U.S.-Chilean Trade: Pesticide Standards and Concerns Regarding Chilean
Sanitary Rules (Chapter Report, 09/28/94, GAO/GGD-94-198).

The United States and Chile are preparing to negotiate a free trade
agreement that would lift tariffs and other import barriers and should
promote more bilateral trade. Agricultural products account for a major
portion of U.S.-Chilean bilateral trade, although Chile exports far more
agricultural products to the United States than it imports from this
country. This report (1) compares U.S. and Chilean processes for
registering pesticides, setting pesticide residue tolerances (maximum
legal limits) on foods, and monitoring compliance with these tolerances
and (2) determines whether Chilean sanitary and animal and plant health
rules restrict potential U.S. agricultural exports.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-198
     TITLE:  U.S.-Chilean Trade: Pesticide Standards and Concerns 
             Regarding Chilean Sanitary Rules
      DATE:  09/28/94
   SUBJECT:  Pesticides
             Safety standards
             Agricultural products
             Food inspection
             Pesticide regulation
             International trade
             Import regulation
             Exporting
             Health hazards
             Air pollution control
IDENTIFIER:  Chile
             Chile Free Trade Agreement Negotiating Act of 1994
             North American Free Trade Agreement
             NAFTA
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Agriculture, House of
Representatives

September 1994

U.S.-CHILEAN TRADE - PESTICIDE
STANDARDS AND CONCERNS REGARDING
CHILEAN SANITARY RULES

GAO/GGD-94-198

U.S.-Chilean Trade


Abbreviations
=============================================================== ABBREV

  APHIS - Animal and Plant Health Inspection Service
  BKD - bacterial kidney disease
  CONAMA - Comision Nacional del Medio Ambiente (National Commission
     on the Environment)
  DDT - dichloro diphenyl trichlorethane
  EPA - Environmental Protection Agency
  FAS - Foreign Agricultural Service
  FDA - Food and Drug Administration
  FSIS - Food Safety and Inspection Service
  GATT - General Agreement on Tariffs and Trade
  IHN - infectious hematopoietic necrosis
  IPN - infectious pancreatic necrosis
  ISP - Instituto de Salud Pï¿½blica (Institute of Public Health)
  NAFTA - North American Free Trade Agreement
  OSHA - Occupational Safety and Health Administration
  OMV - onchorhynchus masou viral
  SAG - Servicio Agrï¿½cola y Ganadero (Agriculture and Livestock
     Service)
  SERNAP - Servicio Nacional de Pesca (National Fisheries Service)
  USDA - U.S.  Department of Agriculture
  USTR - U.S.  Trade Representative
  VHS - viral hemorrhagic septicimia

Letter
=============================================================== LETTER


B-258151

September 28, 1994

The Honorable E (Kika) de la Garza
Chairman, Committee on Agriculture
House of Representatives

Dear Mr.  Chairman: 

This report responds to your request that we compare U.S.  and
Chilean pesticide standards and enforcement and review Chilean
sanitary and phytosanitary (animal and plant health) rules to
determine if they restrict agricultural imports from the United
States.  Specifically, we (1) compared U.S.  and Chilean processes
for registering pesticides, setting pesticide residue tolerances
(maximum legal limits) on foods, and monitoring compliance with these
tolerances; and (2) examined whether Chilean sanitary and
phytosanitary rules restrict potential U.S.  agricultural exports. 
As requested, we also describe the structure of Chile's environmental
regulatory arrangements.  In addition, we discuss rules for importing
Monterey pine logs from Chile and the risks that residues of the
pesticide methyl bromide may pose to U.S.  workers who handle these
logs. 

As you requested, we plan no further distribution of this report
until 30 days from its issue date unless you publicly announce its
contents earlier.  At that time, we will send copies to the Secretary
of Agriculture; the U.S.  Trade Representative; the Administrator of
the Environmental Protection Agency; the Commissioner of the Food and
Drug Administration; the Embassy of Chile; and other interested
parties.  Copies will also be made available to others on request. 

Please contact me on (202) 512-4812 if you have any questions
concerning this report.  The major contributors to this report are
listed in appendix IV. 

Sincerely yours,

Allan I.  Mendelowitz, Managing Director
International Trade, Finance, and Competitiveness


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The United States and Chile are preparing to negotiate a free trade
agreement that would eliminate tariffs and other import barriers and
should promote increased bilateral trade.  Agricultural products
account for a significant portion of U.S.-Chilean bilateral trade,
although Chile exports far more agricultural products to the United
States than it imports from this country.  In view of the extensive
worldwide use of pesticides in fruit and vegetable production, the
Chairman of the House Committee on Agriculture requested that GAO (1)
compare U.S.  and Chilean processes for registering pesticides,
setting pesticide residue tolerances (maximum legal limits) on foods,
and monitoring compliance with these tolerances; and (2) determine
whether Chilean sanitary and phytosanitary (animal and plant health)
rules restrict potential U.S.  agricultural exports. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Recent administration and congressional initiatives indicate a
willingness on the part of the United States to enter into
negotiations leading to a free trade agreement with Chile.  Since
fresh produce accounts for a significant share of Chilean exports to
the United States, questions have arisen about Chile's pesticide
standards and enforcement. 

In June 1992, GAO issued a report comparing U.S.  and Mexican
pesticide standards and enforcement.\1 That report was prepared in
response to congressional concern that pesticide use may increase and
that residue levels on produce may exceed U.S.  limits if growers
attempt to maximize production with the new opportunity for
agricultural exports. 


--------------------
\1 Pesticides:  Comparison of U.S.  and Mexican Pesticide Standards
and Enforcement (GAO/RCED-92-140, June 17, 1992). 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The United States and Chile appear to have relatively open, or
transparent, processes for setting pesticide standards.  There are
differences between the two countries' processes for registering
pesticides, setting pesticide tolerances, and monitoring pesticide
residues in foods, but these differences have not impeded
agricultural trade.  Certain pesticides that are either banned or not
registered in the United States are registered in Chile, and vice
versa.  While the United States sets pesticide residue tolerances
independently, Chile accepts internationally established pesticide
tolerance standards.  In the United States, there is routine
monitoring for pesticide residues on all types of domestic and
imported foods, but in Chile only certain dairy products and samples
of mothers' milk are monitored on a routine basis.  Nevertheless,
Chilean exporters have established extensive controls to ensure that
exports to the United States comply with U.S.  pesticide residue
tolerances. 

On the other hand, certain Chilean restrictive sanitary or
phytosanitary rules, or the lack thereof, impede or have the
potential to impede imports of some agriculture and related products
from the United States.  Such products cannot be imported in the
absence of Chilean regulations specifying entry terms.  Chile's
process for establishing sanitary and phytosanitary regulations is
not always transparent, according to U.S.  officials.  Chile also
lacks several formal procedures that would facilitate efforts to gain
access to the Chilean market for U.S.  agricultural commodities.  The
U.S.  Trade Representative and officials of the U.S.  Department of
Agriculture have been working, with some success, to resolve these
issues in advance of formal negotiations on a free trade agreement. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      PESTICIDE REGISTRATION,
      TOLERANCE-SETTING, AND
      MONITORING IN THE UNITED
      STATES AND CHILE
-------------------------------------------------------- Chapter 0:4.1

Both the United States and Chile have established laws and
regulations that define how pesticide standards are set.  These laws
and regulations clearly define the processes that must be followed in
each country to register pesticides, set residue tolerances, and
monitor residues on foods.  U.S.  and Chilean officials have not
raised any pesticide issues that affect bilateral trade. 

Although neither U.S.  nor Chilean pesticide standards pose barriers
to agricultural trade at this time, there are differences in the
processes followed in each country to register pesticides, set
tolerances, and monitor pesticide residues in commercial trade. 
There are differences between the United States and Chile in the
pesticides that are registered.  The United States bans or has not
registered certain pesticides that are registered in Chile.  U.S. 
officials responsible for monitoring pesticide residues on foods said
that these differences do not affect trade nor impede the ability of
Chilean produce exporters to comply with U.S.  pesticide tolerance
standards.  Moreover, Chilean officials explained that they register
pesticides that are not registered in the United States because Chile
exports crops to markets other than the United States, where these
pesticides are allowed. 

Tolerance-setting practices in the United States and Chile also
differ, because the United States establishes pesticide residue
tolerances independently, while Chile's pesticide tolerances are
based on internationally established standards.  Sometimes these
tolerance levels are not the same.  Also, certain pesticides have
been assigned tolerances by international authorities but are not
registered in the United States and have no U.S.  tolerances.  The
reverse is also true. 

Finally, there are differences between U.S.  and Chilean pesticide
monitoring and enforcement activities.  Monitoring in the United
States is undertaken on a routine basis and entails sampling and
analysis of imported as well as domestic foods by federal and state
agencies.  In contrast, in Chile there is no routine monitoring of
imported food for pesticide residues.  Only specific domestic dairy
products and samples of mothers' milk are subject to recurrent
monitoring in Chile. 

While Chilean authorities do not monitor pesticide residues on
imported foods, Chilean exporters have established extensive controls
to ensure that exports comply with U.S.  pesticide residue
tolerances.  In fact, U.S.  officials point to Chilean exporters'
efforts for ensuring compliance with U.S.  pesticide tolerances as a
model for other exporters of horticultural commodities to the United
States.  According to Food and Drug Administration data, Chile's
violation rates for pesticide residue tolerances averaged 1.7 percent
during the period 1989-1993.  Other countries that export
agricultural commodities to the United States averaged between 3.0
and 5.0 during a comparable period. 


      HOW SANITARY AND
      PHYTOSANITARY ISSUES AFFECT
      U.S.- CHILEAN TRADE
-------------------------------------------------------- Chapter 0:4.2

U.S.  officials acknowledge that Chile has a right to protect its
agricultural resources from the introduction of pests and diseases. 
Nevertheless, they say that Chile's sanitary and phytosanitary
requirements have restricted certain U.S.  agricultural exports. 
Specifically, U.S.  fruits, poultry meat, and salmonid (various
salmon and trout species) eggs have been or could be affected by
Chilean sanitary or phytosanitary rules or the lack thereof.  Such
rules define the entry requirements that permit imports of these
commodities.  In the absence of such rules for fresh fruit and
vegetables, imports of these commodities from the United States have
in effect been banned from the Chilean market.  Also, Chile has
established a sanitary regulation on poultry meat imports that U.S. 
officials believe is unduly restrictive and constitutes a nontariff
trade barrier.  Further, Chilean authorities have proposed sanitary
regulations for live salmonid egg imports that raised concerns about
market access among U.S.  exporters; however, Chilean officials have
indicated a willingness to revise the regulations to address some of
these concerns. 

According to U.S.  officials GAO interviewed, Chile does not always
establish sanitary and phytosanitary regulations in a transparent
manner.  They argue that it is sometimes not apparent to U.S.  plant
and animal health authorities and U.S.  exporters what steps they
must follow to meet Chilean sanitary or phytosanitary requirements
and gain access to the Chilean market. 

Chile also lacks several formal procedures for establishing sanitary
and phytosanitary regulations.  Specifically, Chile does not have (1)
a standardized system for setting entry rules for fresh fruit and
vegetable imports; (2) a quarantine treatment protocol to identify
appropriate measures that would address concerns about the potential
introduction of hazardous pests; (3) a formal procedure for
interested parties, including foreigners, to appeal regulatory
decisions or provide foreign-generated test data to contest
decisions; and (4) a formal process for hearing public comment on
import regulations.  In addition, U.S.  officials have expressed
concern that Chile does not always officially announce proposed rule
changes before they are promulgated. 

Officials of the U.S.  Trade Representative and Department of
Agriculture have been working with Chilean officials since at least
1991 to attempt to resolve these issues in advance of U.S.-Chile
negotiations to seek a free trade agreement.  They have made some
progress, for example, in developing entry rules and clarifying
Chilean phytosanitary concerns for several U.S.  fresh fruit crops. 
Also, Chilean authorities have indicated a willingness to accept
comments from interested parties on proposed entry rules for salmonid
egg imports.  However, the two sides have not made progress on the
issue of poultry meat. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO is making no recommendations in this report. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

GAO discussed the facts and analysis presented in the report with
responsible officials of the U.S.  Department of Agriculture, the
U.S.  Trade Representative, the Food and Drug Administration, and the
Environmental Protection Agency.  Their views were in the form of
suggested changes to GAO's descriptions of various processes, and
were considered in completing the report. 


