católica; and UHF television station TVO Television, Channel 21.

Cable/satellite television reaches an estimate of one million households in Chile, 51% of them in Santiago. The two major cable systems (Metropolis-Intercom and VTR-Cablexpress) merged in late 2004. The resulting company, VTR TV, covers 95% of Chile. It rebroadcast all local stations, as well as major international channels from the United States, Italy, France, Germany, Argentina, Brazil and Mexico. U.S. offerings include CNN International, HBO, MTV, TNT, Worldnet, ESPN and Cartoon Network.

Reaching into the most remote areas, radio is Chile's most extensive mass medium. Nearly all Chilean stations operate commercially, and six have network affiliates. Chile’s Undersecretariat for Telecommunications lists 170 AM and 1,229 FM stations in the country, with 24 AM and 55 FM stations in Santiago alone. An estimated 93 percent of Chile's population listens to radio. However, market share for radio advertising has decreased by 9 percent over the last three years and television, cable and Internet are seen as more effective.

The principal national networks are Radio Cooperativa (76 AM and 93.3 FM), number one in the metropolitan area, Radio Agricultura (57 AM and 92.1 FM), and Bio Bio (99.7 FM). Other major musical and commercial FM radios are Rock & Pop, Duna, Pudahuel, Corazon, Romantica, Activa, and Digital FM that operates outside of the capital city. Chile has approximately 40 newspapers ranging from nationally distributed dailies to small-town tabloids. Distribution ranges from as many as 301,606 copies (Sunday edition of Santiago's El Mercurio) to regional papers with 3,000 copies. Santiago has 10 major newspapers with a combined weekday circulation of approximately 600,000. The circulation of local dailies in the regions is approximately 220,000.

Two major established newspaper enterprises operate in Chile: the El Mercurio chain, owned by the Edwards family, with 3 national newspapers and 19 regional dailies affiliated throughout Chile, and Consorcio Periodístico de Chile (COPESA), owned by the Alvaro Saieh group, which distributes nationally La Tercera, popular La Cuarta, daily free tabloid La Hora and the newsweekly Qué Pasa. Copesa also owns 50% of the new daily Diario 7. El Mercurio of Santiago is Chile's most influential paper, followed by La Tercera.

Also published in Santiago are economic and financial newspapers El Diario and Estrategia, government-owned La Nación, mass-oriented and popular tabloids Las Últimas Noticias (El Mercurio-owned), La Cuarta, and the El Mercurio chain's afternoon La Segunda (El Mercurio-owned), and free tabloid Publimetro.

Approximate circulation for Santiago's major newspapers:

Dailies:	Monday-Friday	Saturday	*Sunday
El Mercurio	119,949	169,874	219,535
La Tercera	102,007	181,703	230,214
Las Ultimas Noticias	151,644	156,276	178,498
La Cuarta	127,687	132,366	178,198
Total:	501,287	640,219	627,947

*Circulation figures are from the study for the Circulation and Readership Verification System for the January-July 2005 period, carried out by KPMG.

Need for a Local Attorney

Because contracts with Chilean firms must abide by Chilean laws, U.S. companies entering the Chilean market should have all legal documents drawn up or checked by a qualified legal counsel. The Commercial Section of the U.S. Embassy in Santiago can supply a list of attorneys practicing in Santiago. This list of attorneys also can be obtained at http://www.buyusa.gov/chile/en under "Business Service Providers: Selected List of Attorneys".

Suppliers can establish their legal relationship with a local representative in one of two ways: an ordinary work contract regulated by Labor Law 19.010, for which some legal guidance is advisable, or the more customary commercial or commission contract, by which the parties establish their own terms and conditions and are not bound by requirements of Law 19.010, particularly its severance conditions.

The Chilean legal system, while fair, is not suited for speedy commercial dispute resolution. Therefore, consider referring to the Amcham's Arbitration Center or include the Center's standard arbitration clause [www.amchamchile.cl]. In establishing a contractual relationship with a local representative, the U.S. supplier should also ascertain its contractual liability vis-à-vis the representative under Chile's labor law.

Chapter 4: Rules of origin

Certificate of Origin

In general, a certification of origin can take many forms, for instance: a statement on company letterhead, a statement on a commercial invoice, or a formal certificate of origin. While no official form is required in order to demonstrate origin under the U.S.-Chile Free Trade Agreement, the Chilean Customs issued a list of required data elements. Shipments under $2,500 in value do not require a certificate of origin or other supporting information of a preferential claim unless the customs authority suspects a claim is fraudulent (see Article 4.13 of the Agreement).

How to Declare That Your Good Is Originating

It is the responsibility of the importer to claim preferential treatment for a given shipment at the time that the good is cleared through the customs authority. Under the U.S.-Chile FTA, the ultimate responsibility for the validity of the claim lies with the importer, not the exporter as under the North American Free Trade Agreement (NAFTA). For more specific information on this, see Article 4.14 of the U.S.-Chile FTA.) In order to claim eligibility for a preferential duty rate, the importer must provide to National Customs Service of Chile (Chilean Customs) a written declaration in the importation document that the good is originating. The importer must also be prepared to provide Chilean Customs, upon request, with a certificate of origin (or other information demonstrating that the good qualifies as originating).

Special Cases

In some cases, a considerable amount of research into the inputs in the production of the goods is required in order to determine origin. Many exporters and importers believe that the only time that the declaration of origin can be provided is at the time the shipment clears customs, creating a sense of urgency in determining the origin of the goods. To obtain the reduced duty rate immediately, this is true. The importer, however, has another option. The importer may pay the non-preferential duties at the time the goods clear customs and then has up to one year from the date on which the goods were imported to apply for a refund of excess duties paid as a result of the good not being accorded preferential tariff treatment. This may happen in cases where the information required to determine that the good is originating is not available at the time of shipment. At the time of the application for refund, the importer is required to supply a written declaration of the goods' originating status, and, if requested by the customs authority, a certificate of origin or other information demonstrating that the good qualifies as originating, and other documentation relating to the importation of the good that the customs authority may require.

In some situations, an exporter may find that multiple shipments of identical goods are being sent to the same Chilean importer. In these cases, it is not necessary to generate new supporting documentation (e.g., certificate of origin) for each individual shipment. The importer may maintain one such "blanket" certificate of origin (or other information demonstrating that a good originates) to be presented to the customs authority at the acceptance of each shipment. It is recommended to identify the "blanket period" on the certificate of origin. Chilean Customs suggests that the "blanket period" not exceed a period of one year.

Supporting Documentation

Despite the fact that the ultimate responsibility for making the declaration lies with the importer, more often than not the information needed to support the declaration will have to be provided by the producer/exporter. The supporting information (e.g., certificate of origin) behind a claim of preferential treatment may be produced by the exporter, importer, or producer of the good. If this supporting information is not generated by the producer (i.e., the importer or exporter), it must be based upon either 1) a certificate of origin issued by the producer or 2) the exporter's or importer's knowledge that the good qualifies as originating. In other words, the importer is heavily dependent upon the assistance and cooperation of U.S. suppliers in producing accurate and well-documented declarations of origin.

An importer claiming preferential treatment for a good is required to have the certificate of origin and/or other supporting documentation used in demonstrating that the good qualifies as originating under the U.S.-Chile FTA rules of origin for a period of five years from the date of importation of the good.

Filing A Correction

After a declaration of origin has been filed with Chilean Customs, it may come to the attention of one of the parties to a transaction that the declaration or certificate was prepared based on incorrect information or contains some type of error. In such a case, it is the responsibility of the issuer of the declaration of origin to immediately notify, in writing, every person to whom it was originally issued. While unpaid duties will have to be paid to the Customs authority, penalties may not be imposed by Chilean customs on the issuer of the certificate of origin when notification of such an error is provided in a timely fashion, as defined by the U.S. Chile-FTA.

