[Federal Register Volume 72, Number 34 (Wednesday, February 21, 2007)]
[Notices]
[Pages 7914-7915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2855]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. WTO/DS-358]


WTO Dispute Settlement Proceeding Regarding China--Certain 
Measures Granting Refunds, Reductions or Exemptions From Taxes and 
Other Payments

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 February 2, 2007, in accordance with the 
Marrakesh Agreement Establishing the World Trade Organization (WTO 
Agreement), the United States requested consultations regarding certain 
measures granting refunds, reductions or exemptions from taxes and 
other payments owed to the government by enterprises in China. That 
request may be found at http://www.wto.org contained in a document 
designated as WT/DS358/1. 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 consultations, comments should be submitted on or before 
March 12, 2006 to be assured of timely consideration by USTR.

ADDRESSES: Comments should be submitted (i) electronically, to 
[email protected], with ``China Prohibited Subsidies (DS358)'' in the 
subject line, or (ii) by fax, to Sandy McKinzy at (202) 395-3640, with 
a confirmation copy sent electronically to the electronic mail address 
above, in accordance with the requirements for submission set out 
below.

FOR FURTHER INFORMATION CONTACT: Arun Venkataraman, Associate General 
Counsel, Office of the United States Trade Representative, 600 17th 
Street, NW., Washington, DC (202) 395-5694.

SUPPLEMENTARY INFORMATION: Section 127(b) of the Uruguay Round 
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. In an effort to provide additional opportunity for comment, USTR 
is providing notice that consultations have been requested pursuant to 
the WTO Understanding on Rules and Procedures Governing the Settlement 
of Disputes (``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 meetings 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 February 2, 2007, the United States requested consultations with 
China regarding certain measures granting refunds, reductions or 
exemptions from taxes and other payments owed to the government by 
enterprises in China. These measures include the following, as well as 
any amendments and related or implementing measures:
    1. Circular of the State Administration of Taxation Concerning 
Transmitting the Interim Measure for the Administration of Tax Refunds 
to Enterprises with Foreign Investment for Their Domestic Equipment 
Purchases;
    2. Circular of the Ministry of Finance and the State Administration 
of Taxation Concerning the Issue of Tax Credit for Business Income Tax 
for Homemade Equipment Purchased by Enterprises with Foreign Investment 
and Foreign Enterprises, read in conjunction with Circular of the State 
Administration of Taxation on Printing and Distributing the Measures 
Concerning Business Income Tax Credit on the Investment of Enterprises 
with Foreign Investment and Foreign Enterprises by Way of Purchasing 
Homemade Equipment;
    3. Circular on Distribution of Interim Measures Concerning 
Reduction and Exemption of Enterprise Income Tax for Investment in 
Domestically Made Equipment for Technological Renovation;
    4. Articles 75(7) and 75(8) of the Rules for Implementation of the 
Income Tax Law of the People's Republic of China on Enterprises with 
Foreign Investment and Foreign Enterprises, read in conjunction with 
Articles 8 and 9 of the Provisions of the State Council on the 
Encouragement of Foreign Investment and Articles 6 and 8 of the Income 
Tax Law of the People's Republic of China on Enterprises with Foreign 
Investment and Foreign Enterprises;
    5. Article 73(6) of the Rules for Implementation of the Income Tax 
Law of the People's Republic of China on Enterprises with Foreign 
Investment and Foreign Enterprises, read in conjunction with Articles 6 
and 7 of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises and Section 
XIII of the Catalogue for the Guidance of Foreign Investment 
Industries;
    6. Article 81 of the Rules for Implementation of the Income Tax Law 
of the People's Republic of China on Enterprises with Foreign 
Investment and Foreign Enterprises, read in conjunction with Articles 6 
and 10 of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises and Article 
10 of the Provisions of the State Council on the Encouragement of 
Foreign Investment;
    7. Article 3 of the Provisions of the State Council on the 
Encouragement of Foreign Investment;
    8. Articles 3 and 6 of the Circular of the People's Bank of China, 
the State Administration of Foreign Exchange, the Ministry of Foreign 
Trade and Economic Cooperation and the State Administration of Taxation 
Concerning Printing and Distribution Detailed Rules on Rewarding and 
Punishment Concerning Provisional Regulations over Examination of 
Export Collections of Foreign Exchange;
    9. Circular of the State Council Concerning the Adjustment in the 
Taxation Policy of Imported Equipment, read in conjunction with and 
Section XIII of the Catalogue for the Guidance of Foreign Investment 
Industries;
    The above laws and regulations of China appear to constitute 
subsidies prohibited under WTO rules. Specifically, the first three 
items above appear to be import substitution subsidies, conditioning 
income tax and value-added tax refunds on the recipient's purchase of 
domestic over imported goods. The last six items appear to be export 
subsidies, to the extent that they offer refunds, reductions or 
exemptions from taxes and other payments owed to the government, on the 
condition that the beneficiary enterprises meet certain export 
performance criteria. Furthermore, by conditioning financial incentives 
on an enterprise's purchase of domestic over imported equipment, the 
three import substitution subsidies also appear to treat imported 
products less favorably than domestic products.
    USTR believes these measures are inconsistent with China's 
obligations under Article 3 of the Agreement on Subsidies and 
Countervailing Measures, Article III of the General Agreement on

[[Page 7915]]

Tariffs and Trade 1994, Article 2 of the Agreement on Trade-Related 
Investment Measures, as well as Parts I.1.2, I.7.2-7.3, and I.10.3 of 
the Protocol on the Accession of the People's Republic of China, 
including paragraphs 167 and 203 of the Working Party Report.

Public Comment: Requirements for Submissions

    Interested persons are invited to submit written comments 
concerning the issues raised in the dispute. Comments should be 
submitted (i) electronically, to [email protected], with ``China 
Prohibited Subsidies (DS358)'' in the subject line, or (ii) by fax, to 
Sandy McKinzy at (202) 395-3640, with a confirmation copy sent 
electronically to the electronic mail address 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. 
Persons who submit confidential business information are encouraged 
also to provide a non-confidential summary of the information.
    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 ASUBMITTED 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. The USTR Reading Room is open to the 
public, by appointment only, from 10 a.m. to noon and 1 p.m. to 4 p.m., 
Monday through Friday. An appointment to review the public file (Docket 
WTO/DS-358, China Prohibited Subsidies Dispute) may be made by calling 
the USTR Reading Room at (202) 395-6186.

Daniel Brinza,
Assistant United States Trade Representative for Monitoring and 
Enforcement.
[FR Doc. E7-2855 Filed 2-20-07; 8:45 am]
BILLING CODE 3190-W7-P