[Federal Register Volume 69, Number 77 (Wednesday, April 21, 2004)]
[Notices]
[Pages 21593-21594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9035]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. WTO/DS-309]


WTO Dispute Settlement Proceeding Regarding China--Value-Added 
Tax on Integrated Circuits

AGENCY: Office of the United States Trade Representative.

ACTION: Notice; request for comments.

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SUMMARY: The Office of the United States Trade Representative (USTR) is 
providing notice that on March 18, 2004, in accordance with the 
Marrakesh Agreement Establishing the World Trade Organization (WTO 
Agreement), the United States requested consultations with the People's 
Republic of China (China) regarding its value-added tax (VAT) on 
integrated circuits (ICs).
    USTR invites written comments from the public concerning the issues 
raised in this dispute.

DATES: Although USTR will accept any comments received during the 
course of the dispute settlement proceedings, comments should be 
submitted on or before May 17, 2004, to be assured of timely 
consideration by USTR.

ADDRESSES: Comments should be submitted (i) electronically, to 
[email protected], with ``China VAT (DS309)'' in the subject line, or 
(ii) by fax, to Sandy McKinzy at (202) 395-3640, with a confirmation 
copy sent electronically to [email protected], in accordance with the 
requirements for submissions set out below.

FOR FURTHER INFORMATION CONTACT: David L. Weller, Assistant General 
Counsel, Office of the United States Trade Representative, 600 17th 
Street, NW., Washington, DC, (202) 395-3582.

SUPPLEMENTARY INFORMATION: Section 127(b) of the Uruguay Round

[[Page 21594]]

Agreements Act (URAA) (19 U.S.C. 3537(b)(1)) requires that notice and 
opportunity for comment be provided after the United States submits or 
receives a request for the establishment of a WTO dispute settlement 
panel. Consistent with this obligation, but in an effort to provide 
additional opportunity for comment, USTR is providing notice that 
consultations have been requested pursuant to the WTO Dispute 
Settlement Understanding (DSU). If such consultations should fail to 
resolve the matter and a dispute settlement panel is established 
pursuant to the DSU, such panel, which would hold its meeting in 
Geneva, Switzerland, would be expected to issue a report on its 
findings and recommendations within six to nine months after it is 
established.

Major Issues Raised by the United States

    On March 18, 2004, the United States requested consultations with 
the Government of China pursuant to Articles 1 and 4 of the DSU, 
Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 
1994), and Article XXII:1 of the General Agreement on Trade in Services 
(GATS) regarding China's VAT on ICs.
    China provides for a 17 percent VAT on ICs. However, USTR 
understands that enterprises in China are entitled to a partial refund 
of the VAT on ICs that they have produced, resulting in a lower VAT 
rate on their products. China therefore appears to be subjecting 
imported ICs to higher taxes than applied to domestic ICs and to be 
according less favorable treatment to imported ICs.
    In addition, USTR understands that China allows for a partial 
refund of VAT for domestically-designed ICs that, because of 
technological limitations, are manufactured outside of China. China 
thus appears to be providing for more favorable treatment of imports 
from one Member than another, and discriminating against services and 
service suppliers of other Members.
    USTR understands that China implements its preferential tax for 
domestically-produced or designed ICs through the following measures:
     Document 18 (June 24, 2000), Notice of the State 
Council Regarding Issuance of Certain Policies Concerning the 
Development of the Software Industry and Integrated Circuit Industry;
     Document 25 (September 22, 2000), Notice of the 
Ministry of Finance, State Administration of Taxation, and General 
Administration of Customs on Relevant Tax Policy Issues Concerning 
Encouraging the Development of the Software Industry and the Integrated 
Circuit Industry;
     Document 86 (March 7, 2002), Notice of the 
Ministry of Information Industry Regarding Issuance of Regulations on 
Certification of Integrated Circuit Design Enterprises and Products;
     Document 70 (October 10, 2002), Notice of the 
Ministry of Finance, State Administration of Taxation Regarding 
Furthering Tax Policies to Encourage the Development of the Software 
Industry and Integrated Circuit Industry;
     Document 140 (October 25, 2002), Notice of the 
Ministry of Finance, State Administration of Taxation Regarding Tax 
Policies for Imports of Integrated Circuit Products Domestically 
Designed and Fabricated Abroad; and
     Document 1384 (December 23, 2003), Notice of the 
State Administration of Taxation Regarding Issuance of the Catalogue of 
Integrated Circuit Products Enjoying Preferential Tax (First Batch); as 
well as any amendments, related measures, or other implementing 
measures.
    USTR therefore believes that these measures are inconsistent with 
the obligations of China under Articles I and III of the GATT 1994, the 
Protocol on the Accession of the People's Republic of China to the WTO, 
and Article XVII of the GATS.

Public Comment: Requirements for Submissions

    Interested persons are invited to submit written comments 
concerning the issues raised in the dispute. Persons submitting 
comments may either send a copy by fax to Sandy McKinzy at (202) 395-
3640, or transmit a copy electronically to [email protected], with 
``China VAT (DS309)'' in the subject line. For documents sent by fax, 
USTR requests that the submitter provide a confirmation copy to the 
electronic mail address listed above.
    USTR encourages the submission of documents in Adobe PDF format, as 
attachments to an electronic mail. Interested persons who make 
submissions by electronic mail should not provide separate cover 
letters; information that might appear in a cover letter should be 
included in the submission itself. Similarly, to the extent possible, 
any attachments to the submission should be included in the same file 
as the submission itself, and not as separate files.
    Comments must be in English. A person requesting that information 
contained in a comment submitted by that person be treated as 
confidential business information must certify that such information is 
business confidential and would not customarily be released to the 
public by the commenter. Confidential business information must be 
clearly designated as such and ``BUSINESS CONFIDENTIAL'' must be marked 
at the top and bottom of the cover page and each succeeding page.
    Information or advice contained in a comment submitted, other than 
business confidential information, may be determined by USTR to be 
confidential in accordance with section 135(g)(2) of the Trade Act of 
1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information 
or advice may qualify as such, the submitter--
    (1) Must clearly so designate the information or advice;
    (2) Must clearly mark the material as ``SUBMITTED IN CONFIDENCE'' 
at the top and bottom of the cover page and each succeeding page; and
    (3) Is encouraged to provide a non-confidential summary of the 
information or advice.
    Pursuant to section 127(e) of the URAA (19 U.S.C. 3537(e)), USTR 
will maintain a file on this dispute settlement proceeding, accessible 
to the public, in the USTR Reading Room, which is located at 1724 F 
Street, NW., Washington, DC 20508. The public file will include non-
confidential comments received by USTR from the public with respect to 
the dispute; if a dispute settlement panel is convened, the U.S. 
submissions to that panel, the submissions, or non-confidential 
summaries of submissions, to the panel received from other participants 
in the dispute, as well as the report of the panel; and, if applicable, 
the report of the Appellate Body. An appointment to review the public 
file (Docket WTO/DS-309, China VAT Dispute) may be made by calling the 
USTR Reading Room at (202) 395-6186. The USTR Reading Room is open to 
the public from 9:30 a.m. to noon and 1 p.m. to 4 p.m., Monday through 
Friday.

Daniel E. Brinza,
Assistant United States Trade Representative for Monitoring and 
Enforcement.
[FR Doc. 04-9035 Filed 4-20-04; 8:45 am]
BILLING CODE 3190-W3-P