INTRODUCTION
============================================================ Chapter 1

A free trade agreement between the United States and Chile\1 may
offer opportunities for expanding U.S.  agricultural exports.  While
U.S.  agricultural exports to Chile have increased in recent years,
U.S.  agricultural trade with Chile is still characterized by an
imbalance in Chile's favor.  Although reductions in Chilean tariffs
could help reduce this imbalance, it is due primarily to factors,
such as the close proximity of competing countries, that are
unrelated to government trade policy.  On the other hand, in an
earlier report\2 we described certain Chilean agricultural sector
policies, such as price support mechanisms, that represent
significant barriers to U.S.  agricultural exports. 


--------------------
\1 Both the United States and Chile were undecided as of July 1994 on
whether to negotiate a bilateral agreement or to take steps needed
for Chile's accession to the North American Free Trade Agreement
(NAFTA). 

\2 See U.S.-Chilean Trade:  Developments in the Agriculture,
Fisheries, and Forestry Sectors (GAO/GGD-93-88, Apr.  1, 1993). 


   BACKGROUND
---------------------------------------------------------- Chapter 1:1

Recent initiatives from the administration and Congress have focused
attention on the potential for a free trade agreement between the
United States and Chile.  Such an agreement would aim to reduce
tariffs and nontariff (such as licensing requirements, quotas, etc.)
barriers and encourage the expansion of U.S.  agricultural exports. 
As the United States and Chile consider whether to enter into free
trade negotiations, Congress has expressed concern about the impact
of pesticide, sanitary, and phytosanitary (animal and plant health)
regulations on bilateral agricultural trade. 

A bill referred to as the Chile Free Trade Agreement Negotiating Act
of 1994 (H.R.  4375) was introduced by Representative Richard
Gephardt and others in May 1994 to clear the way for the President to
begin formal negotiations for a free trade agreement with Chile. 
Also, in a report to the President and Congress in May 1994, the
Office of the U.S.  Trade Representative (USTR) indicated that the
United States is committed to a free trade agreement with Chile.  And
the United States has already concluded framework agreements on trade
and investment with Chile to pave the way for broader free trade
discussions. 

According to a report by the U.S.  Agricultural Attachï¿½ in Chile,
reductions in Chilean tariffs resulting from a bilateral free trade
agreement would encourage the expansion of several U.S.  agricultural
exports, such as cotton, soybean oil, soy meal, dry milk, and meat. 
Other commodities that may benefit from reduced tariffs are wheat,
vegetable oils, sugar, and corn. 


   U.S.-CHILEAN AGRICULTURAL TRADE
   PATTERNS
---------------------------------------------------------- Chapter 1:2

Since 1989, U.S.  agricultural exports to Chile have grown
substantially and been diversified.  The United States ranks among
Chile's top agricultural suppliers.  However, Chilean agricultural
exports to the United States still far exceed imports from the United
States (see table 1.1).  About half of Chile's total agricultural
exports go to the United States. 



                          Table 1.1
           
               Value of U.S.-Chilean Bilateral
                 Agricultural Trade, 1989-93

                  (U.S. dollars in millions)

                                      Chilean exports to the
Year         U.S. exports to Chile             United States
--------  ------------------------  ------------------------
1989                         $36.9                    $494.9
1990                          63.7                     625.9
1991                          72.0                     603.8
1992                          93.6                     685.3
1993                         112.0                     734.5
------------------------------------------------------------
Note:  Agricultural trade includes agriculture, livestock, fisheries,
and forestry products. 

Source:  U.S.  Bureau of the Census trade data. 


      U.S.  EXPORTS TO CHILE
-------------------------------------------------------- Chapter 1:2.1

Data on U.S.  agricultural trade in recent years indicate a trend
toward expansion and diversification of U.S.  agricultural exports to
Chile (see fig.  1.1).  In 1993, the United States exported $112
million in agricultural products to Chile, an increase of 204 percent
over 1989.  Furthermore, the U.S.  share of Chile's market for
imported agricultural commodities has grown from 13 percent in 1991
to 16 percent in 1993, according to the U.S.  Agricultural Attachï¿½ in
Chile.  The United States ranks among Chile's top agricultural
suppliers and is the principal source of three of Chile's top
agricultural imports:  edible corn, sweetened condensed milk, and
prepared foods (see table 1.2). 

   Figure 1.1:  U.S.  Agricultural
   Exports to Chile, 1989-93

   (See figure in printed
   edition.)

Note:  Agricultural exports include agriculture, forestry, and
fisheries products. 

Source:  U.S.  Bureau of the Census trade data. 

According to U.S.  officials, the increased purchasing power of
Chilean citizens is one reason for the recent expansion of U.S. 
exports.  Other factors contributing to the growth in agricultural
exports include new opportunities for wheat and rice.  Wheat exports
to Chile reached $26 million in 1993, up from zero in 1989 and 1991. 
Corn was the principal U.S.  export commodity to Chile until 1993,
when it was surpassed by wheat. 


      CHILEAN EXPORTS TO THE
      UNITED STATES
-------------------------------------------------------- Chapter 1:2.2

Chilean agricultural exports to the United States far exceed imports
from the United States.  In 1993, Chile exported $735 million in
agricultural products to the United States, making it one of the
major suppliers of U.S.  agricultural imports (see fig.  1.2).  Chile
is the principal supplier of many fresh fruit commodities to the
United States, including table grapes, peaches and nectarines, plums,
and pears.  About half of Chile's total agricultural exports go to
the United States. 

   Figure 1.2:  Chilean
   Agricultural Exports to the
   United States, 1989-93

   (See figure in printed
   edition.)

Note:  Agricultural exports include agriculture, forestry, and
fisheries products. 

Source:  U.S.  Bureau of the Census trade data. 


   FACTORS UNRELATED TO GOVERNMENT
   POLICY THAT LIMIT U.S.  EXPORTS
   TO CHILE
---------------------------------------------------------- Chapter 1:3

Certain demographic, economic, and geographic factors that are
unrelated to government trade policy limit U.S.  agricultural exports
to Chile.  With only 14 million inhabitants, Chile offers a much
smaller market than the United States.  Chile is also still a
developing country with limited purchasing power.  In addition, Chile
and its neighboring countries are efficient agricultural producers,
and all share a transportation cost advantage over the United States. 
For example, Argentina is the leading supplier of 8 of Chile's top 20
agricultural imports.  Paraguay and Brazil also figure prominently
among Chile's top suppliers of agricultural commodities (see table
1.2). 



                          Table 1.2
           
           Top 20 Chilean Agricultural Imports and
                    Major Suppliers, 1993

                  (U.S. dollars in millions)

Commodity                    Value  Major supplier
--------------------------  ------  ------------------------
Edible wheat                 $60.1  Canada
Raw soy oil                   46.9  Argentina
Edible corn                   43.2  United States
Frozen beef                   38.5  Argentina
Soy cake                      36.0  Paraguay
Fresh or chilled beef         35.5  Argentina
Bananas                       35.1  Ecuador
Cotton                        32.0  Paraguay
Powdered milk                 29.0  Ireland
Sunflower oil                 20.1  Argentina
Sweetened condensed milk      17.9  United States
Bleached wheat flour          17.2  Canada
Black tea                     16.0  Argentina
Raw coffee                    12.0  Brazil
Matï¿½ tea                      10.6  Brazil
Sorghum                        9.7  Argentina
Prepared foods                 9.6  United States
Bleached rice                  9.3  Uruguay
Combed wool                    9.2  Argentina
Cowhides & skins               5.1  Argentina
------------------------------------------------------------
Source:  ProChile, Chilean Government Statistical Data Bureau. 


   CHILEAN AGRICULTURAL SECTOR
   POLICIES THAT LIMIT U.S. 
   EXPORTS
---------------------------------------------------------- Chapter 1:4

Chile is recognized by USTR as having a relatively liberal trade
regime.  However, in April 1993, we reported that several Chilean
agricultural sector policies represented trade barriers to U.S. 
agricultural exports. 

For example, Chile has imposed "price bands" on various agricultural
imports to shield Chilean producers from price fluctuations in
international market prices.  These "price support mechanisms," or
variable import levies, are imposed on wheat, wheat flour, vegetable
oils, and sugar when their prices fall below a minimum price level
set by the government.  The price bands are imposed in addition to
Chile's standard 11-percent tariff rate and therefore represent a
burdensome tax on U.S exports of these commodities. 

Chile also maintains a system of "minimum customs value requirements"
that constitutes a barrier to U.S.  agricultural exports.  Under this
policy, Chilean authorities temporarily set minimum import prices for
valuing imports of certain commodities in response to low world
prices.  Tariffs are assessed on this higher price, thereby raising
the effective tariff above the amount that would have been imposed on
the lower actual transaction price.  In February 1993, Chile
announced minimum customs values for rice and corn.  In the past,
Chile has also imposed minimum customs values on spun cotton, milk,
and wheat flour. 

In addition, Chile grants preferential tariffs on certain
agricultural commodities from fellow members of the Latin American
Association for Integration.  Members of this association receive as
much as 30- to 50-percent reductions on tariffs on their oilseed and
cotton exports to Chile.  Since the United States does not enjoy
these tariff preferences, its products are at a competitive
disadvantage compared to those of the association. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:5

Given the prospects of a free trade agreement between the United
States and Chile, and the impact that such an agreement may have on
bilateral agricultural trade, the Chairman of the House Committee on
Agriculture asked us to (1) compare U.S.  and Chilean processes for
registering pesticides, setting pesticide residue tolerances on
foods, and monitoring compliance with these tolerances; and (2)
determine whether Chilean sanitary and phytosanitary rules restrict
potential U.S.  agricultural exports.  The Chairman also asked us to
describe the structure of Chilean environmental regulatory
arrangements (see app.  I) as well as rules for importing Monterey
pine logs from Chile and the risks that residues of the pesticide
methyl bromide may pose to U.S.  workers who handle these logs (see
app.  II). 

For information on pesticide registration, tolerance-setting, and
monitoring procedures in the United States, we referred to our past
reports.\3 To update our information on these processes, we
interviewed Environmental Protection Agency (EPA) officials from the
Office of Pesticide Programs, Registration Division; and Food and
Drug Administration (FDA) officials from the Office of Regulatory
Affairs. 

To learn about pesticide registration, tolerance-setting, and
monitoring procedures in Chile, we met with officials from the
Chilean Agriculture and Livestock Service (Servicio Agrï¿½cola y
Ganadero--SAG), the Ministry of Health, and the Public Health
Institute.  We obtained and reviewed Chilean legislation and
regulations governing these processes.  We also consulted U.S. 
officials familiar with Chile's pesticide regulatory arrangements,
and we referred to our past work in this area.\4

We met with representatives of Chile's Exporters Association and the
Chilean Fruit Growers Federation to learn about Chilean efforts to
meet U.S.  pesticide tolerance requirements.  We discussed with FDA
officials Chile's violation record for pesticide tolerances and its
pesticide practices.  We also reviewed data provided by FDA on
surveillance and compliance violation rates for both the United
States and Chile. 

To determine whether Chilean sanitary and phytosanitary rules
restrict U.S.  agriculture and fisheries exports, we interviewed
officials of USTR, the Department of Agriculture's Foreign
Agricultural Service (FAS) and its Animal and Plant Health Inspection
Service (APHIS), and the Department of the Interior's Fish and
Wildlife Service.  We obtained and reviewed documentation provided by
some of these agencies on Chilean policies that have impeded or have
the potential to impede U.S.  agriculture and fisheries exports.  We
reviewed the impediments identified by these agencies with
representatives of concerned U.S.  private sector groups, including
the Agriculture Technical Advisory Committee, the U.S.  Poultry and
Egg Export Council, and the Washington Fish Growers\5 Association. 
We discussed with Chilean National Fisheries Service (Servicio
Nacional de Pesca--SERNAP) and SAG officials the issues raised by
U.S.  government and private sector officials regarding Chile's
sanitary and phytosanitary regulations.  Subsequently, we examined
with APHIS and FAS officials the arguments made by Chilean officials
regarding these issues. 