Rules of Origin

Those familiar with the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, will recognize some aspects of this agreement’s Rules of Origin, as the U.S. Chile FTA was largely modeled upon the NAFTA. There are, however, some important differences, which require the close attention of the US exporter. If you are new to this process, you may wish to read or print out for later reading, the section below on How to Read the Rules of Origin, prior to launching the U.S.-Chile FTA Rules of Origin.

How To Read the Rules of Origin

Rules of origin are written in terms of the Harmonized System of Tariff Classification, (also known as HS) otherwise known as Schedule B codes. Therefore, the first step to using the “rules” is to obtain the appropriate code for the product in question.

A rule of origin may consist of:

A change in tariff classification;
A regional value-content requirement;
Both a change in tariff classification and a regional value content requirement.

Note: It is necessary to refer to the rule associated with the product being exported. Regional value content can only be applied when it is allowed under a product-specific rule.

Some Examples

1) An example of a rule that employs a simple tariff shift is:

Rule of Origin: "A change to heading 1902 through 1905 from any other chapter."

Products: Breads, pastries, cakes, biscuits (HS 1905.90)

Non-U.S. or Chilean input: Flour (classified in HS chapter 11), imported from Europe.

Explanation: For all products classified in HS headings 1902 through 1905, all non-U.S. or Chilean inputs must be classified in an HS chapter other than HS chapter 19 in order for the product to obtain preferential duty treatment. These baked goods would qualify for tariff preference because the non-originating goods are classified outside of HS chapter 19. (The flour is in chapter 11). However, if these products were produced with non-originating mixes, then these products would not qualify because mixes are classified in HS chapter 19, the same chapter as baked goods.

2) An example of a rule that employs both the “tariff shift” and “regional value content” is:

Rule of Origin: “A change to subheading 9403.10 through 9403.80 from any other heading; or

A change to subheading 9403.10 through 9403.80 from any other subheading, including another subheading within that group, provided there is a regional value content of not less than:

(a) 35 percent when the build-up method is used, or
(b) 45 percent when the build-down method is used.”

Product: Wooden Furniture (HS # 9403.50) Non U.S. or Chilean input: Parts of furniture (classified in 9403.90), imported from Asia.

Explanation: Wooden furniture can qualify for preferential tariff treatment in two different ways – through a tariff shift, or a combination of a tariff shift and regional value content requirement. Because the non-U.S. or Chilean input is classified in the same heading (9403) as the final product in this case, the good does not make the simple “tariff shift” in the first rule. Moving down to the second rule though, the good can meet the tariff shift because the non-originating component is from a different subheading than the final product. For the good to qualify as originating, however, it must also pass the regional value content test.

Regional Value Content

The Regional Value Content test allows the good to qualify using either one of two methods. These are the builddown and build up methods.

Builddown method:

Regional

Value

Content (RVC) = Adjusted Value - Value of Non-Originating Materials X 100/Adjusted Value

Buildup method:

Regional

Value

Content (RVC) = Value of Originating Materials X 100/Adjusted Value

Using the example above then:

We will assume that the adjusted value for the piece of furniture in question is $1,000.00.

The value of non-originating materials used in the production of the good excludes, according to Article 4.3:

1) the costs of freight, insurance, packing, and all other costs incurred in transporting the material to the location of the producer;
2) duties, taxes, and customs brokerage fees on the material paid in the territory of one or both of the Parties, other than duties and taxes that are waived, refunded, refundable, or otherwise recoverable, including credit against duty or tax paid or payable;
3) the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or byproducts; and
4) the cost of originating materials used in the production of the non-originating material in the territory of a Party

Our assumed Value of Non-originating Materials in this case is $500.00. Plugging this into the builddown, formula:

Regional Value Content (RVC) = ($1000 – $500)/$1000 X 100 = 50%

We can see that the percentage is greater than the 45% required by the rule. Therefore, the good qualifies as originating.

If instead, we use the buildup formula:

Regional Value Content (RVC) = $500/$1000 X 100 = 50%

The Regional Value Content is again 50% and is greater than the 35% required by the rule. With either method, the good specified in this example qualifies as originating under the U.S.-Chile FTA.

In addition to the rules of origin, it is sometimes appropriate to consider other factors found in Chapter Four of the U.S. Chile-FTA when determining the origin of a product.

Chapter 5: Documentation requirements

Upon implementation of the US-Chile Free Trade Agreement, more than 85% of bilateral trade in consumer and industrial products becomes duty-free immediately upon entry into force of the Agreement, with most remaining tariffs eliminated within four years. Key U.S. export sectors gain immediate duty-free access to Chile, such as agricultural and construction equipment, autos and auto parts, computers and other information technology products, medical equipment, and paper products. The FTA mandates that both governments publish their custom laws, regulations and administrative procedures on the Internet.

This information in currently under development and may change as the U.S.-Chile FTA goes into effect. For more information about documentation and customs requirements, visit Chile’s National Customs Service website at http://www.aduana.cl/p4_principal_eng/site/edic/base/port/home_page.html.

Additional information may be obtained at http://www.buyusa.gov/chile/en/page90.html

Customs Valuation

For those products and services not receiving duty-free treatment, Chilean customs valuation uses the normal value of merchandise, without special discounts, plus freight and insurance (CIF). Used goods are valued by the customs service according to the current new value of similar merchandise, discounting ten percent per year of use, up to a 70-percent discount. For more information, see the Chilean Customs web page at http://www.aduana.cl/p4_principal_eng/site/edic/base/port/home_page.html.

Import/Export Documentation

Labeling, Marking Requirements

Chile does not have general labeling requirements for imported products except that consumer products must display the country of origin before being sold in Chile. Packaged goods must be marked to show the quality, purity, ingredients or mixtures, and the net weight or measure of the contents. There are also specific requirements for canned food, shoes, foods, electric machinery, liquid and compressed natural gas equipment (LNG and CNG), plastics, wines and alcoholic beverages, textiles and apparel, wheat flour, detergents and insecticides for agricultural use.

Canned or packaged foodstuffs imported into Chile must bear labels in Spanish for all ingredients, including additives, manufacturing and expiration dates of the products, and the name of the producer or importer. All sizes and weights of the net contents also must be converted to the metric system. Goods not complying with these requirements may be imported but not sold to consumers until conversion is made. Thus, foodstuffs labeled in English have to be re-labeled in Chile before they can be sold. For information on Chile’s labeling requirements for food, see the Foreign Agricultural Service’s Food and Agricultural Import Regulations at http://www.usembassy.cl, Food & Agriculture, Food Regulations.

Standards

Chile is both a standards maker and a standards taker. The country has in recent days started a concerted effort to develop technical regulations useful to its growing export industrial base. The overall policy is to use and comply with international standards under the guidelines of the World Trade Organization (WTO) Committee on Technical Barriers to Trade. In the event that the required standard does not exist, then the general policy is to look into norms that are generally accepted by Chile’s largest trading partners, including the European Union and the United States.

Chile’s INN (Instituto Nacional de Normalización or National Standards Institute) is the institution that oversees, fosters and develops the use of technical regulations in Chile for three areas: standardization, accreditation and metrology. Certification is done through accredited institutions. These include institutions of private, public, national and international origin. For example, the INN has accredited U.S.-based Underwriters Laboratories (UL) to issue product certification.

Certain standards are set by Chile’s central government. Such will be the case for the High Definition TV (HDTV) standard, currently under study by the Office of the Undersecretary of Telecommunications.

