SERVICES BARRIERS Telecommunications

Canada no longer maintains foreign ownership restrictions for carriers with less than 10 percent share of the total Canadian telecommunications market, following an amendment to the Telecommunications Act in June 2012. Foreign-owned carriers are permitted to continue operating if their market share grows beyond 10 percent, provided the increase does not result from the acquisition of, or merger with, another Canadian carrier. Canada capped the amount of spectrum that all large incumbent companies could purchase in the January 2014 700 MHz spectrum auction in an effort to facilitate greater competition in the sector. No foreign entities participated in the auction, which resulted in Canada's three large incumbent wireless providers winning 85 percent of the available blocks. Canada has blocked deals it believes would lead to excessive spectrum concentration among market leaders, and set aside 60 percent of spectrum auctioned off in March 2015 for new wireless entrants as part of its plan to increase competition in Canada’s wireless sector. The federal government included a provision to cap wholesale domestic wireless roaming rates in its 2014 budget implementation act. The measure is intended to foster increased competition in Canada’s telecom sector by preventing large wireless carriers from charging smaller providers higher roaming rates than they would charge their own customers.

Canada maintains a 46.7 percent limit on foreign ownership of certain suppliers (i.e. those with more than 10 percent market share) of facilities-based telecommunications services, except for submarine cable operations. This is one of the most restrictive regimes among developed countries. Canada also requires

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that at least 80 percent of the members of the board of directors of facilities-based telecommunications service suppliers must be Canadian citizens. As a consequence of these restrictions on foreign ownership, U.S. firms’ presence in the Canadian market as wholly U.S.-owned operators has been limited to that of a reseller, dependent on Canadian facilities-based operators for critical services and component parts.

Canadian Content in Broadcasting

The Canadian Radio-television and Telecommunications Commission (CRTC) imposes quotas that determine both the minimum Canadian programming expenditure (CPE) and the minimum amount of Canadian programming that licensed Canadian broadcasters must carry (Exhibition Quota). Large English language private broadcaster groups have a CPE obligation equal to 30 percent of the group’s gross revenues from their conventional signals, specialty, and pay services. In March 2015, the CRTC announced that it will eliminate the 55 percent daytime Canadian-content quota. The CRTC maintained the Exhibition Quota for primetime at 50 percent from 6 p.m. to 11 p.m.

Specialty services and pay TV services that are not part of a large English language private broadcasting group are now subject to a 35 percent requirement throughout the day, with no primetime quota.

For cable TV and direct-to-home broadcast services, more than 50 percent of the channels received by subscribers must be Canadian programming services. Non-Canadian channels must be pre-approved (“listed”) by the CRTC. Upon an appeal from a Canadian licensee, the CRTC may determine that a non-Canadian channel competes with a non-Canadian pay or specialty service, in which case the CRTC may either remove the non-Canadian channel from the list (thereby revoking approval to provide service) or shift the channel into a less competitive location on the channel dial.

The CRTC also requires that 35 percent of popular musical selections broadcast on the radio qualify as

“Canadian” under a Canadian government-determined point system.

The CRTC held stakeholder hearings in September 2014 to discuss changes to the Canadian broadcasting system and ways to improve consumer choice and flexibility. A proposal to apply a restrictive code of conduct designed for vertically-integrated suppliers in Canada (i.e., suppliers that own infrastructure and programming) to foreign programming suppliers as well (who by definition cannot be vertically integrated, as foreign suppliers are prohibited from owning video distribution infrastructure in Canada) has raised significant stakeholder concern. The CRTC is expected to make its final recommendations to the Canadian government in 2015.

INVESTMENT BARRIERS

The Investment Canada Act (ICA) has regulated foreign investment in Canada since 1985. Foreign investors must notify the government of Canada prior to the direct or indirect acquisition of an existing Canadian business above a particular threshold value. In 2014, the threshold for review of investments/acquisitions by companies from World Trade Organization (WTO) Members was $354 million. Canada amended the ICA in 2009 to raise the threshold for review to $1 billion over a four-year period, although bids by foreign state owned enterprises (SOEs) will remain subject to the current $354 million threshold. The new thresholds will come into force once regulations are drafted and published.

Industry Canada is the government of Canada’s reviewing authority for most investments, except for those related to cultural industries, which come under the jurisdiction of the Department of Heritage. Foreign acquisition proposals under government review must demonstrate a “net benefit” to Canada to be approved.

