U.S.-China Trade: Summary of 2003 World Trade Organization
Transitional Review Mechanism for China (25-JAN-05, GAO-05-209R).
China's 2001 accession to the World Trade Organization (WTO)
raised expectations with Congress and the private sector about
the prospects for China to reform its markets and allow greater
access to foreign goods and services. As part of our long-term
body of work related to China's membership in the WTO, we
reported in October 2004 on how the U.S. Trade Representative
(USTR) and the Departments of Commerce, State, and Agriculture
were positioned to monitor and enforce China's compliance with
its WTO commitments in 2003. In that report, we examined the
multilateral annual WTO review of China's progress, referred to
as the Transitional Review Mechanism (TRM). We found that the TRM
has ongoing limitations in its participation and its procedures.
We made recommendations to improve related U.S. government
activities. In a subsequent request, Congress asked us to provide
detailed information about the TRM process in 2003 so that they
could better gauge the level of activity and the efficacy of the
United States and other WTO members' efforts to utilize it.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-209R
ACCNO: A16256
TITLE: U.S.-China Trade: Summary of 2003 World Trade
Organization Transitional Review Mechanism for China
DATE: 01/25/2005
SUBJECT: Foreign governments
International agreements
International economic relations
International organizations
International relations
International trade
International trade regulation
China
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GAO-05-209R
United States Government Accountability Office Washington, DC 20548
January 25, 2005
The Honorable Max Baucus Ranking Minority Member Committee on Finance
United States Senate
The Honorable Charles B. Rangel Ranking Minority Member Committee on Ways
and Means House of Representatives
The Honorable Sander M. Levin Ranking Minority Member Subcommittee on
Trade Committee on Ways and Means House of Representatives
Subject: U.S.-China Trade: Summary of 2003 World Trade Organization
Transitional Review Mechanism for China
China's 2001 accession to the World Trade Organization (WTO) raised
expectations with Congress and the private sector about the prospects for
China to reform its markets and allow greater access to foreign goods and
services. As part of our longterm body of work related to China's
membership in the WTO, we reported in October 2004 on how the U.S. Trade
Representative (USTR) and the Departments of Commerce, State, and
Agriculture were positioned to monitor and enforce China's compliance with
its WTO commitments in 2003.1 In that report, we examined the multilateral
annual WTO review of China's progress, referred to as the Transitional
Review Mechanism (TRM). We found that the TRM has ongoing limitations in
its participation and its procedures. We made recommendations to improve
related U.S. government activities. In a subsequent request, you asked us
to provide detailed information about the TRM process in 2003 so that you
could better gauge the level of activity and the efficacy of the United
States and other WTO members' efforts to utilize it.
In response to your request, we compiled information about WTO members'
participation and about the particular implementation issues raised by the
United States and other WTO members' during the TRM, using WTO documents.
We
1For more information, see GAO, U.S.-China Trade: Opportunities to Improve
U.S. Government Efforts to Ensure China's Compliance with World Trade
Organization Commitments, GAO-05-53 (Washington, D.C.: Oct. 6, 2004).
GAO-05-209R U.S.-China Trade
organized this information into separate tables for each of the 16 WTO
subsidiary
2
bodies with a role in reviewing China's WTO commitments (encs. I through
XVI). We further discuss our methodology below.
Summary
As seen in the enclosed tables, 11 out of a total of 148 WTO members
participated in the 2003 multilateral review of China's trade commitment
implementation. These members participated in the TRM process by
submitting written questions to China prior to meetings of 16 WTO
subsidiary bodies with a role in the Transitional Review Mechanism (TRM),
or by raising issues verbally with China during these meetings, which
occurred from September to December 2003. Specifically, 7 WTO members both
submitted written questions and discussed issues verbally in some TRM
meetings: the United States, the European Communities, Japan, Chinese
Taipei,3 Australia, Canada, and Mexico. Four other members-Brazil, Korea,
Norway, and Pakistan-only participated verbally during some meetings. The
United States was the most active member in the 2003 TRM, participating
one or both ways in 14 of the 16 subsidiary bodies; the exceptions were
the Committees on Balance-of-Payments Restrictions and Rules of Origin.
Table 1 displays an overview of member participation for the 2003 TRM.
2The subsidiary bodies are described as councils or committees and
generally are organized according to the various trade subjects covered by
the WTO agreements. These subsidiary bodies include the Committees on
Agriculture, Anti-dumping Practices, Balance-of-Payments Restrictions,
Customs Valuation, Import Licensing, Market Access, Rules of Origin,
Safeguards, Sanitary and Phytosanitary Measures, Subsidies and
Countervailing Measures, Technical Barriers to Trade, Trade in Financial
Services, and Trade-Related Investment Measures, as well as Councils for
Trade in Goods, Trade in Services, and Trade-Related Aspects of
Intellectual Property Rights.
3Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu.
Page 2 GAO-05-209R U.S.-China Trade
Table 1: WTO Member Participation in China's Transitional Review
Mechanism, 2003
WTO members Chinese
that submitted WTO members that submission of
Date of written participated in required TRM
WTO subsidiary body meeting questions meeting information
Committee on Agriculture 9/25/2003 EURU.S., Chinese U.S., EC, Chinese N/A
Taipei Taipei
Committee on Import 10/2/2003 U.S., EC, Japan, U.S., EC, Japan, Yes
Licensing Chinese Taipei Chinese Taipei
Committee on Rules of 10/3/2003 Chinese Taipei Chinese Taipei N/A Origin
Committee on Trade-10/3/2003 U.S., EC U.S., EC, Japan, Yes~Related
Investment Brazil ~Measures~
Committee on Customs 10/6/2003 U.S., Chinese U.S., EC, Chinese Yes
Valuation Taipei Taipei
Committee on Market 10/20/2003 U.S., EC, Japan U.S., EC, Japan Yes Access
Committee on 10/20/2003 Japan U.S., EC, Japan Yes
Safeguards
Committee on 10/23/2003 U.S., Japan U.S., Japan N/A
Antidumping Practices
Committee on Subsidies 10/28/2003 U.S., EC, Mexico U.S., EC, Japan, Yes
and Countervailing Mexico
Measures
Committee on Sanitary 10/29/2003 U.S., EC, U.S., EC, Chinese N/A
and Phytosanitary Chinese Taipei Taipei
Measures
Committee on Technical 11/7/2003 U.S., EC, Japan U.S., EC, Japan Yes
Barriers to Trade
Committee on Balance- 11/13/2003 Chinese Taipei Chinese Taipei N/A
of-Payments Restrictions
Council on 11/18/2003 U.S., EC, Japan, U.S., EC, Japan, Yes
Trade-Related
Aspects of Intellectual Chinese Taipei Chinese Taipei,
Property Rights Korea, Pakistan
Council for Trade in 11/26/2003 U.S., EC, Japan U.S., EC, Japan, Yes
Goods Canada
Committee on Trade in 12/1/2003 U.S., EC, Japan, U.S., EC, Japan, N/A
Financial Services Chinese Taipei, Chinese Taipei,
Canada Canada, Australia,
Norway
Council for Trade in 12/5/2003 U.S., EC, Japan, U.S., EC, Japan, Yes
Services Chinese Taipei, Chinese Taipei,
Australia Australia
Source: GAO analysis of WTO documents.
Notes:~Chinese Taipei = Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu.~EC = European Communities.~N/A = not applicable.~
Page 3 GAO-05-209R U.S.-China Trade
The number and scope of issues raised by WTO members during the 2003 TRM
process varied by WTO subsidiary body, as demonstrated in the enclosed
tables. Some committees addressed numerous issues. For example, the
Council on Trade-Related Aspects of Intellectual Property Rights covered
various concerns, including those related to how China treated
semiconductor layout design, pharmaceutical products, and consulting
services. In contrast, only a few issues were brought up in the Committee
on Balance-of-Payments Restrictions. Chinese Taipei was the only member to
raise concerns to this committee, and these took the form of a few
specific questions, such as the rationale behind China's regulation
governing small value trade between Chinese Taipei and China. In addition,
the enclosed tables reveal that some issues are broad in nature, while
others are very technical and specific.
Background
China's December 2001 accession to the WTO resulted in commitments to open
and liberalize its economy so as to offer a more predictable environment
for trade and foreign investment in accordance with WTO rules. However, at
the time of its accession, some WTO members noted that because of the
significant size, rapid growth, and transitional nature of the Chinese
economy, a pragmatic approach should be taken, and this was reflected in
China's accession agreement. China's WTO commitments, many of which were
scheduled to be phased in over time, required China to make extensive
changes to its trade regime. As a result, WTO members, particularly the
United States,4 pushed for China's accession package to include
commitments creating this Transitional Review Mechanism (TRM). This
mechanism, which is unique to China, is intended to be a means for WTO
members to annually review China's implementation of its WTO commitments
and the development of China's trade with other WTO members until all of
China's commitments are phased in.5 This multilateral monitoring process
allows WTO members to better understand China's trade practices and to
communicate their expectations to China.
China's WTO accession agreement defines (1) the scope and process for the
WTO review and (2) the method of exchange of information. First, the
agreement lays out the scope of review and some procedures for China and
WTO members to follow; these require annual reviews by 16 WTO subsidiary
bodies and then a broader review by the WTO General Council, which makes
use of the findings of the subsidiary bodies. The reviews are to occur
annually for eight years, with a final review by the 10th year.6 Second,
China's accession agreement calls for China to provide a broad
4A provision in the legislation authorizing the President to grant
permanent normal trade relations to China stated that "it shall be the
objective of the United States to obtain ... an annual review within the
WTO of the compliance by the People's Republic of China with its terms of
accession to the WTO." Pub. L. 106-286 S: 401, 114 Stat. 900.
5The TRM is in addition to WTO's trade policy review mechanism, which
provides for a broad review of the trade regimes of all WTO members on a
scheduled basis. WTO members viewed the trade policy review mechanism as
insufficient to oversee China's implementation of its commitments and
pursued the TRM.
6The final review can take place at an earlier date to be decided by the
General Council.
Page 4 GAO-05-209R U.S.-China Trade
range of information annually to the WTO subsidiary bodies for their
reviews on its (1) economic policies, (2) framework for making and
enforcing policies, (3) policies affecting trade in goods and services,
and (4) trade-related intellectual property regime.7
In October 2004, we reported on how the USTR and the Departments of
Commerce, Agriculture, and State pursued China's WTO compliance in 2003.
Among other things, we found that overall WTO member participation in the
review declined from the previous year, and U.S. submission of questions
was less timely. Furthermore, procedural and other types of problems that
arose during the 2002 review continued to limit the effectiveness of the
2003 TRM. Specifically, the United States and some other members were
disappointed that China refused to provide written answers to members'
written questions in advance of TRM meetings. Additionally, some members
were disappointed that the review did not result in any conclusions or
recommendations regarding China's implementation. Nevertheless, the TRM
has benefits, and we concluded that these could be enhanced by increased
member participation and earlier U.S. submissions, both of which would
increase the potential for full and informed responses from China.8
Scope and Methodology
To prepare tables detailing issues raised by the United States and other
WTO members, as well as responses from China, we analyzed official World
Trade Organization documents. These documents include members'
communications submitted prior to the TRM meetings and minutes to TRM
meetings for all 16 WTO subsidiary bodies with roles in reviewing China's
WTO commitments. We did not include information on informal side meetings
frequently held by the U.S. and Chinese officials. According to a USTR
official, U.S. delegates further explained U.S. concerns at these informal
meetings and were often able to obtain more detailed responses from China.
In addition, we did not include issues or responses raised outside of
items specifically labeled under the TRM agenda.
Within the tables, we categorized issues and responses into broad theme
topics, most of which are identical or similar to those used by WTO
members. For instances in which the United States and other WTO members
raised similar issues, we aligned these issues in the tables. If China
provided responses to issues raised, we used our judgment to align the
issues with responses to the extent possible, but we did not evaluate the
extent to which China answered specific issues raised by WTO members. We
generally reported Chinese responses verbatim from statements documented
in the TRM meeting minutes, making only minor editorial modifications for
language clarity. However, in categorizing China's responses, we
rearranged parts of them and did not include some of China's general
statements if we could not link them to a
7See GAO, World Trade Organization: First-Year U.S. Efforts to Monitor
China's Compliance, GAO03-461 (Washington, D.C.: Mar. 31, 2003).
8For more information, see GAO, U.S.-China Trade: Opportunities to Improve
U.S. Government Efforts to Ensure China's Compliance with World Trade
Organization Commitments, GAO-05-53 (Washington, D.C.: Oct. 6, 2004).
Page 5 GAO-05-209R U.S.-China Trade
specific issue; therefore, the enclosed tables may not present as complete
a picture of China's responses as the original source documents.
Furthermore, we did not prepare a table for the final 2003 TRM meeting in
the WTO General Council. Six members besides China participated and made
general statements about China's trade reforms rather than raise specific
implementation issues during the General Council meeting.9
Since our work is based mainly on publicly available information, we did
not request agency comments but provided a draft letter with enclosures to
the Office of the U.S. Trade Representative. A USTR official provided
technical comments that we have incorporated into this report, as
appropriate.
We performed our work from September through December 2004 in accordance
with generally accepted government auditing standards.
We are sending copies of this report to interested congressional
committees and the
U.S. Trade Representative. We will make copies available to others on
request. In
addition, this report will be available at no charge on the GAO Web site
at
http://www.gao.gov.
If you have any questions about this report, please contact me at (202)
512-4128 or at
[email protected], or Adam Cowles, Assistant Director, at (202) 512-9637 or
[email protected]. Victoria Lin, Bradley Hunt, and Jamie McDonald were the
principal
contributors to this report.
Loren Yager
Director, International Affairs and Trade
Enclosures
9For minutes of the 2003 General Council meeting, see www.wto.org, document
symbol WT/GC/M/84.
Page 6 GAO-05-209R U.S.-China Trade
Contents
Page
Enclosure I Committee on Agriculture 8
Enclosure II Committee on Anti-dumping Practices 10
Enclosure III Committee on Balance-of-Payments Restrictions 14
Enclosure IV Committee on Customs Valuation 15
Enclosure V Committee on Import Licensing 20
Enclosure VI Committee on Market Access 27
Enclosure VII Committee on Rules of Origin 34
Enclosure VIII Committee on Safeguards 35
Enclosure IX Committee on Sanitary and Phytosanitary Measures 37
Enclosure X Committee on Subsidies and Countervailing Measures 43
Enclosure XI Committee on Technical Barriers to Trade 47
Enclosure XII Committee on Trade in Financial Services 53
Enclosure XIII Committee on Trade-Related Investment Measures 60
Enclosure XIV Council for Trade in Goods 62
Enclosure XV Council for Trade in Services 68
Enclosure XVI Council for Trade-Related Aspects of Intellectual Property
Rights 79
Page 7 GAO-05-209R U.S.-China Trade
Enclosure I Committee on Agriculture
Summary of issues by Raised by Raised by
theme United States other WTO China's response
members
Trade in soybeans
Disagreement that
China's State
Administration for
Quality Supervision,
Inspection and
Quarantine (AQSIQ)
identified valid Concerning quarantine of
scientific basis for Writtena agricultural products, China
suspension of soybean stated that in formulating
imports from and implementing Sanitary
companies based on and Phytosanitary (SPS)
detections of measures, China strictly
phytophthora sojae in abided by the SPS Agreement
shipments of and all other World Trade
soybeans. Organization (WTO) rules,
Reason for China's especially the science-based
delayed announcement and transparency principles.
of its plans for a Written,a Since 1999, China had
suspension of soybean Verbalc identified several cases of
shipments from soybean epidemic in imports
companies in shipped from the United
question. States. China had notified
Purpose of announcing the U.S. authorities nine
plans for a times, but no improvement
suspension of had been made on the part of
shipments without Written,a the United States. For the
setting a date on Verbalc time being, China had not
which the suspension banned any foreign companies
would become to export soybeans to China.
effective. China hoped that the U.S.
Existence and result authorities would take
of risk assessment in strict quarantine measures
accordance with the with respect to its exports
requirements of the Written,a of soybean to China so as to
Agreement on Sanitary Verbalc ensure soybean shipments
and Phytosanitary were free from this epidemic
Measures (SPS or any other diseases.
Agreement). (Verbalc) China had
Explanation of how discovered soybean rust in
suspending shipments the U.S. shipments but so
of soybeans from the Written,a far China had not and was
companies in question Verbalc not planning to take any
would address the actions to suspend U.S. or
identified risk. other Members' exports of
Explanation of how soybeans to China. China was
China is ensuring, seeking solutions to solve
consistent with its this problem and suggested
obligations under the that discussions continue at
SPS Agreement, that a technical level. (Verbalc)
any measures Written,a
addressing Verbalc
Phytophthora sojae
are not arbitrarily
or unjustifiably
discriminating
between Members.
Page 8 GAO-05-209R U.S.-China Trade
Summary of issues by Raised by Raised by other
theme United WTO members China's response
States
Transparency of tariff-rate quotas (TRQ)
Tariff quota fill rates
(in percent) provided
Information on the fill for wheat, corn, rice,
rate of TRQs by product Chinese Taipei soybean oil, rape-seed
and the average quota -Written,b oil, palm oil, sugar,
amount that each quota Verbalc cotton, wool, and wool
holder obtains. tops for 2002, and
January through August
of 2003. (Verbalc)
Public availability of Chinese Taipei
information on quota -Written,b
holders. Verbalc
Criteria China uses in Chinese Taipei
TRQ allocation -Written,b
decision. Verbalc
Other
Export subsidies on
corn and possible
discriminatory Verbalc
value-added tax
policies.
Source : GAO analysis of WTO documents.
aCommunication from U.S.: G/AG/W/59; dated 9/12/03.
bCommunication from Chinese Taipei: G/AG/W/60; dated 9/12/03.
cCommittee report detailing verbal statements made during meeting:
G/AG/R/36; meeting dated 9/25/03.
Page 9 GAO-05-209R U.S.-China Trade
Enclosure II Committee on Anti-dumping Practices
Page 10 GAO-05-209R U.S.-China Trade
China had
enacted the
Provisional
Rules on Access
to Public
Information in
anti-dumping
(AD)
investigations.
Its Article 5
provides for
the types of
public
information
that can be
accessed by the
interested
parties. Its
legal authority
can be found in
Article 23 of
the AD
Regulations.
(Verbalc)
Actually,
access to
information on
injury and
causal link was
made possible
under Article 8
of the
Anti-Dumping Mechanisms for
Regulations of judicial,
China, as well arbitral or
as in Articles administrative
Lack of access 6 and 9 under review are in Unclear role
to, and lack of the rules on place to allow of the State
completeness the Availability, parties to Council
of, the public investigation on a regular challenge a Tariff
Summary Raised record in and the basis, of final Commission in
of Raised by Chinese determination documents determination China's
issues by other China's General anti-dumping Written,a of injury to related to Written,a by the Writtena anti-dumping Written,a
by United WTO response investigations; VerbalC the industries. the injury VerbalC Ministry of proceedings; VerbalC
theme States members type of Here, there was aspects of Commerce Tariff
documents in a particular anti-dumping The process (MOFCOM); Commission's
official record circumstance proceedings. of government details of amendment of
in an already restructuring steps taken to MOFCOM
investigation referred to, was still ensure the determination
or review. that is the going on. Of relevant
Government's course, it tribunal is
restructuring was China's independent of
process. The intention to the Judicial review
functions of make such authorities. and
the former documents or administrative
State Economic information review are
and Trade available in stipulated in
Commission the public the
(SETC) with reading room Administrative
regard to the in the Proceedings Law
investigation future. Even and
of injury had before the Administrative
already been Ministry of Review Law.
incorporated Commerce was Article 53 of
into the newly established, the AD
established SETC already Regulations
Ministry of had a provides for
Commerce statutory administrative
(MOFCOM). requirement review and
Therefore, the to disclose judicial review
information such for AD According to
relating to information investigations. Article 38
both the to the Judicial review of AD
analysis of interested of AD Regulations,
dumping and the parties, determination it makes
determination which can be was further decisions on
of the injury found in clarified by the level of
was now Article 43 of the Supreme tariff
provided by the Rules on People's Court duties on
MOFCOM, and the the in its judicial the proposal
interested investigation interpretation. of MOFCOM.
parties may and Such reviews So far, it
access MOFCOM determination also apply to has not
for that of industry Customs modified any
information. and injury. enforcement. such
(Verbalc) (Verbalc) (Verbalc) proposal by
Page 11 GAO-05-209R U.S.-China Trade
The delegate
of China had
checked the
WTO ADA.
Article 6.1.3
of the ADA,
at footnote
16, read "it
being
understood
that where
the number of
exporters
involved is
particularly
high the full
text of the
written
application
In response to is to be
China's provided only
notification to the
of initiation authorities
With regard to of of the
such Relevant investigation exporting
complaints, agency that China's to the member or the
judicial review China notified notification In regard to Japanese relevant
and about the to the the request Embassy, the trade
administrative initiation of Committee the to notify Japanese association".
review were the relevant relevant Government has This might
possible and investigation portions of laws and no obligation not apply in
could be Notification instead of law and regulations, to notify the all
Summary Raised resorted to by of directly In practice, regulation China would initiation of dimensions to
of Raised by the relevant implementing notifying the what the that dictate of course the the fact that
issues by other China's MOFCOM. Writtena parties. China rules for Writtena exporters or Japan - authorities how Customs Verbalc consider it, investigation Japan - China was
by United WTO response (Verbalc) also had expiration producers in Verbalc did in China Administration and try to to the Verbalc only
theme States members special laws reviews to the following was to send applies see if this Japanese notifying the
and regulations Committee. countries; the anti-dumping was actually company. In Japanese
governing the some notification duties, required by accordance diplomatic
enforcement and investigations prior to the collects WTO in with the AD mission in
the levying of initiated public notice anti-dumping accordance Agreement, it China. He had
customs duties Chapter 5 of without of initiation duties and with China's was the quoted it
by the General China's AD notification to the provides for obligations. investigating just to
Customs Regulations to the diplomatic judicial One authority that indicate the
Administration. focuses on responding mission of the review. additional was obliged to difficulty
(Verbalc) the party. country of note-even notify the the
time-limits those now, if companies that investigating
and review of companies someone was are subject to authority may
AD duties and whose products interested the have in
Procedures to price were subject in gaining investigation. notifying all
ensure that the undertakings. to the access to the
General Customs The investigation. the interested
in Administration provisions So, in the information parties,
proceeding; properly were particular on injury because the
criteria assesses and formulated in cases referred they could parties have
applied in collects the compliance to in the directly to be known
amendment; anti-dumping with the WTO question posed approach the to the
stage at duties imposed Anti-Dumping by Japan, that Ministry of investigating
which Tariff by MOFCOM; Agreement diplomatic Commerce for authority.