Chapter seven of the recently-enacted U.S.-Chile FTA addresses technical barriers to trade and calls on the two parties to intensify their joint work in the field of standards, technical regulations, and conformity assessment procedures with a view to facilitating access to each other’s markets. In particular, the countries agreed to identify bilateral initiatives that are appropriate for particular issues or sectors. Such initiatives may include cooperation on regulatory issues, such as convergence or equivalence of technical regulations and standards, alignment with international standards, reliance on a supplier’s declaration of conformity, and use of accreditation to qualify conformity assessment bodies, as well as cooperation through mutual recognition. Each party is also required to allow persons of the other party – on terms no less favorable that those accorded to its own persons -- to participate in the development of standards, technical regulations, and conformity assessment procedures.

Chile’s INN already interacts with several standards institutions from around the world, including the U.S. Commerce Department’s National Institute of Standards and Technology (NIST), the American National Standards Institute (ANSI) and ASTM International.

Free Trade Zones/Warehouses

Chile's two free-trade zones are the Free Zone of Iquique (ZOFRI) in the northern tip (Region I) of Chile and the Free Zone of Punta Arenas in the southern tip (Region XII). ZOFRI encompasses the free ports of Arica and Iquique. ZOFRI is a major transit point for products bound for Bolivia and to a lesser extent for products going to Peru, Paraguay and northern Argentina. Punta Arenas also has a free port. Modern facilities for packaging, manufacturing and exporting exist in each zone.

Although the U.S.-Chile FTA will allow immediate duty free entry into Chile for 85% of U.S.-made goods, under certain circumstances, U.S. exporters may still want to look at the advantages offered by Chile’s free-trade zones . Regardless of the applicability of the FTA,

imports entering and remaining in Chile's free-trade zones pay no duty or VAT;
imports leaving the free trade zones but remaining in regions I or XII (considered "extended" duty-free zones) pay a reduced 4.4 percent import duty (if not FTA-partner origin) but no VAT. This tax is deductible when the merchandise is exported to the rest of the country;
imports leaving the free-trade zones to enter the greater Chilean market pay full tariff (if not FTA-partner origin) and VAT charges;

Imported goods may remain in customs warehouses for 90 days. If said goods are unclaimed after the 90-day period, the goods will be declared abandoned by Customs and sold at public auction.

The U.S.-Chile FTA calls for the eventual elimination of duty drawback rights. Full drawback rights will remain for the first 8 years the FTA is in place and will then be phased out over the following four years. At present, Chile has a simplified duty drawback program for non-traditional exports, which is mandated by Law 18,480. Chile reduced the amount of the duty drawback to no more than 3% of the value of the exported products, in order to make the systems WTO compliant. To qualify for this drawback, exports for that product during the last year, should not have exceeded $17.9 million FOB.

Chapter 6: Special Issues: IPR, environmental and labor standards

Investment

The agreement will establish a secure, predictable legal framework for U.S. investors operating in Chile. All forms of investment are protected under the Agreement, such as enterprises, debt concessions, contracts and intellectual property. In almost all circumstances U.S. investors the right to establish, acquire and operate investments in Chile on an equal footing with Chilean investors, and with investors of other countries, unless specifically stated otherwise.

Pursuant to the U.S. Trade Promotion Authority, the agreement draws from U.S. legal principles and practices to provide U.S. investors with a basic set of substantive protections that Chilean investors currently enjoy under the U.S. legal system. Among the rights afforded to U.S. investors (consistent with those found in U.S. law) are due process protections and the right to receive a fair market value for property in the event of an expropriation. The Agreement prohibits and removes certain restrictions on U.S. investors, such as requirements to buy Chilean rather than U.S. inputs. These investor rights are backed by an effective, impartial procedure for dispute settlement that is fully transparent. Submission to dispute panels and panel hearings will be open to the public, and interested parties will have the opportunity to submit their views.

Intellectual Property Right Under U.S.-Chile FTA

High level of IPR protection

Protection of copyrights, patents, trademarks and trade secrets is state-of-the-art, going farther than previous free-trade agreements. Enforcement of intellectual property rights is also enhanced under this Agreement.
Non-discriminatory treatment for U.S. intellectual property transmitted over the Internet.

IPR Enforcement: Tough Penalties for Piracy and Counterfeiting

Criminalizes end-user piracy, providing strong deterrence against piracy and counterfeiting. Chilean government guarantees that it has the authority to seize, forfeit and destroy counterfeit and pirated goods, as well as the equipment used to produce them.
Mandates both statutory and actual damages under Chilean law for IPR violations. This serves as a deterrent against piracy, and provides that monetary damages can be awarded even if actual economic harm (retail value, profits made by violators) cannot be determined.

Trademarks: State-of –the-Art Protection in the Digital Age

Ensures government involvement in resolving disputes between trademarks and Internet domain names, which is important to prevent “cyber-squatting” of trademarked domain names.
Applies principle of “first-in-time, first-in-right” to trademarks and geographical indicators applied to products, implying that the first to file for a trademark is granted the first right to use that name, phrase, or geographical place-name.

Copyrights: Protection for Copyrighted Works in a Digital Economy

Ensures that only authors, composers, and other copyright owners have the right to place their works online. Copyright owners maintain all rights to even temporary copies of their works on computers, which is important in protecting music, videos, software, and text from widespread unauthorized sharing via the Internet.
Copyrighted works and phonograms are protected for extended terms, consistent with U.S. standards and international trends.

Patents and Trade Secrets: Protection Expanded

Grounds for revoking a patent are limited to the same grounds required to originally refuse a patent, thus protecting against arbitrary revocation
Ensures that government marketing-approval agencies will not grant approval to patent-violating products.

Labor and Environmental Provisions

Cooperation to Protect the Environment

Both countries ensure that their domestic environmental laws provide for high levels of environmental protection and shall strive to continue to improve such laws. Agreement makes clear that it is inappropriate to weaken or reduce environmental protections to encourage trade or investment.
Agreement requires that both countries effectively enforce their own environmental laws, and this obligation is enforceable through the Agreement’s dispute settlement procedures.

Cooperative Activities to Promote Worker Rights

Both countries reaffirm their obligations as member of the International Labor Organization, and shall strive to ensure that their domestic laws provide for labor standards consistent with internationally accepted labor principles.
Agreement requires that both countries will enforce their own domestic labor laws and this obligation is enforceable through the Agreement’s dispute settlement procedures.

For more information on this initiative, visit the U.S. Trade Representative website at http://www.ustr.gov/.

Chapter 7: Access to Markets

U.S. Consumer and Industrial Products

More than 85% of bilateral trade in consumer and industrial products becomes duty-free immediately upon entry into force of the Agreement, with most remaining tariffs eliminated within four years. At this time, Spring 2006, more than 95% of trade has become duty-free. By 2012 it is expected that all trade between Chile and the U.S. will be duty-free. Key U.S. export sectors gain immediate duty-free access to Chile, such as agriculture and construction equipment, autos and auto parts, computers and other information technology products, medical equipment, and paper products.

Chile’s “luxury tax” on automobiles is being phased out over 4 years. In the meantime, the number of vehicles to which this tax applies was sharply reduced when the Agreement took effect.

Services Trade: Market Access and Regulatory Fairness

The commitments in services cover both cross-border supply of services (such as services supplied through electronic means, or through the travel of nationals) and the right to invest and establish a local services presence. Traditional market access to services is supplemented by strong and detailed disciplines on regulatory transparency. Regulatory authorities must use open and transparent administrative procedures, consult with interested parties before issuing regulations, provide advance notice and comment periods for proposed rules, and publish all regulations.

Through broad commitments to open services markets, Chile will accord substantial market access across its entire services regime, subject to very few exceptions, a so-called “negative list” approach.

Market access commitments apply across a range of sectors, including but not limited to:

Computer and related services
Telecommunications services
Audiovisual services
Construction and engineering
Tourism
Advertising
Express delivery
Professional services (architect, engineers, accountants, etc.)
Distribution services, such as wholesaling, retailing, and franchising
Adult education & training services
Environmental Services

For more information on Market Access issues related to the US-Chile FTA, visit the U.S. Trade Representative website at http://www.ustr.gov/.

