Comparative Guide Chile - U.S. FTA and DR - CAFTA - Annexes on Non-Conforming Measures: Services and Investment

A Comparative Guide to the Chile-United States Free Trade Agreement and the
Dominican Republic-Central America-United States Free Trade Agreement

A STUDY BY THE TRIPARTITE COMMITTEE


Annexes on Non-Conforming Measures: Services and Investment

Table of Contents


Introduction

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

Annex I: Existing Measures: Cross-Border Trade in Services and Investment

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

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

Each annex entry sets out the following elements:

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

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

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

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

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

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

A. CHILE – U.S. FTA

A.1 CROSS-BORDER TRADE IN SERVICES

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

  Chile  17 Sectoral Measures + 1 Horizontal Measure
  United States 5 Sectoral Measures + 1 Horizontal Measure

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

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

A.1.a Horizontal Measures

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

  • Chile : National Treatment / Local Presence

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

  • United States : National Treatment / MFN / Local Presence

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

A.1.b Sectoral Measures

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

Table 1
Chile
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local Presence

MFN

Communications

 

X

X

X

Fisheries

 

X

X

X

Sports, Industrial Fishing and Hunting, and Recreational Services

 

 

X

 

Customs Agents and Brokers

 

X

X

 

Private Armed Security Guards

 

X

 

 

Research Services

 

X

 

 

Research Services

 

X

 

 

Research in Social Services

 

X

 

 

Printing, Publishing, and Other Related Industries

 

X

X

Professional Services

 

X

X

 

Auxiliary Services in the  Administration of Justice

 

X

X

 

Legal Services

 

X

 

X

Air Transportation

 

X

X

X

Shipping

 

X

X

X

Shipping

 

X

X

 

Land Transportation

 

X

X

X

Land Transportation

 

X

 

X

Table 2
United States
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local

Presence

MFN

Business Services (Export Conduct)

 

X

X

 

Business Services (License from BIS)

 

X

X

 

Specialty Air Services

 

X

X

X

Customs Brokers

 

X

X

 

Patents Attorneys, Patent Agents, and Other Practice Before the Patent and Trademark Office

 

X

X

X

A.2 INVESTMENT

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

  Chile 9 Sectoral Measures  + 1 Horizontal Measure
  United States 6 Sectoral Measures  + 3 Horizontal Measures

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

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

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

A.2.a Horizontal Measures

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

  • Chile: National Treatment

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

  • United States: National Treatment / MFN Treatment

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

  • United States: National Treatment / MFN Treatment

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

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

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

  • A.2.b Sectoral Measures

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

Table 3
Chile
Existing Non-Conforming Measures for Investment

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communications

x

x

x

x

Energy

x

 

x

 

Mining

x

 

x

 

Fisheries

x

x

 

x

Fisheries Aquaculture

x

 

 

 

Printing, Publishing, and Other Related Industries

x

x

 

x

Air Transportation

x

x

 

x

Shipping I-CH-25

x

x

 

x

Shipping I-CH-28

x

   

x

Table 4
United States
Existing Non-Conforming Measures for Investment

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Atomic Energy

x

 

 

 

Mining

x

x

 

 

Air Transportation I-US-6

x

x

 

x

Air Transportation I-US-8

x

x

 

x

Customs Brokers

x

 

 

 

Radio Communications

x

 

 

 

B. DR-CAFTA

B.1 CROSS-BORDER TRADE IN SERVICES

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

Costa Rica 28 Sectoral Measures No Horizontal Measures
Dominican Republic 18 Sectoral Measures No Horizontal Measures
El Salvador 16 Sectoral Measures No Horizontal Measures
Guatemala  5 Sectoral Measures No Horizontal Measures
Honduras 30 Sectoral Measures No Horizontal Measures
Nicaragua 27 Sectoral Measures No Horizontal Measures
United States  5 Sectoral Measures + 1 Horizontal Measure

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

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

B.1.a Horizontal Measures

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

  • United States: National Treatment / MFN / Local Presence

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

B.1.b Sectoral Measures

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

Table 5
Costa Rica
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Irrigation Services

X

 

 

 

Solid Waste Treatment Services

X

 

 

 

Maritime and Specialty Air Services

X

 

 

 

Professional Services

 

X

X

X

Maritime-Land Zone

X

X

X

 

Land Transportation Services- Transportation of Passengers

X

X

 

X

Land Transportation Services - Freight Transportation

X

X

 

X

Water Transportation Services

 

X

X

X

Specialty Air Services

 

X

X

X

Tourist Guides

 

X

 

 

Travel Agencies and Tourism

X

 

 

 

   

 

 

 

Transportation Services - Customs Brokers – Assistant  Custom Brokers – Custom Transportation Agents

 

X

X

 

Telecommunications Related Services - Radio and Television

X

X

 

X

Wholesale and Retail Distribution – Crude Oil and its Derivatives

X

 

 

 

Services Incidental to Mining – Hydrocarbon Exploration

 

 

X

 

Mining and Services Incidental to Mining – Ores Other than Hydrocarbons

X

X

X

 

Scientific and Research Services

 

 

X

 

Services Incidental to Agriculture and Forestry

 

X

 

 

 

 

 

 

 

Electric Energy

X

X

X

 

Higher Education Services

 

X

 

 