Commission procedures for (ADA). The mission should such This was a
is importers when expiration be the information practical
consulted; seeking redress reviews will Japanese if they difficulty
public if the General be conducted Embassy in could not and he did
available Customs in strict Beijing. The find such not think
actions Administration conformity view that this information there was any
taken by makes an error with the AD was compliance in the specific or
Tariff in duty Regulations with Article public very clear
Commission collection or and the WTO 6.1.3 of the reading direct
in product ADA. WTO ADA. room. requirement
proceedings. classification. (Verbalc) (Verbalc) (Verbalc) set
Page 12 GAO-05-209R U.S.-China Trade
In these
investigations,
Chinese
authorities
published all
anti-dumping
investigations
to be initiated
and notified
them to
relevant
agencies of the
countries
(regions)
concerned
before making
the public
notices. The
notice of
initiation of
investigations
leaves all
parties
sufficient time
to register and
respond. In
addition,
Chinese
competent
authorities
issued
questionnaires
to all
registered
respondent
companies,
thereby
allowing them
to furnish
information and
evidence. At
the request of Determinations
interested in
parties, investigations
hearings were did not meet
organized in requirements
some cases to of "positive
Application of allow evidence" and
"facts interested "objective While
available" to parties to examinations"; establishing
determine further express considerations industry
anti-dumping their opinions. of data injuries and Insufficient
measures The Chinese accuracy, the causal data disclosure
Summary Raised Raised against investigation evaluation of links between in determining
of by by China's Japanese "all Japan - authority has injury factors Japan - other factors, injury and Japan -
issues United other response other" Writtenb in all the not in an Writtenb Chinese dumping margins Writtenb
by States WTO companies investigations unbiased authorities in
theme members without provided manner, strictly abide investigations;
serving a companies with evaluation of by the WTO ADA adequate
notice of adequate all economic and the remedies.
initiation or opportunity to factors, Chinese
questionnaires access the causal legislations
to companies. relevant relationships in the
information via in terms of following
either public price and aspects:
channels or between conducting a
their dumping and full and
diplomatic injury to comprehensive
missions in domestic analysis and
China. industry. assessment of
Therefore, the all indicators
above determining
anti-dumping injury as
determinations recognized by
made by China WTO;
are consistent demonstrating
with the by positive
requirements of evidence that
Article 6.8 of the volume of
the ADA and its imports from
Annex II. It is each country
proper that the is not
Chinese negligible and
Authority conducting an
applied facts analysis of
available to competition
determine AD conditions
measures between
against "all imported
other" products and
companies of a between
Chinese country that imported
cases failed to products and
against respond and domestic like
coated were unknown to products while In all the
paper, the Chinese cumulatively anti-dumping
Phthalic authority or if assessing the investigations
Anhydride the information effects of in which
(PA), is not provided imports from preliminary
Styrene within a more that one determinations
Butadiene reasonable country, have been
Rubber period. All of conducting an made, the
(SBR), these measures analysis of Chinese
Polyvinyl adopted by the other causes authorities
Chloride Chinese of industry expounded in
(PVC), Authorities are injuries and Notices of
Toluidine fully clarify in the Determination
Di consistent with Notice of on the data
forth in Isocyanate the AD Determination; and facts
the ADA. (TDI), and Agreement. and so on. based on which
(Verbalc) Phenol (Verbalc) (Verbalc) the injury
Summary of issues Raised by Raised by
by theme United other WTO China's response
States members
determinations were made, to
facilitate the comments by
interested parties on the
determinations to protect their
own interests. (Verbalc)
On the examination of physical
characteristics and uses of the
products for determinations of
"like products" in the
anti-dumping investigations of
Coated Paper, SBR and TDI. The
Chinese Authority took full
Inadequate account of the physical
examination of characteristics, chemical
physical characters Japan - characteristics, uses and means of
and uses of Writtenb distribution of the products and
products for other factors according to Article
determination of 2.6 of the ADA in the
"like products." determination of "like product" in
its investigations of coated
paper, SBR and TDI. All the
determinations are available in
the public notice of preliminary
or final determinations. This
practice is in full conformity
with the ADA. (Verbalc)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: G/ADP/W/436; dated 10/22/03. bCommunication from
Japan: G/ADP/W/434; dated 9/30/03. cCommittee report detailing verbal
statements made during meeting: G/ADP/12; meeting dated 10/23/03-10/24/03.
Page 13 GAO-05-209R U.S.-China Trade
Enclosure III Committee on Balance-of-Payments Restrictions
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
Restrictions
As it is known to all, the
convertibility of current
account is, according to the
Article VIII of International
Monetary Fund (IMF)
Agreements, not to impose
restrictions on the payment
China's intention to and transfer of the current
lift restrictions on Chinese international transactions (in
retention of foreign Taipei - China, current transactions
exchange earnings and Writtena with Hong Kong, Macao and
settlement of current Chinese Taipei are also
account transactions. included). It is for the
purpose of bona fide test,
anti-money laundering, and
curbing hot money to require
the relevant documents for
payment in and purchase of
foreign exchange under current
account. (Verbalb)
Rationale behind
Regulation Governing
Small Value Trade
between Chinese Taipei
and China stipulating Chinese
that the only means Taipei -
allowed for settlement Writtena
of small value
bilateral trade
transaction is
convertible currencies.
According to the Notice to
State Administration of
Foreign Exchange (SAFE)
National treatment of Regarding the Related Issues
foreign-invested of the Further Adjustment of
enterprise in allowing the Foreign Exchange Account
foreign exchange Chinese for Current International
deposit accounts to Taipei - Transactions (Huifa (2002) No.
open in a place other Writtena 87), the qualifications for
than place of opening foreign exchange
registration. account for current
international transactions of
foreign-invested enterprises
(FIEs) and Chinese enterprises
have been converged. (Verbalb)
The principle of
convertibility of the current
account has been strictly
followed by China. The
earnings and dividends of the
foreign investor of the FIEs
Plans to simplify are allowed to be remitted
foreign-invested out. The relevant documents to
enterprise's Chinese the authorized banks are
qualification procedure Taipei - required for the bona fide
in respect of outward Writtena test of the earnings by the
remittance of earnings foreign partners, and it is
or dividends. also a regulatory requirement
for normal and legitimate
operation of the FIEs under
the legal framework including
the Law of China on Foreign
Invested Enterprises.
(Verbalb)
Source: GAO analysis of WTO documents.
aCommunication from Chinese Taipei: WT/BOP/W/25; dated 10/31/03.
bCommittee report detailing verbal statements made during meeting:
WT/BOP/R/71; meeting dated 11/13/03.
Page 14 GAO-05-209R U.S.-China Trade
Enclosure IV Committee on Customs Valuation
Page 15 GAO-05-209R U.S.-China Trade
Article 55 of
the Customs
Law of the
People's
Republic of
China
definitely
stipulates
that the
customs value
of either the
imported or
exported goods
will be
examined and
determined on
the basis of
the
transaction
value of the
goods being
valued. There
could be found
corresponding
provisions for
this in the
Regulations on
China Import and
consideration Availability Export Tariff
of a of revisions of the Request for
transaction to Customs People's China to
involving Law and Republic of incorporate
related Regulations China WTO CVA
parties (as for WTO Discrepancy (hereinafter definition
defined in member between referred to as of "price After China
Summary Raised Raised the Agreement review, Decree and Tariff actually entered the
of by by China's on Customs including Chinese WTO Regulations), paid or WTO, the
issues United other response Valuation, Writtena status of Writtena Taipei - Agreement's Writtena and in The payable," Writtena Chinese
by States WTO CVA) to be Regulations Writtenb definition Rules of different Customs
theme members prima facie on Import of General from Administration
grounds for and Export transaction Administration definition made an
determining Tariff of value. of the in Decree overall
that the the People's People's No. 95, into revision to
price has Republic of Republic of all relevant the valuation
been China," China laws and laws and
influenced by relating to Regarding regulations. regulations,
the On the use of CVA. Determination and also
relationship. the on Customs abided by the
transaction Value of stipulations
value among Imported and of the WTO
related Exported Goods Valuation
parties, (hereinafter Agreement in
Article 3.6 referred to as the aspect of
and 42 of The Rules for valuation
Rules of Fulfilling the commitments Valuation). methods, the
General it made upon accession to The entire adjustments
Administration the WTO and to meet the Chinese for the price
of Customs of requirement of Article 12 Customs paid or
the People's the Customs Valuation valuation law payable, and
Republic of Agreement, China published framework has the rights and
China the Customs Law and the been set up in interests of
Regarding Rules Regarding line with the the interested
Determination Determination on Customs principle of parties. It is
on Customs Value of Imported and respecting clearly
Value of Exported Goods. Besides, an trade reality stipulated in
Imported and official journal, "Gazette and based on the Rules for
Exported Goods of China Customs" is also to the Valuation that
set forth be established in the near transaction if the
guidelines on future. Interested parties value. The transaction
the issue, may also visit the web site minimum value value cannot
which was in of the General or reference be determined,
China's conformity Administration of Customs of Notification prices have the customs
responses with WTO China for information of China's definitely value for the
to WTO rules. (http://www.customs.gov.cn). implementing been banned. goods should
checklist (Verbald) (Writtenc) law (Writtenc) be
Page 16 GAO-05-209R U.S.-China Trade
In accordance
with Article
8.2 of the
Agreement,
Article 3 of
The Rules of
General
Administration
of Customs of
the People's
Republic of
China
Regarding
Determination
on Customs
Value of
Imported and
Exported Goods
stated
explicitly
that "The
customs value
of the
imported
goods,
including the
charges
associated
with the
transport of
imported goods
and the cost
of insurance
and associated
costs incurred
prior to
unloading of
the goods at
the port
within the
customs
territory of
the People's
Republic of
China."
Chapter V of
The Rules of
General
Administration
of Customs
Regarding
Determination
on Customs
Value of
Imported and
Exported Goods
provided that
the cost of
freight and
insurance for
goods imported
shall be
determined in
accordance
with the
charges
actually paid.
This was a
fundamental Information
principle, that
which applied importer is
Clarification broadly to the required to
of customs calculation of submit when
Summary Raised administration freight, requesting
of Raised by calculation of Chinese insurance and change to Chinese
issues by other China's freight, Taipei - other charges sequential Taipei -
by United WTO response insurance, and Writtenb in the customs order of Writtenb
theme States members other charges value of application
by fixed imported and of
percentage. exported deductive
goods. Article method and
26 and 28 of computed
the Rules set method.
forth that if
the freight or
insurance for
imported goods
could not be
determined or
did not occur,
the customs
administration
shall
calculate the
custom value
on a
percentage
basis. The
condition for
this
calculation
method was
that the
freight or
insurance for
imported goods
could not be
determined or
did not occur, With regard
which was to the
rarely the application
case in the of the
course of computed
trade. In the value method
drafting of and the
these deductive
provisions, value method,
the practice China was
and standards committed to
for fully
transportation applying the
and insurance Agreement and
industry had refrained
been taken from any
into adequate reservations.
consideration. According to
The percentage the
determined, basis Agreement,
in turn on calculation the computed
the basis of was the result value shall
the of broad include the
transaction experience and cost or value
value of the statistics. of materials
identical Generally, and
goods, the these processing,
transaction designated profit,
value of the percentages general
similar were lower expenses and
goods, and than prices in other
the method actual trading expenses like
of deduction practice. In freight and
(Article 7) line with the insurance.
and so on, market Chinese
all of which situation, legislation
are quite in however, the required
line with level of the importers to
the percentage was provide the
stipulations a variant necessary
of the WTO rather than a information
Valuation constant for the
Agreement. figure. application
(Writtenc) (Verbald) of the
Page 17 GAO-05-209R U.S.-China Trade
After China
entered the
WTO, the
Chinese
Customs
Administration
made an
overall
revision to
the valuation
laws and
regulations,
and also Request for Chinese law
abided by the China to add lacking
stipulations provision provision
of the WTO that that the
Valuation deduction amount for
Agreement in for profit profit and
the aspect of and general general
valuation expenses be expenses is
methods, the taken as a to be taken
adjustments whole and as a whole
Decree No. for the price Discrepancy determined and
95's lack of paid or between on the basis determined
Summary Raised Clarification reference to payable, and Decree and of on the basis Decree's
of Raised by about whether Chinese and the rights and CVA's scope information of lack of
issues by other China's China made a Taipei - application Writtena Writtena interests of of Writtena Writtena supplied by Writtena information Writtena information Writtena
by United WTO response reservation Writtenb of the interested "identical the importer supplied by about
theme States members to Article 4 Circumstances parties. It is goods" and unless the or on behalf currency
of CVA. of Sales clearly "similar importer's of the conversion.
Test. stipulated in goods." figures are producer
the Rules for inconsistent unless the
Valuation that with those producer's
if the obtained in figures are
transaction sales in the inconsistent
value cannot country of with those
be determined, importation "usually
the customs of the reflected in Currently,
value for the imported sales of the the U.S.
Discrepancy goods should goods of the goods of the Dollar, the
computed between be determined, same class same class Japanese Yen,
value. In Decree and in turn on the or kind. or kind." the Hong Kong
the absence WTO CVA's basis of the Dollar and
of the method used transaction the Euro were
information, to value of the Discrepancy four fully
the request determine identical between exchangeable
to use the customs goods, the Decree and currencies
computed value if transaction CVA's used for most
value could imported value of the deductions international
only be goods similar goods, for transactions.
objected by cannot be and the method commissions, The SAFE
the custom Related determined of deduction profit, and published the
authority. parties-circumstances under (Article 7) general exchange
(Verbald) of sales test provision. and so on, all expenses. rates against
of which are
quite in line
with the
stipulations
of the WTO
Valuation
Agreement. In
order to
maintain the
transparency
of the Customs
laws and
Regulations,
any rules and
regulations
concerning
customs
valuation are
duly issued in
the form of
Customs
Decrees or
Gazettes.
(Writtenc)
Page 18 GAO-05-209R U.S.-China Trade
renminbi (RMB)
of these
currencies,
which
constituted
the basis for
transfers.
Given the
stability of
the U.S.
Dollar's
exchange rate
versus the
RMB, this rate Provisions in
was generally Chinese law
taken by SAFE for withdrawal
as the basis of goods under
in the guarantee, in
determination accordance
of the with Article
exchange rate 13 of the
for other Agreement, was
foreign a basic custom
currencies practice to Availability
versus the speed up of "Rules of
RMB. In the customs General
calculation, clearance. As Administration
the exchange a condition Information on Absence of of the
Summary Raised rate of the for this "sufficient CVA's Explanation People's
of Raised by currency provision, the guarantees" and definition and Republic of Chinese
issues by other China's against the Writtena required its legal Writtena Writtena of goods Writtena application Writtena China Writtena Writtena Taipei -
by United WTO response U.S. Dollar at guarantee was obligations for of the of Decree's Regarding Writtenb
theme States members the time of only requested Customs to release same class Article 19. Determination
the when the goods to or kind in on Customs
transaction custom value importer/exporter. Decree. Value of
(could be was difficult Imported and
specified by to determine. Exported
the date) in The guarantee Goods."
the should cover
international the ultimate
currency payment of
market was custom duties Fulfilling the commitments
taken as the for which the it made upon accession to
reference and goods might be the WTO and to meet the
its rate liable. In requirement of Article 12
against RMB that spirit, the Customs Valuation Legal China
could be it was Agreement, China published steps committed
determined. rational for the Customs Law and the planned to itself to the
Authorities the sum of the Rules Regarding implement full
were convinced guarantee to Determination on Customs provisions application
that the Availability of be larger than Value of Imported and of the WTO of the WTO
exchange rate information on the declared Exported Goods. Besides, an Decision Agreement on
through this "relevant value. Given official journal, "Gazette on the Customs
approach was a regulations" the variety of of China Customs" is also to Treatment Valuation,
reliable and citing imported be established in the near of including
WTO-consistent requirements goods, Incorporation China's future. Interested parties Interest valuation
basis for the needed for determining of submission may also visit the web site Charges in methodologies
calculation of importer/exporter the guarantee Interpretative on of the General the set forth in
the value of to request goods differed under Notes to CVA information Administration of Customs of Customs Articles 1
foreign to be released the specific into Chinese required China for information Value of through 8
currencies. from customs circumstances. laws and under Annex (http://www.customs.gov.cn). Imported thereof, upon
(Verbald) custody. (Verbald) regulations. 1A (Writtenc) Goods. its
Summary of issues Raised by Raised by
by theme United States other WTO China's response
members
accession. In addition, China
would apply the provisions of
Legal steps the two Decisions taken by the
planned to Committee on Customs Valuation
implement concerning the treatment of
provisions of the interest charges in the customs
Decision on the Chinese value of imported goods and
Valuation of Writtena Taipei - valuation of carrier media
Carrier Media Writtenb bearing software for data
Bearing Software processing equipment as soon as
for Data practicable, but in any event no
Processing later than two years from the
Equipment. date of accession, as referred
to in paragraph 143 of the
Working Party Report on
Accession of China. (Writtenc)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: G/VAL/W/127; dated 10/3/03.
bCommunication from Chinese Taipei: G/VAL/W/126/Rev.1; dated 9/25/03.
cCommunication from China: G/VAL/W/125; dated 9/22/03.
dCommittee report detailing verbal statements made during meeting:
G/VAL/M/36; meeting dated 10/6/03.
Page 19 GAO-05-209R U.S.-China Trade
Enclosure V Committee on Import Licensing
Page 20 GAO-05-209R U.S.-China Trade
The procedures
concerning
import
inspection
permits were
established on
the basis of the
Law of the
People's
Republic of
China on the
Entry and Exit
of Animal and
Plant
Quarantine,
adopted on 1
April 1992, and
its Implementing
Regulation
adopted on 1
Enforcement by January 1997
China's State (which had been
General notified to the
Administration WTO in documents
of Quality G/SPS/N/CHN/P/4 Steps to Reason for The import
Summary Raised Raised Supervision and ensure fair 90-day Conflicting permit
of by by China's and Inspection Written,a G/SPS/N/CHN/P/5, treatment of Written,a valid import Written,a procedures
issues United other response and Quarantine Verbale respectively). import Writtena Verbale period for Writtena Writtena Writtena Writtena requirements Verbale related to
by States WTO Procedures The said process for import for entry of
theme members (AQSIQ) to procedures were agricultural inspection genetically animal and
control the not newly products. permits. modified plant
pace and developed, and All organism quarantine
quantity of applied equally applications (GMO) did not come
agricultural to all countries would be products: under
imports. exporting accepted and Reason for (1) automatic
animals and The import approved requirement requirement registration
plants as well permit within nine to for importer for an procedures,
as their procedures 30 days by to specify Interim given the
products to were neutral AQSIQ, as long commodity Safety differences
China, not aimed in as they were weight, Certificate, in the
at a certain application in conformity country of which epidemic
country. China and with the origin, and requires an situation of
wanted to make administered provisions of Duplicative port of entry existing the source
it clear that in a fair the quarantine requirements Reason for before contract, to nations and
the import and law and its for facilities requirement entering into obtain an the relevant
permit regime equitable implementation inspections of for an import import preventive
concerned SPS manner in This regime was rules as well an enterprise importers contract; inspection and
measures and was conformity also set up in as AQSIQ that processes to re-apply reapplication permit and treatment
not related to with Article Steps to ensure line with Article Decree No. 25. agricultural for a new for license (2) measures, as
import licensing 1.3 of the that the 2.2 of the This ensured commodities by import if any of the requirement well as the
procedures Agreement on administration of Agreement and did that China's AQSIQ and inspection elements for an risk and
applied to Import import process is not have import permit State permit listed above inspection management
control the Licensing not having trade-restricting regime was Administration rather than change by permit thereof
Inspection quantity in Procedures. trade-restricting effects. fair and just. of Industry permit more than 10 before concerning
permits trade. (Verbale) (Verbale) effects. (Verbale) (Verbale) and Commerce. extension. percent. entering disease
Page 21 GAO-05-209R U.S.-China Trade
introduction.
However, The
importers liberalization
qualified to of
apply for distribution
import rights would
permits could be executed in
submit accordance
applications with the
to AQSIQ on Schedule of
an equitable Specific
basis. Commitments on
Concerning Services.
the questions Currently,
on import enterprises in
requirements China with
for GMO foreign
products, the investment had
Ministry of the right to
Agriculture import
of China had equipment,
decided to technology,
extend raw material
Circular No. and other
222 to 20 goods for
April 2004, self-use, and
wherein export their
contents products,
concerning while for the
application importation of
requirements goods and
and approval technology
procedures other than the
for above-listed,
genetically enterprises
modified (GM) should change
products the scope of
remained their business
unchanged. as required by
The Ministry relevant
of legislation.