Chapter 8: Opportunities in the Products and Services Sectors

Although the U.S.- Chile FTA Agreement makes major strides in eliminating tariffs for US products to Chile, non-tariff provisions, involving as intellectual property, investment, temporary entry of business persons, may have an even greater impact, further strengthening an open business climate between the two countries. Under the proposed Agreement, Chile would eliminate its own duties on many, if not most, eligible U.S. exports.

For more information visit United States International Trade Commission, "U.S.-Chile Free Trade Agreement: Potential Economy wide and Selected Sectoral Effects" found at http://www.usitc.gov.

PRODUCTS

Analysis by the National Association of Manufacturers (NAM) reveals that free trade agreements can alter the sourcing of imported products. As a result of a seven-point loss in the Chilean imports from the United States since 1997, NAM’s projections show a loss of over one billion dollars in exports to Chile in 2002. Further analysis showed that losses totaling hundreds of millions of dollars were spread through a whole array of manufactured goods. In the case of motor vehicles, some of the loss appears to be from Brazilian competitors; for chemicals, a gain in market was achieved by Argentina; for pulp and papermaking machinery, toys and games, photographic equipment – gains were ceded to Brazilian competitors.

Source: National Association of Manufacturers letter to the U.S. International Trade Commission, on May 8, 2003 (refer to http://www.usitc.gov website under Dockets section)

I. Construction and Mining Equipment

The United States is the dominant producer in the construction and mining equipment industry. Caterpillar and other U.S. manufacturers are well established, technically advanced and active in overseas markets. Chile, on the other hand, has virtually no local production of construction and mining equipment and very limited capacity to produce machinery parts.

With passage of the Chile-US FTA, Chilean purchasers will be more likely to choose US equipment. This is due to the historical dominance of the U.S. products, combined with quality, innovation, and after sales service characteristics of US machinery desired by Chilean purchasers. Duty savings that will result from the immediate elimination of the existing 6% tariff rate on most mining and equipment can help US producers resume shipment of their equipment from their U.S. locations. Some producers have supplied large orders to Chile from Canada to avoid the Chilean duty made possible by the Free Trade Agreement Chile has already signed with Canada.

Source: United States International Trade Commission, “U.S.-Chile Free Trade Agreement: Potential Economy wide and Selected Sectoral Effects, Investigation No. TA-2104-5, USITC Publication 3605". (See http://www.usitc.gov under Dockets section)

II. Motor Vehicles

The United States is the world’s largest producer of consumer and motor vehicles. Overseas competition, increased rationalization, and a tendency for U.S manufacturers to produce in foreign markets, are among a host of reasons for the U.S. motor vehicle trade deficit.

Prior to the Agreement, U.S. motor vehicles that are exported to Chile face a uniform 6% ad valorem tariff. Additionally, a luxury tax equivalent to 85% of the excess over the CIF threshold value of $16,361 is added to motor vehicles exported from the US. Given the FTA agreements in place with EU, Canada, Mercosur, and Mexico, U.S. auto manufacturers have preferred to source their vehicles to Chile from countries where they make use of zero tariff arrangements.

Source: United States International Trade Commission, U.S. Chile Free Trade Agreement: Potential Economywide and Selected Sectoral Effects, Investigation No. TA-2104-5, USITC Publication 3605." (See http://www.usitc.gov under Dockets section)

III. Telecommunications Equipment

Chile's telecommunications sector is completely privatized and one of the most advanced and competitive in Latin America. With sizeable investment, Chile’s telecom industry grew an average of 20 percent annually over the last decade.

Chile’s fixed-line network has been fully digital since 1993. But while Chile’s mobile market continues to flourish with a 17.2 percent increase over 2004 (60 percent penetration in 2005,) the fixed-line sector remains flat. Chile’s Undersecretariat of Telecommunications (SUBTEL) reports 10 million cell phones in use in Chile as of June 2005, a 2.5 million increase since December of 2003.

SUBTEL regulates the sector, sets standards, and issues licenses and concessions. At present, the two main regulatory issues before SUBTEL are regulations for VoIP and unbundling of the network.

The telecommunications market in Chile is highly competitive. Mergers and acquisitions are common. During 2004, Telmex (Mexico) purchased Chilesat (long-distance) and Telefónica (Spain) bought BellSouth (cellular.) In cable TV, VTR (United Globalcom) is also merging with Metropólis (Liberty Media).

Chile does not manufacture telecommunications equipment. U.S. products are well-regarded for their high quality. Imports originate mostly from Asia and Latin America, with the U.S. taking 10 percent of the market share and being the 4th most important supplier. The implementation of the U.S.-Chile Free Trade Agreement provides U.S. suppliers an additional competitive edge.

The largest market potential is in mobile telephony and broadband access. WiFi is spreading rapidly and the government of Chile is also looking for technology to improve rural telephony and broadband access to remote areas.

IV. Environmental Technologies

According to Chilean regulation, all wastewater will have to be treated in 2006. The norms regulating discharge of industrial wastewater into the sewage system were published in the Official Gazette in September 2004. According to the Superintendency of Sanitary Services (SISS), the Chilean government office responsible for enforcement of this mandate, this overall effort will require an investment of $1.4 billion before 2015. A number of projects are already underway, and industry sources estimate imported equipment accounts for approximately 20 percent of the total cost of new water treatment plants.

The Metropolitan Environmental and Health Service estimates that the Santiago Metropolitan Region alone generates approximately seven million tons of waste per year, 50 percent of which is residential waste. Chile is working towards establishing the legislative framework and regulatory infrastructure to oversee the collection, handling, transport and disposal of solid waste, particularly medical and industrial hazardous solid waste. The solid waste management equipment and service sector is still a new market in Chile. There are a fairly limited number of companies that can handle solid waste and necessary capital resources remain scarce. Even though production of specialty equipment and technologies used in the treatment of solid waste is limited, the market will grow. U.S. companies may wish to develop long-range plans (5 to 10 years) for promoting their equipment and service in this sector.

After nearly a decade, Chile’s regulations for handling hazardous waste were finally approved and published in Chile’s Official Gazette June 16, 2004. The regulations establish the procedure for identification and classification of hazardous waste and the standards for collection, transport, recycling, incineration and final disposal.

The approval and implementation of these regulations should lead to investment in the market for hazardous waste handling. It is estimated that 5 percent of Chile’s annual 2.5 million tons of industrial waste is hazardous waste.

V. Medical Equipment and Services

Chile spends approximately 7 percent of its GDP on health care and the government’s budget allocation for healthcare has increased every year since 1990. Chile’s healthcare budget for 2005 totaled $2.8 billion, representing an increase of 8.5 percent over 2004. These funds are for primary and emergency medical services.

Chile’s medical sector is small but extremely competitive. Chilean imports of medical equipment in 2004 amounted to $18.6 million and U.S. suppliers accounted for 37.8 percent of the market followed by Germany with 14.3 percent. Chile produces and exports a limited amount of medical products. Chile’s medical products exports amounted to $1.5 million in 2004.

Chile’s “Universal Access with Explicit Guarantees” (AUGE) health care reform plan has recently been approved by the Chilean Congress and is now a law. The plan guarantees government-funded healthcare coverage for select illnesses regardless of the person’s ability to pay.

Chile’s Health Ministry made public the list of 56 major illnesses for which the government guarantees medical coverage. The number of diseases covered by the plan will gradually increase from 40 in 2006 to all 56 by 2007. Plan AUGE is a major step towards Chile’s goal of reducing inequities in healthcare.

