The stock of U.S. foreign direct investment in Chile was $4.5 billion in 1994, 56.6 percent larger than that in 1993. U.S. direct investment in Chile is concentrated largely in mining, services and manufacturing.

IMPORT POLICIES

Chile has a generally open trade regime, particularly in the area of traditional border measures such as tariffs and quantitative restrictions. Chile applies a uniform 11 percent ad valorem tariff on imports. Chile's tariffs are WTO-bound at 25 percent ad valorem. However, significant barriers do exist.

Chile's major border measure barriers are in the agricultural sector. Chile maintains a price band system for wheat, wheat flour, edible oils and sugar. This variable tariff system is designed to maintain domestic prices for these commodities within a predetermined band, which delays the impact of changes in international market prices on Chilean producers. Chile also maintains minimum customs value requirements for imports on occasion, in response to low world prices. These are currently applied only to wheat flour. The United States has indicated its opposition to Chile's price band system for certain agricultural products.

STANDARDS, TESTING, CERTIFICATION AND LABELING

Chile uses animal health and phytosanitary requirements to prevent some imports. Even though Chile is a member of the WTO, announcements of proposed rule changes, notification of proposasl to other members via the WTO Secretariat, and the opportunity for public comment often have not preceded the promulgation of new requirements. U.S. exports of poultry are effectively blocked from the Chilean market through a sanitary requirement that the United States considers unjustified and discriminatory. The U.S. Government has protested this requirement to the Chilean Government. U.S. fruit exporters have found it extremely difficult to penetrate the Chilean market due to phytosanitary barriers. U.S. beef exports have been restricted by Chilean labeling and grading regulations. Chile does not permit U.S. beef in consumer cuts to enter the market without being graded to Chilean grading standards. Because meat grades originate from carcass grades at the time of slaughter, this requirement effectively blocks U.S. produced beef from the market. Meat that will undergo further processing is not affected by this law. The United States will continue to pursue WTO-consistent and scientifically-based sanitary and phytosanitary requirements in Chile.

EXPORT SUBSIDIES

In general, Chile does not subsidize exports. However, Chile has several export promotion measures to help

non-traditional exports. These measures are primarily intended to expedite and simplify the paper work involved in the export process. The Government of Chile also provides exporters with quicker returns of value-added taxes than it provides to other producers.

One such export promotion measure lets all exporters defer import duties for up to seven years on imported capital equipment, or receive an equivalent subsidy for domestically-produced capital goods. Chile also provides a simplified duty drawback program for small exporters, which does not reflect actual duties paid on imported components. This program has been determined to be countervailable under U.S. countervailing duty laws. Chile also is expected to spend $7 million in 1996 from an agricultural export promotion fund, half of which is made up of government funds and the other half composed of industry contributions.

LACK OF INTELLECTUAL PROPERTY PROTECTION

Chile implemented a new patent, trademark, and industrial design law in 1991. This law provides product patent protection for pharmaceuticals. However, deficiencies exist in the law, including: a term of protection that is relatively short (fifteen years from the date of the grant); lack of protection for plant and animal varieties; lack of "product by process" protection; lack of provisions for extending patent terms for delays due to regulatory approval processes; inadequate industrial design provisions; and a lack of transition, or pipeline, protection for pharmaceutical products patented in other countries prior to the time product patent protection became available in Chile. In addition, Chile's registration procedures for marketing new pharmaceuticals are more onerous for first-to-register innovators, which tend to be foreign firms.

Copyrights

Chile's copyright law was revised in 1992. The term of protection in Chile is now the author's life plus 50 years -- the Berne Convention standard. Chile's law does not protect computer software as "literary works" as required by TRIPs. Chile's copyright law also has some deficiencies, including: unclear rental and importation rights; inadequate penalties; lack of provision for ex parte civil searches; unclear provision for injunctions and temporary restraining orders; no provision for "works for hire"; and unnecessary constraints on contractual rights. Piracy of computer software is significant, estimated by industry sources at 64 percent, and piracy of video and audio tapes also exists.

Other IPR

Chile's trademark law also contains deficiencies, including: no requirement of use to maintain trademark protection, as required by TRIPs; a "novelty" requirement for trademark registrations; no provision for trademarking configuration marks, color or packaging or for collective marks; and no provisions for protection of "well-known" marks.

Chile does not provide protection for semiconductor mask works or for encrypted program-carrying satellite signals, nor does it provide comprehensive protection for trade secrets.

INVESTMENT BARRIERS

Chile officially welcomes foreign investment. However, restrictions exist. Under the law that regulates nearly all foreign direct investment, profits may be repatriated immediately, but capital may not be repatriated for one year. Foreign direct investment is also subject to pro forma screening by the Government of Chile. Royalty contracts must be approved by the Central Bank. Contracts may set fees and royalties only as a percentage of sales. Payments are usually limited to one percent of sales for the use of trademarks, three percent for the use of trade secrets and proprietary processes, and five percent for the use of patents. Remittances above these levels may be denied access to the inter-bank foreign exchange market and may be disallowed as expenses by the tax authorities. Trade-related investment measures are also applied in the automobile industry, involving tax benefits in return for meeting local content requirements and for exporting. Oil and gas deposits are reserved for the state. However, private investors, be they foreign or Chilean, are allowed concessions in this area.

OTHER BARRIERS

Distilled Spirits

Chile maintains a tax structure that discriminates against spirits that are usually imported and in favor of a locally produced spirit, pisco. Whiskey is taxed at 70 percent ad valorem, but pisco is taxed at just 25 percent. The United States has urged Chile to adopt a more equitable distilled spirits tax system.