Human Health Service Professionals – Physicians and Surgeons, Dental Surgeons, Microbiologists, Pharmacists, Nurses, and Nutritionists  

X

   
Audiovisuals – Advertising – Services of Cinema, Radio, Television, and Other Shows

X

X

X

X

News Agencies Services

 

X

X

 

Sport Services and Other Entertainment Services

X

X

X

 

 

 

 

 

 

Railroads, Ports, and Airports

X

 

X

 

Wireless Services

X

 

 X

On Premise Supply of Liquors for Consumption

X

 

 

 

Lottery Sale Services

X

     

Table 6
Dominican Republic
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Professional Services – Legal Services

X

X

   
Professional Services – Architectural and Engineering Services

 

 X

X

 X

Professional Services – Accounting, Auditing and Bookkeeping Services

 X

X

 X

 
Professional Services – Health Services and Related Professions

 

X

 X

X

Energy Related Services

 X

 

 

 
Communications – Audio-Visual Services

 

X

 

 X

Communications – Advertising Services

 

X

 

 

Communications - Broadcasting

 X

X

 X

 

Communications

 X

 

X

 
Distribution, Trade, and Commission Agent Services

 X

 

 X

 
Tourism and Services Related to Travel

 

X

X

 

Recreational and Cultural Services

 

X

   
Transportation – Maritime Services

 

X

X

 
Air Transportation – Specialty Air Services and Maintenance and Repair of Aircraft

 

X

 

 X

Educational Services

 

 X

 
Lotteries X  

 

 

Retail Distribution of Pharmaceutical Products X

 

 

 

Services Incidental to Mining, Hydro-Electric Plant Construction and Management; Electricity Transmission, Marketing and Distribution Services; Public Irrigation Services; Management and Operation of Water Distribution and Waste Management Services; Airport and Port Construction, Operation and  Management Services; and Operation of Lotteries

X

 

 

 

Table 7
El Salvador
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Air Services: Specialty Air Services

 

X

 

X

Air Services: Aircraft Repair and Maintenance Services During which an Aircraft is Withdrawn from Service and Pilots of Specialty Air Services

 

X

 

X

Communication Services – Advertising and Promotional Services for Radio and Television

 

X

 

X

Performing Arts

 

X

 

 

Circuses

 

X

 

 

Performing Arts

 

X

 

 

Construction and Related Engineering Services

 

X

X

X

Public Accounting and Public Auditing

 

X

 

X

Professional Services: Architectural Services, Engineering Services Integrated Engineering Services, Urban Planning and Landscaping Services

 

X

X

 

Professional Services: Health Services (Including but not limited to: General and Specialist Medical Services, Dental Services, Veterinary Services, Paramedical Services, Services rendered by Psychologists, Midwives, Nurses, Physiotherapists, Chemists and Qualified Clinical Laboratory Technicians, and Technical Auxiliary Staff)  

X

X

X

 

 

     
Professional Services: Legal Services (Notary Public)

 

X

X

X

Professional Services: Teachers

 

X

 

 

Professional Services: Customs Agents

 

X

 

X

Transport Services - Road Transport Services

 

X

 

 
   

 

 

 

Energy

X

 

 

 

Land Transport

X

 

 

 

Table 8
Guatemala
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Professional Services: Notaries

 

X

X

 

Performing Arts

 

X

X

 

Tour Guides

 

X

X

 

Specialty Air Services

 

 

 

X

Specialty Air Services  

X

   

Table 9
Honduras
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Customs Agents and Customs Agencies

 

X

 

 

Communication Services: Mail

X

 

 

 

Telecommunications  

X

 

 

Telecommunications

X

     
Construction or Consulting Services and Related Engineering Services – Civil Engineering

X

X

X

X

Distribution Services – Petroleum Products (Liquid Fuel, Automotive Oil, Diesel, Kerosene, and LPG)

 

 

X

 

Electricity

X

 

 

 

Lotteries

X

 

 

 

Education Services – Private Preschool, Primary, and Secondary Education Services

 

X

X

X

Entertainment Services – Music Entertainment

 

X

 

 

Championships and Soccer Games Services

 

X

X

X

Amusement, Cultural, and Sports Services – Casinos and Gambling (Encompasses Roulette, Cards, Punter, Baccarat, Slot Machines, and the Like)

 

X

X

 

Environmental Services

X

 

 

 

Distribution, Wholesale and Retail – Weapons, Munitions, and Other Related Items

X

 

 

 

 

 

   

 

Professional Services

 

X

X

X

Air Transportation

 

X

X

X

Maritime Transportation – Coastal Navigation

 

X

X

X

Land Transportation

X

X

X

X

Other Building Services - Warehousing

X

 

 

 

     

 

 
Economic Consulting Services

 

 

X

 

Business Consulting Services

X

X

 

X

Agricultural Engineering and Agronomy

 

X

 

X

Forestry Engineers

 

X

X

 

Veterinarians

 

X

X

X

Microbiologist and Clinicians

 

X

 

 

Notaries

 

X

 

 

   

 

 

 

Electrical Energy Services

X

 

 

 

Telecommunications

X

     
Public Accountants    

X

 
Architects  

 

 X

 

         

Table 10
Nicaragua
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Musicians and Artists

 

X

 

X

Tourism – Hotels, Restaurants, Tour Guides, Car Rental, and Other Tourism Related Activities

 

