On Dec. 11, 2002, the United States concluded negotiations on a free trade agreement (FTA) with Chile, the first such arrangement with a South American country. The U.S. – Chile Free Trade Agreement entered into force on January 1, 2004. This agreement provides America’s farmers, ranchers, food processors, and the businesses they support with improved, and in many cases, new access to Chile’s market of 15 million consumers. This comprehensive agreement calls for duty-free access on all products and addresses other trade measures for both countries.

Before the agreement … U.S. fresh and processed vegetables faced a 6-percent tariff. Trade agreements with Canada, Mexico, and the European Union placed U.S. vegetables at a disadvantage in the Chilean market. Chile’s agreement with MERCOSUR countries includes preferential tariff rates on selected products such as head lettuce, onions, shallots, and sweet corn. U.S. annual exports to Chile of fresh and processed vegetables found in HTS Chapter 7 -- a group that includes most vegetable products except for frozen potato fries, potato chips, and processed tomatoes -- averaged $1.7 million from 2001-2003. The U.S. share of Chile’s $14 million import market from 2001-2003 was 14 percent.

In addition to HTS Chapter 7 products, the major U.S. processed vegetables exported to Chile was potato chips. Chilean annual imports of potato chips (HTS Code 200520) from the United States averaged $1.1 million from 2001-2003.

With the agreement… U.S. fresh and processed vegetables gained preferential access to the Chilean market as the existing tariff are phased out. The phase out period varies by product from immediate elimination to elimination after 12 years. For example, Chile’s 6-percent tariff on U.S. frozen potato fries and potato chips was phased out over 4 years. Tariffs on fresh or chilled tomatoes, onions, and garlic were be phased out immediately. Tariff elimination will make U.S. vegetables more competitive with products from Canada and other competitors.

Before the agreement … Chilean fresh and processed vegetables faced U.S. tariffs ranging from zero to 29.8 percent. U.S. annual imports of fresh and processed vegetables (HTS Chapter 7) from Chile averaged $18.8 million from 2001-2003. The top vegetable imports from Chile were fresh/chilled onions and shallots, chicory, fresh garlic bulbs, fresh asparagus, dried tomatoes, and prepared and preserved artichokes.

With the agreement… Some fresh and processed vegetables from Chile continued to benefit from duty-free access, while others facing tariffs benefited from immediate tariff elimination. In other cases where the U.S. industry is more sensitive to trade, tariffs have phased out over 4 to 12 years. For some products, different schedules are established for different times of the year. For example, cucumbers entering December 1 through February (HTS Code 07070020) were liberalized immediately, while the tariff on cucumbers entering March 1 through April (HTS Code 07070040) will be eliminated in 8 years, and the tariff on cucumbers entering May 1 through June and September 1 through November (HTS Code 07070050) will be eliminated in 10 years.