The Industry Minister may disclose publicly that an investment proposal does not satisfy the net benefit test and publicly explain the reasons for denying the investment, so long as the explanation will not do harm to the Canadian business or the foreign investor.

Under the ICA, the Industry Minister can make investment approval contingent upon meeting certain conditions such as minimum levels of employment and R&D. Since the global economic slowdown in 2009, some foreign investors in Canada have had difficulty meeting these conditions.

Canada administers supplemental guidelines for investment by foreign SOEs, including a stipulation that future SOE bids to acquire control of a Canadian oil-sands business will be approved on an “exceptional basis only.”

OTHER BARRIERS

Port Hawkesbury Paper Mill

The United States remains concerned about the nature and extent of assistance provided by Nova Scotia’s provincial government to the Port Hawkesbury paper mill following a bankruptcy settlement that resulted in the sale of the mill to a Canadian firm. In addition to provincial support, the mill also allegedly receives preferential power rates from Nova Scotia Power Inc. The Port Hawkesbury paper mill produces supercalendared paper which is an uncoated printing paper used to produce a variety of printed materials including magazines, catalogs, retail inserts, direct mail materials, corporate brochures, flyers, directories, and other high-run publications and advertising. On March 19, 2015, as a result of a petition filed by the domestic industry, the Department of Commerce announced the initiation of a CVD investigation of imports of supercalendered paper from Canada.

McInnis Cement Plant

In July 2014, McInnis Cement announced that it completed the financing package for constructing its $1.1 billion cement plant in Quebec’s Gaspe Peninsula. The provincial government and other provincial entities have committed to providing $500 million in loans and equity to the project. The United States is concerned about the public sector assistance provided to McInnis, and is reviewing available information on the terms of such assistance.

Cross-Border Data Flows

The Canadian federal government is consolidating information technology services across 63 Canadian federal government email systems under a single platform. The request for proposals for this project invokes national security as a basis for prohibiting the contracted company from allowing data to go outside of Canada. This policy could preclude some new technologies such as “cloud” computing providers from participating in the procurement process. The public sector represents approximately one third of the Canadian economy, and is a major consumer of U.S. services. In today’s information-based economy, particularly where a broad range of services are moving to cloud-based delivery where U.S. firms are market leaders, this law could hinder U.S. exports of a wide array of products and services.

Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using U.S. services when personal information could be accessed from or stored in the United States.

CHILE

TRADE SUMMARY

U.S. goods exports in 2014 were $16.6 billion, down 5.0 percent from the previous year. Chile is currently the 22nd largest export market for U.S. goods. Corresponding U.S. imports from Chile were $9.5 billion, down 8.6 percent. The U.S. goods trade surplus with Chile was $7.1 billion in 2014, an increase of $9 million from 2013.

U.S. exports of services to Chile were $3.6 billion in 2013 (latest data available), and U.S. imports were

$1.2 billion. Sales of services in Chile by majority U.S.-owned affiliates were $11.5 billion in 2012 (latest data available), while sales of services in the United States by majority Chile-owned firms were $186 million.

The stock of U.S. foreign direct investment (FDI) in Chile was $41.1 billion in 2013 (latest data available), up from $37.8 billion in 2012. U.S. FDI in Chile is led by the mining, finance/insurance, and manufacturing sectors.

TRADE AGREEMENTS

The United States-Chile Free Trade Agreement (FTA) entered into force on January 1, 2004. Pursuant to the FTA, Chile immediately eliminated tariffs on over 85 percent of bilateral trade in goods. All duties for U.S. goods entering Chile were eliminated on January 1, 2015.