Agriculture The Foreign
had Trade Law of
entertained the People's
the idea of Republic of
indicating on China was
an Interim being revised
Safety Applicability of to reflect
Certificate Provisional Rules that specific
Summary Raised Raised into a the names of on Establishment of European requirement.
of by by China's contract importers Sino-Foreign Communities In January
issues United other response with whose Writtena Foreign Trade (EC) - 2003, the
by States WTO supplier. applications Companies to all Writtenb former
theme members were joint ventures with Ministry of
submitted minority share Foreign Trade
after 20 foreign-investment. and Economic
September. Cooperation
However, when (MOFTEC)
they found promulgated
that such a the Interim
measure, were Rules for
it to be Establishing
implemented, Sino-Foreign
would Trade Joint
contradict Ventures,
that adopted endowing
by AQSIQ, legally
they had not incorporated
in fact Sino-foreign
carried out joint ventures
this idea. with the right
Therefore to of import and
reply to the export for the
question, goods,
China had not technology and
promulgated services
such a policy within the
as had been approved
mentioned in scope, and the
the questions right to
presented, conduct
namely a domestic
policy which wholesale of
required the the goods
provision of imported by
the the joint
importer's ventures
name upon themselves.
application With
of the Reason for distribution
Interim requirement also included,
Certificate for the scope of
for GMO inspections the rights
products; of granted by the
therefore the facilities Interim Rules
alleged that import went beyond
contradiction processed what China had
contained in agricultural committed to
the questions goods but in the
had not not for Protocol. In
actually domestic that spirit,
taken place. processing Trading the Interim
(Verbale) enterprises. rights Rules had
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
prescribed some requirements on
experiences and registered
capital for both Chinese and
foreign parties of the joint
venture. In addition,
"Sino-foreign joint venture"
referred to in the Interim Rules
included joint ventures solely
engaged in import and export
business and wholesale of
imported products, as well as
other types of enterprises,
which applied for the operation
of such businesses and satisfied
the requirements of the Interim
Rules. (Verbale)
According to China's commitments
upon accession, China would
eliminate the system of
examination and approval of
trading rights within three
years from accession. At that
time, China would permit all
domestic and foreign enterprises
Elimination of the and individuals, including sole
requirement for prior proprietorships of other WTO
experience and EC - Members, to export and import
minimum capital when Writtenb all goods (with the exception of
granting trading products listed in Annex 2A of
rights. the Protocol reserved for
importation and exportation by
state trading enterprises)
throughout the customs territory
of China. Trading right in this
context only referred to the
right for importation and
exportation, not including the
right of distribution in China.
(Verbale)
Time frame for
adopting definitive EC -
legislation and Writtenb
information on its
scope.
Quotas and tariff-rate quotas
With regard to the alleged
problem of license trade, i.e.
Large parts of selling quota for profit, such
automobile and practice was against the Chinese
fertilizer quotas not law and subject to severe
allocated to genuine EC - punishment. China hoped that
importers but to Writtenb Members would provide relevant
other parties not information and evidence on this
involved in import illegal trade. His authorities
activities. would deal with the offenders
according to the law and
slashing their quotas for the
next year. (Verbale)
Transparency
issue-assurance that In strict accordance with their
full quantity of auto EC - commitments upon accession and
and fertilizer quotas Writtenb the Regulations on the
and tariff-rate Administration of Import and
quotas are allocated Export of Goods of the People's
to genuine importers. Republic of China, his
Page 22 GAO-05-209R U.S.-China Trade
Page 23 GAO-05-209R U.S.-China Trade
authorities
had promptly
published the
total volume
and allocation
criteria of
2003 import
TRQs for
fertilizers,
distributed
2003
fertilizer
TRQs in full
quantity, and
allocated TRQs
for state
trading and
non-state
trading
enterprises
directly to
importers in
line with
specified
proportions.
The allocation
process had
been
administered
in a fair and
transparent
manner.
Enterprises
went about the
importation of
fertilizers
according to
the market
situation,
either for
themselves or
as an agent,
and their
business
activities
were free from
any government
interference.
(Verbale)
Paragraph 130
of the Working
Party Report
stated that in
allocating
quotas for
imported
products for
wholesale or
retail
distribution,
China would
consider
historical
performance,
experience and
ability in
Publication servicing, as
of criteria well as the
applied for qualifications
the of importers
allocation required by
Summary Raised Raised of the the Agreement Actual auto
of by by China's licenses EC - on Import EC - Chinese imports Japan -
issues United other response for Writtenb Licensing Writtenb Taipei - Automobile significantly Written,c
by States WTO automobile Procedures. Writtend lower than Verbale
theme members and The allocation import quota.
fertilizer criteria for
quotas and quotas of
tariff-rate automobiles
quotas. imported for
sale were as
follows:
first, verify
the importer's
qualification
to conduct
automobile
trade in
China; second,
check the
operational The volume
ability of the of import
importer (i.e. quotas was
the venue for not
sale and necessarily
maintenance); equal to
and third, actual
examine the import
business volume, and
performances the fill
of the rate of
importer. The quotas
Chinese depended on
Government actual
would not demand for
allocate imported
quotas for automobiles
sale to on the
importers Chinese
without sale market. Over
qualification recent
and years,
operational automobiles
ability. produced by
Importers with Chinese
prominent enterprises
operational (including
ability and joint
historical ventures)
performance had
would receive satisfied
more quotas. the needs of
Importers Chinese
might decide consumers
the with
composition of enhanced
products for quality,
their quotas diversified
at their own models and
discretion, lower
i.e. they prices.
could Therefore,
themselves although the
determine the need for
type, automobiles
specification on the
and model of Chinese
automobiles of market had
their choice. Specific considerably
The Chinese measures to increased,
Government ensure that the need for
would grant quota-holders imported
import quotas are able to high-price
in light of Interchangeability obtain automobiles
their of import licenses necessary was still
selections. between different import limited. In
(Verbale) types of models. license. particular,
Page 24 GAO-05-209R U.S.-China Trade
given the fast growth in
production of automobiles below
2000 cubic centimeters (cc) and
their relative low prices
compared with imported cars of
the same class, Chinese
importers had voluntarily
increased the proportion of
automobiles above 2000 cc in
their applications for import
quotas, so as to avoid
competition with Chinese auto
manufacturers. (Verbale) In
accordance with Table One and
Table Two of Annex 3 of China's
Protocol of Accession, there
were 65 Harmonized System (HS)
codes covered in the sector of
automobiles and their key parts
which were subject to quota
administration. Based on these
65 HS codes, China had
committed US$ 6 billion worth
of quota for automobiles and
their key parts and had made a
commitment to increase this by
15 percent annually during the
transition period. In 2003, the
total amount of US$ 9.125
billion should also be based on
these 65 HS codes. According to
the timetable on the
elimination of non-tariff
measures committed by China, in
the years 2001, 2002 and 2003
China had consecutively
eliminated its quota
administrative measures on some
automobiles and key parts, but
Summary of Raised by Raised by these parts of the products
issues by United other WTO China's which had been imported should
theme States members response also be included in the import
statistics for 2003, or else it
would be unfair to China. As
concerned the substantial
disparity alleged by Japan
concerning the committed volume
and the actual volume of
imports, the Chinese
representative offered the
following explanation: in the
statistics provided by Japan,
the period covered extended
from April 2002 to March 2003.
The committed volume was not
the actual volume of imports,
because the actual amount of
imports would depend solely on
the market for automobiles in
the Chinese market. (Verbale)
Concerning the period covered
by these statistics, the first
quarter of 2002 also used
quotas allocated for the whole
year, because in order to meet
the requirements of Chinese
domestic manufacturers and some
importers, before April 2002
the Chinese Government had
already arranged for the import
quotas for 2002, or else all
the domestic automobile
manufacturers in China would
have to stop their production.
Therefore the period covered by
the statistics should extend
from January 2002 to March
2003. (Verbale) China had noted
that in Japan's statistics,
auto knock-down kits, or CKD
and SKD, which were imported
for assembly in China, were not
Page 25 GAO-05-209R U.S.-China Trade
included,
because in the
past two years
in the initial
period of
production of
new car models
by Chinese
domestic
manufacturers,
they had to With regard to
import a punitive
considerable measures
amount of against
knockdown kits importers
for assembly failing to
production; return unused
for the import quotas,
of these parts Regulations on
they had to be Import and
granted Export of
certain Goods of
quotas; People's
however, as Republic of
regarded China
customs specified that
statistics, in the event
because these Number of that an
parts arrived quota importer did
at the customs holders to not use all
in the form of whom China quotas in its
component applied possession for
parts, they provision the year, he
had not been for quota should return
incorporated holders not remaining
in the having quotas to the
statistics for imported administrative
complete Actual their full authority for
automobiles. quotas allocation import quotas
Summary Raised The final for would before 1
of Raised by aspect could Japan - 2003 by Japan - receive a Japan - September of Japan -
issues by other China's be attributed Japan - Written,c item Written,c proportional Written,c the current Written,c
by United WTO response to the Writtenc Verbale and by Verbale reduction in Verbale year; if he Verbale
theme States members restrictions country their quota failed to do
placed by of allocation so and failed
certain origin. in the to use the
suppliers in subsequent remaining
Japan. year unless quotas by the
According to the quantity end of that
their is returned year, the
information, for quota
some allocation authority
manufacturers by 1 would reduce
and suppliers September; his quotas for
in Japan had total the next year
placed reduction in accordingly.
restrictions quota. Considering
on the number that import
of Chinese quotas of 2002
importers, could be
mainly extended to 31
limiting the March 2003,
number of there were no
Chinese quotas
importers who returned in
could sign 2002. If a Regarding the
contracts with quota holder alleged
suppliers in failed to use control by
Japan. all quotas in the Chinese
According to his possession Government of
their by the end of granting
understanding According to 2003 and Concern with import
from these China's failed to method that licenses for
importers, Disparity understanding, return the Chinese automobiles
Japanese between Confirmation from the unfilled government below 2000 cc
suppliers had reported China that no automobiles quotas within controls the displacement,
also placed Customscleared items are subject and key parts the specified number of the Chinese
restrictions auto imports to import quotas covered by the time limit, auto import delegate said
on the amount and nominal other than 44 quota the Chinese licenses to that
of automobiles quota for items under administration authorities be granted according to
to be exported 2003; measures complete vehicles should be 65 would reduce by category; China's WTO
to China on a to improve and one HS codes his quotas for licenses not commitments
monthly basis. implementation item-bodies-under instead of 45. the next year. granted importers had
(Verbale) of quota. auto parts. (Verbale) (Verbale) impartially. the
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
discretion to choose the types,
specifications and models of
some automobiles to be
imported, and the relevant
authorities in China, by
deriving from their needs and
choices, issued the relevant
licenses. In fact, given the
quick growth of the production
of automobiles below 2000 cc
and the relative low prices
compared with imported cars,
Chinese importers had
voluntarily increased the
proportion of automobiles above
2000 cc in their applications
for import quotas, so as to
avoid competition with Chinese
auto manufacturers. (Verbale)
Measures for administration of licenses for import of goods
Reason for requirement
that one license be
used at one customs Chinese
office that appears to Taipei -
place restrictions on Writtend
traders going against
the principle of trade
facilitation.
Circumstances in which Chinese
license for multiple Taipei -
entries is granted. Writtend
Laws protecting
license applicant's Chinese
right of appeal or Taipei -
review if application Writtend
is not approved.
Measures on the administration of automatic import licensing of goods
Requirement to submit Chinese
an import contract in Taipei -
the case of automatic Writtend
import licensing.
Requirement of other
necessary documents
specified in China's Chinese
Measures on the Taipei -
Administration of Writtend
Automatic Import
Licensing of Goods.
Justification for
article stipulating
that the entire Chinese
application be made Taipei -
over again if Writtend
automatic import
licenses need to be
extended or changed.
Source: GAO analysis of WTO documents.
Note: An additional document source is a communication from China:
G/LIC/W/20; dated 9/23/03.
aCommunication from U.S.: G/LIC/Q/CHN/9; dated 9/25/03.
bCommunication from European Communities: G/LIC/Q/CHN/5; dated 8/14/03.
cCommunication from Japan: G/LIC/Q/CHN/6; dated 9/1/03.
dCommunication from Chinese Taipei: G/LIC/Q/CHN/7; dated 9/19/03.
eCommittee report detailing verbal statements made during meeting:
G/LIC/11; meeting dated 10/2/03.
Page 26 GAO-05-209R U.S.-China Trade
Enclosure VI Committee on Market Access
Page 27 GAO-05-209R U.S.-China Trade
According to
China's
commitments
upon
accession,
China would
eliminate the
system of
examination
and approval
of trading China
rights within implemented
three years "VAT
from drawback
accession. At upon Levy"
that time, measures on
China would ordinary VAT
permit all payers
domestic and producing
foreign and selling
enterprises integrated
and circuits.
individuals, The refunded
including sole tax
traders from represented
WTO Member Reason for the part of
countries, to differential total tax
export and treatment of levied in
import all reduced excess of
goods with the Time schedule value-added three
exception of for China to Time schedule tax (VAT) percent of
products implement and applied to the taxable
outlined in automatic implementation integrated value. This
Annex 2A of availability of procedures for circuits measure was
Summary Raised the Protocol trading rights phase-in designed or a part of
of Raised by reserved for to all Japan - commitment on Japan - manufactured China's
issues by other China's Writtena importation Writtena enterprises in Writtena Written,c trading rights Written,c Value-added in China and Written,a policies on
by United WTO response and China and Verbale of Verbale tax full VAT on Verbale the
theme States members exportation by foreign joint-venture imported integrated
state run enterprises and enterprises integrated circuits
enterprises individuals, with majority circuits; industry,
throughout the including sole share of status of and did not
custom proprietorships, foreign review of violate WTO
territory of by 11 December investment. measures by national
China. Trading 2004. Chinese treatment
rights in this ministries principle. A
context only and 17 percent
referred to agencies. VAT was
the right of imposed on
importation both
and imported and
exportation, domestically
and did not produced
include the integrated
right of circuit
distribution products
in China. The Applicability of when they
liberalization "Provisional Rules Time schedule entered the
of on the and reason market. No
distribution Establishment of for delay of extra VAT
rights would Conditions Sino-Foreign revision of was levied
be exacted in required to be Foreign Trade the Foreign on imported
accordance fulfilled by Companies" to all Trade Law of products
with the foreign-invested joint ventures with China related directly or
schedule of enterprise to minority share Time schedule to phase-in indirectly.
specific obtain trading foreign-investment, and scope for commitments Thus this
commitments on rights, relating "trading" joint adoption of on trading policy was
services at to minimum ventures, and "Provisional rights for consistent
Measures the time registered Sino-foreign joint Rules on the joint-venture with Article
governing enterprises in capital, past venture companies Establishment enterprises III.2 of
trading rights China with import and that were already of with minority General
of foreign export levels established in Verbale Sino-Foreign share of Agreement on
Trading foreign-invested EC - investment had and prior EC - China when rules EC - Foreign Trade foreign Tariffs and
rights enterprises. Writtenb the right to experience. Writtenb were implemented. Writtenb Companies." investment. Trade
import
equipment,
technology,
raw material
and other
goods for self
use and to
export their
products. For
the
importation of
goods and
technology
other than
those just
listed,
enterprises
should change
their scope of
the business
as required by
the relevant
legislation.
The foreign
trade law of
the People's
Republic of
China was
being revised
to reflect the
specific
requirements
on that.
(Verbale)
China had
already
responded to
questions in
relation to
trading
rights,
automobile
quotas and
fertilizer
TRQs in a
meeting held
under the
Committee on
Import
Licensing
Procedures and
the statement
by the head of
the Chinese
Delegation had
been provided
to the
Secretariat.
(Verbale)
Page 28 GAO-05-209R U.S.-China Trade
China had
adjusted its
policies in
relation to
the
fertilizer
VAT,
including the
differential
policies on
monoammonium
phosphate
(MAP) and
diammonium
phosphate
(DAP) in
2001, to
bring them
into
conformity
with the
national
treatment
principle
contained in
Article III
of GATT 1994.
After the
adjustment,
China began
to implement
the same VAT
policies on
imported and
domestic
fertilizers.
However, it
continued to
exempt MAP
from VAT
while
imposing VAT
on DAP.
Different VAT
measures on
these two
were adopted
based on the
agricultural
production
requirements
and
(GATT) 1994. fertilizer
Based on such products of
understanding, China. MAP
the rebate was and DAP were
a kind of two different
subsidy paid Reason for products with
to domestic differential different
producers treatment of uses and
allowed by diammonium users.
Article phosphate Although the
III.8(b) of (DAP) reserves of
GATT. produced in Chinese
(Verbale) Work the United phosphorite
Summary Raised Raised was underway States, mines were
of by by China's on a further which Written,a quite
issues United other response study of the competes Verbale abundant,
by States WTO issue, but with similar most of them
theme members according to phosphate were lean
preliminary fertilizers ores, so the
conclusions, produced in cost of ore
the policy of China, such concentration
rebate upon as was quite
collection monoammonium high. As a
adopted by the phosphate result, in
Chinese (MAP). order to
government was fully apply
a subsidies phosphate
payment to its resources and
national protect the
products and environment,
was allowed China
under Article implemented
XIII. B of VAT exemption
GATT which measures
stated that encouraging
the provisions the
of that production of
article should MAP directly
not prevent from
the payment of relatively
subsidies lean ores.
exclusively to Producers
domestic were also
producers, encouraged to
including produce
payments to compound
domestic fertilizers.
producers (Verbale)
which were Article III
derived from of GATT 1994
the proceeds stated that
of internal same duties
taxes or should be
charges levied on
applied identical or
consistently similar,
with the mutually
provisions of substitutable
the article and directly
and the competitive
subsidies products.
effected However, MAP
through and DAP were
governmental goods of a
purchases of different
domestic nature and
products. In were not
accordance directly
with that competitive
provision, nor
China believed substitutable
that its VAT products in
policy with China. They
regard to were not
integrated identical or
circuits was similar goods
not in due to their
violation of different
the national natures. They
treatment were not
principle of substitutable
GATT. products due
(Verbale) to their
Page 29 GAO-05-209R U.S.-China Trade
different use. In With regard
China, DAP was to
directly applied in questions In 2003,
manufacturing, while in relation the volume
MAP was mainly used to new of
to produce compound automobile non-state
or special policies, trading
fertilizers. They the Chinese quotas for
were not competitive delegation urea was
products. China had had Information 180,000
been producing DAP clarified Possible on the tons, while
since 1965. the issue establishment total that of
Currently, VAT was in the of a dual quantity of state
levied on both Trade distribution each trading
imported and Review network for fertilizer quotas was
domestically-produced Mechanism domestically TRQ for 1,620,000;
DAP. In 2001, prima (TRM) under produced and 2003 that the volume
facie consumption of the TRIMS imported was of DAP China's
DAP was 4,970,000 Committee. vehicles; allocated non-state implementation
Summary Raised Raised tons, including Given that China's plan for trading of its
of by by China's 3,290,000 tons of Written,a issues in to establish a importation quotas was commitments
issues United other response imports which Verbale relation to Writtena "Law Writtena through Writtena 1,190,000 regarding Writtena
by States WTO represented a 66 automobile Controlling state tons while reallocation
theme members percent of total financing the trading that of of 2003 TRQ on
consumption. These and the Monopolization enterprises state fertilizer and
statistics showed separate of Automobile and trading wool tops. On 27 August
that production and operation Brands" to quantity quotas was 2003, MOFCOM
consumption of DAP in network for prohibit allocated 4,760,000 published
China had increased Status and new dealers from for tons; the the notice
instead of having implementation automobiles selling both Time schedule importation volume of on
decreased as a of new would be imported and for through non-state application
consequence of a tax automobile discussed domestic cars. legislation non-state trading for
exemption measure on industrial under the on car trading quotas for reallocation
MAP. There was no policy Council for financing and entities. compound of 2003
comparative relation "Guidelines Trade in confirmation fertilizers fertilizer
between the two kinds for Current Services Information on Implementation EC - that China was 600,000 TRQ through
of products. Development of they would China's new of new Written,b will not tons while some media,
Consequently, VAT Information Automobile not address automotive automobile Verbale impose any that for requiring
measures on these two on VAT Industry" that those policy and industrial Japan - performance state importing
kinds of products regime may discourage issues clarification policy seeking Written,c rule or Tariff-rate trading was entities to
were not in violation applied to Automobile the here. on the to restrict Verbale excessive quotas 2,380,000 return
EC - of Article III of copper raw (non-quota importation of EC - (Verbale) policy's WTO imports of EC - capital (TRQ) and tons. unfilled
Writtenb GATT 1994. (Verbale) materials. issues) auto parts. Writtenb compatibility. CKDs. Writtenb requirements. quotas (Verbale) quotas
Page 30 GAO-05-209R U.S.-China Trade
Quantity of Import TRQ
made available for
2003, number of
enterprises/applicants
filed and granted for
TRQ reallocation,
quantity of TRQs for
allocation or
reallocation rejected,
fill rates for quota
or TRQ, amount of any
Information goods entered at the
on 2003 over quota rate, time
quota taken to grant a quota
allocation or TRQ allocation -
for autos specified for wheat,
and other maize, rice, soybean
products: oil, rape seed oil,
total palm oil, sugar,
quantity of cotton, wool, wool
quotas top, urea, diammonium
applied phosphate, nitrogen,
for; number phosphorous, potassium
of requests (NPK). (Writtend) With
for quotas regard to TRQ
denied; allocation for
total automobiles in 2003,
quantity of in accordance with
before quotas China's WTO
September 15 Confirmation On 10 October allocated commitments, China had
of that that China has 2003, MOFCOM to fully allocated the
year, and fully made public end-users; US$ 9.125 billion
stating that allocated DAP the total minimum worth of quotas for
Summary Raised Raised applications TRQs for 2003 volume, the size of automobiles. No return
of by by China's for and has not principles of individual quotas had been
issues United other response reallocation sought to Writtena allocation quota Writtena received before 10
by States WTO would be control the and the allocation; September 2003 and
theme members accepted level of DAP application fill rates therefore the
from imports procedures of for the government authority
September 15 through TRQs for quotas; in charge of quota
to September administrative fertilizer total administration did not
30 and that means. import as of quantity of exercise any
reallocation the year quotas reallocation in this
would be 2004. The allocated regard. (Verbale) In
completed competent to entities accordance with Public
before 15 Chinese that had Notice No. 58 issued
October authorities not by the former MOFTEC
2003. On had already previously in 2002, China
October 14, distributed been eliminated import
MOFCOM all 5,950,000 allocated quota administration
circulated tons of DAP quotas; and for motorcycles and
the public for 2003, and total crane lorries ahead of
notice for had not quantity of schedule, while
fertilizer adopted quotas automobiles and its
TRQs import allocated key parts remained
reallocation controlling to under quota
as of the measures. enterprises administration in
year 2003, Enterprises with 2003. In line with its
amongst could, at foreign accession commitments,
which the their own ownership. the Chinese government
volume for discretion, had already
compound decide on the distributed US $9.1
fertilizers time and billion worth of
was 350,000 import volume quotas. Given that
tons, that in light of they had not come to
for DAP was market the end of 2003, it
12,000 tons demands, would be impossible to
and for without calculate the filled
urea, 20,000 government rate of quotas at the
tons. interference. present stage.