VI. Wood Products:

Wood products are one of the largest agricultural commodities exported by the U.S. Total U.S wood products dropped from $5.1 billion in 2002 to $5.3 billion in 2001, largely due to a number of factors including a strengthened dollar, a decrease in demand from the Japanese market, and rising competition from low cost producers. The immediate setting of Chile’s tariffs to zero upon Agreement implementation, provides equity and reciprocity within the sector, and levels the playing field for competitors from the EU, Canada and Mercosur countries.

Almost two-thirds of wood production in Chile is industrial wood. The main types of trees in Chile are radiata pine and eucalyptus, which mature at a rapid rate relative to other parts of the world. Chile, despite its small share of the region’s industrial wood production, leads Latin America with a 68 percent share of industrial wood exports. This represents over 31 percent of Chile’s industrial wood production.

For more information visit: http://www.ita.doc.gov/exportamerica/NewOpportunities/no_Chile_0603.html

SERVICES SECTORS

U.S. trade in services accounts for an important element of the US trade balance, consistently offsetting a portion of the merchandise trade deficit. Findings by the Coalition of Service Industries show that in 2002, the US trade surplus in services was $48.8 billion against a merchandise trade deficit of $484.4 billion. High levels of transparency with respect to administrative, licensing, and legal proceedings will help US firms compete more effectively in the Chilean marketplace.

Source: Statement of Linda Schmid, Vice President, Coalition of Service Industries on the US Chile Free Trade Agreement before the International Trade Commission.

I. Software and Services

Chile’s market for computers and peripherals has been showing positive growth over the last two years due to better overall economic conditions, 0 percent import tariffs and a 15 percent drop in prices.

Computer hardware sales in Chile totaled $542 million in 2005, of which approximately US$ 200 million represented notebooks/laptops. Notebook computers have seen strong growth in Chile due to their significant increase in processing and storing capabilities coupled with gradually declining prices. A few years ago, the high demand for better notebook capabilities was an unthinkable issue.

U.S. giants like HP, IBM and Dell are key players in the Chilean market, although they are beginning to receive stronger competition from Japanese Toshiba. In addition, local assemblers of clones have increased their participation as well as their importation of used equipment.

The purchase of computer software by companies is also rising along with the overall growth in the economy. Small enterprises are important potential customers since they account for some 40 percent of software purchases done in the country.

Market Access

Personal computers: Laptop popularity is increasing as the number of WiFi hotspots in Chile grows and laptop prices drop.

There are good opportunities for software products aimed at small and medium-sized companies. The most common programs purchased by such companies are data processing programs, navigators, and email systems.

IT and software application services, especially development and implementation of solutions for industrial production processes.

The IT services market should be boosted by the U.S.-Chile Free Trade Agreement’s guarantee of non-discriminatory access for U.S. service providers.

Opportunities

While the 51% piracy rate in Chile is less than rates seen in Asia, Eastern Europe, Africa, and the Middle East, the FTA significantly strengthens existing piracy laws. A likely result of these Agreement provisions will be a significant drop in piracy rates, boosting legitimate software sales.

Case Study:

Symantec, a Cupertino, California based company specializing in Internet security technology, provides a broad range of content and network security software and appliance solutions to individuals, enterprises and service providers. As a leading provider of client, gateway and server security solutions for virus protection, firewall and virtual private network applications, the company has a product that is meeting Chile’s needs as it rapidly works to upgrade its vulnerability management, intrusion detection, and remote management technologies for applications in principal sectors of the economy.

Written Testimony to the U.S. International Trade Commission Concerning the U.S.-Chile Free Trade Agreement, U.S. High-Tech Trade Coalition, May 8, 2003, (refer to www.usitc.gov under Dockets section), p. 1-2.
Asociacion de Distribudoras de Software http://www.ads.cl, interview with US Commercial staff on July 16, 2003
U.S High-Tech Trade Coalition, p. 9

II. Financial Services - Banking

Overview

Chile’s capital markets have thrived for over 15 years, anchored by sturdy financial institutions, a growing pool of domestic savings, and committed foreign investors. The financial system has evolved from a few private firms to a busy marketplace of banks, stock exchanges, specialized service providers, and institutional investors. Chile’s commitment to allow a wide range of services in the banking, securities and insurance sectors offers great opportunities for US companies. Coalitions of Service Industry findings indicate that sales of unaffiliated financial services amounted to $69 million. These exports are expected to grow with the US-Chile FTA.

The Chilean banking industry is made up of 26 institutions: one state-owned bank, 11 private domestic banks, and 14 foreign banks. Foreign banks also own sizable stakes in domestic entities. The banking sector offers services such as home loans, credit cards, business credit, insurance brokerage, fund and initial stock offering management, leasing, and factoring. Total assets have grown hand-in-hand with a robust economy. The Chilean banking system is very sound with $45.4 billion in assets, with a majority number of foreign affiliated banks. The total assets of the largest banks in Chile, according to the Superintendence of Banks, are as follows: Banco SantanderSantiago, $10.8 billion; Banco del Estado de Chile, $5.6 billion; Banco Chile, $5.6 billion. 3 The Chilean banking sector consistently wins high marks from international watchdogs and ratings agencies, especially when compared with the industry in other emerging markets.

Regulatory Bodies

The Central Bank of Chile and the Superintendency of Banks regulate the banking industry. The Central Bank acts autonomously from the government to exercise its mandate, which includes regulating the money supply and preventing traumatic fluctuations in the exchange rate as well as overseeing banks. The Superintendency of Banks holds legal authority to charter banks and interprets and enforces laws as an independent government agency. This regulator requires that two credit ratings agencies review each bank’s loan exposure on a monthly basis. Both the Central Bank and the Superintendency mandate high levels of transparency to help create efficient markets with as many informed participants as possible.

Chile recognizes the importance of international banks operating on its soil. As such, banking laws guarantee equal treatment for domestic and foreign investors. The country’s banking regulations ensure free competition among financial institutions and stable and efficient capital markets. A flush of mergers and acquisitions in the past several years have further ratcheted up competition in banking industry.1 The Superintendency of Banks has recently clarified in an announcement that holders of bank accounts outside Chile do not enjoy Chilean government deposit guarantees.

Sector Market Access

While all banks can access their customers through the Chilean ATM network, those financial institutions with ownership in this network pay lower access fees, providing them a competitive advantage over newer entrants. Currently in the Chilean Congress, discussions are underway to provide more open market access to all financial institutions.

Market Opportunities

Mutual Funds

The multiple fund system for AFP raised the number of available social security pension investment funds from two to five. This has increased the percentage of investment in variable income securities. With the multiple funds, the funds managed by the AFP are distributed into five funds. It is therefore estimated that investment in variable income instruments, and specifically mutual funds, will increase by at least 24 percent, which makes AFPs a very attractive client.

AFPs may invest 30 percent of their equity in international instruments. Industry specialists expect that this limit will be raised to 35 percent or 40 percent in the near term.

Factoring

In the next two years, the Chilean factoring sector will grow 20 to 25 percent. In spite of this growth, the participation rate is still low compared to more advanced economies such as Italy or the United Kingdom, which show volumes of factoring operation that surpasses 8 percent of their respective GDP, while Chile reached only 6 percent in 2005.

The stock of accounts receivable acquired by the factoring industry represents less than 3 percent of outstanding loans in the financial system. Currently fewer than 10,000 Chilean SMEs use factoring, which is 11 percent of the approximately 90,000 potential companies.

Another important factor for the development of this industry is the government project that gave legally binding status to the invoice. This way invoices have the same legal validity or liability as a check, thus facilitating domestic factoring transactions as well as making their operation safer and more formal.

The growing needs of Chilean SMEs for liquidity, outsourcing of collection, credit risk information and credit risk reduction, should motivate the development of factoring in Chile.

Case Study

Citibank’s success in Chile has been established through its long-term vision of involvement and ability to adapt to market conditions. A diverse range of services offerings has allowed Citibank to meet the needs of a wide range of commercial and individual client needs.