X

X

 

Services Related to Construction

 

X

X

 

Distribution of Fireworks, Firearms, and Munitions

 

X

X

 

Private Security Services

 

X

X

 

Radio Broadcast, Free Television Reception

 

X

 

 

Communications – Professional Radio and Television Broadcast Services

 

X

 

X

Electricity Distribution

 

 

X

 

 

 

 

 

 

 

 

 

 

 

Services Incidental to Mining - Hydrocarbons    

X

 
Services Incidental to Mining – Metallic and Non-Metallic Minerals    

X

 
Fisheries and Services Incidental to Fishing

 

X

X

 

Land Transportation

 

X

X

X

Maritime Transportation

 

X

 

 

Ports

X

 

 

 

Air Transportation - Repair and Maintenance Services, Specialty Air Services

 

X

X

X

Professional Services

 

X

X

X

Public Accounting and Auditing

 

X

X

 

Professional Services - Notary Publics

 

X

 

X

Customs Brokers

 

X

X

X

Scientific Research Services

 

 

X

 

Telecommunications

X

X

 

 

Development of Maps

X

 

 

 

Potable Water, Sanitary Sewer Systems, and Sewage Collection and Disposal

X

 

 

 

Airports

X

 

 

 

Energy Services

X

 

 

 

Administration of Lotteries

X

 

 

 

Public Communication Services

X

 

 

 

   

 

 

 

Table 11
United States
Existing Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Business Services

 

X

X

 

Business Services  

X

X

 
Air Transportation

 

X

X

X

Transportation Services-
Customs Brokers

 

X

X

 

Professional Services --Patent Attorneys, Patent Agents, and Other Practice before the  Patent and Trademark Office

 

X

X

X

B.2 INVESTMENT

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

Costa Rica 14 Sectoral Measures No Horizontal Measures
Dominican Republic 12 Sectoral Measures 1 Horizontal Measure
El Salvador  7 Sectoral Measures + 2 Horizontal Measures
Guatemala 3 Sectoral Measures + 5 Horizontal Measures
Honduras 14 Sectoral Measures + 3 Horizontal Measures
Nicaragua  4 Sectoral Measures No Horizontal Measures
USA  3 Sectoral Measures + 3 Horizontal Measures

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

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

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

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

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

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

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

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

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

B.2.a Horizontal Measures

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

  • Dominican Republic: National Treatment

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

  • El Salvador: National Treatment / MFN Treatment

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

  • El Salvador: National Treatment / MFN Treatment

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

  • Guatemala: National Treatment

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

  • Guatemala: National Treatment

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

  • Guatemala: National Treatment

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

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

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

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

  • Guatemala: National Treatment

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

  • Guatemala: National Treatment

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

  • Honduras: National Treatment

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

  • Honduras: National Treatment / MFN Treatment

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

  • Honduras: National Treatment / MFN Treatment

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

  • United States: National Treatment / MFN Treatment

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

  • United States: National Treatment / MFN Treatment

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

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

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

B.2.b Sectoral Measures

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

Table 12
Costa Rica
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Maritime-Land Zone

X

 

 

 

Land Transportation Services - Transportation of Passengers

X

X

 

 

Land Transportation Services – Transportation of Freight

X

X

 

X

Water Transportation Services

X

 

 

 

Air Transportation Services

X

X

 

X

Telecommunications Related Services -
Radio and Television

X

X

 

X

Mining and Services Incidental to Mining -- Ores Other than Hydrocarbons

X

 

 

 

Free Zones

 

 

X

 

Fisheries and Services Incidental to Fishing

X

 

X

 

Electric Energy

X

 

 

 

Higher Education Services

X

 

 

X

Audiovisuals - Advertising - Services of Cinema, Radio, Television, and Other Shows

X

X

X

 

Sports Services and Other Entertainment Services

X

 

 

 

Wireless Services

X

X

 

 

Table 13
Dominican Republic
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Energy Related Services

X

 

 

 

Mining

X

 

 

 

Communications: Audio-Visual Services  

 

 X

 
Communications: News Agency Services      

X

Communications: Broadcasting

X

     
Distribution, Trade and Commission Agent Services    

X

 
Transportation – Maritime Transportation

X

   

X

Air Transportation

X

   

X

Free Zones    

X

 
Oil Exploitation and Exploration Services

X

     
Fishing

X

     
Cooperative Associations

X

     

Table 14
El Salvador
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Cooperative Production Societies

X

 

 

 

Duty-Free Commercial Centers and Establishments

X

 

 

 

Communications Services:
Television and Radio Broadcasting Services

X

 

 

 

Construction and Related
Engineering Services

X

X

 

 

Public Accounting and Public
Auditing

X

X

 

 

Professional Services:
Customs Agents

X

X

 

 

Transport Services - Road Transport Services

X

 

 

 

Table 15
Guatemala
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Forestry

X

 

 

 

Professional Services

X

 

 

 

Air Transportation

X

 

 

X

Table 16
Honduras
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Customs Agents and Customs Agencies

X

 

 

 

Agricultural

X

 

 

 

Radio, Television, and Newspaper Services

 

 

 

X

Construction or Consulting Services and Related Engineering Services - Civil Engineering

X

 

 

 

Distribution Services - Petroleum Products (liquid Fuel, Automotive Oil, Diesel, Kerosene, and LPG)