(Verbale) (Verbale) (Verbale)
Page 31 GAO-05-209R U.S.-China Trade
The process
for tariff
quota rates,
publishing the
total volume
of TRQs for
fertilizers in
2003 and 2004
and also
publishing
conditions for
enterprises
applying for
the allocation
of such quotas
was
transparent
and fair. With
regard to the
reselling of
quotas,
according to Quotas Request for Provision Method
Chinese officially China to that quota for
legislation announced as publish the holders not granting
this was an issued criteria having import
illegal act conform to applied for Interchangeability imported licenses
and one to be China's the of import licenses their full that
Summary Raised combated commitments allocation between different allocation China
of by China's seriously. The but of the types of models Japan - Japan - would Japan - uses to Japan -
issues United response Chinese quantities licenses (e.g., engine Written,c Written,c receive a Written,c control Written,c
by States government actually for quotas specifications) Verbale Verbale proportional Verbale the Verbale
theme firmly cracked allocated and with regard to reduction in number of
down on all are smaller, tariff-rate automobiles. their quota import
kinds of including quotas for allocation licenses
reselling import automobile in the granted
activities and quotas on and subsequent by
Large parts they requested automobiles. fertilizer. year unless category.
of the that the the quantity
quotas for European is returned
automobile Communities for
and provide then Status of reallocation
fertilizer with any China's by 1 China had
not relevant quota September; already made
allocated to information allocation number of detailed and
the genuine they may have Confirmation and quota specific
importers concerning that no reallocation holders to explanations
(state-owned reselling so other items for 2003 in whom this in the
or not) but that the subject to light of provision Import
to other Chinese automobile ensuring a applied in Licensing
parties not authorities import transparent China's Committee on
involved in could deal quotas for system; allocation 2 October
import with it. 2003 other actual of import 2003. In
activities, (Verbale) The than 44 quotas for quotas in particular,
Raised from which administration items under 2003, not fiscal year they had
by other the genuine of imported Japan - complete only item by (FY) 2003; highlighted
WTO importers automobiles, Written,c vehicles and item, but total number the
members have to with regard to Verbale one item also by of disparity
EC - "buy" the EC - the disparity EC - EC - under auto country of reductions issue.
Writtenb licenses. Writtenb existing Writtenb Writtenb parts. origin. in quotas. (Verbale)
between the
actual and the
committed
volume, from
April 2002 to
March 2003,
namely in the
first year of
China's
administration
of quotas for
automobiles;
the
administration
of the import
quota for
2003; the
transparency
of
distribution
procedures and
the criteria
for
distribution.
(Verbale)
China had
already made
detailed and
specific
explanations
in the Import
Licensing
Committee on 2
October 2003.
In particular,
they had
highlighted
the disparity
issue.
(Verbale)
Page 32 GAO-05-209R U.S.-China Trade
In China,
taxable value
for the
purpose of
imposing
consumption
tax included
a consumption
tax factor,
i.e.: taxable
value = (cost
+ profit)/(1
-consumption
tax rate).
Such a The relevant
calculation WTO Agreement
method did not
applied to stipulate the
both imported types of
goods and duties that
domestic should be
goods. The levied by WTO
consumption Members, nor
tax factor did it
was put into require WTO
the taxable Members to
value while implement the
calculating same types of
and levying duties as
consumption those
tax on either contained in
imported or the schedule
domestic of
products. Due concessions.
to such a The agreement
method, the only required
consumption that the
tax factor duties be
was taken imposed at a
into account level no
when the higher than
selling price the committed
of domestic duty rates.
products was This had been
being recognized in
determined. previous WTO
Thus, since Understanding
Reason for the taxable Reason for on Dispute
different value of specific Settlement
and higher domestic duties using (DSU) cases
Summary Raised tax base products excessive by the Information
of Raised by used to already tariff rates Appellate Japan Prohibition about
issues by other China's compute Writtena included a Tariffs imposed on Japan - Body. -Written,c on sale of China's Japan
by United WTO response consumption consumption photographic Writtenc Therefore, Verbale imports plan to -
theme States members tax for tax factor, products although limit
imported the instead of China had
and corresponding ad valorem made
domestic consumption duties. commitments
goods. tax was the in relation
taxable value to ad valorem
multiplied by duties on the
the tax rate. 35 kinds of
Since the photographic
import value products, it
of imported still had the
goods did not right to
include a apply
consumption specific
tax factor, duties on
such a value these
was converted products. In
into a 2003, China
taxable value had lowered
that the specific
contained a duty rates on
consumption the 35 kinds
tax factor. of
The photographic
consumption products.
tax was then Specific
worked out duties
based on the imposed on
converted these
taxable products were
value. within the
Otherwise, committed
the value of tariff rate
imported level and
goods would were
not contain a therefore not
consumption in violation
tax factor, of China's
while that of commitments.
domestic However,
goods would, China wished Time
which would to continue schedule for
lead to the technical tariff
unfair consultations amendments
treatment in with Japan to to apply
relation to ensure that China's
tax specific duty tariff
imposition on rates concessions
imported and remained at a for 35 items
domestic reasonable of
Consumption products. level. photographic
tax (Verbale) (Verbale) products.
Summary of issues Raised by Raised by
by theme United other WTO China's response
States members
the scope of
"management right
to passenger
vehicles,"
required of
retail dealers in
passenger Written,c
vehicles, either Verbale
to domestic cars
or imported cars;
belief that such
regulation should
not be
introduced.
With respect to wastes that could
be used as raw materials, the
former National Environmental
Protection Agency, with other
governmental departments concerned,
jointly issued the "Provisions on
Administration of Environmental
Protection on Import of Wastes" on
March 1, 1996, and a "List of
Wastes Used as Raw Materials and
Restricted in Import" had also been
annexed. Wastes listed in the
catalogue could be imported upon
examination and approval by the
former National Environmental
Protection Agency (now called the
State Environmental Protection
Administration). The import of
unlisted wastes was thereby
China's prohibited. Therefore, it could be
prohibition on seen that China did not generally
used goods, Japan prohibit the importation of all
including worn -Written,c used goods or wastes. (Verbale)
clothing and Verbale China prohibited the importation of
automobiles; used clothing and automobiles in
possibility to line with the "general exception"
abolish measures. principle and health quarantine in
international trade. The measures
on used clothing and automobiles
were implemented on a
non-discriminatory basis.
Applicable regulatory procedures
were transparent and the catalogue
of prohibited products was publicly
available, fully consistent with
WTO rules. In addition, those
measures were adopted for the
purpose of protecting the life and
health of humans, animals and
plants; nor had they constituted
discrimination or trade
restrictions in disguised forms;
thus they were in conformity with
"general exception" rules enshrined
in Article XX(b) of GATT 1994.
(Verbale)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: G/MA/W/51; dated 10/10/03.
bCommunication from European Communities: G/MA/W/49; dated 8/14/03.
cCommunication from Japan: G/MA/W/50; dated 9/8/03.
dCommunication from China: G/MA/W/52; dated 10/15/03.
eCommittee report detailing verbal statements made during meeting:
G/MA/M/35; meeting dated 10/20/03.
Page 33 GAO-05-209R U.S.-China Trade
Enclosure VII Committee on Rules of Origin
Page 34 GAO-05-209R U.S.-China Trade
In accordance
with Article 8 of
Announcement
No.17, 2001 of
the General
Administration of
Customs, the
party dissenting
to the decision
made by the
Customs may apply
for
administrative
review or bring a
suit before a
people's court.
Review of In accordance
origin by with Article 6,
judicial, the review had Punishment for Customs list
arbitral, or the right to import of for China's existing
Summary Raised Method of The method administrative change or annul products whose manufacturing non-preferential
of Raised by calculating Chinese applied was procedures; Chinese specific Regulations Chinese origin is Chinese and Chinese rules of origin
issues by other China's percentage of Taipei - that the importer's Taipei - pre-determination concerning Taipei - In accordance falsely Taipei - Actions such processes, Taipei - for exports were
by United WTO response substantial Writtena value-added appeal Writtena of origin made by confidentiality Writtena with Article 9 of reported or Writtena as false application Writtena promulgated on 8
theme States members transformation. component procedures for the Customs. The of information. Announcement counterfeited; declaring of of rules, and March 1992 and
was more ruling on application of No.17, 2001 of published country or calculation came into effect
than 30 origin; administrative or the General records of faking of assembly on May 1, 1992.
percent in authority that judicial review Administration of punishment. certificate of ratio. The rules were
the total assesses was based on Customs, the origin were applied in
value of a appeal. Administrative Customs would not dealt with by issuing Chinese
new product, Review Law of the disclose the Customs certificate of
the People's Republic information for according to origin for
calculation of China, origin relevant non-preferential
of which was Provisions for pre-determination stipulations exports upon
that the CIF the without the of Customs Law request of
value of Implementation of specific of the consignee of the
non-original Administrative permission of the People's export and had
component Review Law of the person concerned, Republic of no binding on
was 70 Customs of the except to the China and the importing side.
percent or People's Republic extent that it Rules of There was no
less in FOB of China, and may be required Administrative origin
value of the Administrative to be disclosed Penalties for declaration
product Procedure Law of in the context of the requirement by
after being the People's judicial Implementation Customs for
Imported processed. Republic of proceedings. of the Customs Exported exports.
goods (Verbalb) China. (Verbalb) (Verbalb) Law. (Verbalb) goods (Verbalb)
Source: GAO analysis of WTO documents.
aCommunication from Chinese Taipei: G/RO/W/99; dated 9/22/03.
bCommittee report detailing verbal statements made during meeting:
G/RO/56; meeting dated 10/3/03.
Enclosure VIII Committee on Safeguards
Page 35 GAO-05-209R U.S.-China Trade
China's
safeguard
investigation
on certain
imported steel
products had
been carried
out in full
compliance
with the WTO
Agreement on
Safeguards and
in strict
conformity to
China's
safeguards
laws.
Regarding the
provisional
and definitive
safeguard
measures on
certain
imported steel
products,
China had
notified the
Committee on
Safeguards of
the findings
with regard to
serious injury
and the threat
thereof caused
by increased
imports, as
well as the
authority's
decisions to Legal
apply such basis
Detailed measures, thus enabling
explanation having the
on legality fulfilled its Government
of notification to retain
provisional obligations measures
and under the on
definitive Agreement on products
safeguard Safeguards. that the The EC
measures on China's State questions
certain investigating Economic concerning the
steel authorities and Trade review of
Summary Raised Raised products also made Commission Article 16 of China's Delay in Concerning
of by by China's Measures and China's Japan - adequate (SETC) Japan - China's EC - safeguard China any delay
issues United other response on steel schedule Written,a information determined Written,a safeguards Verbalb measures would notifying in the
by States WTO aiming at Verbalb disclosures do not Verbalb regulations be referred to rules to submission
theme members totally regarding cause provided that capital for the of
repealing findings of injury; in a case where further
these the immediate a preliminary consideration.
measures; investigation, repeal or determination (Verbalb)
Chinese and notified plans of established the
measures disclosed mitigating existence of an
not in information to measures, increase in the
conformity Members having and quantity of an
with a substantial schedule imported
Safeguards interest, aiming at product and
Agreement. including repealing injury and a
Japan. measures causal link
Moreover, to these between the
pursuant to products. two, MOFTEC and
the rules set the State
out in Economic and
Articles 12.3 Trade
and 12.4 of Commission
the Agreement (SETC) should
on Safeguards, continue with
China had held their
consultations investigations
with those and, on the
Members having basis of the
substantial findings of
interest, such
including investigations,
Japan, make a final
furnished the determination
relevant which should be
information, published by
and exchanged MOFTEC.
views on the Accordingly, a Inconsistencies
measures. final in China's
China's determination measures;
safeguard was published possibility
measures on by MOFTEC on 19 that China
certain November 2002. might review
imported steel Relevant its measures
products had information before their
been, and could be found three-year
would continue in the Official expiry and
to be, applied Notice China's
according to published by consideration
the timetables the Ministry of of a review in
stipulated in Foreign Trade the event that
China's and Economic the U.S. and
Official Cooperation, E.C. steel
Bulletin on now the safeguard General
definitive Ministry of measures were safeguard
measures. Commerce. revoked in the measures
(Verbalb) (Verbalb) coming months. Verbalb
Raised by Raised by
Summary of issues by theme United other WTO China's response
States members
China's legislative
notifications, that was
attributable to government
restructuring which China
WTO in light of China has been engaged in
having undertaken a starting from March or
safeguard investigation April 2003. China
before all the necessary considered that it was only
rules had been issued and appropriate for it to make
notified. the necessary modifications
and changes to the original
legislations because of the
restructuring of the
Chinese government
Verbalb departments. (Verbalb)
Lack of transparency in
China's decision-making
process for the safeguard
measures (e.g. unclear
process for allocating
quotas). Verbalb
Criteria China had used in
determining which WTO
Members would be accorded
the status of a developing With regard to the specific
country or region for issues raised by the United
purposes of Article 9.1 of States, such as the
the Agreement (provision standards or criteria that
requiring non-application China had used for defining
of safeguard measures to developing countries, at
developing country WTO least for the purpose of
Members where import share China's safeguard
criteria were met), and investigations, and other
whether those criteria issues such as the
were clear and treatment of non-WTO
transparent. Verbalb Members, these were already
China's treatment of covered by China's written
non-WTO Members under replies to written
Article 9.1, given that it questions. (Verbalb)
did not provide for the
exclusion of countries
that were not WTO Members. Verbalb
Protection of confidential
data submitted during the
course of a safeguard
investigation, especially
when outside experts were
employed. Verbalb
Access to non-confidential
information from safeguard
investigations by
interested parties and by
the general public, in
terms of the procedural
requirements for and
limitations on such
access. Verbalb
Refunding of safeguard
duties collected pursuant
to provisional measures
when definitive measures
were not imposed on the
relevant products. Verbalb
Terms and conditions
covering China's extension
of safeguard measures.
Source: GAO analysis of WTO documents.
Note: An additional document source is a communication from China:
G/SG/W/195; dated 10/17/03.
aCommunication from Japan: G/SG/Q2/CHN/2; dated 9/19/03.
bCommittee report detailing verbal statements made during meeting:
G/SG/66; meeting dated 10/20/03.
Page 36 GAO-05-209R U.S.-China Trade
Enclosure IX Committee on Sanitary and Phytosanitary Measures
Page 37 GAO-05-209R U.S.-China Trade
China's WTO
Notification
and Enquiry
Center in the
Ministry of
Commerce is
responsible
for SPS
notifications.
The SPS
Enquiry Point
is established
in the State
General
Administration
for Quality
Supervision
and Quarantine
(AQSIQ). All
SPS
notifications
undergo the
technical
review of the
SPS Enquiry Results of
Point and then risk
Explanation are notified assessments
of steps to WTO through conducted
taken to China's WTO for China's
ensure that Notification plans to
other Member and Enquiry suspend
Summary Raised Countries Center. Full list of soybean
of Raised by are given a (Verbald) To products imports from
issues by other China's Writtena Writtena realistic date in 2003, subject to Science-based companies in Writtena Writtena Writtena Writtena
by United WTO response opportunity China has made mandatory measures U.S.,
theme States members to comment 24 SPS health Argentina
on notified notifications. certification. and Brazil,
measures in Some of these based on
advance of were specific detections
their detailed of
application. implementation Phytophthora
rules sojae in
Role of State corresponding shipments of
General to laws or soybeans.
Administration regulations On the issue
of Quality that had been of soybean
Supervision, previously quarantine
Inspection and notified to measures,
Quarantine WTO. The China had
(AQSIQ) in regulations provided the
monitoring the enacted and necessary
development revised under clarifications
and the auspices during the
implementation Explanation of the transitional
of China's of how Ministry of review by the
regulatory comments Health are Committee on
controls for were taken national food Agriculture. Role of AQSIQ
seafood, into account safety No single in monitoring
including when China standards at foreign the
Decree 31, notifies the draft company's development,
Certification changes in stage. The soybeans were implementation,
Requirements Time SPS measures first 17 suspended or and
for schedule after the drafts have prohibited Risks that notification of
Fresh/Chilled, for proposed been notified from being Decree 31 Scientific laws and
Frozen and AQSIQ to date of to the WTO, imported into is justification regulations
Processed notify entry into for comments China on SPS endeavoring for Decree 31 covering food,
Notification of Aquatic Degree EC - force of the EC - EC - from Members. grounds. to certification forestry and
measures/transparency Products. 31. Writtenb legislation. Writtenb Writtenb (Verbald) (Verbald) mitigate. requirement. fishery
Page 38 GAO-05-209R U.S.-China Trade
China respects the
China fully principle of
respects the non-discrimination
principles in the course of
identified developing and
in the SPS implementing SPS
Agreement, measures. For
especially products with
the Chinese identical risks,
principle of experts China's SPS
a scientific have measures,
basis, in received especially end
Concern that the process and are product criteria,
the of now are applied
notification developing studying equally to
MOH draft and the domestic and
regulations implementing China's experts' imported products.
would compel its SPS implementation report on The recent
the measures. of European cosmetics Equal standards revised
initiation of Measures to China's SPS and Chinese which was application or developed by
an immense ensure that measures are experts' drafted by of MOH's the Ministry of
set of sanitary and all based on scientific the EC new Health, in which
complex phytosanitary risk assessment panel. regulations some Members are
Summary Raised Raised testing, measures are assessments. applied to China pays covering interested, will
of by by China's grading and based on In December cosmetics, great National food, also apply equally
issues United other response Writtena risk Writtena scientific 2002, China including attention treatment forestry, Writtena to domestic and
by States WTO assessment principles published finding that to the and fishery imported products
theme members Risk reviews, and are not Regulatory substances work done products once they are
assessments which may maintained Measures on banned in by Chinese between approved.
completed on unjustifiably without Import Risk China, or and domestic (Verbald) China is
the products deny imports scientific Analysis for those subject European and a centralized
for which of products, evidence. Animals and to specific experts. imported country, and all
standards and such as Animal import China will products. the SPS measures
tolerances grain, Products measures, were consider (including
are processed (AQSIQ actually safe. the national standards
established foods, dairy, Decree No. revision related to SPS)
at levels meat and 40) and of the developed by the
more poultry into Regulatory control central government
restrictive China. Measures on measure if are enforced
than the Import Risk the nation-wide. The
relevant Analysis for experts Constitution of
international Plants and from both China and the
standards Plant sides can current legal and
regarding Products achieve standards
MOH's new (AQSIQ consensus framework can
products draft Decree No. on the effectively ensure
published regulations 41), which scientific the uniform
by on food, were basis and implementation of
Ministry forestry, and notified to technical SPS measures
of Health fishery EC - EC - WTO. issues. across the
(MOH). products. Writtenb Writtenb (Verbald) (Verbald) country. (Verbald)
Page 39 GAO-05-209R U.S.-China Trade
The procedures
set forth in
two decrees,
namely, AQSIQ
Decree No. 7,
Administrative
Measures for
the Entry-Exit
Inspection and
Quarantine for
Grains and
Feed Stuffs,
as well as
AQSIQ Decree
No. 25,
Administrative
Measures for
Import Permit
for Entry of
Animal and
Plant
Quarantine,
apply equally
Description of to all
the steps to countries
Concern that ensure that exporting
certain meat Administrative animals and
and poultry Measures for plants as well
standards are the Entry-Exit as their
significantly Inspection and products to
stricter than Quarantine for China.
those set by Extent to Grains and (Verbald) The
Codex and are which China Feed Stuff, procedures and
Summary Raised blocking the has unified and processing
of Raised by entry of sanitary and Inspection Administrative periods for
issues by other China's Writtena imports; Writtena phytosanitary and Measures for Writtena the
by United WTO response standards for measures approval Entry Animal application
theme States members domestically applied to procedures and Plant and issuance
produced meat domestic and Quarantine, of import
and poultry; The standards imported comply with permits are
scientific applied to products. its clearly
rationale and domestic meat obligations of specified in
risk and poultry the Agreement Decree No. 7
assessments products are on the and Decree No.