1. Asociación de Bancos e Instituciones Financieras de Chile http://www.abif.cl, interview with US Commercial Service staff, July 10 and 15, 2003.
2. U.S. Foreign and Commercial Service, Chile Country and Commercial Guide FY 2003.
3. Statement of Linda Schmid, Vice President, Coalition of Service Industries on the US-Chile Free Trade Agreement before the International Trade Commission, May 1, 2003 (see http://www.ustr.gov)

III. Architectural, Engineering, and Construction (AEC) Services

Demand for architectural design for public building has increased in the last several years, especially from Chile’s regional governments and organizations. For example, the MOPTT’s (Public Works Ministry) Architecture Division had 108 construction and maintenance contracts in 2003 for 37 projects, amounting to a total investment of $57 million, requiring architectural construction services of $35 million. Twenty-seven of those projects were schools and other educational buildings that include a budget of $737,000 for architectural design services.

There is a limited presence of U.S. architectural services providers in Chile. Architectural design for offices space, shopping malls, resort areas, golf courts, offer the best prospects. There are several international real estate firms operating in Chile and, as a result of the recently enacted U.S.-Chile Free Trade Agreement, more are expected to enter the market. This boom is the result of a growing interest in real estate investment in Chile. The arrival of these international firms means that new expertise and additional foreign capital will be available for new projects. Some of the firms doing business in Chile include Cushman and Wakefield, Semco, Mackenzie Hill, Tramel Crow, and CB Richard Ellis. U.S. real estate firms such as ReMax have established local branches.

European companies or institutions dominate the market. They provide architectural services primarily related to high-rise buildings. Two such companies are: SCPE (Italy) and the Catalá Institute of Energy (Spain).

IV. Educational Services

Case Study

Chile’s government plans to train more than 500,000 citizens in the use of new technologies At a speech at a local school in the suburbs of the capital Santiago, President Lagos laid out an adult education program, for citizens of 15 years of age or more, which he explained would be administered separately from the country’s school system. The first group of 100,000 citizens to receive training will begin instruction before December of this year, he added. The program, an initiative of the Ministry of Education, received attention from the President, after a government study emerged that more than 70% of Chilean still do not know how to use a computer. “At present only a third of Chileans know how to use word processing or spreadsheet programs, or navigate through cyberspace. As such is the case, the jump that must be made is enormous,” Lagos said.

Source: Business News Americas, May 16, cited from Chile Investment Review, June 2003

VI. Franchising

In 2005, franchising sector sales reached some $210 million, providing 35,000 local jobs, and creating a nationwide presence. There are 113 franchises operating in Chile, mainly in the fast-food and service sector (University of Chile Economics Department).

Franchise companies operating in Chile are subject to regular trade laws and have benefited greatly from the US-Chile FTA. Royalties and fees have a withholding tax that ranges from 15 percent to 35 percent. Chile’s Franchise Chamber was founded in 2005, therefore, its activity is at its initial stages. It is the second attempt of local companies to establish a franchise entity after the first association – AFICH – was dissolved in 2000. Currently, there is no franchise exhibition in Chile, but the local Chamber is making efforts to create franchise awareness and to promote an official event.

Since trademark/brand stockpiling is rather common in Chile, U.S. companies are encouraged to register their trademarks as soon as possible if they are considering Chile as a potential market. U.S. franchises operating in Chile include: Applebee’s, Blockbuster, McDonald's, Domino's Pizza, Pizza Hut, KFC, Burger King, Curves, Powerhouse Gym, Ruby Tuesday, H2O, Holiday Inn Express, Manpower, Remax, Berlitz, Taco Bell, Fridays, Subway, Coverall, Gymboree, Hampton Inns, and Hooters.

Some successful Chilean companies also franchise their businesses, however, the trend to franchise local businesses has yielded mixed results. Local franchises currently account for 23 percent of the total market. Franchise operations of U.S. origin account for 48 percent of the total Chilean market. Even though Chile has an ideal geography for sub-franchising, the basic benefits of franchising is not well understood outside Santiago, so companies that offer a master franchise with the prospects of sub-franchising most or all of their units must be aware that sub-franchising outside Santiago remains a challenge.

V. Energy Sector

Renewable energy sources, mostly hydropower, supply close to 38% of Chile’s total energy demand. There is also one small facility in southern Chile that generates energy out of wind power. Based upon existing preliminary estimates, geothermal resources could supply a considerable amount (believed to be in the order of several thousand MW) of electric power currently generated from hydro and fossil resources.

Non-Renewable energy sources are almost nonexistent in Chile, thus the country is a net importer of fossil fuels. Less than 10% of the country’s oil demand is produced domestically, while 100% of natural gas (NG) is imported exclusively from Argentina, producing a high degree of energy dependency on its neighbor (about 35% of the energy matrix as of June 2006).

The majority of Chile’s natural gas and oil is imported from just three countries. Because of recent supply shortages, particularly reduced supply of Argentine natural gas, the Chilean state owned oil company ENAP is conducting a study with the financial advisory of Citicorp (U.S.) to examine the feasibility of developing a re-gasification plant --5 million cubic meter/day-- to be fed with LNG from other sources.

VI. Electronic Commerce

The Internet is an important business tool in Chile. Local businesses are communicating with other businesses and with clients through the Internet, incorporating digital information technology in their business processes. Chile is still facing challenging that limit its full development, but is taking giant steps in the e-commerce sector.

Internet use in Chile is growing rapidly. From 1999 to 2000, the growth rate for Internet users was 100%, from 600,000 to 1.2 million. Chile is conscious of the importance of the Internet and is making efforts to spread it in businesses as well as in education establishments. During 2005, Internet access grew 42% in relationship to 2004. It is estimated that by December of 2006, connections will surpass 800 thousand.

The Internet is used primarily for education and entertainment, but e-commerce is becoming more prevalent. According to a 2004 study by the Santiago Chamber of Commerce, “digital economy” transactions reached $11.1 billion in Chile, a 36% increase compared to 2003. The figure represents 13% of Chile’s GDP. E-commerce is the base of this dynamism, representing 60% of digital economy sales. Within this segment, B2B and B2G transactions amount to $6.7 billion, with average annual growth of 70%. B2C retail e-commerce sales, rose from $61 million in 2003 to $80 million in 2004.

While the telecommunications infrastructure of Chile is among the best in Latin America, local access charges for Internet use still make heavy Internet use expensive. E-banking is still underdeveloped in Chile and has ample room for development. The government of Chile supports the development of the Internet and is fostering a public-private alliance to: 1) increase access to the Internet; 2) create secure and trusted methods of payment and certification; and 3) enhance product distribution throughout Chile. The Government also intends to make public services available on-line and already allows on-line filing of income tax returns.

Chapter 9: Bilateral Statistics

LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTS

Best Prospects for Non-Agricultural Goods
For industry Best Prospects, you can also check http://www.buyusa.gov/chile under Best Prospects.