X

 

 

 

Education Services - Private Preschool, Primary, and Secondary Educational Services

 

 

 

X

Entertainment Services - Music Entertainers

X

 

 

 

Amusement, Cultural, and Sports Services - Casinos and Gambling (Encompasses Roulette, Cards, Punter, Baccarat, Slot Machines, and the Like)

X

 

 

 

Investigation and Security Services

X

 

 

X

Fisheries

X

 

 

 

Air Transportation

X

 

 

X

Maritime Transportation - Coastal Navigation

X

X

 

 

Land Transportation

X

 

 

 

Transportation - Railways

X

 

 

X

Table 17
Nicaragua
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Radio Broadcast, Free Television Reception

X

 

 

 

Fisheries and Services Incidental to Fishing

X

 

X

 

Air Transportation

X

 

 

X

Regime on Free Zones and Regime on Active Improvement

 

 

X

 

Table 18
United States
Existing Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Atomic Energy

X

 

 

 

Mining

X

X

 

 

Air Transportation

X

X

 

X

Air Transportation

X

X

 

X

Transportation Services-
Customs Brokers

X

 

 

 

Communications - Radiocommunications

X

 

 

 

Annex II: Future Measures: Cross-Border Trade in Services and Investment

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

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

Each annex entry sets out the following elements:

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

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

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

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

C. CHILE–U.S. FTA

C.1 CROSS-BORDER TRADE IN SERVICES

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

  Chile 9 Sectoral Measures + 2 Horizontal Measures
  United States 4 Sectoral Measures + 2 Horizontal Measures

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

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

C.1.a Horizontal Measures

  • United States / Chile / MFN

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

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

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

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

  • United States: Market Access

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

  • Chile: Market Access

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

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

C.1.b Sectoral Measures

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

Table 19
Chile
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Communications Services

 

x

X

x

Issues Involving Minorities

 

x

X

x

Issues Involving Indigenous People

 

x

X

x

Education Services

 

x

X

x

Fishing-related Activities

 

x

 

x

Cultural Industries

 

 

 

x

Social Services

 

x

X

x

Environmental Services

 

x

X

x

Construction Services

 

x

X

 

Table 20
United States
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Communications Services

 

 

 

x

Social Services

 

x

X

x

Minority Affairs

 

x

X

 
Maritime Transport

 

x

X

x

C.2 INVESTMENT

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

  Chile  7 Sectoral Measures + 3 Horizontal Measures
  United States  4 Sectoral Measures + 1 Horizontal Measure

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

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

Chile lists a greater number of measures with respect to investment than does the United States. With respect to specific sectors, Chile has a list of 7 non-conforming measures, while the United States has 4 measures. National Treatment is invoked with respect to six non-conforming measures. The same number applies to MFN Treatment. Four non-conforming measures violate the Performance Requirements obligation and 4 the obligation for Senior Management and Boards of Directors. The US has the same number of non-conforming measures for all obligations (3 measures for each).

Both Parties include the greatest number of future non-conforming measures in sectors relating to social issues, including social services, minority affairs, and in the case of Chile, issues involving indigenous people. Chile includes a non-conforming measure for communications, which does not apply to National Treatment, MFN Treatment, Performance Requirements, and Senior and Management and Boards of Directors. The United States, on the other hand, does the same in the transportation sector.

C.2.a Horizontal Measures

  • US / Chile: MFN

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

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

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

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

  • Chile: National Treatment / MFN

Chile reserves the right to adopt or maintain any measure relating to the ownership or control of land within five kilometers of the coastline that is used for agricultural activities. Such measures could include a requirement that the majority of each class of stock of a Chilean juridical person that seeks to own or control such land be held by Chilean persons or by persons residing in Chile for 183 days or more per year.

  • Chile: National Treatment / Senior Management and Boards of Directors

In the transfer or disposal of any interest in stock or asset held in an existing state enterprise or governmental entity, Chile reserves the right to prohibit or impose limitations on the ownership of said interest or asset and on the right of foreign investors or their investments to control any State company created thereby or investments made by the same. In connection with any such transfer or disposal, Chile may adopt or maintain any measure related to the nationality of senior management and members of the Board of Directors. A “State company” shall mean any company owned or controlled by Chile by means of an interest share in the ownership thereof, and it shall include any company created after the effective date of this Agreement for the sole purpose of selling or disposing of its interest share in the capital or assets of an existing state enterprise or governmental entity.

C.2.b Sectoral Measures

The non-conforming measures on investment in Annex II are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for Chile are found in Table 21 and those for the United States in Table 22.

Table 21
Chile
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communications

X

X

X

X

Issues Involving Minorities

X

X

X

X

Issues Involving Indigenous People

X

X

X

X

Government Finances

X

 

 

 

Fishing-Related Activities

X

X

 

 

Cultural Industries

 

X

 

 

Social Services

X

X

X

X

Table 22
United States
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communications

 

X

 

 

Social Services

X

X

X

X

Minority Affairs

X

 

X

X

Transportation

X

X

X

X

D. DR-CAFTA

D.1. CROSS-BORDER TRADE IN SERVICES

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

Costa Rica 2 Sectoral Measures 1 Horizontal Measure
Dominican Republic 4 Sectoral Measures 1 Horizontal Measure
El Salvador 3 Sectoral Measures 1 Horizontal Measure
Guatemala 2 Sectoral Measures 1 Horizontal Measure
Honduras 6 Sectoral Measures 1 Horizontal Measure
Nicaragua 3 Sectoral Measures 1 Horizontal Measure
United States 4 Sectoral Measures + 2 Horizontal Measures

The sector with the largest number of listed non-conforming measures is Health and Related Social Services.
The sector with the fewest non-conforming measures is that of Recreational, Cultural and Sporting Services.