for standards the same as Application of 25, that also
for imported those applied Sanitary and stipulate that
products. to imported Phytosanitary all importers
ones. These Measures. are equally
standards are eligible to
all submit
established application as
on the basis The recent long as they
of relevant standards fulfill the
international revised or requirements
standards. China respects the developed of applying
Risk The standards principle of by the for import
assessment for poultry non-discrimination Ministry of Steps taken permits. All
supporting meat were in the course of Health, in to eliminate the
differing notified to developing and which some multiple or Steps taken applications
treatment the Technical implementing SPS Members are duplicative to ensure will be
under AQSIQ's Barriers to measures. For interested, control that the same accepted and
Decree 44, Trade (TBT) products with Steps taken to will also procedures conformity approved
Certification Committee in identical risks, ensure that the apply and to avoid assessment within 9 to 30
Requirements 2002 and China's SPS principle of equally to imposing procedures working days
for Live modification measures, non-discrimination domestic requirements apply to both by AQSIQ if
Aquatic to them is especially end with regard to and exclusively imported and they are in
Products, underway in product criteria, expanded list of imported on imported domestic conformity
which accordance are applied products subject products products products with the
mandates with the equally to to health once they subject to subject to regulations
different comments made domestic and certification are health health identified in
practices for EC - by Members. EC - imported products. system is fully EC - approved. certification EC - certification the Quarantine
imports. Writtenb (Verbald) Writtenb (Verbald) respected. Writtenb (Verbald) system. Writtenb system. Law
Page 40 GAO-05-209R U.S.-China Trade
and its
Regulation of
Implementation
as well as
AQSIQ Decree
No. 25. To
facilitate the
application
for the import The
permit, since Government of
1 September China
2003, AQSIQ attaches Measures to
has introduced great ensure China is a
online importance to consistent and centralized
application the principle uniform country, and Consideration
whereby Policy and that SPS Risk assessment application of all the SPS of other less
importers may schedule to measures as basis for China's measures trade
file the align Chinese shall be sanitary and sanitary and (including restrictive
Summary Raised application sanitary and based on phytosanitary phytosanitary national means to
of Raised by through Chinese phytosanitary international measures when measures standards achieve the
issues by other China's internet Taipei measures with standards. In measures do not throughout the related to objective of
by United WTO response access from -Writtenc relevant December conform to country, SPS) developed consumer
theme States members their own international 2001, AQSIQ international avoiding by the central protection
office. This standards issued standard unnecessary government are and
practice has Information on where "Regulatory guidelines or additional enforced information
remarkably the content of appropriate. Measures recommendations. regional/local nation-wide. for food and Consideration
reduced the Administrative Governing the regulations The cosmetics. for steps to
cost of Regulations on Adoption of and standards Constitution improve the
application the Review and International imposed by of China and coordination of
and improved Permission for Standards" regional/local the current the different
the efficiency Entry of (AQSIQ Decree authorities. legal and administrations
of approvals. Quarantined No. 10), standards Consideration of that have a
This makes the Imported which framework can relevant regulatory
issuance of Animal and stipulates effectively international competence in
import permit Plant Products clearly the ensure the standards by the the SPS field
conform to the and compliance principles uniform Codex (which are,
regulations both with and implementation Alimentarius and inter alia,
identified in China's procedures of SPS International AQSIQ, the
Article 8 and accession International for adopting measures Less trade Office of Ministry of
Annex C of the commitments standards and international across the restrictive Epizooties/Office Agriculture,
SPS Agreement. and with the consistency EC - standards. EC - country. measures EC EC - International de EC - the Ministry of
(Verbald) SPS Agreement. EC - Writtenb Writtenb (Verbald) Writtenb (Verbald) - Writtenb Writtenb Epizooties (OIE). Writtenb Health and
Page 41 GAO-05-209R U.S.-China Trade
As expressed in
the
notification,
the measures
taken in AQSIQ
Notice No. 36
are based on
the fact that
chloramphenicol
residues were
detected not
only in milk
powder and veal
from the
Netherlands by
France and
Germany, but
Steps to also in salted
ensure that casings from
proportional the Netherlands
response in by China at a
accordance later stage. It
In March with Article is a
2002, to 5 of the SPS provisional
protect the Agreement is emergency
health and adapted to measure taken
life risk, following
China's belief security of including a unsuccessful
that the the people measure consultations
internationally of China, restricting with the
recognized the imports on Netherlands.
standards (WHO Ministry of all Even after the
and OIE) in Health and foodstuffs of measure came
connection with AQSIQ Consideration animal origin into force,
Summary Raised ingredients issued a of other less from another China still
of Raised by derived from joint trade member detected
issues by other China's cattle and decree restrictive country as a chloramphenicol
by United WTO response sheep tissues which alternatives response to a in animal
theme States members coming from prohibits on BSE single products
countries and the import related positive originating
regions and sale of measures. interception from the
affected by BSE cosmetics of a Netherlands in
do not fulfill containing veterinary a number of
the level of ingredients drug residue cases. In
protection set derived in a single addition, some
up by China. from cattle consignment other Members
and sheep of casings have also
tissues and with no identified
coming from positive chloramphenicol
countries interceptions in poultry meat
and regions having been and aquatic
affected by reported in products
BSE. At the other food imported from
same time, products the
China Scientific before the Netherlands.
classified basis for measure was According to
the raw deviating introduced. the explanation
materials from the by the
with BSE existing Netherlands,
risks and international Level of the reason for
takes standards, as protection the existence
Consideration different required in and of
for adopting measures on Article 2 of scientific chloramphenicol
measures those with the SPS justification in casings
rationalizing lower risk, Agreement, applied by exported to
the repartition thus for measures China to the China is that
of competence reducing introduced imports in there is
between the the burden which relate comparison chloramphenicol
different Bovine on to import with the in feedstuffs
administrations Spongiform cosmetics restricting level of imported from
that have an Encephalopathy importers on a range of protection Eastern
the State Food overlapping (BSE) related to some products applied to Proportionality European
and Drug EC - role in SPS measures EC - EC - extent. related to EC - national EC - of measures EC countries.
Administration). Writtenb issues. Writtenb Writtenb (Verbald) BSE. Writtenb production. Writtenb - Writtenb (Verbald)
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
On the basis of relevant
information and promises
provided by the Netherlands,
China has revoked the
restriction on some products
and conditionally lifted the
import ban on dairy products
and casings. At the moment,
Chinese experts are studying
the investigation report on
the residue control system
of the Netherlands and
coming to a final appraisal
on the basis of the study.
The administrative decision
by AQSIQ will be made as
soon as possible in line
EC - with the professional
Writtenb findings. (Verbald)
China's citation of
Article 5.7 when
defending proportional
response measure.
Application of the principle of regionalization EC - Writtenb
China respects and follows
Justification for the principle of
non-application of regionalization provided for
measures in line with in Article 6 of the SPS
Article 6 of the SPS Agreement and treats animal
Agreement (the and plant diseases on the
application of the basis of this principle.
principle of China encourages Members to
regionalization) when submit applications for
China introduced a regionalization in written
measure restricting form and provide the
imports of porcine origin necessary documents to prove
from France due to their status as indicated in
Classical Swine Fever; Article 6.3 of the SPS
circumstance under which Agreement. China will make
provisions related to the decisions after
principle of evaluation and inspection
regionalization would be tours to the applicant's
applied. territory in a timely
manner. (Verbald)
Source: GAO analysis of WTO documents.
Note: An additional document source is a committee report detailing verbal
statements made during meeting: G/SPS/R/31; meeting dated 10/29/03-
10/30/03.
aCommunication from U.S.: G/SPS/W/139; dated 10/3/03.
bCommunication from European Communities: G/SPS/W/137; dated 9/30/03.
cCommunication from Chinese Taipei: G/SPS/W/138; dated 10/1/03.
dCommunication from China (verbal statement): G/SPS/GEN/452; dated
10/29/03-10/30/03.
Page 42 GAO-05-209R U.S.-China Trade
Enclosure X Committee on Subsidies and Countervailing Measures (SCM)
Page 43 GAO-05-209R U.S.-China Trade
China had
terminated all
export subsidies.
For example, at
present, China
maintained no
subsidies or
subsidy schemes
in the textile
industry, which
was in conformity
with China's
accession
commitments. The
China National
Textile Industry List and
Council referred explanation
to in the of all
questions had not subsidies
engaged in any granted at
work related to the national
subsidy schemes. and
Status of The delegate of sub-national
China's China China stressed level to
collection of attached that the reports enterprises
Summary Raised information great Type of were not true. in the EC -
of Raised by for its importance to information Since accession following Written,b
issues by other China's subsidy Written,a Verbald making such Writtena China relies Writtena General Details on Writtena to the WTO, China sectors: Mexico - Writtena Verbald
by United WTO response notification, Verbald notifications upon to subsidies had embarked upon leather and Writtenc Japan -
theme States members and because it assemble its available in extensive efforts footwear; Verbald Questions
submission of was their notification. the textile in the collection textiles and in this
its subsidy view, and industry for of subsidy clothing; regard had
notification. they believed manufacture information. A electric and already
that it was with raw number of electronic been
also the view materials, difficulties had products; addressed
shared by financing of been encountered iron and in the TRM
many, that mill during the steel; of the
making such establishments process, chemical; Committee
notifications and purchase including the automotive Information on Market
was conducive of raw partial industry. on VAT rebate Access on
to the materials-type understanding of program 20 October
sharing of of subsidy, the WTO granted for 2003.
information timeline of notification imports of China felt
and also for the program requirements by scrap copper it
improving the and local officials, in accordance preferable
transparency recipients, under-performance with required not to
of the Description role the China of the domestic subsidy repeat
domestic of problems National information notification those
processes of preventing Textile collection system format, responses
different China from Industry and varied including the in the SCM
countries. making its Council plays criteria on recipients of Committee
China wished notification to support statistics. the rebate, meeting
Subsidies to reaffirm under subsidy Measures were the amount of due to the
notification its Article 25.1 programs for being taken to the rebate limited
EC commitment to of the the textile address these and how the time.
-Written,b fulfilling Agreement. industry. issues, both on administering (Verbald)
its the national and
notification sub-national
obligation. level, for
(Verbald) example, the
Concerning strengthening of
the the
notification communications
obligation of between ranks of
China, China officials,
stated that briefings by WTO
it was very experts, and the
serious about translation of
fulfilling the technical
its cooperation
notification handbook on WTO
obligations notification
and that it requirements.
was in the China was
process of vigorously
improving its pushing forward
notification work but that
system so as they were not in
to be up to a position to
the standard give a specific
set by the time frame for
WTO. the completion of
(Verbald) it. (Verbald)
Page 44 GAO-05-209R U.S.-China Trade
It was
established
policy to
eliminate
such
subsidies
provided to
state-owned
enterprises
running at
a loss.
Allegations
had been
made in the
U.S.
statement
that,
according
to some
recent
Chinese
press
reports,
the
Government
was still
in the
process of Information
eliminating China had on measures
this reduced the granted to
program scope of companies to
Status of instead of Identification products fulfill
elimination terminating items reduced and export
of the whole from or added services requirements Implication on
"subsidies program by to the list of and the stated on the Shanghai There was no such
provided to the year products or government the Shanghai Foreign practice as
Summary Raised certain 2002. services price Foreign Investment Center different pricing
of Raised by state-owned Request subject to control and Investment website that for energy, water,
issues by other China's enterprises Written,a made for price Writtena that Center state owned power, Mexico -
by United WTO response which are Verbald the U.S. controls, and vegetable website; companies enjoy transportation and Writtenc
theme States members running at delegation explanation of oil had explanation preferential telecommunications
a loss"; to provide extraordinary been lifted of how supply of water, between
decree or China with circumstances from the measures for electricity, state-owned
government more supporting list of companies transport and enterprises and
document detailed each added Annex 4 of fulfilling telecommunication other types of
that ended information product or China's export enterprises. The
subsidies. with regard service. Accession requirements The web site practice of
to these Protocol in are of the multiple pricing
press 2001. China compatible so-called for one commodity
reports, had not, with Shanghai or service had
such as the and did obligations. Foreign been entirely
source of not, plan Investment eliminated in
the to expand Centre was China. State
reports, the scope not a pricing and
the time of products government government
when the in services web site and guidance pricing
reports had subject to information only applied to
been state it posted was goods and
published pricing or not services,
and the guidance authoritative regardless of the
sectors, pricing and and did not ownership of the
industries that any have binding enterprises.
or changes to power. Enterprises of all
enterprises the scope Members could types, including
which were of these get access to state-owned
involved in products the relevant enterprises,
such and laws and foreign investment
reports, so services regulations enterprises and
as to would be through the foreign
facilitate published government enterprises in
authorities China's in the designated China were treated Requirements
ensure that efforts in China journal: the on an equal for a Article 3 of
rebates making Foreign China Foreign footing in the company to the Law of
granted are appropriate Trade and Trade and process of be the People's
not in responses Economic Economic determining considered a Republic of
excess of to the Cooperation Cooperation government pricing foreign China (PRC)
rebates question. EC - Gazette. EC - Gazette. and guidance direct on Wholly
paid. (Verbald) Writtenb (Verbald) Writtenb (Verbald) pricing. (Verbald) invested Foreign-owned
Page 45 GAO-05-209R U.S.-China Trade
Enterprises
stipulated
that the
establishment
of a wholly
foreign-owned
enterprise
shall be
conducive to
the
development of
China's
national
economy. The
State
encouraged the
establishment
of wholly
foreign-owned
enterprises
with export
orientation
and adoption
of advanced
technology.
Article 17 There were
stipulated three laws
that wholly governing
foreign-owned foreign
enterprises investment
shall pay enterprises,
taxes in namely the
accordance Law on
with relevant Chinese
state Foreign
regulations Equity Joint
and may enjoy Ventures, the
preferential Law on
treatment of Chinese
tax reduction Foreign
or redemption. Contractual
Paragraphs 7 Joint
enterprise and 8 of Ventures, and
devoted to Article 75 of the Law on
exports; the Rules of Explanation Wholly
availability Implementation of Foreign-Owned
of income of the Income stipulation Enterprises.
tax Tax Law of the in the Among these
exemptions PRC for Foreign three laws,
or rebates, Enterprises Investment only the Law
and with Foreign Enterprise on Wholly
availability Investment and Law, which Foreign-Owned
of Foreign appear to Enterprises
Summary Raised Raised additional Enterprises require used to
of by by China's exemptions stipulated enterprises Mexico - contain the
issues United other response and rebates that after with Writtenc requirement
by States WTO granted to expiration of foreign on export
theme members such the period of capital to performance.
companies income tax export a As part of
set up in exemption and percentage the
the special the reduction of their preparations
economic the foreign production for joining
zones; investment in order to the WTO in
relation enterprises be eligible October 2000,
between whose export for tax Article 3.1
rebates and volume for a breaks. of the Law on
export year exceeded Wholly
results. 7 percent of Foreign-Owned
their Enterprises
production for was amended
the same year as follows:
were entitled the
to a 50 establishment
percent rebate of a wholly
of the normal foreign-owned
rate of income enterprise
tax as shall be
provided by conducive to
tax law. The the
enterprises development
located in of China's
special national
economic economy. The
zones, or State
economic and encouraged
technology the
development establishment
zones, or any of wholly
other foreign-owned
exporting enterprises
enterprises with export
that already orientation
enjoyed an and adoption
income tax of advanced
rate of 15 technology.
percent, would The original
pay income tax provision,
at the rate of that the
10 percent if establishment Gaps in
they also met of a foreign CVD legal
the above invested structure,
requirements. enterprise including
The must adopt in the So far, China
consistency of advanced areas of had not
this provision technology or interim initiated any
with the SCM export all or and countervailing
Agreement was most of its expiration investigations
currently products, had reviews, but that China
being been Countervailing rules and was, however,
reviewed. replaced. Duty Laws procedures in the process
(Verbald) (Verbald) (CVD) Verbald on of making such
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
legislation just in case such
an investigation might be
initiated in the future. That
access to delegates could be reassured
non-confidential that China would honor its
information, and commitments in the WTO and
undertakings. continue to bring its
legislation in line with WTO
rules, including in the field
of countervailing
Verbald investigations. (Verbald)
The delegate of China noted
that there was another
procedural request contained
in the last paragraph of the
statement by the U.S., namely
to reflect China's CVD laws
and regulations on Chinese
subsidy practices which had
Notification of all not yet been notified in the
laws and regulations TRM report of the Committee to
that had a bearing on the Council for Trade in
countervailing duty Goods, as well as that the
investigations and relevant minutes, Members'
reviews. questions and China's
responses be appended or
referenced in that report. The
delegate of China stated that
he wished to consult his
colleagues from the U.S. as to
the legal basis for such a
request before China made
appropriate responses to this
Verbald request. (Verbald)
This question had been
repeated a number of times
both in the Committee on
Safeguards and in the
Committee on Anti-Dumping
Practices. The role of the
Clarification of the Tariff Commission was quite
oversight role of the clear, as referred to, or
State Council Tariff provided for, in the three
Commission, including regulations that China had so
when it may exercise far promulgated, namely the
discretion in the regulations on anti-dumping
course of an investigations, the
investigation; regulations on countervailing
encouragement for China investigations and the
to establish procedures regulation on safeguards. The
for publicizing the role, to put it simply, was
Tariff Commission's for the Tariff Commission to
decisions in make determinations on the
countervailing duty rates of the anti-dumping,
actions. countervailing or safeguards
duty on the proposal of the
former MOFTEC, now MOFCOM. The
duty rates that it decided
would not exceed the proposed
rate of MOFCOM. This had
already been made quite clear
by China. (Verbald)
Source: GAO analysis of WTO documents.
Note: An additional document source is a communication from China:
G/SCM/N/104; dated 10/24/03.
aCommunication from U.S.: G/SCM/Q2/CHN/6; dated 10/27/03.
bCommunication from European Communities: G/SCM/Q2/CHN/5; dated 9/30/03.
cCommunication from Mexico: G/SCM/Q2/CHN/4; dated 10/31/02.
dCommittee report detailing verbal statements made during meeting:
G/SCM/111; meeting dated 10/28/03.
Page 46 GAO-05-209R U.S.-China Trade
Enclosure XI Committee on Technical Barriers to Trade (TBT)
Page 47 GAO-05-209R U.S.-China Trade
The content
of mandatory
standards in
China
conforms to The same
the technical
definition Notification regulations,
of technical of changes to standards
regulations the Chinese China and
under the Compulsory recognized the conformity
TBT Certification importance of assessment
Agreement System (CCC) adopting procedures
and forms a Mark international Status of are applied
Steps to main certification standards, China's to both
ensure China component of scheme, which which had been work with imported and
notifies all Chinese permit used as a conformity domestic Updated
regulations technical applicants to basis for the assessment products. list of
meeting TBT regulations. conduct development of bodies to For imported domestic
Summary Raised Agreement Since factory its technical implement and domestic and
of Raised by criteria, not accession to selfinspection Notification As to regulations, commitments products, foreign
issues by other China's Notifications just those Written,a the WTO, and to proceed Writtena of proposals Verbale transparency International Writtena standards and to Written,a all bodies conformity Writtena China Quality
by United WTO response issued by Verbale China has with CCC Mark under TBT and standards Plans to address conformity undertake Verbale and agencies assessment Certification
theme States members China's State notified 19 issuance on an Agreement. coordination China's limited assessment conformity shall issue bodies Center, China
Administration mandatory interim basis among domestic definition of procedures assessments the mark and that are Certification
of Quality, standards to while awaiting agencies international (CAPs). A for charge the recognized Center for
Supervision, the WTO a full factory involved in standards to those publication of imported same fee, by China. Electromagnetic
Inspection, Secretariat inspection by TBT promulgated by the AQSIQ had and and provide Compatibility,
and Quarantine under designated notifications, International recognized as domestic the same China
(AQSIQ). Article 2 of certification the Chinese Organization for international products. processing Certification
the TBT bodies; representative Standardization the standards periods and Center for
Agreement. request for informed the (ISO), issued by 42 complaint Security and
Relevant catalogue of Committee that International international procedures. Protection,
terms are products on 30 October Electrotechnical organizations. The choice China
also used subject to CCC 2003, China Commission (IEC) (Verbale) of the Certification
according to certification. had replied to and International conformity Center for
the TBT the same Telecommunications assessment Agricultural
Agreement in question Union (ITU); bodies is at Machinery,
the during the SPS reason for the China
modification Annual limiting options discretion Certification
of existing Transitional to only three Conformity of the Center for
measures. Review (TRM). standardizing assessment applicant. Safety Glazing,
(Writtend) (Verbale) bodies. procedures (Writtend) Beijing
Page 48 GAO-05-209R U.S.-China Trade
Zhong Hua
Combination
Quality
Certification
Co. Ltd.,
Certification
Center for The spare
Fire Products, parts and
Ministry of components to
Public which the CCC
Security, system applied Specific
China and that were conditions
Certification listed in the were set
Center for First out to
Automotive Catalogue of Concern with apply for
Products, Products were the issue of an
Center of exempted from spare parts Request for exemption
Boiler and a separate and China to make from the
Pressure There was no certification; components, clear with CCC
Vessel discrimination, but if those especially which system; a
Inspection and nor goods were when spare authority the unified
Summary Raised Raised Research, the multiplication imported and parts were ultimate fee scheme
of by by China's National or duplication sold supplied decision lies applied to
issues United other response Institute for Writtena of CAPs between separately, separately as to whether both
by States WTO the Control of imported and they would for the or not the imported Concern with
theme members Pharmaceutical domestic require a purposes of mandatory or the issue of
and Biological products. separate repair or certification domestic fees for
Products, the (Verbale) mandatory maintenance, is required, goods, and conformity
Maritime certification. or when in cases of any assessment
Administration Those goods, components uncertainty. difference that were
of the Steps taken and whether were in fees rather
People's planned to produced assembled in was due to expensive;
Republic of eliminate Request domestically China. Clarification the there appeared
China and duplicative for China or imported, whether fixed different to be
Register of conformity to grant for fees and testing variations
Shipping at assessment spare maintenance, conformity costs. according to
all levels, requirements, parts and end-use, or assessment (Verbale) the specific
Register of such as between Emphasis that components the fees reflect product under Specification
Fishing the CCC Mark National an maintenance of the real cost question that if and when
Vessels of the requirements Treatment exemption, products that Request for of could lead to so-called
People's and those of should be following were no longer China to avoid certification discrimination factory
Republic of the Ministry of ensured in the a manufactured, subjecting end and do not between the inspections
China and Information Chinese implementation procedure were exempted products and discriminate fees applied included in
Local Register Industry, or Compulsory of the new as clear from the EC - their between to domestic EC - conformity
of Fishing Health/ Food Certification Compulsory and easy mandatory Verbale components to domestic and and to Verbale assessment
Vessels. and Drug (CCC) system Certification EC - as certification. EC - separate EC - EC - imported importing EC - procedures
(Writtend) Administration. EC - Writtenb system. Writtenb possible. (Verbale) Writtenb certification. Writtenb Writtenb products. producers. Writtenb are
Page 49 GAO-05-209R U.S.-China Trade
Concern that
the approval
The certification marks for
bodies were obliged automobiles
to protect the -while it
confidentiality and seemed that
non-disclosure of the China did
technical information Hurdles not accept
and trade secrets caused by United
that were required to the Nations
Procedures obtain certificates. repetition Economic
implemented to Mutual recognition of of tests Commission's
Request for ensure that results should be for several (UNEC)
China to confidentiality based on bilateral or Concern with parts approval
ensure local of technical multilateral the issue of and/or marks,
Summary Raised manufacturer information agreements between confidentiality components; China's
of Raised by of like about products governments or of the detailed Confirmation China's standards
issues by other China's products are is dealt in a organizations duly technical about whether willingness were
by United WTO response subject to manner that authorized by the documentation products to accept basically Trade obstacle
theme States members similar legitimate government. China support to be already the results the same created by
treatments commercial supported the supplied by certified Concern with Explanation of foreign standards as China's Unit
and interests are recognition of manufacturers. according to the issue of of how far conformity UNEC-could Classification
conditions. protected at certification/testing the previous the foreign assessment lead to a Guidelines,
both national results on an equal regime (for recognition conformity procedures repetition which deviate
and local basis; in this sense instance, Law of different assessment based on of tests for from
levels. China had joined the on Import and conformity will be taken practically several international
International Export assessment into the same parts, and practices;
Electrotechnical Commodity procedures, consideration standards. to different recommendation
Commission for Inspection particularly in the certificates that China
Electrical Equipment (CCIB) where Chinese for accede to the
(IECEE); and, certification) products had procedures, identical 1958 United
therefore, recognized need to already been notably in products Nations
the CB certificates EC - undergo the certified EC - sectors where when EC - Economic
issued in the context Verbale new according to Verbale similar Automobile produced in Verbale Commission for
EC - EC - of the IECEE system. EC - certification the previous EC - requirements EC - different EC - Europe
compulsory. Writtenb Writtenb (Verbale) Writtenb system. system. Writtenb apply. Writtenb plants. Writtenb (UN/ECE)
Page 50 GAO-05-209R U.S.-China Trade
Concern that
the
pre-market
Concern on the registration
so-called for
"active cosmetics,
Implementation pharmaceutical performed by
of newly ingredients," Discrimination the Ministry
enacted rules given the of importers Imported of Health,
in conformity hurdles required to cosmetics was lengthy
with the The import encountered by file an were and onerous,
requirements registration EC producers application to subject to and appeared
stemming from for when exporting the Ministry an to be
the WTO-TBT pharmaceutical to China, and of Health to assessment different
Summary Raised Raised Agreement products the import obtain a and from the one
of by by China's rather than exported to drug license EC - pre-market approval required for
issues United other response requiring China required registration Verbale registration, of their domestic
by States WTO higher quality those products Consistency of that was which is safety and producers. Request for
theme members standards on to meet both standards used required, the lengthy and hygiene There was China to
imported drugs the Chinese for active specifications onerous and qualities another Request for reconsider
compared to and the pharmaceutical of which had requires the and to a pre-import China to phase its
domestic national ingredients been the disclosure of labeling registration out current legislation Request for
products standards of (API) in the subject of confidential approval. for imported expensive and on labeling the Chinese
standards and the country of import drug frequent data, whereas (Verbale) cosmetics, time-consuming and authorities
international origin. license changes domestic required by double advertising to formally
standards. Therefore, registration without producers AQSIQ, which registration in order to endorse the
Agreement domestic and (IDL) external notify the apparently system by achieve important
and sign up foreign requirements communication local established AQSIQ, before transparency, achievements
to the pharmaceutical and request or authorities a double import and compliance in de facto
majority of producers were for China to consultation. two months registration EC - repeated at with global removal of
the existing treated respect Cosmetics after the system for Verbale local level, practice and BSE-related
Geneva Pharmaceuticals EC - equally. transparency EC - launch of the imported EC - for imported EC - a rule-based EC - trade
regulations. EC - Writtenb Writtenb (Verbale) obligations. Writtenb product. products. Writtenb cosmetics. Writtenb system. Writtenb impediments.