Sector:	U.S. Exports to Chile for 2002(Projected in millions of U.S. dollars)
1. Pollution Control	N/A
2. Telecom Equipment	$137*
3. Travel and Tourism	$245
4. Medical Equipment	$25*
5. Franchising	$210
6. Computer Equipment	$289
7. Food and Processing Equip.	$24*
8. Construction Equipment	$166
9. Mining Equipment	$252
10. Plastics Mach. & Resins	$45**
11. Air Cond. & Refrigeration	$9.12
12. Electric Power Equipment	$10**
13. Security Equipment	$ 13.3

* Estimated Figures

**Figures from 2004

Source: Chile Country and Commercial Guide FY 2004

The Domestic Economy

(In US million dollars unless otherwise indicated)

	2003	2004	2005
Nominal GDP	56,628	68,213	68,891
Real Growth (%)	-3.3	5.8	6.3
Per Capita GDP (USD)	4,360	4,910	N/A
Inflation (%)	1.1	2.4	3.7
Unemployment (%)	8.5	8.8	8.1
Reserves (year-end)	15,851	16,016	16,963
Exch. Rate (pesos/USD)	691	609	560
Foreign Debt (year-end)	43,068	43,283	44,333*
U.S. Economic and Military Aid	0.3	0.3	0.3

* Provisional data

Source: Chile Central Bank (www.bcentral.cl)

State-by-state Benefits of Trade with Chile
U.S. Exports to Chile by State:Top 20 Exporting States (2001)
Rank	State	Exports to Chile in Millions of Dollars
1	Florida	385.3
2	California	348.0
3	Texas	325.2
4	Illinois	311.2
5	Washington	182.9
6	New York	122.7
7	Pennsylvania	113.3
8	Ohio	111.0
9	New Jersey	98.7
10	Michigan	96.4
11	Wisconsin	95.5
12	North Carolina	67.4
13	Connecticut	59.0
14	Georgia	48.9
15	Tennessee	48.7
16	Minnesota	45.0
17	Indiana	33.9
18	Massachusetts	33.5
19	Colorado	32.1
20	Maryland	31.9
Source: U.S. Department of Commerce, International Trade Administration

Source: http://www.uschilecoalition.com/portal/uscftc/fta/trade/factsheets

Chapter 10: Frequently Asked Questions

What is the U.S.-Chile Free Trade Agreement?

The U.S.-Chile Free Trade Agreement is an agreement between the United States and Chile which allows both nations to strengthen and develop economic relations and to establish free trade between the two nations through the reduction and elimination of barriers to trade in goods and to investment; and to lay the foundation for further cooperation to expand and enhance the benefits of such Agreement.

Does this require additional paperwork for all of my shipments to Chile?

No. Only goods that are deemed to be originating and claim eligibility for lower preferential rates of duty are affected by the U.S.-Chile FTA.

Who benefits from the lower duty rates negotiated under this agreement?

In general, it is the importer that pays for the duties as a matter of clearing the goods through customs, and the importer that will benefit if the good being exported to Chile qualifies as originating. However, in situations where the duty payable on a shipment is considered significant, it may affect the competitiveness of the U.S. supplier as the importer decides what to buy and from whom to buy it. An exporter that is able to prove that their goods are originating may afford their buyer considerable savings, in essence discounting their product at no cost to themselves.

How can my product qualify to take advantage of the U.S. – Chile Free Trade Agreement?

The product must qualify as an originating good.

In order to be eligible for preferential duty rates, is it necessary to fill out a certificate of origin?

The U.S. Chile FTA calls for a written declaration of origin for originating goods valued at more than US$2500.

Why do I need to go through the process of qualifying my good if I don’t even need a certificate of origin?

Many low value shipments will not require a written declaration of origin, and customs officers will only be told of the product's eligibility by the import broker. Regardless of what form - written or oral - the statement of eligibility for preferential duty rates takes, it remains a declaration whose truthfulness may be verified by Chilean customs as they deem it necessary under the provisions of the U.S.-Chile FTA. Declarations that are found after the fact to deliberately make false statements may result in significant penalties.

I have heard that packaging materials and containers are not taken into consideration when qualifying a good under the Chile FTA. Is this true?

When the packing materials and containers are being used for shipping purposes, the materials and containers are disregarded in determining the origin of the good being shipped.

I often send accessories for my product separately from the product. Will these qualify automatically if the main product qualifies?

When accessories, spare parts, or tools, are delivered with a good, they are regarded as a material used in the production of the good as long as they 1) are classified with and not invoiced separately from the good 2) the quantities are not considered to be unusual. However, when these ancillary items are sent separately from the original good, they become “the good” and must qualify as such.

What if my good is produced in the United States, but is transshipped through a third country on its way to Chile? Can it still qualify for preferential treatment?

According to Article 4.11 of the U.S.-Chile FTA, a good that undergoes “subsequent production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other process necessary to preserve the good in good condition or to transport the good to the territory of a Party” can no longer qualify for preferential treatment.

How does this agreement affect the treatment of used goods entering Chile from the United States?

Used goods from the U.S. that are originating will no longer be subject to a 50% surcharge upon entering Chile.

If I believe after thoroughly reviewing my product, its inputs, and the applicable rule of origin, that there remains ambiguity as to the origin of the product under the U.S.-Chile FTA, is there a way that I can find out the position of Chilean customs prior to the arrival of my goods in Chile?

The customs authority of Chile will issue "advance rulings" at the written request of the importer, exporter, or producer on questions of tariff classification, customs valuation questions, duty drawback, origin, and treatment of goods entering temporarily for repair or alteration. Extensive information regarding the facts and circumstances of the inquiry will be required by the Customs authority prior to issuing such a ruling. In general, advance rulings will remain in effect for at least three years from the date of their issuance and will be made publicly available, subject to confidentiality requirements in domestic Chilean law. Chilean customs has up to 150 days to issue an advance ruling from the date of the request.

What are the duties on U.S. direct exports to Chile?

As of January 2006, 95 percent of all U.S. exports to Chile are dury free. The remaining 5 percent included duties primarily on agricultural products. Key U.S. exports such as autos and auto parts, computers and IT equipment, medical devices and contruction and agricultural equipment all won instant duty-free access. In addition, Chilean tariffs on more than three quartersof U.S. farm products will be eliminated within four years. By 2015, all trade between the two countries will be duty-free. For those products still subject to duty and products not of U.S. (or other FTA country) origin, Chile generally applies a uniform 6 percent duty.

Is there a value added tax (VAT) in Chile? Where does one pay it?

There is a VAT of 19% on all goods sold in Chile. Goods exported to Chile pay the VAT at the Customs House, at their port of entry. However, the VAT is not considered to be an import tax, and is technically levied only after the import duties are paid and the goods are considered to be in country.

The formula for calculating the VAT is: CIF + import duty x 19%

How are temporary imports and/or samples handled?

Under the terms of the U.S.-Chile FTA, Chile will permit duty-free temporary admission of professional equipment necessary for carrying out the business activity of a businessperson who qualifies for temporary entry under Chilean law. Temporary duty-free admission of goods intended for display or demonstration and commercial samples is allowed. For temporary entry of food samples, see http://www.aduana.cl, Acuerdos Internacionales, Tratados de Libre Comercio, Chile – Estados Unidos, Oficios Circulares, Oficio Circular Nº 333.

Do exports from U.S. subsidiaries in other countries pay the same import duties?

It depends upon whether or not Chile has a preferential trade agreement with the source country where the U.S. subsidiary exists. For example, both Canada and Mexico have free trade agreements with Chile. If there is no trade agreement with the source country, then the uniform duty is 6%.

How do I pay my import duties when selling to Chile?

You don’t! The U.S. exporter cannot and does not pay import duties when selling to Chile. Rather, import duties must be paid by the importer, end-user, buyer or their local agent, who must be residing in Chile. To pay the import duties, the representative must go into the Chilean Customs House, at the port of entry of the goods. Even if the exporter has a subsidiary in Chile, the duties are paid by the subsidiary, not by the parent company. The fact that there may be subsequent or prior reimbursement by the exporter or parent company to the importer or subsidiary does not change the procedure. The importer, not the exporter, pays all duties and value added taxes.

Can I export used cars to Chile?

No, the importation of used passenger and cargo transport vehicles is prohibited. Limited exceptions do occur in the two free zones in Chile, Iquique in the far north and Punta Arenas in the far south. Used cars can be sold in these zones, but said vehicles cannot subsequently be sold outside the zones.

What charges are assessed on goods entering the Chilean free zones?