Honduras lists the greatest number of non-conforming measures with respect to cross-border services supply, with Guatemala and Costa Rica applying the fewest non-conforming measures. All Parties to the Agreement have an identical horizontal measure affecting MFN, and the US has an additional horizontal measure affecting Market Access.

D.1.a Horizontal Measures

  • US / Costa Rica/ Dominican Republic/El Salvador/ Guatemala/ Honduras/ Nicaragua: MFN

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

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

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

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

  • US / Market Access

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

D.1.b Sectoral Measures

The non-conforming measures on cross-border trade in services in Annex II are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for the Central American Parties and the Dominican Republic to DR-CAFTA are found in Table 23 through 28 and those for the United States in Table 29.

Table 23
Costa Rica
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Cultural Industries

 

 

 

X

Social Services

X

X

X

X

Table 24
Dominican Republic
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Communications

 

 

 

X

Services Related to Craft Industry

X

X

   
Social Services  

X

X

X

Socially and Economically Disadvantaged Groups  

X

X

 

Table 25
El Salvador
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Social Services

X

X

X

X

Minority Affairs

 

X

X

 

Transport Services: Road Transport Services

 

X

X

X

Table 26
Guatemala
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Maritime Transportation

 

X

X

X

Matters Related to Disadvantaged Minorities
and Indigenous People

 

X

X

 

Table 27
Honduras
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Communication Services - Telecommunications

X

 

 

 

Agronomists

 

X

X

X

Social Workers

 

X

 

 

Chemists and Pharmacists

 

X

X

X

Social Services

X

X

X

X

Minority Affairs

 

X

X

 

Table 28
Nicaragua
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Minority Affairs and Indigenous Peoples

 

X

X

X

Communications

 

 

 

X

Social Services

 

X

X

X

Table 29
United States
Future Non-Conforming Measures for Cross-Border Trade in Services

 

Type of Obligation

Sector / Sub-Sector

MA

NT

Local
Presence

MFN

Communications

 

 

 

X

Social Services  

X

X

X

Minority Affairs

 

X

X

 

Transportation

 

X

X

X

D.2 INVESTMENT

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

Costa Rica 2 Sectoral Measures 1 Horizontal Measure
Dominican Republic 4 Sectoral Measures 3 Horizontal Measures
El Salvador 2 Sectoral Measures 1 Horizontal Measure
Guatemala  2 Sectoral Measures 1 Horizontal Measure
Honduras  3 Sectoral Measures 1 Horizontal Measure
Nicaragua 4 Sectoral Measures 2 Horizontal Measures
USA 5 Sectoral Measures 1 Horizontal Measure

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

The sector with the largest number of listed non-conforming measures is Social Services, followed by Minority Affairs.

The Dominican Republic lists the greatest number of non-conforming measures with respect to investment, with Costa Rica, El Salvador and Guatemala having the fewest. All Parties to the Agreement have an identical horizontal measure affecting MFN. Nicaragua and the Dominican Republic have an additional horizontal measure pertaining only to investment that affects National Treatment and Senior Management and Board of Directors. The Dominican Republic lists a third horizontal measure pertaining only to investment that affects National Treatment.

D.2.a Horizontal Measures

  • US / Dominican Republic/ Costa Rica/ El Salvador/ Guatemala/ Honduras/Nicaragua: MFN

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

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

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

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

  • Dominican Republic/Nicaragua: National Treatment / Senior Management and Boards of Directors

At the Horizontal level the Dominican Republic and Nicaragua list a measure with respect to investment that affects National Treatment and Senior Management and Board of Directors. The measure includes two components.

The first part of the measure preserves the right to limit the transfer or disposal of any interest held in an existing state enterprise, such that only a national can receive such interest. This pertains only to the initial transfer or disposal of the interest and not to subsequent transfers or disposals.

Under the second part of the measure, the Dominican Republic and Nicaragua preserve the right to limit control of any new enterprise created by the transfer or disposal of any interest through means other than limitations on the ownership of the interest. The Parties also reserves the right to adopt or maintain any measure related to the nationality of senior management and members of the board of directors in that enterprise.

  • Dominican Republic: National Treatment

The Dominican Republic reserves the right to adopt or maintain any measure relating to the ownership or control of land within 20 kilometers of the Dominican border.

D.2.b Sectoral Measures

The non-conforming measures on investment in Annex II are set out by each Party to the Agreement according to the various sectors or sub-sectors, and with reference to the core discipline(s) invoked in the measure. The measures for the Central American Parties and the Dominican Republic to DR-CAFTA are found in Tables 30 through 35 and those for the United States in Table 36.