Page 51 GAO-05-209R U.S.-China Trade
Currently, the
The General
inventory Administration
of of Environment
The data existing Protection is
testing of chemical Progress made revising the
foreign Detailed time substances in Regulatory
certification schedule, consisted consideration Provisions on
Request for Request Under bodies was including the of the of comments Initial
China to Request for Food for China Chinese accepted in time for the chemical from Imports of
The approval apply China to allow labels to accept regulation Reason why Reason why China China, compilation of substances interested Chemical
of food transparent economic for that that food China did not will not accept provided that the accurate produced, parties on Products and
labels had criteria for operators to imported approved labels for Imports of submit WTO eco-toxicological these bodies inventory of sold, draft Import Import and
been the approval The Chinese decide how to food labels are imported bulk notification data of new had been existing utilized and Export Export
Summary Raised Raised regularly of labels. In regulations on present the products attached food products regarding chemical accredited by chemicals, the in or Registration Environmental
of by by China's completed particular, food labeling required were after the products for food Chemicals Provisions on Japan - substance data Japan - the competent establishment Japan - imported Regulations Japan - Requirements
issues United other response within the the best applied to all Chinese-language subject goods are subject processing and the Writtenc obtained by Writtenc national of detailed Writtenc into China of Dangerous Written,c on Hazardous
by States WTO time limits before pre-packaged information on to enter to approval did not environment Environmental reliable institution. administrative from 1 Chemicals; Verbale Chemical
theme members set out in indication food to be the product approval China, but in the require a Administration laboratories in The rules, and the January request for Products. At
the for wines and sold in China, label(s) as long in the before the Chinese label. of New other countries ecological time for the 1992 to 30 China to take present, this
pertinent spirits including as the objective Chinese AQSIQ language, (Verbale) Request for Chemical which conduct the and Chinese April necessary draft is
Request for regulations. should follow wines and of consumer language. inspection there is a China to Substances. same tests as toxicological authority to 2003. procedures publicly
China to (Verbale) international spirits; and information is (Verbale) takes requirement guarantee that those in China. information start Foreign with regard available so
ensure that practice. the met. place. to Request for only the on those receiving the chemical to the as to invite
registration information to accompany China to trademark products notification companies regulation in comments from
procedure for be provided the request clarify the owner/producer should under this could question, related
a label be no was not with the labeling could apply for include the law. access the including WTO parties and is
more discretionary, sales requirements the label, in information inventory notification. in full
time-consuming since it had certificate for products order to and data through compliance
Food than necessary to meet the of the in protect obtained from the with the WTO
labeling (currently, it pertinent country of "largescale" products tests carried Internet. national
EC - takes more EC - EC - regulations. EC - EC - production. or bulk EC - against out in China. (Verbale) treatment
Writtenb than 90 days). Writtenb Writtenb (Verbale) Writtenb Writtenb (Verbale) packaging. Writtenb counterfeiting. (Verbale) principle and
Summary of Raised by Raised by
issues by United States other WTO China's response
theme members
relevant international practice on
regulatory provisions. (Writtend) As to
hazardous chemicals, China was in the
process of revising a final text.
(Verbale)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: G/TBT/W/231; dated 10/20/03.
bCommunication from European Communities: G/TBT/W/227; dated 10/6/03.
eCommunication from Japan: G/TBT/W/229; dated 10/15/03.
dCommunication from China: G/TBT/W/235; dated 11/6/03.
eCommittee report detailing verbal statements made during meeting:
G/TBT/M/31; meeting dated 11/7/03.
Page 52 GAO-05-209R U.S.-China Trade
Enclosure XII Committee on Trade in Financial Services
Page 53 GAO-05-209R U.S.-China Trade
Three years
after China's
accession
(i.e. starting
from 11
December
2004), there
will be no
geographic
restrictions
on foreign
insurance
companies
anymore. By
that time,
foreign Limited
insurance number of
Geographic companies foreign
restriction of meeting insurance
foreign non-life certain branches that Concern
Summary Raised firms as Canada - qualifications can open at about
of Raised by branches to be Writtene will be one time and extremely
issues by other China's Insurance lifted 3 years Written,a Australia allowed to Canada - in the types Writtena Writtena Canada - The minimum high level Japan - Writtena
by United WTO response after accession; Verbalf - Verbalf apply for the Ability of Writtene of geographic Writtene capital of minimum Verbalf
theme States members foreign-invested Japan - establishment domestic licenses requirements of capital
insurance firms' Verbalf of operational insurers granted; an insurance requirement.
ability to institutions to apply justification company, be it
expand nationwide. to be for domestic or
geographically. However, they licensed differential Reduction of foreign-invested,
must approach at the treatment. requirement were set out in
China city level for the "Insurance
Insurance or the registered Law", which was
Regulatory provincial capital for adopted by the
Commission level, and low risk National People's
(CIRC) for a insurance Congress of Regarding the
approval. This provincial models, with China. These capital
approval license the RMB 200 requirements were requirement
procedure was allows a million integral parts of Elimination for the
based on the firm to registered the prudential of the establishment
prudential offer capital regulatory redundant of new
supervision of services requirement High minimum framework and RMB 20 branches,
the regulatory to any becoming a capital applied to both million China was
body over city or ceiling requirements domestic and Confirmation capital currently
insurance area rather than for foreign foreign insurers. of minimum requirement drafting the
enterprises within the a uniform insurance The determination capital for detailed
and applied to province. requirement. companies. Verbalf of minimum requirement. branching. rules of the
both foreign capital
and domestic requirements was
insurers, thus a legitimate
granting right of a WTO
national Member's
treatment to regulatory
all foreign authorities and
insurance went beyond the
companies. scope of General
Furthermore, Agreement on
three years Trade in Services
after China's (GATS) rules and
accession to China's accession
the WTO, when commitments in
geographic the insurance
restrictions sector.
are lifted, Therefore, it was
provincial not appropriate
branches of to discuss it
foreign under the
insurance Transitional
companies will Review Mechanism.
be allowed to (Verbalf)
conduct
insurance
business in
any city or
area within
the province
pursuant to
relevant
regulations of
CIRC.
(Verbalf)
Page 54 GAO-05-209R U.S.-China Trade
With regard
to the
so-called
national
treatment
for the
approval of
the number
of branches
of foreign
insurers, it
The was not
representative appropriate
of China to set up a
referred to Concerning compulsory
the question future number of
by the United liberalization Foreign licenses to
Allowance States-whether of insurance life be issued to
of a joint services, operations' foreign
Administrative geographic venture with China's China had made ability to insures by
Time schedule Regulation on expansion foreign implementation enormous receive CIRC at one Application
for China's Foreign-Invested of joint ownership of its efforts to several time. of Permission of
Summary Raised issuance of Insurance venture exceeding 50 commitment to comply with branch Licenses contemplated all
of Raised by Regulations on Companies and insurers percent would open its the broad and licenses at EC - were issued reduction in EC - joint-venture
issues by other China's the Writtena working on the with more Written,a be allowed to pension market Written,a Australia substantive one time or Written,b on the basis minimum Written,b Japan - Japan - insurers to
by United WTO response Administration revision of the than 50 Verbalf set up to Verbalf - Verbalf commitments in on a "one Verbalf of capital Verbalf Writtenc Writtenc issue
theme States members of Administrative percent branches. He international this sector. application prudential requirements insurance
Foreign-Invested Regulation on foreign replied in the participation For the for one principle. to contracts
Insurance Insurance ownership affirmative, by 11 December phase-in city" China did reinsurance Relationship
Companies. companies, where in the and added that 2004. commitments in basis, not agree branches. between
consideration current after the insurance unlike that the different
was being given ownership geographical sector (e.g. domestic national capital and
to the possible structure. restrictions elimination of companies. treatment license
relaxation of had been geographical meant that requirements;
capital lifted three restrictions CIRC had to relationship
requirements for years after and the issue between
the accession, opening of licenses to regional and
establishment of according to pension branches of national
new branches. relevant laws services), foreign Permission for licenses under
However, this and China would insurers as licensed Insurance
capital regulations, implement its many as foreign-invested Company
requirement was all joint commitments in their insurers in Administrative
aimed at venture due time. It domestic Shanghai, Measures and
prudential insurance was not counterpart. Guangzhou, Rules of
regulation and companies appropriate to And there Dalian, Shenzhen Regulations on
was irrelevant would be discuss future was not such and Foshan to Administration
to China's allowed to liberalization a commitment provide services of
accession establish in the context in China's nationally based Foreign-Funded
commitments. branches. of the TRM. schedule. on existing Insurance Japan -
(Verbalf) (Verbalf) (Verbalf) (Verbalf) licenses. Companies. Written,c
Page 55 GAO-05-209R U.S.-China Trade
Regarding
insurance, China
Consistency said that
between (1) a several
regulation questions
prohibiting related to
foreign-invested CIRC's daily Approval
insurers to regulatory work requirements and
engage in over procedures for Reason for
cross-border foreign-invested new life recent changes
reinsurance with insurance insurance introducing
their associated companies. For products for stricter
enterprises example, the foreign-invested reserving
unless they are questions raised firms and requirements
otherwise by Australia and domestic firms; for life
approved by Canada on requirement for insurance
CIRC, and (2) a approval prior approval products; Complex
regulation requirements and by CIRC for each request for multi-stage
requiring a procedures for new life overview of approval
Summary Raised simple approval new life insurance recent changes process for
of by China's from CIRC to Japan - insurance product; Canada - to reserving Canada - Canada foreign Canada - Australia
issues United response engage in this Writtenc products, on requirement for Writtene requirements; Writtene - establishment Writtene - Verbalf
by States line of service, reserving product's request for Verbalf at new
theme with China's requirements for reapproval for information on locations in
commitments that life insurance sale in each further the insurance
licensing products, on separate city revisions to sector.
procedures and outward and that a its life Rationale
conditions would inward foreign-invested insurance behind
not act as cross-border life insurance reserving regulations
barriers to insurance with firm operates regulations such as Streamline
market access associated in; differences and whether multiple of
and would not be enterprises, and in actual China has product insurance
more trade on the approval times ensured that requirements product
denominated by restrictive than management of for it is for the same approval
foreign currency; necessary; foreign exchange foreign-invested complying with insurance process to
reason for justification control of and domestic its national product; avoid
regulation that for prohibition insurance firm. treatment reasons for multiple
Raised foreign-denominated and criteria business. These commitments in the approvals
by insurance contracts CIRC uses to regulatory the design and reserving for
other are prohibited, and base measures were implementation requirement insurance
WTO on specific consideration. based on of these new for life product in
members criteria upon which prudential reserve insurance separate
Verbalf approval is based. principles and requirements. products. areas.
were legitimate.
CIRC applied
these measures
to both foreign
and domestic
insurers on an
equal basis. The
regulatory
rights of CIRC
should be
respected.
Besides, the
regulations
governing the
above-mentioned
issues were all
published and
publicly
available.
(Verbalf)
Page 56 GAO-05-209R U.S.-China Trade
China believed
that a WTO
Member was
entitled to
set its own
minimum
working
capital
requirements
for branches
of foreign
banks. Some
other WTO
Members also
had different
working
capital
requirements
for branches
of foreign
banks,
although
levels might
differ.
Secondly,
China's
minimum
working
capital
requirement
was a
Requirement prudential Requirements
that an requirement, for minimum Draft
insurance High minimum which was set working regulation
company must working up according capital and that would
Summary Raised Raised have senior capital to the capital limit
of by by China's Norway management Canada - Canada - requirements Written,a development adequacy interbank
issues United other response - personnel for Writtene Writtene for direct Verbalf level of its ratios financing
by States WTO Verbalf the branch branches of financial required for to 40
theme members office who foreign sector and the each direct percent of
Ability of speak Chinese; banks. regulatory branch in RMB
Chinese criteria used capacity of China from liabilities
owned vessel to assess this the financial the same of a bank.
to buy qualification. authority. The bank.
insurance requirement
directly also tried to
from an Regarding the cater for the
insurance questions on demands of
company not language foreign bank
incorporated requirements for branches in
or present senior terms of their
in China; management business
taxes personnel of operation.
applicable foreign-invested Thirdly, along
to such insurance the same line,
cross-border companies, China China also had
business; said that CIRC working
restrictions had already capital
on the changed the requirements With regard to
ability of a related for branches the 40 percent
Chinese qualification of domestic limitation on
company to requirements banks. interbank
obtain contained in the However, with borrowing, the
foreign measures the Chinese
exchange to governing the Requirement that improvement of representative
buy direct qualifications foreign-invested Japan - the risk said that at
non-life of senior firms obtain Verbalf management present there
insurance management special written Chinese system of was no such
from personnel of permission from Taipei - foreign banks EC - regulation for
insurance insurance the regulator Written,d and the Written,b foreign banks.
companies companies. The before they can Verbalf development of Verbalf The
not language negotiate Canada - China's Canada - Japan - requirement
incorporated requirement was contractual Banking Verbale regulatory Writtene Written,c did not exist
or present no longer in deposits with EC - Australia framework, EC - Verbalf at this
in China. force. (Verbalf) local banks. Writtenb - Verbalf China Banking Writtenb Canada - moment. China
Regulatory
Commission
(CBRC) would
relax the
minimum
capital
requirement
for foreign
banks
accordingly.
Finally, the
Chinese
representative
reiterated
that the
determination
of the minimum
capital
requirements
was a
legitimate
right of a
Member to
regulate, and
it was
irrelevant to
GATS rules and
China's
accession
commitments.
He expressed
the hope that
future TRM
processes
would not be
bothered by
such
irrelevant
questions.
(Verbalf)
Page 57 GAO-05-209R U.S.-China Trade
The licensing
procedure for
foreign banks was
a domestic
regulation issue
in nature, based
on the need of
prudential
regulation and in
conformity with
the internal
working formality
of China's
regulatory body.
Some of the This licensing
questions procedure applied
raised were equally to
related to foreign-invested
CBRC's banks and
prudential domestic banks.
Requirement regulation and Secondly,
for 30 administration Reason for Procedures according to
percent of of foreign limited and China's research,
the working invested banks opening of criteria many WTO Members
capital of (e.g., the foreign EC - used in had similar
foreign requirement to banks to one Written,b determining Multi-stage Chinese requirements with
Summary Raised branches to deposit 30 new branch Verbalf the extent licensing Taipei - regard to
of Raised by be percent of per year, Japan - of local On the process for Written,d licensing
issues by other China's deposited working unlike Verbalf currency Japan - questions banks as Verbalf procedures for Canada - Canada -
by United WTO response at a local capital of Chinese Canada - services Writtenc concerning trade Canada - the approval of Writtene Writtene
theme States members bank listed foreign banks banks; Written,e that a the barrier for Written,e foreign banks.
by Chinese at a local prudent Verbalf foreign commitment market Verbalf Certain
authorities bank). These restrictions Australia financial to permit access. developed-country
or used to measures were in its - Verbalf institution foreign Members also
buy for the licensing is allowed financial required a
Government purpose of regime. to engage institutions "preliminary
bonds. regulating the in. to provide review" or
operations of local "pre-review"
foreign banks, currency stage before
and were based business to final approval.
on prudential Chinese Thirdly, at
principles. enterprises present, Members
The objective two years were engaged in Plan and
was to keep after discussions on a time There was
away financial accession. possible schedule to one
risks arising In that multilateral introduce Reason for question on
from the regard, discipline on more requirement the
operation of China would licensing flexibility that the requirement
foreign banks. implement procedures, and into value of a that the
These those therefore it was China's foreign value of
was of the prudential commitments inappropriate for capital bank's foreign
view that regulations to in due time the Committee to rules to foreign banks'
future prevent according to review China's help currency foreign
liberalization financial what was licensing smaller deposits currency
should not be risks should stated in procedures before firms received deposits
Writtene discussed in also be the any possible compete on within within
EC - the context of respected. schedule. discipline in the a more even China shall China
Writtenb TRM. (Verbalf) (Verbalf) (Verbalf) future. (Verbalf) footing. not should not
Page 58 GAO-05-209R U.S.-China Trade
Auto financing
regulation did
not permit
direct
branching from
abroad. The
reasons for
not allowing
direct
branching from
abroad were
the following.
Firstly,
auto-financing
institutions
belonged to
non-banking
financial
institutions
under China's
regulatory On the issue of
system, the the requirements
administration imposed on
of which was auto-financing
conducted by institutions (e.g.
CBRC pursuant minimum capital
to relevant requirements and
regulations others), the
governing representative of
financial China said that
institutions. they were of a
However, prudential nature,
exceed 70 companies based on the fact Conditions
percent of engaging in that the imposed on
the value of Plans to Condition the auto auto-financing car Condition
its foreign expedite that financing market in China financing that Condition that
Summary Raised Raised currency applications direct business were was just at a institutions Condition of auto-finance deposit-taking
of by by China's assets within submitted to Written,a branching regulated by beginning stage. in order to high minimum Written,a companies are from local car
issues United other response China; obtain motor Writtena Verbalf from different The regulatory be eligible capital Verbalf not allowed manufacturers
by States WTO request for vehicle abroad is regulatory body had to get a requirements. to set up does not seem
theme members any details financing not authorities in insufficient risk license, internal to be allowed.
of China's licenses. allowed. other Members. control capacity such as branches or
plans to Therefore, and lacked restrictions subsidiaries.
remove China could supervision on total
restrictions. not establish experience. assets.
effective Besides, all these
communication requirements,
exceed 70 with foreign including minimum
percent of the regulatory capital
value of the authorities. requirements, were
banks' foreign As a result non-discriminatory
currency CBRC's found and applied to
assets within it extremely both foreign and
China. In difficult to domestic
reply, the exchange auto-financing
representative information companies.
of China said with foreign (Verbalf)
that prior to regulatory
his country's bodies and to
accession, the regulate.
ratio was 40 Secondly, this
percent. After requirement
accession, the applied to
ratio was both domestic
increased and foreign
substantially, companies. For Requirements
up to 70 the purpose of that a
percent. China prudential shareholder of
would further regulation, an
relax this domestic auto auto-financing
ratio during Deregulation financing company must
the five-year of interest enterprises meet for
phase-in rate charged were also not certain level EC -
period by motor permitted to of total Written,b
mentioned in Motor vehicle establish assets, Verbalf
the schedule. vehicle financing EC - EC - branches. revenues, and EC - EC - EC -
(Verbalf) financing entities. Writtenb Writtenb (Verbalf) profitability. Verbalf Writtenb Writtenb
Raised by Raised by
Summary of issues by United other WTO China's response
theme States members EC -
Writtenb
Condition that
activities of an
auto-finance company
may be stopped if it
loses in one year
more than 50 percent
of the capital or
accumulates losses
over three years
representing more
than 10 percent of
the capital.