Chile is a participant in the Trans-Pacific Partnership (TPP) negotiations, through which the United States and 11 other Asia-Pacific partners are working to establish a comprehensive, high-standard, next-generation regional agreement to liberalize trade and investment in the Asia-Pacific. Once concluded this agreement will advance U.S. economic interests with some of the fastest-growing economies in the world; expand U.S. exports, which are critical to the creation and retention of jobs in the United States; set high standards for regional trade and investment that promote U.S. interests and values; and serve as a potential platform for economic integration across the Asia-Pacific region. The United States is proposing to include in the TPP agreement ambitious commitments on goods, services, and other traditional trade and investment matters, and enforceable labor and environment obligations. TPP will also address a range of new and emerging issues of concern to U.S. businesses, workers and other stakeholders in the 21st century. In addition to the United States and Chile, the TPP negotiating partners currently include Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANTIARY BARRIERS Technical Barriers to Trade

Nutrition Labeling

The Chilean Congress adopted Law No. 20,606 on nutrition and composition of food and food advertising in July 2012, and the Chilean Ministry of Health (MOH) published and notified the “Proposed Amendment to the Chilean Food Health Regulations, Supreme Decree No. 977/96, provisions on the nutritional composition of food and on food advertising, in accordance with Law No. 20.606” on August 22, 2014, but it has not gone into effect, and the final rule has not yet been issued.

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The 2014 draft regulation sets thresholds for saturated fat, calories, sugar, and sodium according to 100 gram or 100 ml portion sizes for prepackaged foods. If the specified thresholds are exceeded, an octagonal warning icon must be placed on the front label panel, indicating that the product has an excessive level of the nutrient(s) for which the threshold has been exceeded. One icon is required per category that is exceeded, up to four on a single package. The specified size of each icon fluctuates between 4 percent and 10.4 percent of the total surface area of the packaging depending on the size of the labeled area of the main face of the package. Further, the icons must be placed in the upper half of the main face of the package.

The disclaimer used in the icon is “Excess Of” and includes a statement from Chile’s Ministry of Health.

Initial estimates from the USDA’s Foreign Agricultural Service indicate that as much as 80 percent of the

$312.4 million of U.S. prepackaged foods exported to Chile could need to bear at least one warning icon.

The draft also restricts the use of positive health claims if at least one icon is used, but provides exemptions for foods that have no added saturated fat, sugar, or sodium.

The United States has discussed this issue with Chile within the framework of the WTO Committee on Technical Barriers to Trade (WTO TBT Committee), under the FTA, and on other bilateral occasions. Most recently, the United States submitted written comments to Chile on the proposed regulation on October 19, 2014. The United States, Canada, Mexico, European Union, Switzerland, Australia, Costa Rica, Brazil, and Colombia raised questions regarding and concerns with the draft regulation in the November 2014 meeting of the WTO TBT Committee. The United States has concerns about certain aspects of the proposed regulation — such as the “warning” element of the icons, and the prohibition on health claims and complementary information for products that carry icons—and will continue to discuss these issues with Chile.

Sanitary and Phytosanitary Barriers Salmonid Products Ban

In 2010, Chile’s Ministry of Fisheries, SERNAPESCA, suspended imports of salmonid species from all countries, including the United States, due to Chile’s revised import regulations for aquatic animals, including salmonid eggs. Under the new regulations, U.S. producers cannot export salmonid eggs to Chile until SERNAPESCA completes a risk analysis and an on-site audit of the U.S. Department of Agriculture’s (USDA) oversight of aquatic animal exports and U.S. salmonid egg production sites. An audit was conducted in 2011 on USDA’s oversight of production sites in the states of Washington and Maine. The United States and Chile have had subsequent engagement on this issue, but a final risk assessment has not been completed. The United States government continues to work with Chile to resolve the issue.

Live Cattle

In 2003, Chile restricted imports of U.S. cattle because of bovine spongiform encephalopathy (BSE). The United States began requesting that Chile lift this restriction in 2007. In December 2014, Chile informed the U.S. Animal and Plant Health Inspection Service that Chile recognizes the United States’ negligible risk status for BSE. The United States will work with Chile to move forward on re-opening Chile’s market to U.S. live cattle on the basis of this recognition.

IMPORT POLICIES

Tariffs and Taxes

Chile has one of the most open trade regimes in the world with a uniform applied tariff rate of 6 percent for nearly all goods not covered under a free trade agreement. Additionally, many capital goods may be imported with an applied tariff rate of zero percent under specific conditions. Importers must pay a 19

percent value-added tax (VAT) calculated based on the CIF value of the import. The VAT is also applied to nearly all domestically produced goods and services. There are additional taxes applied to some products regardless of their origin, such as an 18 percent tax on sugared non-alcoholic beverages, a 20 percent tax for beers and wines, and a 31.5 percent tax for distilled alcoholic beverages. Cigarettes are subject to a 30 percent ad valorem tax plus approximately $0.07 per cigarette; other tobacco products have taxes between 52.6 percent and 59.7 percent. These values reflect changes recently implemented under the reformed tax regime introduced in 2014.