To understand the structure of Chilean environmental regulatory
arrangements, we met with the Director of Chile's National Commission
on the Environment (CONAMA).  We reviewed legislation establishing
CONAMA and documents provided by CONAMA regarding its activities.  We
also coordinated our research in this area with EPA's Office of the
General Counsel. 

We met with USDA's Forestry Service and APHIS officials to learn
about the rules for importing Monterey pine logs from Chile.  We
discussed with officials from APHIS, EPA, and the Department of
Labor's Occupational Safety and Health Administration (OSHA) the
potential risks that residues of the pesticide methyl bromide may
pose to U.S.  workers who handle these logs.  We reviewed data
provided by OSHA on the legal and recommended exposure levels for
methyl bromide, and APHIS' Plant Protection and Quarantine Treatment
Manual with directions on fumigation procedures for methyl bromide. 

Our report compares different processes for pesticide registration,
tolerance-setting, and monitoring in the United States and Chile. 
However, we did not evaluate the implementation or effectiveness of
these processes in either country. 

We did our work from March through August 1994 in Washington, D.C.,
and Santiago, Chile, in accordance with generally accepted government
auditing standards. 

In a series of exit interviews in July and August 1994, we discussed
the facts and analysis presented in the report with responsible
officials of EPA, FDA, the Interior Department's Fish and Wildlife
Service, OSHA, the U.S.  Department of Agriculture (USDA), and
USTR.\6 We considered their comments in preparing the final report. 
This report contains no conclusions or recommendations, and therefore
the officials' comments were in the form of suggested changes to our
descriptions of various processes. 


--------------------
\3 See Pesticides:  A Comparative Study of Industrialized Nations'
Regulatory Systems (GAO/PEMD-93-17, July 30, 1993); Pesticides: 
Comparison of U.S.  and Mexican Pesticide Standards and Enforcement
(GAO/RCED-92-140, June 17, 1992); and Food Safety and Quality:  Who
Does What in the Federal Government (GAO/RCED-91-19A & B, Dec.  21,
1990). 

\4 See Food Safety and Quality:  Five Countries' Efforts to Meet U.S. 
Requirements on Imported Produce (GAO/RCED-90-55, Mar.  22, 1990). 

\5 The Washington Fish Growers Association is a group of farmers or
producers of salmon and trout in Washington State. 

\6 The principal officials involved in these discussions included the
GAO Liaison, Office of Pesticide Programs, EPA; the Associate
Commissioner for Legislative Affairs, FDA; the National Aquaculture
Coordinator, Fish and Wildlife Service; the Program Analyst, Office
of Congressional Relations, OSHA; the Biotechnology Trade Officer,
International Services, APHIS; the Compliance Review Staff Director,
FAS; and the Deputy Assistant U.S.  Trade Representative for Latin
America and the Caribbean. 


COMPARISON OF PESTICIDE
REGISTRATION, TOLERANCE- SETTING,
AND MONITORING PROCESSES IN THE
UNITED STATES AND CHILE
============================================================ Chapter 2

Both the United States and Chile appear to have relatively open or
transparent processes for setting pesticide standards.  However,
there are differences between the two countries in registering
pesticides, setting pesticide tolerances, and monitoring pesticide
residues in foods.  Some pesticides that are either banned or not
registered in the United States are registered in Chile.  The United
States sets pesticide residue tolerances independently.  In contrast,
Chile accepts internationally established pesticide tolerance
standards.  In the United States there is routine monitoring of
pesticide residues on all types of domestic and imported foods, but
only certain dairy products and samples of mothers' milk are
monitored on a routine basis in Chile.  None of these differences
appear to affect trade nor impede the ability of Chilean produce
exporters to comply with U.S.  pesticide tolerance standards.  FDA
and Chilean officials said that Chilean exporters have established
controls to ensure that exports to the United States conform with the
tolerance levels that the United States sets for pesticide residues. 


   PESTICIDE STANDARDS AND
   ENFORCEMENT
---------------------------------------------------------- Chapter 2:1

The United States and Chile appear to have relatively open processes
for setting pesticide standards.  Neither U.S.  nor Chilean pesticide
standards pose barriers to agricultural trade at this time.  Since
Chile does not routinely monitor pesticide residues on imported food,
Chilean pesticide tolerances have not emerged as a concern for U.S. 
food exports to Chile.  Similarly, U.S.  pesticide residue tolerances
do not present a barrier to Chilean agricultural exports, because
they are generally able to meet U.S.  standards. 

Both countries have established laws and regulations that define how
such standards are set, including processes that must be followed to
register pesticides, set residue tolerances, and monitor residues on
foods.  While there are certain differences in each of these
processes between the two countries, U.S.  officials responsible for
monitoring pesticide residues on foods emphasized that past
experience with their Chilean counterparts has been very positive. 
FDA officials explained that there are currently no efforts to
harmonize U.S.  and Chilean differences in this area, because Chilean
pesticide usage controls on U.S.- destined crops are sufficient to
guarantee with a high degree of confidence that violations of the
U.S.  tolerances will not occur.  U.S.  officials also noted that
current U.S.  pesticide tolerances would still apply to food imported
from Chile even under a free trade agreement. 


   PESTICIDE REGISTRATION
   PROCESSES
---------------------------------------------------------- Chapter 2:2

In accordance with U.S.  federal law, EPA is responsible for
registering pesticides for use in the United States.  In Chile, SAG
has responsibility for registering pesticides used in agricultural
production in that country.  There are certain differences between
U.S.  and Chilean pesticide registration practices.  Some pesticides
registered for use in Chile are not registered in the United States,
and vice versa. 


      EPA'S PESTICIDES
      REGISTRATION PROCESS
-------------------------------------------------------- Chapter 2:2.1

Under the Federal Insecticide, Fungicide, and Rodenticide Act passed
in 1947, as amended (7 U.S.C.  136), EPA is required to register
pesticide products, specify the terms and conditions of their use
before they are marketed, and remove unreasonably hazardous
pesticides from the marketplace.  EPA can register a pesticide only
if it determines that the pesticide will perform its intended
function without causing any unreasonable adverse effect on humans or
the environment, taking into account the economic and environmental
costs and benefits of the pesticide's use.  To register a pesticide,
EPA requires the manufacturer to provide health and environmental
effects data,\1 product labeling information, a confidential
statement of the chemical formula of the pesticide, and
child-resistant packaging (if applicable).  This process can take 9
months to a year, if all the necessary data have been provided, but
much longer if the data are incomplete and additional data are
needed. 

A pesticide generally must be registered with EPA before it may be
sold or distributed in either intrastate or interstate commerce. 
However, a pesticide produced solely for export is not required to be
registered with EPA and may be exported regardless of its U.S. 
regulatory status, subject to certain labeling, production reporting,
and notification requirements. 


--------------------
\1 These data include information on toxicology, residue chemistry,
environmental fate, worker exposure, product chemistry, oncogenicity
(quality or property of causing tumors), potential birth defects,
efficacy, and environmental effects. 


      SAG'S PESTICIDE REGISTRATION
      PROCESS
-------------------------------------------------------- Chapter 2:2.2

In 1980, the Chilean government enacted Decree Law 3557, giving SAG
the authority to regulate the production, importation, distribution,
sale, and application of pesticides used in agricultural production
in Chile.  Resolution 1178 of August 8, 1984, proceeding from Decree
Law 3557, sets forth SAG's requirements for registering pesticides. 
According to SAG officials, Chile's regulations for registering
pesticides are based on the international Food and Agriculture
Organization's guidelines. 

Resolution 1178 requires that the party desiring to register a
pesticide for agricultural production submit data identifying, among
other things (1) the manufacturer; (2) the physical and chemical
properties of the pesticide and its active ingredient(s); (3) the
biological impact and residue degradation rates; (4) the usage
instructions and preharvest intervals; (5) the pesticide's
toxicology, risks, and antidotes; and (6) the pesticide's tolerance
levels in major market countries, including the United States.  The
registration process also requires that the registrant submit certain
documents, such as proof of registration in the country of origin,
and the proposed label for marketing the product in Chile. 

The product label is a key element in Chile's process for registering
pesticides.  Resolution 1179 of August 14, 1984, sets forth
pesticide-labeling requirements.  Each product label must be in
Spanish.\2 A label must be color coded according to the pesticide's
level of toxicity.  It must include directions for use, such as the
pests it is meant to control and the crops on which it can be used. 
It must also include information on preharvest application intervals
and residue tolerance levels for principal market countries. 


--------------------
\2 According to SAG officials and private sector agrochemical
importers, there are serious penalties, including fines and
confiscation of products, for marketing pesticides in Chile that do
not conform with label regulations, such as printing labels in a
language other than Spanish. 


      DIFFERENCES IN PESTICIDE
      REGISTRATION PRACTICES
      BETWEEN THE UNITED STATES
      AND CHILE
-------------------------------------------------------- Chapter 2:2.3

The United States and Chile have similar requirements for registering
pesticides.  To register a pesticide, both countries require basic
data such as the product's chemical properties, environmental impact,
residue chemistry or degradation rates, and toxicology.  However, the
Chilean process depends to a greater extent on data regarding the
product's registration status in its country of origin, and tolerance
levels in market countries.  This is primarily due to the export
orientation of Chilean agricultural production and the fact that
Chile does not manufacture its own pesticides. 

There are also differences between the United States and Chile in the
pesticides that are registered in each country.  Chile does not
manufacture pesticides, so it must import the pesticides it uses in
agricultural production.  SAG requires that a pesticide registered in
Chile must be registered in the pesticide's country of origin.  SAG
officials explained that this requirement was instituted to eliminate
the use of dangerous pesticides in Chile that have been banned in the
country where they are manufactured.\3 However, since Chile imports
pesticides from various countries, there are a number of pesticides
registered in Chile that are either banned or not registered in the
United States (see app.  III). 

Chilean officials explained that they register pesticides that are
not registered in the United States because Chile exports crops to
markets other than the United States, where these pesticides are
allowed.  FDA officials added that the United States also has
registered pesticides that are not registered in Chile and that there
is nothing improper or unusual about this situation.  They noted that
all major U.S.  trading partners have pesticides registered that are
not registered in the United States, and vice versa.  FDA officials
said that the fact that Chile has registered pesticides that are not
registered in the United States is not a problem, since these
pesticides are not used on foods exported to the United States, and
that Chile's excellent compliance history with U.S.  tolerances is
evidence of this circumstance. 


--------------------
\3 Representatives of a Chilean environmental group explained that
some foreign chemical companies circumvent this requirement by
manufacturing certain pesticides in a third country with more liberal
registration standards, registering it there, and then registering it
in and exporting it to Chile. 


   TOLERANCE-SETTING PROCESSES
---------------------------------------------------------- Chapter 2:3

Federal law directs EPA to set tolerance levels for pesticides used
on food for human or animal consumption marketed in the United
States.  The Chilean Ministry of Health establishes tolerances for
pesticides under a general mandate to set safety standards for food
marketed for domestic consumption in Chile.  Tolerance-setting
practices in Chile differ from those of the United States because the
United States independently evaluates data to set pesticide residue
tolerances, which may differ from international standards; Chile's
tolerances are based on internationally established standards. 


      EPA'S TOLERANCE-SETTING
      PROCESS
-------------------------------------------------------- Chapter 2:3.1

Under the Federal Food, Drug, and Cosmetic Act passed in 1938, as
amended (21 U.S.C.  301), EPA is responsible for setting maximum
allowable residue levels, or tolerances, for pesticide residues on
food commodities and animal feed marketed in the United States. 
Establishing tolerances or exemptions from tolerances is a
prerequisite to granting registrations for pesticides used in
agricultural production in the United States.  The tolerance
program's purpose is to ensure that U.S.  consumers are not exposed
to unsafe levels of pesticide residues.  U.S.  tolerances apply to
imported commodities as well as to domestically produced food
commodities and animal feed. 