Securities EC - Writtenb
In accordance with China's
existing laws and regulations,
a fund management company,
Limitation that whether domestically-owned or
securities fund joint-venture, was not allowed
management companies to manage assets for
manage assets of institutional investors
retail investors but because this service did not
are not allowed to exist in China due to the
manage assets of special situation of the
institutional Chinese securities market. In
investors. other words, this service for
institutional investors was a
new service in China, and was
therefore not covered by
China's commitments. (Verbalf)
Limitation that only
domestic securities, The questions on minimum
fund management or capital requirements and
investment trust licensing procedures, which
companies may hold EC - were similar to the ones
the highest capital Written,b raised with regard to banking
contribution, Verbalf and insurance services, had
limiting the choice already been answered.
of partners for (Verbalf)
foreign investors in
joint ventures.
Complex multi-stage
approval process for
establishment of new
locations for Canada -
foreign Writtene
participation in the
fund management
sector.
Source: GAO analysis of WTO documents.
aCommunication from U.S.: S/FIN/W/35; dated 11/24/03.
bCommunication from European Communities: S/FIN/W/32; dated 11/12/03.
cCommunication from Japan: S/FIN/W/30; dated 9/29/03.
dCommunication from Chinese Taipei: S/FIN/W/34; dated 11/19/03.
eCommunication from Canada: S/FIN/W/33; dated 11/12/03.
fCommittee report detailing verbal statements made during meeting:
S/FIN/M/43; meeting dated 12/1/03.
Page 59 GAO-05-209R U.S.-China Trade
Enclosure XIII Committee on Trade-Related Investment Measures (TRIMS)
Page 60 GAO-05-209R U.S.-China Trade
Upon join
the WTO,
China has
eliminated
or ceased to
implement
the
provisions
like foreign
currency
balancing
requirement,
local
content and
etc., which
were
contained in
the 1994
Automobile
Industrial
Policy. The
newly
drafted
Policy on
the
Development
of Auto
Industry is
now with the
State
Council for
approval.
During the
process of
enactment,
we published
the draft of
new policy
on the
website for
the opinions Revisions to
from all investment
Status of walks of the guidelines in
China's society. conformity
research General Legal steps Legal steps with the WTO
and study Motors, to to raise the Agreement,
to issue Association completely limit within especially as
new of remove all which regards the
Summary Raised automobile Automobile restrictions investments status of the
of Raised by industrial Industry in on the in motor Catalogue on
issues by other China's Automotive policy and Writtena Japan - Japan and categories, Writtena vehicle Writtena General Investment and EC -
by United WTO response sector issuance of Verbald some types or manufacturing the Writtenb
theme States members new companies in models of could be categorization
Guidelines the European motor approved at of restricted;
for Current Union (EU) vehicles the permitted; and
Development are among permitted provincial encouraged
of those who for According to level. investments,
Automobile submitted production. Paragraph 205 and
Industry. comments. of the Working requirements
Afterwards, Party Report relating to
we have sent on the transfer of
the draft Accession of technology.
directly to China, the
the category
companies in authorizations
the by the Chinese
industry, Government
the research could continue
institute to distinguish
and scholars between trucks Before accession
alike for and buses, to the WTO,
their light The draft of China had
inputs, and commercial the upcoming already modified
explicitly vehicles and development three basic laws
require the passenger policy on in respect of
Chinese cars. In the automobile foreign direct
parties of Policy on the industry is investment - Law
joint Development of characterized of People's
ventures to Automobile by its Republic of
solicit the Industry, provisions on China on
opinions of which is in deregulation Sino-Foreign
their the process of and transfer Equity Joint
foreign revision, the of approval Ventures, Law of
partners. measures authority to People's
Beside that, restricting governments Republic of
extensive the production at provincial China on
and in-depth under each levels. After Sino-Foreign
exchanges of category will the issuance Cooperative
ideas, be eliminated. of the new Joint Ventures
discussions The new Policy Policy, the and Law of
and is now waiting invest limits People's
consensus for the on auto Republic of
building approval from manufacturing China on
have been the State that could be Foreign-invested
conducted Council and approved at Enterprises as
with many will be provincial well as their
foreign auto enforced as level will be implementing
makers on a soon as the increased as rules. The
number of legislative required in revised
specific procedures are the Working legislation has
issues. completed. Party Report. eliminated or
(Verbald) (Writtenc) (Writtenc) ceased
Page 61 GAO-05-209R U.S.-China Trade
the
implementation
of provisions
on foreign
currency China has
balancing, revised the Law
local content, of the People's
export Republic of
performance China on
requirement Chinese-Foreign
and mandatory Equity Joint
technology Venture; Law on
transfer. Chinese-Foreign
(Writtenc) On Contractual
February 11, Joint Venture;
2002, State and Law on
Council of Wholly Foreign
China Owned
promulgated Enterprises and
newly-amended their
the Regulation respective
on Guiding the implementing
Foreign regulations.
Investments. The revision
Afterwards, includes the
strictly elimination and
according to cessation of
WTO rules and enforcement of
commitments requirements on
upon accession trade and
to WTO, China foreign
amended the exchange
original balancing,
Guiding local content,
Industrial Amendment of export Contracts which
Catalogue for contractual performance, may contain TRIMs
Foreign arrangements that compulsory incompatible
Investment in contain technology commitments and
a TRIMsincompatible transfer, and obligations will
comprehensive commitments and etc. This not be enforced
Summary Raised manner. It was obligations in revision has before domestic
of Raised by made effective such a way that got extensive law courts or
issues by other China's as of April 1, they will contain EC - media coverage. other EC
by United WTO response 2002. The obligations which Writtenb Chinese administrative -Writtenb
theme States members Catalogue are fully government tribunals or
lists 371 compatible with respects bodies and that
industries and the TRIMs freedom of the
divides them Agreement; contract. If TRIMs-incompatible
into three indication of how the articles of commitments and
categories China might association or obligations are to
including institute such contract of be considered null
"encouraged," amendments. enterprises and void.
"restricted" with foreign
and investment
"prohibited" approved before
for foreign amendment of
investment, of the relevant
which 262 are laws contain
encouraged, 75 the terms on
restricted and foreign
34 prohibited. exchange
All the balance, local
industries not contents, and
listed in the export
Catalogue are performance,
considered as and the
permitted. The investors on
contents in both sides can
relation to reach an
liberalization agreement, they
committed by may file the
China upon application to
accession are relevant
listed in the authorities to
Attachment to alter or
the Catalogue. nullify those
In addition, terms. The
requirement application
for technology will be
transfer has processed
been timely and in a
eliminated in manner
approving the consistent with
foreign TRIMs
investment. agreement.
(Verbald) (Verbald)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: G/TRIMS/W/32; dated 9/23/03.
bCommunication from European Communities: G/TRIMS/W/31; dated 8/14/03.
cCommunication from China: G/TRIMS/W/34; dated 10/1/03.
dCommittee report detailing verbal statements made during meeting:
G/L/648; meeting dated 10/3/03.
Enclosure XIV Council for Trade in Goods
Page 62 GAO-05-209R U.S.-China Trade
According to
China's
commitments upon
accession, China
would
progressively
liberalize the
availability and
scope of the
right to trade
so that within
three years
after accession
all domestic
enterprises and
foreign
enterprises and
individuals,
including sole
proprietorships
of other WTO
Members, would
have the right
to export and
import all goods
(with the
exception of
products listed
in Annex 2A of
the Protocol
reserved for
importation and
exportation by
state trading
enterprises)
throughout the
custom territory
of China. The
point that the
trading rights
in this context
only referred to
the right of
importation and
exportation, not
including the
right of
distribution in
China. The
liberalization
of distribution
rights would be
executed in
accordance with
the Schedule of
Specific
Commitments on
Services and
governing
regulations in
China. (Verbald)
Given the
above-mentioned
commitments and
relevant laws
and regulations
governing
foreign-invested
enterprises, the
enterprises in
China with
foreign
Measures investment had
governing the right to
trading rights import
of equipment,
foreign-invested technology, raw
enterprise; material and
Summary Raised Raised China's limited other goods for
of by by China's availability of Writtena self-use, and
issues United other response trading rights Verbald export their
by States WTO for products. While
theme members foreign-invested for the
enterprises by importation and
imposing domestic
conditions on distribution of
the eligibility the goods other
of those than the above
enterprises. listed, the
enterprises
should apply for
the expansion of
its business
scope of
distribution in
accordance with
China's
timetable
regarding
distribution in
the Schedule of
Specific
Commitments on
Services and
other relevant
regulations in
China.
Furthermore, the
Chinese
Government also
allowed
foreign-invested
enterprises to
engage in import
and export,
domestic
purchase and
distribution in
China through
the
establishment of
specific trading
company, holding
company,
logistics
company,
distribution
enterprises,
procurement
centre, etc.
(Verbald)
Trading rights
only referred to
import and
export, not
distribution. In
this regard,
foreign invested
enterprises with
majority or
minority
ownership should
follow the
relevant
provisions of
the regulations
with regard to
foreign invested
enterprises.
These
enterprises
could import
goods, services
and technologies
for their own
use, and if
those
enterprises
imported goods
Trading and services to
rights be
Page 63 GAO-05-209R U.S.-China Trade
With regard
to the
capital
requirements
of trading
companies set
up by foreign
investment,
one was
referring to
foreign trade
companies
only.
Regarding the In China,
question customs imposed
raised by the duties and VAT
U.S. about for the
holding Explanation importation of
companies, of VAT rebate copper scraps,
their program copper ore
functions works, i.e. concentrates
were much amount of VAT and raw copper
more than originally by
trading, and paid, entity coppersmelting
China imposed that pays enterprises
Explanation of capital VAT, entity reaching a
how conditions requirements Exclusion to which VAT certain
of on those of rebate is production
foreign-invested companies. conditions paid, amount scale. After
enterprises With regard relating of a rebate paying the duty
relate to to logistics to minimum received by and tax, a
minimum companies set registered Distinction Measure entity, company could
registered up by foreign capital, between that availability apply for the
Summary Raised Raised capital, past investment, past so-called implements of rebate drawback of 30
of by by China's import and EC - these import and "trading joint EC - the policy upon the Written,a percent VAT on
issues United other response export levels, Writtena Written,b companies export Writtena ventures (JVs)" Written,b for Writtena exportation Verbald presentation of
by States WTO and prior Verbald were actually levels and and Verbald rebates of of finished dutypaid
theme members experience, involved in prior "manufacturing" the VAT on or proofs. The
consistent with distribution, experience JVs. imported semi-finished refunded tax
China's purchasing in the copper. products should be
commitments to and a series draft copper applied to the
provide full of other revisions products, technological
rights to trade activities. to the application innovations of
to So with this Foreign and the enterprise.
foreign-invested expanded Trade Law. differences VAT rebate
enterprises. business in policy on
scope China application copper
had to impose of VAT rebate materials
capital to imported applied to all
requirements At present, scrap or enterprises
for these the Foreign domestically reaching
distributed companies. Trade Law of sourced certain
within China was now China was copper scrap. production
Chinese revising its being scale, and was
territory foreign trade revised. The China currently not conditioned
they needed law. current applied 17 percent on ownership of
firstly to According to draft of the VAT on both the enterprise
file the the draft of Foreign domestic and or local
application the foreign Trade Law imported goods, content.
for changing trade law did not which was fair and Copper-smelting
their China would contain the non-discriminatory enterprises had
business further requirements in terms of the to pay VAT
scope and specify the on minimum value of goods. while importing
after doing trading registered The current VAT copper
that they rights and capital, rebate policy was materials. The
could their import or consistent with amount of VAT
undertake availability export the national should be the
distribution to foreign performance treatment rule total sum of
business in invested and history Value-added under Article III dutiable value
China. companies. experience. tax of GATT 1994. and tariff
(Verbald) (Verbald) (Verbald) policies (Verbald) multiplied
Page 64 GAO-05-209R U.S.-China Trade
Fluorspar was a
kind of
non-regenerative
resource under
the protection
of the Chinese
Government. The
mining of
fluorspar had a
significantly
negative impact
on the
environment.
China had been
attaching great
importance to
the
exploitation,
processing and
consumption of
exhaustible
resources. From
the 1970s, China
had begun to
impose export
quotas on
fluorspar while
restricting the
domestic mining
and production
of fluorspar.
Pursuant to
China's Foreign
Trade Law, the
Regulations on
the
Administration
of Import and
The VAT rebate VAT rebate Export of Goods
policy only policy on and China's
applied to copper commitments upon
imported copper materials accession, China
scraps, copper applied to still imposed
ore concentrates all export quota
and raw copper enterprises administration
and did not apply reaching on fluorspar.
Summary Raised Raised to other certain WTO Due to the
of by by China's by VAT rate products. China production justification Japan - depleting of
issues United other response for copper Writtena did not implement Writtena Writtena scale, and for the Writtena Writtenc fluorspar
by States WTO materials. any similar was not export quota resources and
theme members According to policy on other conditioned on fluorspar. its shrinking
relevant products or adopt on production, the
policy and any other ownership domestic
provisions, preferential of the consumption and
the policies on enterprise export of
government copper-processing or local fluorspar had,
would refund enterprises. content. in turn,
30 percent (Verbald) (Verbald) gradually
of the paid decreased.
VAT to the China's export
enterprise. quota
(Verbald) administrative
After measure on
payment of fluorspar was
duties, consistent with
enterprises the "general
could apply exceptions"
for a provided in
drawback of Article XX of
VAT on GATT 1994 -
presentation "nothing in this
of duty paid Agreement shall
proofs. This be construed to
policy only prevent the
applied to adoption or
exporters of enforcement by
finished any contracting
products and party of
semifinished measures:
products. Preferential including those
This tax policies relating to the
rebate benefiting conservation of
system was copper scrap, exhaustible
equally copper or Preferential natural
applied to semi-fabricated policies resources if
all Measures products such benefiting such measures
enterprises similar as flat-rolled copper scrap, are made
reaching a to VAT products, long copper or effective in
certain rebate products and semi-fabricated conjunction with
production programs pipe and tube, products restrictions on
level on whether those conditioned on domestic
regardless imported policies domestic production or
of the products involve the production or consumption."
ownership of other VAT, other ownership, or Furthermore,
the than taxes, duty on domestic or according to the
enterprise. copper drawback or foreign Export WTO rules, the
(Verbald) scrap. tariffs. content. restrictions general
Page 65 GAO-05-209R U.S.-China Trade
The WTO did
not provide
for the
specific
definition,
forms and
territorial
scope of
border
trade, and
With regard to only set
the export forth a
license, only fundamental
20 RMB was provision
collected for that "the
the cost of provisions
the license of this
itself. No The border Agreement
other fees trade policy shall not be
were charged. List of of China was construed to
Secondly, products List of the in line with prevent
Justification fluorspar was taken off products the MFN advantages
for export a scarce the list of that principle of accorded by
abolition of license fee resource with imports from continue to GATT 1994. The any
quantitative on fluorspar; great market Detailed border areas receive list of China's contracting
restrictions requirement demand. information that can preferential preferential plans to party to
Summary Raised Raised set forth by for exporters Production was on the benefit from border area treatment for eliminate adjacent
of by by China's the Article to pay fees Written,a falling in restriction Japan - Border preferential Written,a treatment; border trade preferential countries in
issues United other response XI did not which range Verbald recent years of domestic Written,c trade treatment in Verbald explanation Writtena was published border Writtena order to
by States WTO preclude the from 85 in China, fluorspar Verbald the form of of products' by the treatment facilitate
theme members various percent to where the production reduced benefits Ministry of for frontier
exemptions more than 150 costs of and import from reduced Finance with products. traffic."
as contained percent of exploitation consumption. duties import approval by Therefore,
in Articles the fluorspar and and/or VAT, duties, the State special
XII to XXI cost. transportation and measure reduced VAT, Council and preferential
of GATT were that ended According to or both. the executive treatments
1994. During constantly preferential Bulletin No. agency was the for border
recent rising, which treatment. 27 and No. 39 general trade were
years, resulted in a issued by the customs allowed by
domestic and surge of State General administration the WTO, and
foreign demand and Customs in China. The advantages
prices of shortage in Administration list was and
fluorspar supply. It was In recent on 1 May 2003 published in conveniences
had risen to this gap years the and 11 June several accorded by
various between the production of 2003 batches and up a
degrees. supply and the fluorspar had respectively, until now contracting
This rise in demand that been China had there had been party to
price was was the cause constantly removed boric no complete adjacent
determined of the rise in decreasing. acid and 19 and uniform countries
by the rules price and was Exports, other products document were not
of market not the result together with from the list containing all inconsistent
rather than of quota domestic of products products with the
the export restrictions consumption, subject to subject to basic
quotas by imposed by the had also been border trade preferential principle of
the Chinese Chinese decreasing import duties treatment for the WTO,
Government. Government. significantly. policy. border trade. i.e. Most
(Verbald) (Verbald) (Verbald) (Verbald) (Verbald) Favored
Page 66 GAO-05-209R U.S.-China Trade
Administrative
Nation Measures on
(MFN). Information
China had Publication of
committed In line with Government
in its China's reform Procurement
accession and opening up and Measures
protocol to process, and on Complaints
apply WTO to implement by the
Agreements the Suppliers
and the commitments would be
protocol Time schedule upon its promulgated
across the to circulate accession, together with
whole draft of China was now, the
customs several according to Administrative
territory trade-related its Timetable for Measures on
including laws, arrangement of circulating Tendering and
border regulations, legislative and issuing Bidding for
trade and measures, plan, revising sets of Goods and
areas, and including relevant laws implementing Services under
would amendments to and rules, Government
develop and the foreign regulations including Procurement.
implement trade law, mentioned by measures Administrative
laws, amendments to some Members relating to Measures on
regulations commercial in their Timetable for the Software
Summary Raised and other banking law, questions. issuing the administration Procurement by
of Raised by measures in regulations Amendments to Canada Measures on the of government the
issues by other China's relation to on rules of Writtena these laws and - Administration of Writtena software Writtena Government, Writtena
by United WTO response trade in origin for regulations Verbald Bidding of procurement, Administrative
theme States members goods in a imports and would be open Government-Procured the Measures on
uniform, exports, for public Goods and Services administration Expert
impartial import and comment in final form. of bidding for Recruitment
and export tariff pursuant to goods and for Government
rational regulations, provisions of services in Procurement
manner. construction the government and
Border engineering Legislation procurement, Examination
trade design Law and the Measures on
policies regulations Regulations on administration Institutions
had been and the Drafting of government of Government
uniformly intellectual Procedure of Opinions had procurement Collective
implemented property Administrative been solicited information, Procurement
and rights Regulation. In extensively the were to be
enforced in customs addition, concerning the examination of promulgated at
the protection China would Administrative centralized the end of
provinces regulations. also notify Lack of Measures on government 2003. Comments
and regions those laws and transparency Tendering and procurement on these Timetable for
in border regulations to in China's Bidding for institutions, measures had establishment
areas of the WTO. Above approach to Goods and the also been and
China as an all, China TRQ and Services under administration solicited. The information
important would fully quota Government of complaints Ministry of on completion
part of fulfill its allocation Procurement, by suppliers, Finance had of the
China's commitments on for certain which was due and the made the Government
foreign transparency products, to be administration accession to Procurement
trade made upon its particularly promulgated in of government the Government Agreement
policies. accession to agricultural Government December 2003. procurement Procurement (GPA) working
(Verbald) Transparency WTO. (Verbald) commodities. procurement (Verbald) experts. Agreement group.
(GPA)
Page 67 GAO-05-209R U.S.-China Trade
Since became a
Member, China
had been
actively
laying the
ground work
for the full
implementation
of the
commitments
relating to
government
procurement
contained in
its accession
protocol, and
these efforts
had yielded
remarkable
results in
many ways.
China's first
Government
Procurement
Law was
published in
2001 and was
followed by
the enactment
of a series of
supplementary China's
rules. The intention to
All implementing reconsider a
government regulation to measure to
procurement the Law was Timetable establish a
procedures also being for China's dual
are drafted. Since response on With regard distribution
conducted the Government U.S. to the network for
Timetable in a Procurement questions to questions domestically
Summary Raised intended for EC - transparent Japan - Law took China raised posed by produced and
of by China's China to Written,b manner and Writtenc force, Customs in Members imported EC -
issues other response start Verbald that the EC - purchase valuation connection Writtena concerning Automobiles automobiles; Written,b
by WTO negotiations Japan - MFN Verbald activity with the customs the Verbald
theme members to join the Writtenc principle falling under transitional valuation, legislative
GPA. is applied the provisions review China had process for
to all of the State before provided its adoption;
foreign Council had to Committee on responses timetable for
suppliers follow Customs in the notification
in government Valuation. context of to the WTO;
practice. procurement TRM held by concerns about
procedures, the its WTO
which had to Committee compatibility.
be made of Customs
transparent. Valuation
According to on 6 A new
the existing October automobile
regulations of 2003. If development
Ministry of Members had policy was in
one of its Finance, further the process of
research procurement questions being drafted.
subjects in from foreign to China's During the
2003. The suppliers had responses drafting
establishment to go under during TRM, process China
and international they could had
composition public raise these extensively
of the panel tendering. questions solicited the
of experts Information under the opinions from
would be relating to appropriate various
further the bidding agenda item parties,
decided based and winner had in the including U.S.
upon the to be made meeting of and EU
results from public via the the manufacturers.
the media Committee The final
preliminary designated by with the solution of
study, while the Ministry mandate, to this problem
the timetable of Finance. Up which China would have to
for the till now, no would wait until the
launch of complaints provide final text of
Raised negotiations from foreign answers this new
by would be set suppliers had according policy was
United in the same been filed to to due ready and
States manner. the Ministry. procedures. published.