Table 30
Costa Rica
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Cultural Industries

 

X

 

 

Social Services

X

X

X

X

Table 31
Dominican Republic
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communications

 

X

 

 

Government Finances

X

     
Social Services

X

X

X

X

Socially and Economically Disadvantaged Groups

X

 

X

X

Table 32
El Salvador
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Social Services

X

X

X

X

Minority Affairs

X

 

X

X

Table 33
Guatemala
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Maritime Transportation

X

X

X

X

Matters Related to Disadvantaged Minorities and Indigenous Peoples

X

 

X

X

Table 34
Honduras
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communication Services -Telecommunications

X

 

 

 

Social Services

 

 

 

X

Minority Affairs

X

 

X

X

Table 35
Nicaragua
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Minority Affairs and
Indigenous Peoples

X

X

X

X

Communications

 

X

 

 

Coastal Lands, Islands and River Banks

X

 

 

 

Social Services

X

X

X

X

Table 36
United States
Future Non-Conforming Measures for Investment

 

Type of Obligation

Sector / Sub-Sector

NT

MFN

PR

SM

Communications

 

X

 

 

Communications - Cable Television

X

X

 

X

Social Services

X

X

X

X

Minority Affairs

X

 

X

X

Transportation

X

X

X

X


Annex III: Financial Services

In Annex III, the Schedule of a Party sets out the headnotes that limit or clarify a Party’s commitments with respect to the obligations listed below and that Party’s non-conforming measures for cross-border trade and investment in financial services. These measures are set out according to a negative listing.55

A. U.S. under the Chile-U.S. FTA:

In the annex to the Chile-U.S. FTA, the United States distinguishes between existing non-conforming measures relating to banking and other non-insurance financial services and those relating to insurance. The United States does not reserve the right to adopt new or more restrictive non-conforming measures relating to financial services. The non-conforming measures scheduled by the U.S. include those that are not subject to some or all of the obligations imposed by:

Relating to Banking and Other Non-Insurance Financial Services

(a) National Treatment;
(b) Most-Favored-Nation Treatment;
(c) Senior Management and Boards of Directors; or
(d) Right of Establishment with Respect to Certain Financial Services

Relating to Insurance

(a) National Treatment;
(b) Most-Favored-Nation Treatment;
(c) Market Access for Financial Institutions;
(d) Cross-Border Trade; or
(e) Senior Management and Boards of Directors.

Each non-conforming measure entry in the annex sets out the following elements:

Relating to Banking and Other Non-Insurance Financial Services and to Insurance

(a) Description

(i) for entries related to banking and other non-insurance financial services, sets out the non-conforming aspects of the entry and the subsector, financial institution, or activities covered by the entry; and

(ii) for entries related to insurance, provides general, nonbinding description of the Measures

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

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

Relating to Insurance Only

(d) Level of Government indicates the level of government maintaining the listed measure(s).

B. DR-CAFTA and Chile under the Chile-U.S. FTA:

In the annex to DR-CAFTA, the Parties distinguish between existing non-conforming measures (section A) and specific sectors, subsectors or activities for which the Parties may maintain existing, or adopt new or more restrictive non-conforming measures (section B). Chile, in Annex III to the Chile-U.S. FTA, uses a slightly different text to distinguish between existing measures (section I) and existing and future measures (section II). For the sectors and sub-sectors included in sections B or II in the respective annexes, Governments remain free to regulate in a discriminatory manner in any way they feel desirable, without constraint. Measures are set out according to a negative listing. For the countries member to both Agreements, existing and future non-conforming measures include those that are not subject to some or all of the obligations imposed by:

(a) National treatment;
(b) Most-Favored-Nation Treatment (except Chile for existing measures);
(c) Market Access for Financial Institutions;
(d) Cross-Border Trade;
(e) Senior Management and Board of Directors; or
(f) Right of Establishment with Respect to Certain Financial Services (Chile only);

Each non-conforming measure entry in the annex sets out the following elements:

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

(b) Subsector refers to the specific sector for which the entry is made;

(b) Obligations Concerned as above;

(c) Level of Government as above;

(d) Measures as above (except DR-CAFTA Members, other than the U.S., for future measures);

(e) Description

(i) (i) and (ii) above (the U.S. in DR-CAFTA for existing measures);

(ii) provides general, nonbinding description of the Measures (DR-CAFTA Members, except the U.S., for existing measures and Chile for existing and future measures);

(iii) sets out the scope of the sectors, subsectors, or activities covered by the entry (DR-CAFTA Members for future measures).

The non-conforming measures in Annex III to both Agreements are listed at their level of actual application and are supported by references to laws, regulations or other measures. Each Party is bound to apply such measures on a basis not more restrictive than what is indicated in the description of the measure. If a non-conforming measure set out in Annex III is made less restrictive or eliminated after the entry into force of the Agreement, it cannot subsequently be amended by or replaced with a new measure that is more restrictive (“ratcheting”). Thus the new measure is considered to be legally bound and must be applied to all Parties at the more liberalized level. Both texts establish exceptions to this rule (see headnotes to a Party’s schedule of non-conforming measures in Annex III). In the Chile-U.S. FTA, these relate to the right of establishment in Chile and the U.S. with respect to banking and other financial services (excluding insurance) (Annex 12.9), as well as market access (Article 12.4) for financial institutions in Chile and insurance providers in the U.S. For the U.S. in DR-CAFTA, the rule does not apply to market access (Article 12.4) for insurance providers and restrictions on the specific type of legal entity or joint venture (Article 12.4.b) for banking institutions or providers of “other financial services (excluding insurance)”.