If a pesticide is being considered for use on a food or feed crop,
the registrant (the party seeking to register the pesticide) must
petition EPA for a tolerance.  It then must submit appropriate data
so that EPA can define a safe and realistic tolerance level or grant
an exemption from the tolerance requirement.  Registrants are
required to submit toxicology and residue data in their tolerance
petitions (applications) to assess possible health and environmental
risks, to identify the nature and amount of residue that could occur
with proper pesticide use, and to present analytical methods that FDA
can use to test the food for residues of the pesticide. 

While EPA requires tolerances to be set before registering pesticides
for use on food domestically, in some cases EPA sets tolerances for
residues of pesticides that are not registered.  Such tolerances may
be referred to informally as "import" tolerances.  These tolerances
acknowledge other countries' needs for some pesticides not registered
in the United States.  For example, such a pesticide could be
employed to control a pest that is not a problem in the United States
or for use on a crop that is not grown domestically. 


      CHILEAN MINISTRY OF HEALTH'S
      TOLERANCE-SETTING PROCESS
-------------------------------------------------------- Chapter 2:3.2

According to a spokesman for Chile's Ministry of Health, Chile's food
safety law--Supreme Decree 60 from April 5, 1982--directs the
Ministry to set safety standards for food marketed for domestic
consumption.  Under this general mandate, the Ministry of Health has
responsibility for setting maximum residue limits, or tolerances, for
pesticides.  The Ministry of Health sets tolerances only for foods
consumed domestically in Chile.  Chilean authorities do not establish
tolerances for foods to be exported. 

In setting tolerances, Chile accepts standards established by the
international Codex Alimentarius Commission.\4 The spokesman for the
Ministry of Health explained that Chile does not have the resources
to undertake comprehensive studies on the impact of pesticide
residues on consumers.  Instead, the Ministry relies on Codex
standards and on other information from the U.S.  EPA or the World
Health Organization.  Chile's food safety regulations were being
updated in May 1994 to reflect recent changes in Codex standards. 

The Ministry of Health spokesman also explained that only pesticides
registered by SAG are authorized for use in agricultural production
in Chile.  The product label required by SAG to register a pesticide
is critical in providing guidance to Chilean farmers about how
pesticides should be used to meet applicable tolerances.  It should
be noted that while Chilean pesticide labels list tolerances for
major export markets, they do not list Chilean tolerances.  According
to the Ministry of Health official, this omission is due to the
export orientation of Chilean agricultural production. 


--------------------
\4 In 1962, the Codex was created under the auspices of the United
Nations to establish international standards for food quality and
safety concerns, including pesticide uses.  Both the United States
and Chile are members of Codex. 


      DIFFERENCES IN
      TOLERANCE-SETTING PRACTICES
      BETWEEN THE UNITED STATES
      AND CHILE
-------------------------------------------------------- Chapter 2:3.3

Tolerance-setting practices in Chile are different from those
followed in the United States because Chile's pesticide tolerances
are based on the Codex, while the United States establishes pesticide
residue tolerances independently.  The Codex sets standards, referred
to as "maximum residue limits," for pesticides.  Although Codex
maximum residue limits are comparable to EPA tolerances, they are not
always the same.  EPA officials explained that sometimes the Codex's
maximum residue limit for a given pesticide may be lower than EPA
tolerances, and sometimes EPA tolerances may be lower.  There are
also certain pesticides that have been assigned maximum residue
limits by the Codex but have no tolerances in the United States. 
Conversely, there are pesticides that have been assigned U.S. 
tolerances but have not been assigned Codex maximum residue limits. 
In addition, there are differences between EPA and Codex definitions
of "crop groupings"\5 and methods used in measuring pesticide
residues that may lead to different tolerance standards. 

Codex standards are voluntary and only enforceable if adopted and
used as national regulations.  Chile's food safety regulations are
based on Codex standards.  On the other hand, while the United States
is also a member of the Codex, EPA does not necessarily accept Codex
standards.  The United States may accept some Codex maximum residue
limits, after independent assessment to ensure compliance with U.S. 
health standards.  Thus, EPA evaluates and sets pesticide residue
tolerances independently. 


--------------------
\5 Crop groupings are categories of related commodities such as
stonefruit (peaches, nectarines, and prunes) or citrus (lemons,
oranges, grapefruit, and tangerines).  Differences in what EPA and
Codex include under these groupings can result in certain crops
having tolerances set for a given pesticide by one agency but not by
the other. 


   PESTICIDE RESIDUE MONITORING
   PROCESS
---------------------------------------------------------- Chapter 2:4

In the United States, FDA is responsible for monitoring and enforcing
EPA tolerances on domestic and imported food products, except for
meat, poultry, and some egg products, which are the responsibility of
USDA.  In Chile, the Institute of Public Health (Instituto de Salud
Pï¿½blica--ISP) is charged with monitoring pesticide residues on food. 
While the United States conducts routine monitoring on all types of
domestic and imported foods, Chile routinely monitors only certain
dairy products and samples of mothers' milk. 


      FDA AND USDA SHARE
      RESPONSIBILITY FOR
      MONITORING PESTICIDE
      RESIDUES IN THE UNITED
      STATES
-------------------------------------------------------- Chapter 2:4.1

FDA is responsible for ensuring that domestic and imported food
products (except meat, poultry, and some egg products) are safe,
sanitary, nutritious, and wholesome; it also has responsibility for
ensuring honest labeling.  USDA has monitoring and enforcement
responsibilities for pesticide residues in meat, poultry, and egg
products.  FDA, USDA, and state enforcement agencies are involved in
enforcing tolerances.  These agencies test samples of various types
of foods to determine if they contain residues for which no tolerance
has been set or residues exceeding tolerance levels, rendering the
food adulterated.  Food commodities with residues in excess of
tolerance levels or residues for which no tolerance has been set are
subject to seizure. 

To ensure that the consumer is protected against undue risk from
pesticides in the food supply, FDA enforces EPA tolerances on most
foods.  FDA activities range from developing an analytical
methodology for measuring trace amounts of pesticides in food to
determining the frequency and level of occurrence of pesticides in
the food supply.  FDA carries out toxicological studies to determine
the toxic behavior of chemical contaminants and their effects on
humans.  In addition, FDA establishes regulatory limits for
nonpesticide chemical contaminants in food and carries out
field-monitoring programs for other chemical contaminants, and can
take regulatory action where warranted. 

FDA has established a process to coordinate with other federal
agencies, such as EPA, as well as USDA's Food Safety and Inspection
Service (FSIS) and its Agricultural Marketing Service.  FDA's goal is
to promote more effective, efficient, and coordinated federal
regulatory activities concerning residues of pesticides and other
contaminants that may adulterate food.  FDA is responsible for
notifying EPA of possible misuse of pesticides or chemical substances
that may indicate a violation of laws that EPA administers.  FDA is
also to notify USDA of illegal residues of pesticides or other
contaminants in food for human consumption or animal feed, for USDA
consideration in planning meat and poultry inspections. 

USDA is responsible for notifying FDA of findings of illegal residues
in edible meat, poultry, or egg products.  USDA is also to keep FDA
and EPA informed of all FSIS and Agricultural Marketing Service
sampling and testing programs for illegal residues.  FSIS administers
a comprehensive system of inspection laws to ensure that meat and
poultry products moving in interstate and foreign commerce for use in
the food supply are safe.  Such inspection includes checking, on a
sample basis, for drug and chemical residues in slaughtered animal
tissue.  Residues can result from the improper use of pesticides,
animal drugs, and medicated feeds, as well as from industrial
accidents that may contaminate animal feeds or the environment where
food animals are raised.  The Agricultural Marketing Service's only
responsibilities with regard to regulating food safety are in the egg
products and egg shell surveillance programs. 


      ISP'S PESTICIDE RESIDUES
      MONITORING
-------------------------------------------------------- Chapter 2:4.2

Chile's ISP, an agency of the Ministry of Health, monitors compliance
for pesticide residues on some foods.  According to ISP and Ministry
of Health officials, Chilean law does not specifically require
monitoring of pesticide residues on foods.  The law is phrased more
broadly and simply sets forth the Ministry of Health's responsibility
to make sure that food is safe for human consumption.  Pesticide
residue monitoring is undertaken within the context of the Ministry
of Health's efforts to ensure the safety of food under Supreme Decree
60.  ISP does not have the resources to conduct routine pesticide
residue monitoring of most domestically produced Chilean foods or
imports.  An ISP official explained that the agency has a single lab,
located in Chile's capital, Santiago, equipped to monitor pesticide
residues.  This lab has a staff of 14 employees who are involved in
testing foods for other contaminants besides pesticide residues. 
Moreover, the ISP lab lacks the equipment and supplies necessary to
detect certain pesticide residues.  The ISP lab depends for its
sampling on a system of 28 Ministry of Health regional field offices
located throughout Chile.  The regional offices have their own labs
that monitor food for sanitary control purposes, but not for
pesticide residues. 

Given its limited resources, the ISP lab has focused its monitoring
on organochlorine pesticide residues in certain dairy products and
mothers' milk.  According to an ISP official, monitoring has focused
on organochlorines because they are a particularly dangerous family
of pesticides that remain in the environment long after they are
applied.\6 Certain dairy products, such as powdered milk and butter,
have been selected for routine monitoring because they are not too
perishable, and they can be readily tested for traces of pesticide
residues.  The ISP lab also monitors mothers' milk from various parts
of Chile on a routine basis.  Again, this monitoring focuses on
organochlorine pesticides.  The reason for monitoring mothers' milk
is that it can be an indicator of the presence of pesticide residues
in the food supply. 

An ISP official explained that the lab also conducts studies on
pesticide residues in other commodities, including imports, on an ad
hoc basis, if there is reason to suspect that the food is tainted.  A
Chilean environmental group recently prepared a study decrying the
fact that while Chile has thorough controls over pesticide residues
on food destined for export, there is no routine monitoring of
pesticide residues on foods consumed domestically.  Thus, it is
conceivable that Chile might increase its monitoring of pesticide
residues on imports in the future, particularly if it opens its
markets to fresh fruits and vegetables from abroad. 


--------------------
\6 The organochlorines include dichloro diphenyl trichloroethane
(DDT).  Chile banned DDT in 1984. 


      DIFFERENCES IN PESTICIDE
      RESIDUE MONITORING BETWEEN
      THE UNITED STATES AND CHILE
-------------------------------------------------------- Chapter 2:4.3

The previous discussion underscores the differences between U.S.  and
Chilean pesticide monitoring and enforcement activities.  In the
United States, several federal agencies and state agencies are
responsible for monitoring domestically produced and imported foods
for pesticide residues.  Monitoring in the United States is done on a
routine basis and entails sophisticated sampling and analysis.  In
contrast, Chile devotes few resources to monitoring pesticide
residues in foods for domestic consumption.  There is no routine
monitoring of food imported into Chile for pesticide residues.  For
domestic foods, only certain dairy products and samples of mothers'
milk are routinely monitored for pesticide residues in Chile. 


   PESTICIDE REGULATION ON CHILEAN
   EXPORTS
---------------------------------------------------------- Chapter 2:5

FDA officials have pointed to the process followed in Chile for
ensuring compliance with U.S.  pesticide residue regulations as a
model for other exporters of horticultural commodities to the United
States.  They stressed that they do not consider it to be a problem
that certain pesticides registered in Chile are not registered in the
United States.  They explained that while FDA would be hard pressed
to look for all possible pesticide residues, the agency does monitor
for a very large portion of these residues.  FDA officials noted that
their monitoring over many years has not identified any significant
pesticide residue problem with Chilean exports.  Moreover, FDA
officials said they have had extensive communications with Chilean
fruit exporters.  The officials said that these interactions have
clearly demonstrated that the exporters are familiar with and
dedicated to controlling pesticide usage on commodities destined for
the U.S.  market.  Chile has been one of the few countries to respond
to FDA's request for usage data under the requirements of the
Pesticide Monitoring Improvements Act of 1988 (P.L.  102-585). 