Provided the goods do not leave the free zone, the only charge is a free zone user service amounting to 1.5% of the CIF value. Import duties are levied if the goods leave the free zone. A VAT is also levied if the goods leave the free zone.

What are the labeling requirements for exports to Chile?

Imported products customarily consumed by the public must display the country of origin before being sold in Chile. Packaged goods must be marked to show the quality, purity, ingredients or mixtures, and the net weight or measure of the contents. Labeling must be in Spanish and measurements must be metric.

Canned or packaged foodstuffs imported into Chile must bear labels in Spanish for all ingredients, including additives, manufacturing and expiration dates of the products, and the name of the producer or importer. All sizes and weights of the net contents also must be converted to the metric system. Goods not complying with these requirements may be imported but not sold to consumers until conversion is made. Thus, foodstuffs labeled in English have to be re-labeled in Chile before they can be sold. For information on Chile’s labeling requirements for food, see the Foreign Agricultural Service’s Food and Agricultural Import Regulations at www.usembassy.cl, Food & Agriculture, Food Regulations.

Are import permits required and, if so, how do I get one?

Import permits (called certificates of importation) are required, but issued on a pro forma basis to the importer or his agent, provided they are a resident of Chile. The procedure can take 2-3 days. The importer or his agent applies for an import permit at the Central Bank for all shipments valued at over $3,000. For lesser amounts, any commercial bank can issue the import permit.

Do I need a business visa to travel to Chile?

Not unless you intend to stay for more than 90 days. Business people who visit Chile usually enter on a regular tourist visa, issued by immigration officers at the airport upon arrival. If you intend to stay in Chile for more than 90 days, but less than one year, you should obtain a business visa from a Chilean Consulate in the United States. For persons who have been contracted to carry out a specific job, there is a “Resident Subject to Contract” visa, valid for up to two years.

Upon entering Chile, a “Reciprocity Fee” of $100 will be charged to all U.S. passport holders when entering the country. It remains valid until the passport expires.

For more information about visa requirements, go to Chile’s National Customs Service website at http://www.aduana.cl/home_ingles.htm

Can I get my money out immediately if I export to Chile, or is there a waiting period?

Subject to the terms of your sales contract (letter of credit, payment against documents, open account, etc.), you are able to get your money out as soon as the terms of the transaction have been fulfilled.

If you are in Chile itself, you can exchange currency at any bank, without restriction. If you are an investor, you are able to remit dividends as soon as they are earned. If you are a licensor, your licensee may remit royalties to you as soon as they are earned.

If I decide to invest in Chile, what will my corporate income taxes be?

Currently, you have two options: 35% or 42%. First, the investor can elect a fixed rate of 42%. This rate is granted to companies investing in Chile under the D.L. 600 Foreign Investment Statute. Under D.L. 600, the investor signs a contract with the Chilean Government’s Foreign Investment Committee, guaranteeing an investor the 42% rate for up to 10 years. Alternatively, the investor can elect to be taxed at the local rate of 35% of profits. Legislation can alter the 35% rate, however, so an investor needs to keep this in mind.

Which currency exchange rate would be used for investment transactions?

There is an official rate set and updated by the Central Bank of Chile, depending upon market forces. There is also a second or informal, but legal, rate. The two rates seldom differ by more than a few points. Certain transactions, like investment contracts under D.L. 600, guarantee the investor the right to foreign exchange at the official rate. For investments not made under D.L. 600, the informal rate must be used when remitting dividends.

Current rates of exchange can be found on the Santiago Stock Exchange website, at http://www.bolsadesantiago.com.

Source: This information provided by the ITA Trade Information Center.

Chapter 11: Resources and useful contacts

U.S. Commercial Service

The U.S. Commercial Service, part of the U.S. Department of Commerce, is a global network of trade specialists dedicated to helping American companies do business in markets around the world. Staff in the American Embassy in Santiago, Chile and in 107 Export Assistance Centers across the U.S. can help you launch your company into Chile and Latin America.

Contact the U.S. Commercial Service in Chile or the U.S. for assistance identifying business opportunities in Chile, obtaining market research, and finding buyers and partners.

U.S. Commercial Service, Santiago

American Embassy in Santiago

Av. Andres Bello 2800, Las Condes

Santiago, Chile 755-0006

E-mail: Santiago.Office.Box@mail.doc.gov

Web: http://www.buyusa.gov/chile

Phone: 011-56-2-330-3316

Fax: 011-56-2-330-3172

Government Organizations:

US Commercial Service

http://www.buyusa.gov/CommercialService

Market Access and Compliance - US Department of Commerce

http://www.mac.doc.gov

Foreign Agriculture Service

http://www.fas.usda.gov

Business Groups:

United States Chamber of Commerce

http://www.uschamber.com/default.htm

US-Chile Free Trade Coalition – coalition of more than 250 companies and business organizations that support approval of the U.S.-Chile Free Trade Agreement

http://www.uschilecoalition.com

National Association of Manufacturers

http://www.nam.org

The Chilean American Chamber of Commerce

http://www.amchamchile.cl

Español

Printable version
Last updated 2006-06-01

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0	6	6	6	6	6	6	6	6	6	6
1	0	4.5	5.2	5.4	5.5	6	6	6	1.2	6
2	0	3	4.5	4.8	5	6	6	6	0.6	6
3	0	1.3	3.7	4.2	4.5	6	5.2	0	0	6
4	0	0	3	3.6	4	6	4.5	0	0	6
5	0	0	2.2	3	3.5	5.5	3.7	0	0	6
6	0	0	1.5	2.4	3	5	3	0	0	6
7	0	0	0.7	1.8	2.5	4.5	2.2	0	0	5.8
8	0	0	0	1.2	2	4	1.5	0	0	4.5
9	0	0	0	0.6	1.5	3	0.7	0	0	2.7
10	0	0	0	0	1	2	0	0	0	1.1
11	0	0	0	0	0.5	1	0	0	0	0.2
12	0	0	0	0	0	0	0	0	0	0

	A	B	C	D	E	G	H	O	P	V
0	6	6	6	6	6	6	6	6	6	6
1	0	4.5	5.2	5.4	5.5	6	6	6	1.2	6
2	0	3	4.5	4.8	5	6	6	6	0.6	6
3	0	1.3	3.7	4.2	4.5	6	5.2	0	0	6
4	0	0	3	3.6	4	6	4.5	0	0	6
5	0	0	2.2	3	3.5	5.5	3.7	0	0	6
6	0	0	1.5	2.4	3	5	3	0	0	6
7	0	0	0.7	1.8	2.5	4.5	2.2	0	0	5.8
8	0	0	0	1.2	2	4	1.5	0	0	4.5
9	0	0	0	0.6	1.5	3	0.7	0	0	2.7
10	0	0	0	0	1	2	0	0	0	1.1
11	0	0	0	0	0.5	1	0	0	0	0.2
12	0	0	0	0	0	0	0	0	0	0

	A	B	C	D	E	G	H	O	P	V
0	6	6	6	6	6	6	6	6	6	6
1	0	4.5	5.2	5.4	5.5	6	6	6	1.2	6
2	0	3	4.5	4.8	5	6	6	6	0.6	6
3	0	1.3	3.7	4.2	4.5	6	5.2	0	0	6
4	0	0	3	3.6	4	6	4.5	0	0	6
5	0	0	2.2	3	3.5	5.5	3.7	0	0	6
6	0	0	1.5	2.4	3	5	3	0	0	6
7	0	0	0.7	1.8	2.5	4.5	2.2	0	0	5.8
8	0	0	0	1.2	2	4	1.5	0	0	4.5
9	0	0	0	0.6	1.5	3	0.7	0	0	2.7
10	0	0	0	0	1	2	0	0	0	1.1
11	0	0	0	0	0.5	1	0	0	0	0.2
12	0	0	0	0	0	0	0	0	0	0