A. Existing Measures

A.1. Chile-U.S. FTA

The total number of reservations or non-conforming measures listed in Annex III by each Party is the following:56

Chile 26 Measures on Banking and Non-Insurance Services
+ 6 Measures on Insurance and Insurance-Related Services
U.S. 17 Measures on Banking and Non-Insurance Services
 + 4 Measures on Insurance and Insurance-Related Services

The disciplines that both Parties invoke most often in their non-conforming measures are those of National Treatment (11 the U.S. and 6 Chile) and the Right of Establishment with respect to Certain Financial Services (12 the U.S. and 23 Chile). It must be noted that the large number of non-conforming measures that affect the Right of Establishment with respect to Certain Financial Services does not necessarily imply that Chile and the U.S. excessively limit this right. An accurate assessment of this issue would require establishing the extent to which the discipline deepened the right in question and confronting this to each relevant non-conforming measure scheduled by Chile and the U.S.

Chile also lists a number of existing non-conforming measures against Senior Management and Board of Directors (3 measures), Market Access (1 measure) and Cross-Border Trade (1 measure). The non-conforming measures of the U.S. also affect MFN (4 measures), Senior Management and Boards of Directors (2 measures), Market Access (1 measure) and Cross-Border Trade (3 measures). The table below lists the non-conformation measures scheduled by Chile and the U.S. with respect to each obligation:

Table 37: U.S. and Chile: Non-Conforming Measures for Financial Services

 

NT

MFN

Senior Management and Boards of Directors

MA

Right of Establishment with respect to Certain Financial Services

Cross-Border Trade

 

B

I

B

I

B

I

B

I

B

I

B

I

Chile

3

3

0

0

1

2

0

1

23

0

1

0

U.S.

8

3

3

1

1

1

0

1

12

0

0

3

B: Banking and Other Financial Services (excluding Insurance)
I: Insurance and Insurance-Related Services

Headnotes:

Chile and the U.S. list the following headnotes that limit or clarify their commitments:

Chile:

· Juridical persons supplying financial services and constituted under the laws of Chile are subject to non-discriminatory limitations on juridical form.

U.S.:

· National treatment with respect to banking will be provided based upon the foreign bank’s “home state,” as that term is defined under the International Banking Act. A domestic bank subsidiary of a foreign firm will have its own “home state,” and national treatment will be provided based upon the subsidiary’s home state, as determined under applicable law.

· The U.S. undertakes no commitment with respect to any existing non-conforming measures maintained at the regional level with respect to Banking and Non-Insurance Services.

· Juridical persons supplying banking or other financial services (excluding insurance) and constituted under the laws of the United States are subject to non-discriminatory limitations on juridical form.

· National treatment commitments of the U.S. with respect to insurance financial institutions are provided according to a non-U.S. insurance financial institution’s state of domicile, and is generally the state which an insurer either is incorporated, is organized or maintains its principal office in the U.S.

Horizontal Measures

Chile and the U.S. do not schedule measures that apply horizontally to financial services.

A.2. DR-CAFTA

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

  Costa Rica 6 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Dominican Republic 4 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  El Salvador 7

Measures on Banking and Non-Insurance Services

+ 1 Measure on Insurance and Insurance-Related Services
+ 1 Horizontal
  Guatemala 5 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Honduras 7 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Nicaragua 6 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  U.S. 14 Measures on Banking and Non-Insurance Services 
+ 3 Measures on Insurance Insurance-Related Services

The U.S. is the country that listed the highest number of non-conforming measures with respect to National Treatment (9 measures) and Market Access (9 measures), El Salvador with respect to MFN (6 measures) and Nicaragua with respect to Cross-Border Trade (5 measures). The table below lists the non-conformating measures scheduled by DR-CAFTA member countries with respect to each obligation:

Table 38: DR-CAFTA Countries: Non-Conforming Measures for Financial Services

 

NT

MFN

Senior Management and Boards of Directors

MA

Cross-Border Trade

 

B

I

B

I

B

I

B

I

B

I

Costa Rica

4

0

0

0

0

0

2

3

1

0

Dominican Republic

0

1

0

1

0

0

4

1

0

0

El Salvador

5

1

5

1

2

0

5

1

2

0

Guatemala

2

1

0

0

0

0

2

1

1

1

Honduras

2

1

1

0

0

0

6

0

1

0

Nicaragua

2

0

0

0

1

1

3

1

4

1

U.S.

7

2

3

0

1

0

8

1

1

2

B: Banking and Other Financial Services (excluding Insurance)
I: Insurance and Insurance-Related Services

Headnotes:

DR-CAFTA members list the following headnotes that limit or clarify their commitments:

All DR-CAFTA Members:

· Juridical persons supplying financial services57 and constituted under the laws of a Party are subject to non-discriminatory limitations on juridical form. This headnote is not itself intended to affect, or otherwise limit, a choice by a financial institution of another Party between branches or subsidiaries.

U.S.:

· National treatment commitments in the subsectors specified in the Annex are subject to the following limitations:

(a) National treatment with respect to banking will be provided based upon the foreign bank’s “home state” in the United States, as that term is defined under the International Banking Act, where that Act is applicable. A domestic bank subsidiary of a foreign firm will have its own “home state,” and national treatment will be provided based upon the subsidiary’s home state, as determined under applicable law.
(b) National treatment with respect to insurance financial institutions will be provided according to a non-U.S. insurance financial institution’s state of domicile, where applicable, in the United States. State of domicile is defined by individual states, and is generally the state in which an insurer either is incorporated, is organized or maintains its principal office in the United States.