According to FDA records, Chile has very low violation rates for
pesticide residue tolerances when compared to other countries.  From
1989 to 1993, on average only 1.7 percent of food shipments imported
from Chile sampled under FDA's surveillance monitoring were found to
contain pesticide residue violations (see table 2.1).  While this
figure is higher than the violation rate for pesticide residues on
domestically produced foods, it is much lower than that of all other
foreign countries, which range between 3 and 5 percent, according to
FDA. 



                          Table 2.1
           
            Percentage of Food Samples Found With
           Pesticide Residue Violations Under FDA's
             Surveillance Sampling, Fiscal Years
                           1989-93

                        Foods from Chile      Domestic foods
Fiscal year              with violations     with violations
--------------------  ------------------  ------------------
1989                                3.0%                1.0%
1990                                 1.3                 1.1
1991                                 1.2                 0.8
1992                                 1.0                 1.1
1993                                 2.2                 1.1
Average (1989-93)                    1.7                 1.0
------------------------------------------------------------
Source:  FDA, regulatory monitoring data for pesticides. 

FDA officials characterize most tolerance violations on produce from
Chile as "technical" violations.  This designation refers to the fact
that these violations are not due to findings of pesticides that have
been banned for use in the United States.  Rather, they involve
findings of pesticides registered in the United States for use on
other commodities, or findings of a pesticide on a commodity for
which no pesticide tolerance has been set.  FDA officials explained
that the few tolerance violations encountered on Chilean exports are
usually not found on high-volume export crops, such as grapes or
stonefruit (plums, peaches, and nectarines).  These violations are
typically found on lower-volume products, for example, boysenberries
or persimmons. 

There are several ways that pesticide practices of Chilean growers
involved in exporting are controlled to ensure acceptable levels of
pesticide residues.  The Chilean Exporters Association (Asociaciï¿½n de
Exportadores) has compiled an extensive guide on pesticide use, known
as the Agenda de Pesticidas.  This guide contains a comprehensive
list of pesticides registered for use in fruit and vegetable
production in Chile and their tolerances by commodity in principal
market countries.  This information is to be updated every 2 months. 
The guide also has recommendations on preharvest intervals for
applying pesticides. 

According to a spokesman for the Chilean Fruit Growers Federation
(Federaciï¿½n de Productores de Frutas de Chile), larger Chilean
growers, who are generally also exporters and account for about 40
percent of production, rely on the data contained in the Agenda de
Pesticidas to ensure that the pesticide residue levels on their
produce exports meet tolerance levels set by the various market
countries.  The information in the guide considerably supplements the
data on the labels required by SAG on pesticides marketed in Chile. 

Representatives for the Chilean Fruit Growers Federation explained
that smaller growers usually must follow the pesticide practices
specified in their contracts with the exporting company.  Often the
exporters provide the growers with all chemicals used in production
so that only the pesticides permitted by market countries are used. 
Moreover, Chilean law requires that all pesticides registered in
Chile be properly labeled.  This requirement should help ensure that
the growers or agricultural laborers applying the pesticides are
aware of recommended procedures.  In addition, some exporters
contract with agronomists and other technicians to advise smaller
growers and to monitor pesticide use practices. 

A spokesman for the Exporters Association noted that his association
sometimes cooperates with members in monitoring pesticide residue
levels in crops.  He said the testing is typically done at private
labs that have modern pesticide monitoring equipment.  This type of
monitoring or testing is not uncommon, but it is also not required. 
It is typically undertaken when the growing season has been somewhat
unusual, such as when an early heat spell has hastened ripening, or
if there is reason to suspect some problem in the pesticide treatment
followed for a given crop. 

It is also important to note the role of research undertaken by the
University of Chile in helping growers meet tolerance requirements in
foreign markets.  The data on preharvest intervals contained in the
Agenda de Pesticidas were based on field studies performed under the
direction of a scientist with the University of Chile who was also a
consultant for the Exporters Association.  His research considerably
augmented information on the degradation rates of pesticides provided
by the foreign manufacturers, because it was based on observations of
pesticides' performance under Chile's unique climatic and soil
conditions. 

This scientist also investigated cases of tolerance violations found
on Chilean produce in foreign markets.  He told us he maintains
regular communications with FDA officials and has usually been told
on an informal basis about Chilean tolerance violations as they
occurred.  His investigations allowed Chilean growers to address
problems leading to violations as they arise. 

For example, in 1993 FDA's surveillance monitoring found that a
shipment of pears from Chile was discovered to have violated U.S. 
pesticide residue standards.  This shipment was found to contain
low-level residues of iprodione, a fungicide that is not registered
for use on pears in the United States and has no tolerance set for
this commodity.  The University of Chile scientist explained that his
investigation into this case revealed that machinery used to process
the pears had previously been used to process stonefruit.  Iprodione
is registered for use on stonefruits in the United States, and it is
applied with a wax that is difficult to remove from the processing
machinery.  When the pears were processed, they were inadvertently
contaminated with iprodione residues.  Following this incident, the
exporter's machinery was cleaned, and the situation was corrected. 


HOW CHILE'S SANITARY AND
PHYTOSANITARY RULES LIMIT CERTAIN
U.S.  AGRICULTURAL EXPORTS
============================================================ Chapter 3

U.S.  officials recognize that Chile has legitimate reasons for
protecting its agricultural resources.  However, certain Chilean
sanitary or phytosanitary rules, or the lack thereof, impede or have
the potential to impede exports of agriculture and related products
from the United States.  According to U.S.  trade officials we
interviewed, Chile's processes for establishing sanitary and
phytosanitary regulations are not always transparent and lack several
formal procedures that would facilitate access to the Chilean market
for U.S.  agricultural commodities. 

USTR and USDA have been working to resolve, in advance of
negotiations for a free trade agreement, issues impeding Chilean
imports of U.S.  fresh fruit, poultry meat, and salmonid eggs.  They
have made some progress in developing entry rules and clarifying
Chilean phytosanitary concerns for several U.S.  fresh fruit crops. 
Also, Chilean authorities have indicated a willingness to accept
comments from interested parties on proposed entry rules for salmonid
egg imports.  However, they have not made progress on the issue of
poultry meat. 


   CHILEAN REGULATIONS GENERALLY
   BASED ON LEGITIMATE CONCERNS
---------------------------------------------------------- Chapter 3:1

Chile has legitimate sanitary and phytosanitary concerns due to its
special biological and geographical characteristics, according to
U.S.  officials.  Natural barriers, such as the Andes Mountains, the
Atacama Desert, and the Pacific Ocean, effectively shelter Chile from
many biological pests and diseases.  Furthermore, many pests found in
neighboring South American countries are not present in Chile. 

Agriculture and related products account for a significant portion of
Chile's export earnings.  For instance, Chile's agricultural,
fisheries, and forestry sectors represent about 9 percent of Chile's
overall gross domestic product and 46 percent of Chile's overall
exports to the United States.  Furthermore, some of Chile's export
markets, such as Japan and South Korea, have very restrictive
sanitary protection laws.  Also, Chilean sanitary authorities are
concerned that imported agricultural commodities might bring in
certain pests and diseases that could threaten Chilean agricultural
production and raise questions about the sanitary condition of
Chilean exports in foreign markets. 

In general, U.S.  officials we interviewed said that Chilean
authorities develop sanitary and phytosanitary regulations in
accordance with sound scientific principles.  The United States
exports a number of agricultural commodities to Chile, including
grains and dairy products, that do not face phytosanitary or sanitary
barriers.  U.S.  officials repeatedly said that they respect the
professionalism of their Chilean counterparts.  They noted that in
some instances Chile has eliminated or liberalized sanitary
requirements when presented with scientific evidence by U.S.  plant
or animal health officials.  For example, the United States and Chile
recently resolved a dispute over weed seeds in U.S.  wheat exports,
so that Chile is again accepting U.S.  wheat.\1 However, U.S. 
officials also described situations in which Chile's animal and plant
health requirements have unduly restricted U.S.  agricultural
exports. 


--------------------
\1 During the early 1990s, Chile restricted imports of U.S.  wheat
because of concerns about certain noxious weed seeds present in U.S. 
wheat shipments. 


   CASES IN WHICH CHILEAN RULES
   IMPEDE U.S.  EXPORTS
---------------------------------------------------------- Chapter 3:2

Chile's sanitary and phytosanitary requirements have limited the
export of certain U.S.  agricultural products.  Specifically, U.S. 
fruits, poultry meat, and salmonid (various salmon and trout species)
eggs have been or could be affected by Chilean sanitary or
phytosanitary rules. 


      FRESH FRUIT CROPS
-------------------------------------------------------- Chapter 3:2.1

U.S.  fruit producers and Chilean importers see opportunities for
certain fruit exports from the United States in the Chilean market. 
However, SAG has not established phytosanitary rules necessary to
allow the entry of fresh fruit and vegetable imports to Chile. 
Intended to safeguard domestic resources, such rules define the entry
requirements that imports must meet to be permitted entry into Chile. 
In effect, the absence of these rules bans virtually all U.S. 
exports of fruits and vegetables to Chile.  U.S.  officials have
helped Chilean authorities to develop entry requirements to allow
imports of several U.S.  fruit crops into Chile.  Although progress
has been made on some of these crops, U.S.  officials remain
concerned over how difficult it may be to gain access for other U.S. 
produce exports in the future.  Representatives of U.S.  agricultural
producers maintain that the technically complex phytosanitary issues
that block U.S.  produce exports to Chile must be resolved before any
negotiations on a free trade agreement take place. 

Until recently, there had been limited U.S.  interest in exporting
fresh fruit and vegetables to Chile.  However, U.S.  fruit producers
and Chilean importers now see an opportunity for U.S.  summer fruit
crops in the Chilean market during the winter season in the Southern
Hemisphere when there is no production in Chile.  Chilean importers
estimate that the potential market for quality U.S.  fruit could be
about $16 million annually.  Importers are specifically interested in
cherries, nectarines, peaches, apricots, and grapes from the United
States.  They expect that the market potential for U.S.  fruits
should further expand as Chile's standard of living continues to
rise. 

In response to interest expressed by U.S.  fruit producers, USDA
APHIS officials have assisted Chilean authorities in establishing
phytosanitary requirements that would allow the entry of certain U.S. 
fruit crops into Chile.\2 APHIS first expressed an interest in
gaining permission for U.S.  exports of specific fruit crops at a
bilateral meeting with Chile's SAG in 1991.  However, SAG was unable
to provide APHIS with information on what fruit and vegetable crops
were allowed to be imported into Chile.  It became apparent that SAG
lacked phytosanitary rules to govern the entry of fresh fruits and
vegetables.  In the absence of such rules, virtually all U.S.  fresh
fruit and vegetable exports were in effect banned from the Chilean
market. 

SAG officials had difficulties developing entry rules because they
lacked a standardized system for conducting pest risk analyses.  SAG
also lacked a quarantine treatment protocol that would define
appropriate measures to address concerns about the introduction of
potential pests with U.S.  fruit and vegetable imports.  APHIS had to
identify many of the pests associated with the crops and suggest
appropriate measures, including treatment procedures, that could be
used by Chilean authorities to establish entry rules. 

After 3 years of consultations between U.S.  and Chilean officials,
some progress has been made in developing entry rules for certain
U.S.  fruit crops.  Specifically, SAG officials have agreed to allow
entry of grapes, kiwis, and lemons from the United States after being
visually inspected and found to be free of pests.  Resolution is
still pending on a number of other fruit crops, including apples,
avocadoes, blackberries, blueberries, raspberries, strawberries,
other citrus fruit, pears, and stonefruit. 

Despite progress in removing restrictions on certain fruit crops,
U.S.  officials remain concerned over how difficult it may be to gain
access for other U.S.  produce exports in the future.  Establishing
entry rules for these fruit crops took an inordinate amount of time,
according to APHIS officials.  The U.S.  Agricultural Technical
Advisory Committee for Trade in Fruits and Vegetables, a private
sector advisory panel to USTR and USDA, maintains that the
phytosanitary issues that block U.S.  exports of fruit and vegetables
to Chile must be resolved before any formal negotiations on a free
trade agreement between the United States and Chile occur. 