Import Controls

There are virtually no restrictions on the types or amounts of goods that can be imported into Chile, nor are there any requirements to use the official foreign exchange market. However, importers and exporters must report their import and export transactions to the Central Bank. Commercial banks may sell foreign currency to any importer to cover the price of imported goods and related expenses as well as to pay interest and other financing expenses that are authorized in the import report. Licensing requirements appear to be primarily used for statistical purposes; legislation requires that most import licenses be granted as a routine procedure. More rigorous licensing procedures apply for certain products such as pharmaceuticals and weapons.

Nontariff Barriers

Chile maintains a complex price band system for sugar (mixtures containing more than 65 percent sugar or sugar substitute content are subject to the sugar price band), wheat, and wheat flour. However, pursuant to the FTA, Chile phased out its application of the price band system to imports from the United States, and as of January 1, 2015, imports of U.S. goods are fully exempt from application of the system. Chile’s President will evaluate in 2015 whether to continue the price band system for all other trading partners with which Chile has a free trade agreement.

Companies are required to contract the services of a customs agent when importing or exporting goods valued at over $1,000 free on board (FOB). Companies established in any of the Chilean duty-free zones are exempt from the obligation to use a customs agent when importing or exporting goods, as are non-commercial shipments valued at less than $500.

EXPORT POLICIES

Other than cases where a free trade agreement makes an exception, Chile currently provides a simplified duty drawback program for nontraditional exports. The program reimburses a firm up to 3 percent of the value of the exported good if at least 50 percent of that good consists of imported raw materials. Chile publishes an annual list of products excluded from this policy. In accordance with its FTA commitments, as of January 1, 2015, Chile eliminated the use of duty drawback and duty deferral for imports that are incorporated into any goods exported to the United States.

Under Chile’s separate VAT reimbursement policy, exporters have the right to recoup the VAT paid on goods and using services intended for export activities. Any company that invests in a project in which production will be for export is eligible for VAT reimbursement. Exporters of services can only benefit from the VAT reimbursement policy when the services are rendered to people or companies with no Chilean residency. Also, the service must qualify as an export through a resolution issued by the Chilean customs authority.

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GOVERNMENT PROCUREMENT

The FTA requires procuring entities subject to the Agreement to use fair and transparent procurement procedures, including advance notice of purchases and timely and effective bid review procedures for procurement covered by the Agreement. The FTA also contains nondiscrimination provisions that require Chilean entities covered by the FTA to allow U.S. suppliers to participate on the same basis as Chilean suppliers in covered procurements. Most Chilean central government entities, 13 regional governments, 10 ports, state-owned airports, and 341 municipalities are covered by the FTA and must comply with the government procurement obligations.

Chile is not a party to the WTO Agreement on Government Procurement, but it is an observer to the Committee on Government Procurement.

INTELLECTUAL PROPERTY RIGHTS PROTECTION

Chile remained on the Priority Watch List in the 2014 Special 301 Report. The report identified weaknesses in the adequacy and effectiveness of Chile’s protection of intellectual property. The report also identified obstacles to swift resolution of patent issues in connection with applications to market pharmaceutical products and inadequate protection against unfair commercial use as well as unauthorized disclosure of undisclosed test or other data generated to obtain marketing approvals for pharmaceutical products. Chile has inadequate protection against the circumvention of technological protection measures, inadequate legal basis for rights-holders to take effective action against any act of infringement of copyright and related rights, and inadequate administrative and judicial procedures for intellectual property violations. Chile has

Chile remained on the Priority Watch List in the 2014 Special 301 Report. The report identified weaknesses in the adequacy and effectiveness of Chile’s protection of intellectual property. The report also identified obstacles to swift resolution of patent issues in connection with applications to market pharmaceutical products and inadequate protection against unfair commercial use as well as unauthorized disclosure of undisclosed test or other data generated to obtain marketing approvals for pharmaceutical products. Chile has inadequate protection against the circumvention of technological protection measures, inadequate legal basis for rights-holders to take effective action against any act of infringement of copyright and related rights, and inadequate administrative and judicial procedures for intellectual property violations. Chile has