Horizontal Measures:

Only El Salvador scheduled non-conforming measures that apply to all types of financial services:

· The Banco de Fomento Agropecuario will not be member of the Instituto de Garantía de Depósitos.
·
Panama and the Dominican Republic may be treated as Central American Parties for the purposes of the Financial Services Chapter.

B. Future Measures

B.1. Chile-U.S. FTA

The total number of reservations or non-conforming measures listed with respect to future measures by each Party is the following:

Chile 1 Measure on Banking and Non-Insurance Services
+ 2 Measures on Insurance and Insurance-Related Services
+ 3 Horizontal Measures
+ 1 Measure on Social Services
U.S.    No future measures

Chile’s non-conforming measure with respect to Banking and Other Financial Services invokes the National Treatment obligation, and its two non-conforming measures with respect to Insurance and Insurance-Related Services invoke one of the Market Access or Cross-Border Trade obligations.

For insurance services, Chile modifies the listing approach followed for Banking and Other Financial Services (excluding Insurance). It binds a market access reservation following a positive list approach. In particular, Chile reserves the right to adopt or maintain any measure with respect to Article 12.4 (Market Access), except for a limited number of insurance subsectors -direct life insurance and direct general insurance, insurance brokerage and reinsurance and retrocession (including reinsurance brokers)- and under the terms, limitations and conditions specified in the schedule.

Horizontal Measures:

At the horizontal level, Chile lists non-conforming measures with respect to:

· Right of Establishment and Market Access: Chile reserves the right to adopt measures that restrict or require specific types of juridical form or establishment, such as subsidiaries, with respect to financial conglomerates, including the entities forming part of it.
·
Cross-Border Trade: Chile requires that the purchase of financial services, by persons located in the territory of Chile and its nationals wherever located, from financial services suppliers of the U.S. be subject to the exchange rate regulations adopted or maintained by the Banco Central de Chile.
·
National Treatment and Senior Management and Board of Directors: In the transfer or disposal of any interest in stock or asset held in an existing state enterprise or governmental entity, Chile reserves the right to prohibit or impose limitations on the ownership of said interest or asset, and on the right of foreign investors or their investment to control any State company created thereby or investments made by such company. In connection with any such transfer or disposal, Chile may adopt or maintain any measure related to the nationality of senior management and member of the Board of Directors. 

Chile also lists one measure with respect to social services:

· Chile reserves the right to adopt or maintain any measure with respect to the provision of public law enforcement and correctional services, and the following services to the extent that they are social services established or maintained for reasons of public interest: income security or insurance, social security or insurance, social welfare, public education, public training, health care and child care.

B.2. DR-CAFTA

The total number of reservations or non-conforming measures listed with respect to future measures by each Party is the following:

  Costa Rica 1 Measure on Banking and Non-Insurance Services 
+ 1 Measure on Insurance and Insurance-Related Services
  Dominican Republic 1 Measure on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  El Salvador 1 Measure on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Guatemala 1 Measure on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Honduras 2 Measures on Banking and Non-Insurance Services
+ 1 Measure on Insurance and Insurance-Related Services
  Nicaragua 1 Measure on Banking and Non-Insurance Services
+1 Measure on Insurance and Insurance-Related Services  Horizontal
  U.S. 1 Measure on Insurance and Insurance-Related Services

All Parties to DR-CAFTA, except the U.S., list a non-conforming measure with respect to market access that applies to “All Subsectors Other than Banking and Insurance”, i.e. it covers “Other Financial Services (excluding insurance)” and “Insurance-Related Services”. The measure states that a Party reserves the right to adopt or maintain measures requiring the incorporation in the Party’s territory of foreign financial institutions, other than those seeking to operate as banks or insurance companies within the country.

One additional subsector-specific measure is scheduled by each of Honduras and the U.S.:

Honduras: reserves the right to adopt or maintain non-conforming measures with respect to the supply of services by Savings and Loan Cooperatives. This measure affects four obligations: National Treatment, MFN, Market Access and Senior Management and Boards of Directors.

U.S.: The United States reserves the right to adopt or maintain any measure that is not inconsistent with the United States’ obligations under Article XVI of the GATS. This measure affects the Market Access obligation with respect to insurance services.

Horizontal Measures:

The only country that scheduled a future non-conforming measure affecting all financial services is Nicaragua. The measure states that:

Nicaragua: reserves the right to accord benefits to financial institutions or public entities wholly or majority owned by the State that supply financial services and are established with a public interest purpose, including but not limited to agriculture production finance, housing credits for low income families, and credits for small and midsize enterprises. Such benefits shall not disadvantage the core operations of commercial competitors and include, but are not limited to: extension of State guarantees, tax exemptions, exceptions to the usual juridical form requirements, and the legal requirements to begin operations.

 



55 Note that the non-conforming measures are set out according to a negative listing, even though a positive listing was followed with respect to some specific commitments (see section Market Access above).

56 The number of reservations or non-conforming measures includes relevant limitations inscribed in Annexes 12.5 and 12.9.

57 The U.S. excludes insurance services.