--------------------
\2 These fruit crops are apples, avocadoes, berries (blackberries,
blueberries, raspberries, and strawberries); citrus (grapefruit,
lemons, and oranges); grapes; kiwi; pears; and stonefruit (plums,
peaches, nectarines, and cherries). 


      POULTRY MEAT
-------------------------------------------------------- Chapter 3:2.2

SAG has established a sanitary regulation for poultry meat imports
that U.S.  officials said is unduly restrictive and constitutes a
nontariff trade barrier.  U.S.  officials said Chile's poultry meat
restrictions may in part be in response to USDA's unwillingness to
approve plants in Chile to process poultry destined for the United
States.  SAG maintains that its sanitary regulations for poultry meat
are based on legitimate concerns. 

Although U.S.  exports of poultry meat to Chile have been very
limited, there is reason to expect increased opportunities for these
products in the Chilean market.  According to a report by the Office
of the U.S.  Agricultural Attachï¿½, poultry consumption in Chile has
risen by about 20 percent in recent years, as consumers look for
alternatives to beef.  However, U.S.  poultry meat exports have been
effectively barred from entry into Chile due to a sanitary rule
imposed by SAG in October 1992.  The rule requires poultry meat
imports to be tested and certified as being free of salmonella.\3 FAS
and APHIS officials, as well as a representative from the U.S. 
Poultry and Egg Export Council, believe that Chile's sanitary rule
regarding salmonella is unduly restrictive and poses a nontariff
trade barrier to U.S.  poultry meat exports.  This view is echoed by
USTR.  Since the rule mandates that poultry meat imports must be free
of all strains of salmonella, in effect the rule represents a "zero
tolerance" for salmonella.\4 According to APHIS, the rule exceeds any
standards attained by any country, including Chile, because Chile
itself is not entirely free of salmonella. 

APHIS officials maintain that Chile's salmonella rule is not based on
sound scientific principles.  According to a senior APHIS
veterinarian, the international scientific community has recognized
that salmonella is present worldwide.  Approximately 2,400 different
salmonella serotypes (strains) exist.  Salmonella has many carriers,
including poultry, other livestock, and even humans.  According to
the APHIS veterinarian, Chile cannot justify a zero tolerance
restriction for salmonella in poultry meat because salmonella is just
as likely to be carried into Chile by other sources.  For example,
Chile accepts U.S.  exports of live chicks and hatching eggs, both of
which are known carriers of salmonella.  In fact, these commodities
pose a greater risk of salmonella exposure to flocks than would
poultry meat.  According to this APHIS official, Chile's restriction
of poultry meat does not represent an effective or scientifically
based control for salmonella, because imports of other commodities
that may carry salmonella are allowed. 

According to the APHIS veterinarian, Chile should only be concerned
with two strains of salmonella that are specific to
poultry--gallinarum and pullorum--and have a potential impact on
commercial poultry breeding operations.  Salmonella gallinarum and
pullorum can have a severe economic impact on flocks by lowering the
hatch rate and weight gain rate and raising the mortality rate among
young birds.  However, gallinarum and pullorum salmonella have been
effectively eliminated from U.S.  commercial poultry through an
industry-driven control program coordinated by each state and by
APHIS.  Every major U.S.  poultry producer participates in this
program.  If Chile's sanitary rule applied only to these two
dangerous strains, APHIS could certify that U.S.  poultry meat
exports are free of these strains of salmonella, and the United
States could export its poultry meat products to Chile. 

FAS and APHIS officials suggested that Chile's zero tolerance
restriction was enacted in response to a USDA unwillingness to
approve Chilean poultry processing plants as a source for U.S. 
imports.  The U.S.  action is a result of a February 1992 lawsuit
brought by the National Broiler Council\5 against the Department of
Agriculture.  USDA's FSIS is responsible for making sure that foreign
countries that want to export meat products, including poultry, to
the United States have sanitary inspection systems that meet U.S. 
standards.  Section 1701 (a) of the Food Security Act of 1985 (P.L. 
99-198) amended section 17 of the Poultry Products Inspection Act (21
U.S.C.  466) passed in 1957 to require that foreign poultry be
processed in facilities and under conditions that are "the same as"
those under which similar products are processed in the United
States. 

Initially, FSIS interpreted this language to mean that foreign
inspection systems should be "equivalent to" those found in the
United States.  However, the National Broiler Council in its lawsuit
against USDA has insisted that foreign inspection systems must be
certified as being the same as those in the United States. 
Subsequently, FSIS made a policy decision to place a hold on
certifying foreign inspection systems until the lawsuit is resolved. 

Several countries, including Chile, that have sought FSIS
certification in order to export poultry meat to the United States
have been affected by this decision on the part of FSIS and have been
unable to export poultry meat to the United States.  U.S.  officials
note that Chile generally prefers to base trade relations with other
countries upon the principle of reciprocity.  U.S.  officials believe
Chile has established the salmonella rule in response to the U.S.'
unwillingness to approve Chilean poultry plants. 

SAG officials maintained that Chile's salmonella rule is based on
legitimate sanitary concerns.  They claimed that Chilean poultry
producers are concerned that poultry meat imports may bring in
certain strains of salmonella that are not present in Chile and that
may contaminate Chilean flocks.  For instance, they noted the United
States has salmonella enteritidis, a serotype of salmonella that
commonly infects humans.  According to SAG officials, Chile is free
of enteritidis.  They argue that unlike the United States, where up
to 45 percent of all dressed birds might be contaminated with
salmonella, only 0.4 percent of all Chilean birds are contaminated
with salmonella.  According to SAG officials, Chile is able to keep
its poultry products relatively free of salmonella because the
country has a vertically integrated production system in which a
small number of producers also control marketing and distribution. 
These producers adhere to a rigorous testing system that weeds out
poultry found with salmonella. 

Chilean producers use several sampling tests and procedures to detect
and weed out salmonella.  Whenever birds test positive for these
tests, producers remove them from the flock.  SAG officials claim
that these tests and procedures effectively reduce the percentage of
birds found to have salmonella at the time of slaughter. 

This claim is disputed by APHIS.  According to the senior APHIS
veterinarian, these tests and procedures are designed to screen
flocks for various salmonella strains, but they cannot detect all
salmonella strains that might be present in the flocks.  Thus, on the
basis of these tests, Chilean officials would not be able to certify
that flocks are entirely free of all salmonella strains.  This is
precisely why APHIS officials cannot certify that U.S.  flocks are
completely free of salmonella.  Furthermore, if any birds did test
positive for any salmonella strain, it would be an indication that
this strain could be present in the rest of the flock as well. 
Simply removing individual birds that test positive would not ensure
that this salmonella strain had been eliminated; instead, the entire
flock would need to be destroyed. 

Regarding SAG's concern about salmonella enteritidis, an APHIS
official commented that this bacteria rarely causes death in humans
and is likely to be present in Chile already.  This official
estimated that approximately 10,000 cases of enteritidis poisoning
are reported each year in the United States, but only 1 or 2 cases
are fatal.  Since any type of food poisoning can cause death in
humans, and not just poisoning caused by salmonella contamination,
the officials said that it is unreasonable for Chile to single out
salmonella for food safety reasons. 


--------------------
\3 Salmonella is a bacteria that is frequently found in poultry but
also is found in several other raw products of animal origin, such as
pork, beef, milk, and eggs. 

\4 "Zero tolerance" is a term used by APHIS and FSIS officials to
describe Chile's rule that all imports must be free of all salmonella
strains.  The United States usually discusses the maximum level of
tolerable residues in foods in terms of a tolerance level.  By not
accepting any salmonella in poultry at all, Chile has in effect set a
"zero tolerance" level for salmonella in poultry. 

\5 The National Broiler Council is a nonprofit corporation that
represents producers and processors of broiler/fryer chickens
throughout the United States. 


      SALMONID EGGS
-------------------------------------------------------- Chapter 3:2.3

U.S.  growers view Chile as one of their most important markets for
live salmonid eggs.  Recently Chile proposed sanitary regulations for
live salmonid egg imports that raised significant concerns among U.S. 
fish growers because they view the regulations as discriminatory and
in excess of international standards.  However, informal discussions
have taken place to resolve these concerns. 

According to the Washington Fish Growers Association, the United
States exports approximately $2 million in fertilized salmonid eggs
to Chile annually.  These eggs are used in the production of
farm-raised salmon and trout for human consumption.  While U.S. 
salmonid egg exports to Chile are small in dollar terms, Chile is one
of the U.S.' largest markets for this product.  A representative from
the Washington Fish Growers Association estimated that Chile
represents about 20 percent of live egg export sales in Washington
State. 

In 1991, the Chilean Congress passed a comprehensive fisheries law. 
According to the Director of SERNAP, this law calls for the
establishment of new sanitary regulations for all live fish marketed
in Chile, imported as well as domestic.  Under the law, SERNAP has
been assigned responsibility for drafting the new regulations. 
SERNAP has placed priority on developing regulations for imports
because of the potential for the introduction of exotic diseases
associated with imports.  This situation has raised concerns among
U.S.  producers that Chile's regulations may discriminate against
imports. 

In some cases, U.S.  fish growers found the proposed import
regulations for salmonid eggs to be highly restrictive because they
exceeded international standards followed by the aquaculture
industry.  They were specifically concerned with requirements that
called for (1) individual testing of all salmonid broodstock (parent
fish) for several high-risk viral diseases,\6 (2) certification that
producers' broodstock is free of bacterial kidney disease (BKD)
before any eggs from the broodstock can be exported, and (3) a
disinfectant dip treatment that limits the number of eggs that could
be disinfected per dip.  U.S.  fish growers objected to the
requirement for individual testing of all broodstock because it
exceeded a generally accepted international standard that calls for
sampling 60 fish per lot.  They argued that if the broodstock
originated from a clean water source,\7 Chile should be able to
accept a testing methodology that relies on sampling techniques,
rather than 100-percent testing procedures.  They objected to the
requirement to certify that producer's broodstock is free of BKD
because BKD is present in Chile as well as in the United States. 
Finally, they objected to a limit of 250 eggs per dip of iodine
disinfectant treatment because this procedure would be excessively
laborious and costly.  The generally accepted international standard
is approximately 2,000 eggs per dip. 

The U.S.  fish growers have held informal talks with SERNAP officials
to express their concerns and offer suggestions for alternative
controls.  SERNAP officials have reviewed the U.S.  fish growers'
suggestions and indicated to U.S.  fish growers that they were
willing to revise several of the proposed provisions of the
regulation.  At a meeting with us in May 1994, SERNAP officials said
that they had agreed to accept a standard of sampling 150 broodstock
per fish lot when the broodstock originated from a clean water
source.  SERNAP officials also said they were willing to drop the
proposal to require certification that producers' broodstock was free
of BKD, as long as producers sampled 150 fish out of each lot and
fewer than 10 percent of each sample tested positive for BKD. 
Finally, SERNAP agreed to further consider the 2,000-egg standard for
the disinfectant procedure, as suggested by the U.S.  fish growers. 
According to SERNAP officials, they had only proposed the 250-egg
standard because it had been recommended by the International
Epizootic Organization.\8 SERNAP officials said that, upon review,
they would probably be able to accept and incorporate the
international standard of 2,000 eggs per dip into the final import
regulations. 

According to SERNAP's Director, in May 1994 SERNAP expected to
finalize the regulations shortly.  He also indicated that SERNAP
would welcome an official presentation by the United States on the
proposed regulations.  We communicated this message to the U.S. 
Ambassador to Chile, and U.S.  embassy officials met with SERNAP
authorities in June 1994 to discuss Chile's proposed regulations.  A
revised draft of the regulations was expected to be ready soon. 
SERNAP officials indicated they would accept comments on this draft
from interested parties. 


--------------------
\6 The viral diseases of concern to SERNAP are infectious
hematopoietic necrosis (IHN), viral hemorrhagic septicemia (VHS),
infectious pancreatic necrosis (IPN), and onchorhynchus masou viral
disease (OMV). 

