The U.S.–Colombia Free Trade Agreement: A Comprehensive Analysis of Key Provisions and Potential Implications

By Castillo Grau Abogados

The U.S.–Colombia Free Trade Agreement (FTA), officially known as the Trade Promotion Agreement (TPA), entered into force on May 15, 2012. This comprehensive agreement aims to eliminate tariffs, reduce trade barriers, and promote economic cooperation between the United States and Colombia. It encompasses various sectors, including market access, intellectual property, customs procedures, and investment protections. Recently, Colombian President Gustavo Petro has expressed intentions to reassess Colombia's participation in the FTA, raising questions about the potential impacts on bilateral trade and investment.

This measure was contemplated by President Petro as a result of the United States government's decision to cancel his visa after Petro, during the United Nations Assembly meeting, took to the streets of New York with a megaphone to ask members of the US military not to obey President Trump's orders due to the conflict in Gaza.

Market Access and Tariff Elimination

Upon implementation, over 80% of U.S. consumer and industrial goods exports to Colombia became duty-free. This immediate tariff elimination included products such as agricultural and construction equipment, building products, aircraft and parts, fertilizers, information technology equipment, medical and scientific equipment, and wood. For remaining products, tariffs were scheduled to be phased out over ten years, with average tariffs on U.S. industrial exports ranging from 7.4% to 14.6%. This structured tariff schedule aimed to increase U.S. exports by providing greater market access and reducing trade barriers.

Investment Protections

Chapter Ten of the FTA focuses on investment protections, establishing a framework to promote and protect investments between the two countries. Key provisions include:

• National Treatment: Each party must accord to investors of the other party treatment no less favorable than that it accords to its own investors.

• Most-Favored-Nation Treatment: Each party must accord to investors of the other party treatment no less favorable than that it accords to investors of any other country.

• Minimum Standard of Treatment: Each party must accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.

• Expropriation and Compensation: Investments cannot be expropriated or nationalized except for a public purpose, in a nondiscriminatory manner, and with prompt, adequate, and effective compensation.

• Performance Requirements: The agreement prohibits certain performance requirements, such as export requirements and local content requirements, to ensure a fair investment environment.

These provisions aim to create a stable and predictable environment for investors, fostering increased investment flows between the two nations.

Intellectual Property Rights

Chapter Sixteen of the FTA addresses intellectual property rights, aiming to strengthen protections and enforcement mechanisms. Key provisions include:

• Copyrights: Protection for authors' rights, including the right to authorize or prohibit the creation of derivative works.

• Trademarks: Affirmation of commitments under the Trademark Law Treaty and establishment of systems for resolving disputes related to domain names.

• Patents: Protection against arbitrary revocation and provision of data exclusivity for test data submitted for regulatory approval.

• Enforcement: Measures to combat digital piracy and unauthorized distribution over the internet, including anti-circumvention provisions.

These provisions aim to create a secure environment for creators and businesses, fostering innovation and facilitating trade.

Customs Administration and Trade Facilitation

Chapter Five of the FTA focuses on customs administration and trade facilitation, aiming to streamline procedures and reduce trade barriers. Key provisions include:

• Publication of Customs Laws and Regulations: Each party is required to publish its customs laws, regulations, and general administrative procedures, including making them available on the internet.

• Release of Goods: Each party must adopt simplified customs procedures for the efficient release of goods, aiming to release goods within 48 hours of arrival.

• Automation: Each party must endeavor to use information technology to expedite procedures for the release of goods, including electronic submission and processing of information and data.

• Risk Management: Each party must adopt or maintain risk management systems to focus inspection activities on high-risk goods and simplify the clearance of low-risk goods.

• Cooperation: The parties must cooperate in achieving compliance with their respective laws and regulations pertaining to the implementation and operation of the provisions of the agreement governing importations or exportations.

These provisions aim to facilitate trade by reducing delays and costs associated with customs procedures.

Rules of Origin

Chapter Four of the FTA addresses rules of origin, which determine whether a product qualifies for preferential tariff treatment under the agreement. Key provisions include:

• Originating Goods: A good is considered originating if it is wholly obtained or produced entirely in the territory of one or more of the parties, or if it is produced entirely in the territory of one or more of the parties and each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification or satisfies a regional value content requirement.

• Regional Value Content: The agreement provides methods for calculating regional value content, which is used to determine whether a good qualifies as originating.

• De Minimis Rule: The agreement allows for a de minimis rule, permitting a certain percentage of non-originating materials in a product without affecting its originating status.

• Certification of Origin: Importers must submit a claim for the FTA rate, which may be done by submitting a certification of origin or an importer attestation.

These provisions aim to ensure that only goods with substantial production in the parties' territories benefit from preferential tariff treatment.

Potential Implications of Modifying the FTA

President Petro's statements regarding the potential termination or renegotiation of the FTA raise significant considerations. Modifying or withdrawing from the agreement could impact the investment protections currently afforded to U.S. and Colombian entities. Such changes might affect the enforcement of intellectual property rights, customs procedures, and rules of origin, potentially leading to increased risks of infringement, reduced incentives for innovation, and disruptions in trade flows. Additionally, alterations could influence Colombia's compliance with international standards, potentially affecting its standing in global trade forums.