\7 According to the Washington Fish Growers, a clean water source is
a protected water source that is free of migratory fish. 

\8 According to SERNAP officials, the International Epizootic
Organization, located in Paris, is part of the United Nations' system
and works on animal disease issues.  It is roughly equivalent to the
World Health Organization for human diseases. 


   CONCERNS ABOUT CHILE'S PROCESS
   FOR SETTING SANITARY AND
   PHYTOSANITARY RULES
---------------------------------------------------------- Chapter 3:3

USTR, FAS, and APHIS officials maintain that Chile does not always
establish sanitary and phytosanitary regulations in a transparent
manner.  According to an official with USTR, when a country's process
for making regulatory decisions is not clear, or it does not provide
for public comment by outside observers, then that country's
regulatory system is not transparent.  Transparency of administrative
processes is generally regarded by trade experts as an essential
condition supporting basic trade objectives of national treatment and
"most favored nation" principles.  U.S.  officials maintain that it
is not always apparent to APHIS and U.S.  exporters what steps they
must follow to meet Chilean sanitary or phytosanitary requirements
and gain access to the Chilean market for U.S.  agricultural
products.  In addition, in certain cases the scientific basis for
Chile's sanitary and phytosanitary regulation is not always clear or
open to appeal by outside observers. 

Chile lacks several formal procedures for establishing sanitary and
phytosanitary regulations.  For example, SAG officials do not have a
standardized system to establish entry rules for fresh fruit and
vegetable imports.  Chile does not have a quarantine treatment
protocol that would have allowed SAG officials to identify
appropriate measures to address concerns about the potential
introduction of hazardous pests.  The absence of these procedures has
delayed and hampered the ability of U.S.  officials to gain access to
the Chilean market for certain U.S.  fresh fruit crops. 

A 1991 report prepared by the USTR Trade Policy Staff Committee's
Chile FTA [free trade agreement] Working Group also notes that Chile
lacked formal procedures for interested parties, including
foreigners, to appeal regulatory decisions or to provide
foreign-generated test data to contest decisions.  In the absence of
such procedures, APHIS has been unable to appeal and challenge the
scientific basis of SAG's decision to require poultry meat imports to
be certified free of all salmonella strains.  This requirement
precludes U.S.  poultry meat exports to Chile. 

U.S.  officials point out that Chile has not always officially
announced proposed rule changes before they are promulgated, even
though Chile is a signatory to the General Agreement on Tariffs and
Trade's (GATT) Agreement on Technical Barriers to Trade.\9 GATT
requires that member countries provide official notification of rule
changes to major trading partners if their exports will be affected
by any rule change.  In particular, U.S.  officials cite the poultry
meat case as an example of Chile's failure to meet GATT obligations,
because Chile did not notify the United States before implementing
the salmonella rule. 

Finally, Chile lacks a formal forum for public comment on import
regulations.  Without such a forum, it is not clear to U.S. 
officials or other interested parties what procedures to follow to
make their concerns known, whether comments would be welcome, or when
it would be appropriate to raise questions or objections to proposed
regulations.  For example, although SERNAP informally welcomed
comments on proposed salmonid egg regulations, a formal process for
public comment might have clarified Chile's sanitary concerns and
facilitated an official response from the United States. 


--------------------
\9 The Agreement on Technical Barriers to Trade obligated GATT
signatories to ensure that technical regulations and standards,
including packaging, labeling, and marking requirements and methods
of ensuring conformity with technical regulations and standards, are
not adopted or applied so as to have the effect of creating
unnecessary obstacles to trade. 


CHILE'S ENVIRONMENTAL REGULATORY
FRAMEWORK
=========================================================== Appendix I

On March 1, 1994, Chile enacted a new environmental framework law to
coordinate the country's environmental policy, which had historically
been divided among various ministries.  The law formally established
the National Commission on the Environment (Comision Nacional del
Medio Ambiente--CONAMA) as Chile's coordinating body for setting
environmental regulations, developing standards, and studying
environmental issues.  CONAMA is a decentralized commission under the
immediate direction of the Office of the Chilean President.  One of
the primary tasks of CONAMA is the implementation of regulations
known as the System for the Evaluation of Environmental Impact, which
will verify that proposed projects and activities are in compliance
with current environmental standards.  Chile has conducted studies,
passed legislation, and is party to international agreements in order
to address environmental concerns. 


   BACKGROUND
--------------------------------------------------------- Appendix I:1

Before 1994, Chile lacked a comprehensive environmental framework. 
There was no specific regulatory agency responsible for coordinating
and monitoring environmental legislation.  Over 800 conflicting legal
and regulatory requirements were scattered throughout the Chilean
legal code, involving over 70 different government ministries and
agencies. 

In January 1994, the Chilean Congress passed the Basic Law on the
Environment (Ley de Bases del Medio Ambiente--L.  19.300).  According
to Chilean officials, Chile embarked on environmental reform because
it realized the important role that the environment plays in economic
development. 


   OBJECTIVES OF THE BASIC LAW ON
   THE ENVIRONMENT
--------------------------------------------------------- Appendix I:2

The Basic Law on the Environment is designed to make improvements in
Chile's environmental regulatory system and help guarantee Chilean
citizens the constitutional right to live in a pollution-free
environment.  By giving CONAMA responsibility for the coordination
and enforcement of legal and regulatory requirements, the government
addressed the confusion stemming from overlapping ministerial
jurisdictions in Chile's environmental regulatory system.  In
addition, the law established a legal regime for punishing polluters
and created a standard of liability and potential penalties for
violators. 

Under the law, designated ministries are required to develop
environmental quality standards to protect the water, soil, and air. 
These standards aim to protect Chilean citizens' right to live in a
pollution-free environment by establishing permissible concentration
levels of pollutants within designated time periods.  The procedure
for development of standards is to include technical and economic
analysis, scientific studies, consultations with public and private
agencies, analysis of comments offered, and appropriate public
notification. 

According to the American Chamber of Commerce, in passing and
implementing recent environmental laws the Chilean government has
taken great care not to overburden the economy with unreasonable or
unenforceable decrees.  When the Basic Law on the Environment was
drafted, business lobby groups had few objections.  The law is
founded on the principle of gradual change and allows the market to
play a large role in regulating pollution. 


   THE STRUCTURE AND
   RESPONSIBILITIES OF CONAMA
--------------------------------------------------------- Appendix I:3

CONAMA was originally created in 1990.  Formerly, CONAMA had
functioned as an ad hoc commission within the Ministry of National
Properties with a general mandate to advise the President on
environmental policy issues.  Under the Basic Law on the Environment,
CONAMA was formally established as a decentralized commission
immediately under the direction of the Office of the Chilean
President functioning on the national and regional\1 levels. 

At the national level, CONAMA will be responsible for transregional
and international coordination efforts on the environment.  The
national-level organization will consist of a Board of Directors, an
executive directorship, and a Council of Advisers.  The Board of
Directors is to be composed of various government ministers and is
responsible for the higher administration of the commission.  The
Minister Secretary General of the presidency will preside as
Chairman; other members will include the Minister of Economics,
Promotion, and Reconstruction; the Minister of Public Works; the
Minister of Agriculture; the Minister of National Properties; the
Minister of Health; the Minister of Mining; the Minister of Housing
and Urbanization; the Minister of Transportation and
Telecommunications; and the Minister of Planning and Cooperation. 

The Executive Director is responsible for coordination between
regions and for daily administrative activities.  He is designated by
the President and is the highest authority and representative of the
National Commission on the Environment. 

The Council of Advisers is to respond to environmental questions
posed by the Board of Directors and issues opinions on environmental
policy.  The Council is to consist of two science experts, two
representatives of environmental organizations, two representatives
of independent academic centers who study environmental affairs, two
representatives of the business community, and two representatives of
labor as well as a representative of the President. 

The new law also calls for the establishment of a Regional Commission
on the Environment in each region of Chile.  Each regional commission
will be responsible for addressing problems and issues confined to
the individual region.  Each regional commission will parallel in
structure at the regional level CONAMA's structure at the national
level.  Each regional commission will consist of regional officials
and representatives.  Each Regional Intendant\2 will preside over the
environmental commission in his respective region.  Other members of
the regional commissions will include regional governors,\3 the
regional Ministry secretaries, and the Regional Director of the
National Commission on the Environment.  Regional Councils of
Advisers are to address questions on the environment posed by the
regional commissions.  The Regional Councils will have private
representatives comparable to that of the Council of Advisers, and a
representative of the Regional Intendant. 

CONAMA has several mandates to protect the environment.  CONAMA's
primary functions include (1) advising the President on environmental
policy, (2) coordinating all government agency activities affecting
the environment, (3) collaborating with other agencies in the
development of environmental quality standards, (4) imposing
pollution prevention and abatement plans when necessary, and (5)
administering Chile's new environmental impact system.  CONAMA is
also responsible for maintaining a national public information system
on the environment and financing various environmental projects and
activities.  On environmental projects linked to international
financing or assistance, CONAMA serves as the coordinator and
national representative for government agencies. 


--------------------
\1 Chile is divided into 12 numbered regions for administrative
purposes, plus the Santiago metropolitan region. 

\2 The Regional Intendant is the supreme governing authority of the
region. 

\3 These are lower-level administrative officials within a region. 


      SYSTEM FOR THE EVALUATION OF
      ENVIRONMENTAL IMPACT
------------------------------------------------------- Appendix I:3.1

All projects or activities that are likely to affect the environment
require evaluation by CONAMA to ensure compliance with environmental
standards.  Through the System for the Evaluation of Environmental
Impact, CONAMA is to evaluate projects and activities in conjunction
with the government agencies responsible for issuing related
environmental permits or decisions.  CONAMA is responsible for
creating the system's procedures, which are to be administered in a
nondiscriminatory manner.  For an evaluation, the project or activity
sponsor must submit either an environmental impact study or an
environmental impact statement.  The type of documentation required
depends upon the expected effects of the project or activity. 

Projects or activities that are likely to risk human health or change
the landscape, cultural heritage sites, renewable natural resources,
or ways of life will require an environmental impact study.  The
environmental impact study must contain a description of the project
and its effects, measures to be taken to eliminate or minimize risks
associated with the project, and a plan for complying with
environmental legislation.  The Basic Law on the Environment requires
CONAMA to include the following administrative procedures when
evaluating environmental impact studies:  (1) consultation with
government agencies responsible for granting related government
permits; (2) fixed deadlines for evaluating projects; (3) mechanisms
for requesting clarification, rectification, and amplification of
studies if necessary; (4) participation of citizens' organizations;
and (5) notification to interested parties of the final approval. 

Projects or activities that do not require an environmental impact
study but are still likely to affect the environment will require an
environmental impact statement.  This statement must be in the form
of a sworn affidavit declaring the project or activity to be in
compliance with environmental legislation. 


      CHILE'S ENVIRONMENTAL
      ACTIVITIES TO DATE
------------------------------------------------------- Appendix I:3.2

CONAMA has worked to identify and address a number of Chile's most
pressing environmental problems.  In 1992, CONAMA issued a study for
the United Nations on Chile's environment and economic development. 
The following year, CONAMA issued a summary of the country's
principal environmental challenges by region.  CONAMA has also
developed legislative proposals and guidelines.  In April 1993,
CONAMA published a proposal for a national action plan on
biodiversity.  Also, in September 1993, CONAMA issued guidelines for
the evaluation of foreign investment's impact on the environment.  In
addition, working in conjunction with the Ministry of Agriculture,
CONAMA issued a proposal for a national soil conservation plan in
January 1994. 

Chile has signed several international agreements dealing with the
environment.  These agreements cover a wide variety of problems,
including protection of the ozone layer, Antarctica, biodiversity,
and marine life.  Chile is also a party to international agreements
on such topics as climate change and the transboundary movement of
hazardous materials.  The Chilean government is implementing action
programs in accordance with several of these agreements.  Through one
of these programs, Chile expects to meet its commitment to reduce the
production of certain ozone-depleting substances under the Montreal
Protocol\4 to the 1985 Vienna Convention for the Protection of the
Ozone Layer 4 years early. 


--------------------
\4 Parties to the Montreal Protocol agreed, effective January 1989,
to limit and reduce the use of specific substances that deplete the
ozone layer. 


METHYL BROMIDE FUMIGATION OF
MONTEREY PINE LOG IMPORTS FROM
CHILE
========================================================== Appendix II

The U.S.  Department of Agriculture's (USDA) Animal and Plant Health
Inspection Service (APHIS) has established interim regulations to
allow imports of Monterey pine logs from Chile to the United States. 
These regulations require fumigation of the logs with methyl bromide,
a broad-spectrum pesticide, to guard against potential introduction
of exotic pests into the United States.\1 APHIS regulations require
that after fumigation, the enclosure where the process takes place
must be aerated until a concentration level of no greater than 5
parts per million is detected.  Based on Occupational Safety and
Health Administration (OSHA) recommendations, exposure to
concentration levels of methyl bromide of 5 parts per million or less
should not pose an undue risk to U.S.  workers who handle logs that
have been treated with this product.  Nevertheless, methyl bromide
has been internationally recognized to be an ozone depleter and is
being phased out under the 1990 Clean Air Act (2 U.S.C.  7671(c)). 
Signatories to the Montreal Protocol have also taken steps to limit
the chemical's use. 


--------------------
\1 Methyl bromide is considered a broad-spectrum pesticide because it
is effective against many different types of pests. 


   BACKGROUND
-------------------------------------------------------- Appendix II:1

The continuing expansion of the Chilean forestry sector has increased
producers' ability to export a wide variety of wood products.  In
1991, Chile harvested 11.4 million cubic meters of Monterey pine.  It
is estimated that by 2015, Chile will have 30 million cubic meters of
Monterey pine available for harvest.  According to forest industry
and government officials, Chile intends to further develop exports of
high-value-added wood products.  In the past, Chile has exported
lumber and furniture to the United States and is now looking to
export Monterey pine logs. 

Mills in the Pacific Northwest are interested in Monterey pine logs
from Chile as an additional source of unprocessed wood.  The Monterey
pine provides high-quality timber that can serve as a substitute for
domestically grown U.S.  ponderosa pine and sugar pine.  There have
been shortages of domestically grown pines due to recent restrictions
limiting the harvesting on federal lands. 

In the past, the United States has received only limited log
shipments from all countries.  These shipments have generally been
small, containing no more than 15 logs, and until recently they were
only subject to a visual inspection by APHIS officials upon arrival. 
However, with an increased domestic demand for logs, shipments have
become larger and more frequent, giving rise to concerns about the
dangers of importing logs that may carry exotic pests.  APHIS is
concerned that log imports could infest U.S.  forests with exotic
pests and threaten domestic timber supplies.  Therefore, regulations
have been imposed to minimize the risks of importing infested logs. 


   APHIS ESTABLISHES IMPORT
   REGULATIONS
-------------------------------------------------------- Appendix II:2

Before allowing importation of Monterey pine logs from Chile, APHIS
called on the U.S.  Forest Service to conduct a risk assessment of
pests associated with Monterey pine logs grown in Chile. 
Specifically, the Forest Service set out to (1) identify the pests
that might be introduced with Chilean logs into the United States,
(2) assess the potential for the introduction and establishment of
these pests, and (3) evaluate the impact these pests might have on
U.S.  forests.  The Forest Service concluded that there were
sufficient reasons to be concerned about the potential introduction
of exotic pests with log imports from Chile and that mitigation
measures were appropriate for Chilean pine logs entering the United
States. 

Based on the pest risk assessment conducted by the Forest Service, in
November 1993 APHIS established interim regulations allowing log
imports from Chile.  To limit the introduction of pests, APHIS
regulations require that all logs be de-barked before leaving Chile
and undergo a methyl bromide fumigation before entering the United
States.  Once in the United States, the processed wood must be heat
treated.  According to U.S.  embassy officials, as of April 1994,
Chile had not exported logs to the United States since the interim
regulations were established.  Chile was still in the process of
testing the new fumigation procedures required by APHIS. 

In addition to Chile, other countries, including Russia, have
expressed an interest in exporting logs to the United States. 
Consequently, APHIS has proposed general regulations to govern log
imports from all countries.  When these regulations are finalized,
they will supersede the interim regulations now in effect for Chilean
logs. 


      NO HEALTH RISKS POSED TO
      U.S.  WORKERS
------------------------------------------------------ Appendix II:2.1

Methyl bromide is a highly toxic chemical used on many commodities
for killing a wide range of agricultural pests.  However, experts
agree that after it has been applied, methyl bromide generally
dissipates quickly, leaving negligible residues.  According to APHIS
and Environmental Protection Agency (EPA) officials, methyl bromide
is used extensively in agricultural operations in the United States. 
Data provided by OSHA suggest that exposure to high concentrations of
methyl bromide, or even chronic exposure to lower levels of this
chemical, can be toxic to humans.  Exposure to high levels of methyl
bromide can result in acute poisoning, which is characterized by lung
irritation, convulsions, and coma.  Chronic exposure to lower levels
of methyl bromide affects the nervous system, producing muscle
weakness and pain, loss of coordination, inability to focus one's
eyes, and behavioral changes.  The National Institute for
Occupational Safety and Health recommended that methyl bromide be
considered a potential occupational carcinogen, but OSHA does not
believe there is currently enough evidence to support this
recommendation. 

APHIS requirements for treatment of Chilean logs with methyl bromide
call for fumigation to take place in Chile.  The logs and ambient air
must be at a temperature of 40 degrees Fahrenheit or above throughout
the fumigation process.  Furthermore, minimum concentration levels of
methyl bromide and time requirements for fumigation must be met. 
After the logs are fumigated, the treatment chamber must be aerated
until gas concentration levels of 5 parts per million or less are
detected, as stipulated by APHIS.  This is based on EPA standards and
is incorporated in Schedule T-404 of APHIS' Plant Protection and
Quarantine Manual.  According to an APHIS official, aeration can
usually be completed within an hour, and commodities can be released
on the market the same day. 

To protect the occupational health of U.S.  workers, OSHA sets
permissible exposure limits for toxic substances used in the
workplace, including methyl bromide.  Currently, OSHA enforces a
permissible exposure limit for methyl bromide of 20 parts per million
or 80 milligrams per cubic meter with a skin designation.\2 According
to OSHA officials, while this amount is the legally enforceable
exposure limit for concentrations of methyl bromide, recent studies
have shown that this limit may not protect workers from risks
associated with chronic exposure. 

OSHA has recommended lowering the permissible exposure limit to a 5
parts per million 8-hour time-weighted average, with a skin
designation.  In 1989, as part of an effort to update permissible
exposure limits on over 400 chemicals, OSHA had lowered the
permissible exposure limit on methyl bromide to 5 parts per million. 
However, according to OSHA officials, in July 1992 this decision was
overturned by the Eleventh Circuit Court of Appeals in Atlanta
(AFL-CIO v.  OSHA, 965 F.2d 962 (11th Cir.  1992)).  OSHA is
currently supporting a reform of the Occupational Safety and Health
Act of 1970 that would allow it to lower the permissible exposure
limit for methyl bromide.  Based on OSHA recommendations, exposure to
concentrations of methyl bromide of 5 parts per million or less, as
required by APHIS, should not pose an undue risk to U.S.  workers who
handle Chilean pine logs treated with this chemical. 


--------------------
\2 OSHA's skin designation refers to the fact that methyl bromide can
be absorbed through the skin as well as inhaled in breathing. 


   PHASING OUT OF METHYL BROMIDE
-------------------------------------------------------- Appendix II:3

Methyl bromide has been found to be an effective broad-spectrum
pesticide.  However, it has also been internationally recognized to
be an ozone depleter and is scheduled to be phased out of use under
the Clean Air Act. 

EPA is responsible for regulating the use of methyl bromide under
both the Federal Insecticide, Fungicide, and Rodenticide Act and the
Clean Air Act.  As with all pesticides, methyl bromide must be
registered with EPA.  EPA now requires that methyl bromide be
reregistered, due to amendments to the Federal Insecticide,
Fungicide, and Rodenticide Act made in 1988.  Reregistration is
contingent upon producers submitting data to prove that methyl
bromide meets existing standards.  EPA has set a schedule for phasing
out methyl bromide, as required under the Clean Air Act:  in 1994,
production will be frozen at 1991 levels; by 2001, the production and
importation of methyl bromide will be completely banned.  According
to APHIS officials, its use on imported products before their entry
to the United States will also be prohibited.  There are no interim
reductions scheduled between 1994 and 2001. 

In 1992, signatories of the Montreal Protocol, including the United
States and Chile, agreed to limit the use of methyl bromide. 
According to the agreement, by 1995 production must be frozen at 1991
levels, except for quarantine and shipment uses.  Exemptions from
these obligations are available for developing countries. 
Signatories have also agreed to attempt to reduce emissions of methyl
bromide into the atmosphere.  An international expert assessment team
is scheduled to issue a report on methyl bromide in late 1994, and
the signatories are to meet in 1995 to agree on a general control
scheme for the pesticide.  The requirements of the Montreal Protocol
are less stringent than the requirements under the Clean Air Act. 

Efforts are being made to find a safe substitute for methyl bromide. 
In the United States, both public and private funds support this
research.  However, since methyl bromide is a broad-spectrum
pesticide, it is doubtful that any one substitute will be able to
serve all the purposes that methyl bromide does.  Therefore, it will
be necessary to develop multiple substitutes.  According to Forest
Service officials, unless alternative pesticides are developed,
Monterey pine logs from Chile will have to be heat treated before
they enter the United States.  As a result, because heat treatment is
very expensive, Chile may be driven out of the U.S.  timber market. 


PESTICIDES REGISTERED IN CHILE
THAT ARE PROHIBITED OR NOT
REGISTERED IN THE UNITED STATES
========================================================= Appendix III


   PESTICIDES REGISTERED IN CHILE
   USED IN THE PRODUCTION OF
   FRUITS AND VEGETABLES THAT DO
   NOT HAVE EPA TOLERANCES
   ESTABLISHED FOR THE ACTIVE
   INGREDIENTS
------------------------------------------------------- Appendix III:1

Azinphos Ethyl
Azocyclotin
Bitertanol
Bromopropylate
Bupirimate
Carbendazim
Carbosulfan
Cartap Chlorhydrate
Demethon-S-Methyl
Dichlofluanid
Dichloran
Dithianon
Dyphonate
Ethiofencarb
Etoprophos
Fenthoate
Flufenoxuron
Flusilazol
Futriazol
Hexaconazole
Isotiazolin
Omethoate
Penconazole
Penconazole+Mancozeb
Phenamiphos
Phosfamidon
Pirimicarb
Propineb
Prothiofos
Pyrazofos
Quinalphos
Tetracyclin Oxi
Thiometon
Triflumizole
Triflumuron
Vamidothion

Note:  This information is current as of July 1994. 

Source:  Chilean Exporters Association, Agenda de Pesticidas. 


   OTHER PESTICIDES REGISTERED IN
   CHILE THAT DO NOT HAVE EPA
   TOLERANCES ESTABLISHED FOR THE
   ACTIVE INGREDIENTS OR ARE
   PROHIBITED IN THE UNITED STATES
------------------------------------------------------- Appendix III:2

Dienochlor
Dinoseb and salts
Fenaminosulf
Fentin acetate
Flubenzimine
Flutriafol
Kasugamycin
Phenthoate
Phoxim

Note:  While these pesticides are not listed in the Agenda de
Pesticidas prepared by the Chilean Exporters Association, they were
identified in previous GAO work and confirmed as registered in Chile
by Agriculture and Livestock Service (Servicio Agrï¿½cola y
Ganadero--SAG) officials. 

Source:  SAG. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV


   GENERAL GOVERNMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix IV:1

Curtis Turnbow, Assistant Director
Rona Mendelsohn, Evaluator


   LOS ANGELES REGIONAL OFFICE
-------------------------------------------------------- Appendix IV:2

Patrick Gormley, Core Group Manager
Juan Gobel, Project Manager
Carolyn Marie Black, Evaluator
Catherine McFarland, Evalutor