Verbald (Verbald) (Verbald) (Verbald) (Verbald)
Source: GAO analysis of WTO documents.
Note: An additional document source is a communication from China:
G/C/W/474; dated 11/21/03.
aCommunication from U.S.: G/C/W/473; dated 11/17/03.
bCommunication from EC: G/C/W/476; dated 11/26/03.
cCommunication from Japan: G/C/W/471; dated 11/29/03.
dCommittee report detailing verbal statements made during meeting:
G/L/664; meeting dated 11/26/03.
Enclosure XV Council for Trade in Services
Page 68 GAO-05-209R U.S.-China Trade
Explanation Explanation Status and
of of time frame
The current conditions The current conditions for Reason for
regulation relating to regulation relating to issuance of delay and
governing this registered governing this registered new time
sector was the capital, sector was the capital, regulations schedule in
Status and Measures Pilot Measures assets, Pilot Measures assets, may implementing Schedule to
timetable of governing the on the past import on the past import severely revision of implement
regulation provision of Foreign-Invested and export Measures Foreign-Invested and export impact the the commitments The "Pilot
Summary Raised Raised to implement wholesaling Merchandising levels, governing the Merchandising levels, ability of Regulations on wholesale Measures on the
of by by China's Distribution commitment services and Written,a Enterprises and prior Written,a provision of Enterprises and prior U.S. and on Japan - (foreign Japan - Foreign-Invested
issues United other response services Elimination Writtena on Writtena commission Verbalg that China was experience Verbalg retailing Writtena that China was experience Writtena other Writtena Investment Writtenc majority Writtenc Merchandising
by States WTO of national elimination agents' services drafting a new requirement services by drafting a new requirement foreign of Foreign ownership, no Enterprises,"
theme members treatment of national by distribution on joint foreign-invested distribution on joint retailers Distribution geographical promulgated in
and market treatment foreign-invested regulation ventures enterprises. regulation ventures to expand Business or 1999, had given
access and market enterprises. governing with governing with their Enterprises quantitative foreign service
restrictions access wholesaling and foreign wholesaling and foreign presence in for restrictions) suppliers the
on foreign restrictions retailing minority retailing minority China; wholesale and retailing opportunity to
enterprises on foreign services. China ownership services. China ownership concern trade services possess majority
providing enterprises was starting to to engage was starting to to supply about services (foreign ownership in the
distribution providing solicit opinions in solicit opinions retail national (foreign majority joint-venture
services by distribution from industries. wholesaling from industries. services. treatment. minority control, wholesaling
11 Dec 2004. services. (Verbalg) services. (Verbalg) ownership). easing of enterprises,
Page 69 GAO-05-209R U.S.-China Trade
which was
consistent with
the China's
commitment in
market access.
The drafting of
the new
distribution
regulation
governing
wholesaling and
retailing
services was
on-going, and Explanation
that it would for China's
provide more consideration
detailed rules Explanation of 500 gram
on the for restriction
opening-up of China's plan creation of after it
the distribution to establish a a China withdrew a
market in "Law Post similar Timetable China's
accordance with Controlling monopoly on restriction for plans for
Summary Raised geographical the phase-in the China's the with the issuing China took a separating
of Raised by restrictions), commitments of Monopolization plans to delivery of issuance of China's positive China
issues by other China's especially for China. China had Japan - of Automobile Japan - limit the Japan - letters Written,a the Writtena draft Writtena attitude Post's Written,a
by United WTO response motor started to Writtenc Brands" to Writtenc This policy scope of Writtenc under 500 Verbalg Supplement amendment towards regulatory Verbalg
theme States members vehicles. solicit opinions prohibit did not the grams in Notice on the to its Members' keen and
on this draft dealers from violate WTO management China's Engagement in Postal interest. operational
from industries, selling both rules or right of draft Postal and Service Enacting a functions.
including imported and China's retail amendment Regarding Delivery Law. new law and
foreign-invested domestic cars. commitments dealers in to its monopoly and Services for revising
distribution and that passenger Postal exclusive Cross-border existing
enterprises. The foreign and vehicles Service rights, the Letters and ones, even if The Chinese
actual market domestic either to Law. Chinese Materials of they aimed at representative
access had never investors domestic or representative Letters in implementing referred to
been negatively would be imported recalled Nature. obligations paragraph 309
affected. 35 treated cars with China's under of the Working
foreign-invested equally in acquisition reservation in international Party Report,
distribution China would establishing of the its treaties, which stated
enterprises had implement automobile "Management commitments, were the "the
been approved Schedule to its distribution Right to which stated legitimate representative
with 347 implement commitments enterprises Passenger "except for rights of a of China
outlets. commitment of in selling Vehicles" those Member and confirmed that
Carrefour and full accordance either and currently that the TRM for services
Wal-Mart had liberalization with the imported publication specifically was not the included in
respectively of wholesale phase-in cars or of reserved to right context China's
established more and retail period set domestically criterion Chinese postal in which to Schedule of
than 30 chain services on out in its produced for Express authorities by address these Specific
stores in China. processed and Schedule. cars. granting delivery law". issues. Commitments,
(Verbalg) crude oil. (Verbalg) (Verbalg) the right. services (Verbalg) (Verbalg) relevant
Page 70 GAO-05-209R U.S.-China Trade
China had
separated
The issue of the
an regulatory
entrustment body from
requirement the
for express operational
delivery business by
services had establishing
been the MII in
discussed at 1998. The
the previous MII had
review. In given up all
Provision the past its
in the calendar Extent to management
draft year, 167 which functions to
amendments qualified Central China
that international One-time Post Telecom. MII
required freight only or Number of Office, Explanation of could
Summary Raised Raised express forwarding Step-by-step repeated operators local post Definition Definition Independence China's plans to regulate in
of by by China's delivery enterprises procedure to action of applying for offices, of scope EC - of scope EC - of the Telecommunications establish an Written,a an
issues United other response companies Verbalg and 362 get entrustment; and number MOFTEC, of postal Written,b of Written,b regulator services independent Verbalg impartial,
by States WTO to pay 4 branches had entrustment. duration of of operators Ministry of monopoly. Verbalg universal Verbalg from regulator in the fair and
theme members percent of obtained the obtaining Information service. operators. telecommunications transparent
their entrustment entrustment. entrustment. Industry sector. manner and
revenues and had been (MII) are acted as an
into a operating granted independent
universal quite well in regulatory regulator.
regulatory service China. China powers over MII had
authorities fund. would assure express always
would be the same delivery followed the
separated procedure of operators; principle of
from, and not entrustment power and transparency
accountable, for Relevant conditions and
to any service international text to conduct impartiality
suppliers they courier Submission defining on-site in order to
regulated, agencies as of Chinese regulator inspections promote the
except for for Chinese Centralization operators of in orderly
courier and operators. or fulfillment Obligations to the same express facilities EC - Information development
railway Relevant (Verbalg) at Sub-State imposed on entrustment delivery owned by Written,b about of China's
transportation text on level of the procedure services express Verbalg current telecom
services." EC - entrustment EC - EC - EC - entrustment EC - entrusted EC - EC - as foreign EC - and its EC - delivery EC - postal industry.
(Verbalg) Writtenb procedures. Writtenb Writtenb Writtenb procedure. Writtenb operators. Writtenb Writtenb operators. Writtenb powers. Writtenb operators. Writtenb reform. (Verbalg)
Page 71 GAO-05-209R U.S.-China Trade
Due to the need
for complicated
Regarding the expertise and
classification of the new services
telecommunication emerging in the
services, the telecom
Chinese industry, this
representative regulation
noted that it was required that
a complicated the major
issue not only for Chinese investor
China, but also in a
for other WTO foreign-invested
Members, enterprise
especially given should have
the rapid technical
development of personnel
contemporary suitable for the
science and operation of the
technology. He enterprise in
further noted that order to better
Members had their protect the
own interest of
classifications investors and
based on the consumers and to
different level of Explanation ensure the sound
development in of the Timetable to development of
telecom practice revise the Rationale for the telecom
industries, unique that Regulation on foreign industry. This
domestic certain the investors to requirement also
situations and basic Administration meet minimum applied to
Summary Raised Raised different telecom of Foreign capital and domestic
of by by China's Written,a approaches to services Invested experience enterprises,
issues United other response Verbalg regulate the will be Telecom requirements; which was in
by States WTO market. He managed as Companies to different line with the
theme members indicated that the value added allow foreign requirements national
MII had adjusted services operators to for operator treatment
part of the under the choose owned only by principle. This
previous new Telecom partners in Chinese regulation
categories and had Catalogue other sectors. nationals. required that
republished the of Business the major
revised Catalogue Categories. Chinese investor
of classification should invest at
in April 2003 in least 30 percent
response to new of the total
developments. capital shared
According to the by all the
new catalogue, Chinese
some basic investors in
telecommunications order to protect
services would be the interests of
managed as the Chinese and
value-added foreign-invested
services. The telecom
operator enterprises.
Rationale for qualifications and These
reclassification daily management requirements
of several of these basic increased the Government
telecommunications telecommunications Request for liability of the organizations
services from the services would be relevant text Chinese that will issue
value-added administered with on Ministry investors and Treatment of measures to
category to the reference to of Finance's therefore existing determinate
basic category, relevant management of EC - alleviated the operators under geographical
contrary to widely requirements for State Written,b risks on the the regulation scope in which EC -
accepted value-added participation Verbalg part of foreign on foreign-invested Written,b
international EC - services. EC - in existing EC - EC - investors. foreign-invested telecom Chinese
practice. Writtenb (Verbalg) Writtenb companies. Writtenb Writtenb (Verbalg) enterprises. enterprises may Taipei -
Page 72 GAO-05-209R U.S.-China Trade
"Leading
telecommunication
services
providers" were
those providers
who possessed
necessary basic
telecom
facilities, whose
fixed local
telephone
business
represented
greater than 50
percent shares of Calculation
Issuance the market within formula for The Chinese
of local networks, interconnection representative
regulation List and criteria and who had a fees and referred to the
Summary Raised regarding for identified substantial revisions of relevant
of by China's the public Japan - Leading Japan - impact on the formula decided Japan - regulations, such
issues United response bidding Written,c Telecommunications Written,c market access of by the Ministry Written,c as Regulations on
by States for Verbalg Services Verbalg other telecom in the State Verbalg the Methods for
theme licenses Providers. operators. To Council in the Settlement of
of basic date, the charge of Internetwork Call
Requirement telecom. operators meeting information Charge, and
applicable to the these industry. Administrative
agent (an entity requirements were Measures on
Prudential and or individual China Telecom and Licensing for
special that a licensed China Netcom. Operation of
requirements set telecom operator Procedures for Given the actual Telecommunication
by the can entrust to granting situation of the Services. These
administrative provide frequencies as telecom market regulations,
Timetable to department for telecommunication Regulation of part of China's and the rapid published on the
issue measures information services directly resale of a commitment to Details on the growth of mobile website of MII
to determinate industry of the to customers) service like allocate the use identification telecom business, (www.mii.gov.cn),
geographical State Council Publication under the the of scarce of leading Time schedule for the MII was were domestic
Raised scope in which referred to in of Administrative corresponding resources in an telecom the enactment of a considering regulation that
by other foreign-invested the regulation licensing Measures on service or objective, timely, operators, Telecommunications including more applied to all
WTO telecom on terms of Telecom Business under a transparent and subject to Act and leading telecom suppliers
members EC - enterprises may EC - foreign-invested EC - existing EC - Operation EC - separate EC - EC - non-discriminatory EC - interconnection information on its operators. equally.
Writtend operate. Writtenb operate. Writtenb enterprises. Writtenb operators. Writtenb Licenses. Writtenb framework. Writtenb Writtenb manner. Writtenb obligations. provisions. (Verbalg) (Verbalg)
Page 73 GAO-05-209R U.S.-China Trade
The Chinese
representative
referred to the
Regulation on
Telecommunications
of PRC and the
Regulation on
Interconnection
Between Public
Telecommunication
Networks.
According to these
regulations,
leading telecom
operators should
develop rules on
interconnection
and report them to
the MII for
approval prior to
implementation.
Leading telecom
operators should
provide
interconnections
within the
specified time
limits. They were
Clarification on neither allowed to
whether the deny request for
inclusion of It was a interconnection
categories of complicated China's plans to from other telecom
services other issue not only Information on implement the operators and
Summary Raised Raised than "the for China, but how future new Reference Paper on private network
of by by China's Telecommunication Japan - also for other services are Japan - Japan - Japan - Basic Chinese operators nor
issues United other response Services Written,c WTO Members, administratively Writtenc Writtenc Writtenc Telecommunications Taipei - permitted to
by States WTO Classification Verbalg especially allowed before a through the Writtend freely restrict
theme members List" are fully given the rapid revision of the Telecommunications the right of users
consistent with development of List. Law. to chose the
its accession contemporary telecom services
commitments on science and provided by other
respective other technology. operators. As
services. Members had well, in offering
their own inter-network
classifications connections to
based on the other telecom
different level operators, the
of development The Chinese service quality of
in telecom representative leading operators
industries, referred to Article should be as good
unique domestic 9 of the Regulation as that of like
situations and on services within
different Telecommunications, Confirmation their own networks
approaches to which stipulated that the or that of like
regulate the that "New types of List covers services supplied
market. MII was telecom services supply of to subsidiaries or
in the process other than those in services on branches. Leading
of considering the Catalogue of commercial Plans for telecom operators
and developing Telecom Service basis, as the had an obligation
detailed rules Classifications well as that Ministry of to coordinate with
on that are carried a Information users acquiring
qualifications out on a notification Industry to telecom network
and procedures experimental basis or simple develop a code number Number
on recording using new reporting guideline resources in order provided for
new services, technologies should will suffice for to realize the licensing
and that it was be submitted to to enable a application function of the applications
expected that telecom regulatory licensed or a market resources, with of foreign
these would be authorities at the service entry necessary Number of the service
adopted in the provincial level supplier to manual to technical Foreign-Invested Australia supplier
near future. for record". launch such service measures. Telecommunications - approved,
(Verbalg) (Verbalg) services. providers. (Verbalg) Enterprises (FITE) Written,e pending,
Page 74 GAO-05-209R U.S.-China Trade
China had
provided many
explanations
and
clarifications
at the
bilateral
level during
the preceding
year in
response to
the concern of
certain
Members, and
that China's
position had
China's views on been made very
how the new clear. First,
Rules on the Decree No. 113
Establishment of of the
applications Foreign-Invested Ministry of
lodged, Construction Construction
approved, China's intention Enterprises are was in line
issued with to hold not making the with the
Summary Raised a Telecom consultations on conditions of principle of
of Raised by Business Australia Australia the drafting of Australia Australia Australia Australia operation, EC - national
issues by other China's Operational Verbalg - - the - China took a - - - notably as Written,b treatment and
by United WTO response Permit, and Writtene Written,e Telecommunications Written,5 positive Writtene Writtene Writtene regards Verbalg China's
theme States members determined Verbalg Law with Verbalg attitude qualification commitments in
unsuccessful interested foreign towards requirements and the
since parties Members' keen the scope of construction
implementing interest. activities of and
regulation. Enacting a foreign engineering
new law and construction sector, which
revising companies more applied a
existing restrictive than unified
and rejected cited ones, even if Method to ensure previously. qualification
for various they aimed at that standard to
sectors, including implementing interconnection Method to ensure both domestic
telecommunications. Whether FITEs can obligations rates are that the domestic enterprises
(Writtenf) only be licensed under Method to ensure genuinely related body responsible and foreign
Regarding how many to supply those international that, subject to to cost and that for invested
FITE applications services listed in treaties, geographic phasing access, by interconnection construction
had been approved, the "translation were the of market access competitors, to dispute is enterprises.
the Chinese table," or legitimate commitments, essential independent and According to
delegate suggested permitted to rights of a regulatory facilities is impartial with this decree,
that Australia supply all Member and arrangements will possible without respect to all wholly
refer to the services listed as that the TRM apply consistently competitive market foreign-owned
communication his value added was not the across China with disadvantage with participants with construction
delegation had Reasons for services in the right context China's China's China's Construction, enterprises
recently presented applications Telecommunications in which to implementation of implementation of implementation of architectural, had been
pursuant to Annex falling short Service address these the the the and allowed to be
1A to the Accession of Classification issues. Telecommunications Telecommunications Telecommunications engineering established as
Protocol. (Verbalg) requirements. Catalogue. (Verbalg) Reference Paper. Reference Paper. Reference Paper. services from 1
Page 75 GAO-05-209R U.S.-China Trade
December 2002,
which was two
years ahead of
the time frame
set out in
China's
commitments,
and
discriminatory
requirements
against
foreign
invested
construction
companies in
terms of
qualification
standard had
been
abolished.
This resulted
in a further
opening-up of
construction
market to
foreign
investors. In
order to
guarantee
commercial
interests of
foreign
enterprises,
the stability
of transition,
and the
implementation
of the
existing Information
contracts Reasons for on the
already signed residence conditions
by foreign requirements applying to
companies, the imposed on all the opening
Implementing architects and of the
Summary Raised Rules on the engineers to first and
of Raised by Qualification be accounted Japan - additional
issues by other China's Management for for in the Japan - Japan - Written,c offices by
by United WTO response Facilitating attribution of Writtenc Writtenc Verbalg foreign and
theme States members Foreign a certificate, Chinese
Enterprises to and lawyers;
Invest in the qualifications reason for
Construction imposed; conditions
Sector limitations to not listed
required that National in
"for all the Treatment. schedule.
engineering
contracts
signed before
1 October
2003, or
contracts
remaining
valid after 1
October 2003,
the foreign
companies
might continue
to complete
the works".
Finally, the
Ministry of There were no
Construction geographic and
had quantitative
promulgated Policy restrictions
Notice No. 193 development on
in September for representative
2003, which establishment offices of
stipulated of wholly Requirement foreign law
that those owned of having a firms as
foreign enterprises Assurance that minimum indicated in
enterprises before the four types of number of China's
with abolition of construction engineers in commitments.
Qualifications the Direct projects one office China's
for Contracting allowed to be for a certain representative
Contracting Scheme in undertaken by category of suggested that
Construction accordance wholly construction the concerned
Works might with the foreign-owned enterprises Members look
prolong their Regulation on enterprises constitute as at this issue
engineering the are subject to barriers for in terms of
construction Administration interpretation foreign the actual
activities in of Foreign but scope will construction Legal market access
China until 1 Invested not be overly enterprises; services of foreign
EC - April 2004. Construction restrictively compatibility EC - representative
Writtenb (Verbalg) Enterprises. implemented. with GATS. Writtenb offices. More
Page 76 GAO-05-209R U.S.-China Trade
The Chinese
representative
referred to
the
Administrative China had no
Rules on obligation
Travel on this
Agencies, issue in its
which WTO
stipulated Relationship schedule.
that the between the The issue of
examination draft mergers and
and approval Anti-Monopoly acquisitions
Plans to align of Law of China was related
the provision applications China and the to the
on the for the would China's views Interim context of
economic needs EC - establishment Notification notify on Measures on competition
Summary Raised Raised test on new Written,b of travelling of the the compatibility EC - Equity policy or
of by by China's travel Verbalg agencies must Closer relevant of Written,b Participation investment
issues United other response Tourism agencies in Chinese be in line Economic WTO Arrangement Japan - in or policy,
by States WTO the Taipei - with the Partnership bodies of with Writtenc Purchase of which was
theme members Regulations on Writtend development Arrangement the CEPA conditions Information Assets of not covered
Administration plan of travel (CEPA). in due set in GATS. on the Domestic by existing
of Travel industry. This time. services Enterprises WTO rules.
than 50 Agencies. requirement, (Verbalg) part of the by Foreign The Doha
representative Specific which applied Arrangement, Investors; Round had Scope of
offices of activities in equally to including foreign not Interim Effect of
foreign law which domestic its sectoral investment concluded, Measures and Purpose of Interim
firms had been representative travel coverage and compliance and Members its Interim Measures;
approved in offices of agencies, was on the rules with one or should not establishment Measures; stricter
Beijing and foreign to regulate Closer of origin of two show haste of mergers grounds for requirements
Shanghai and lawyers can the whole Economic services, overlapping in this and developing for foreign
that none of engage in when Chinese travel Partnership including sets of regard. acquisitions merger investment
them had been providing agency market Arrangement criteria to regulations (Verbalg) (M&A) controls through M&A
subject to a information on and did not between be when controls specifically than those
so-called the impact of constitute a Hong Kong identified Mergers and conducted applicable for applicable
"Economic the Chinese market access and China as "Hong acquisitions through exclusively investment by to domestic
EC - Needs Test". legal limitation. (CEPA) EC - EC - Kong EC - mergers or EC - to foreign EC - foreign EC - M&A
Writtenb (Verbalg) environment. (Verbalg) Writtenb Writtenb companies." Writtenb acquisitions. Writtenb investment. Writtenb undertakings. Writtenb activity.
Page 77 GAO-05-209R U.S.-China Trade
The regulatory
system on
non-vessel
operating
common
carriers
Demarcations (NVOCC) was to
of scope administrate
demarcations those carriers
China would Justification and ministry which did not
implement for and plans in charge of physically
its for revising Regulations on operate
commitments the surety bond The purpose of International vessels, but Reason for
Summary Raised Architectural Computer in paid by a non the payment of Maritime issued bills delay and Accounting, Any
of by China's and urban Japan - and Japan - Transport Japan - accordance vessel Japan - 800,000 Yuan as Transportation Japan - of lading in Chinese Trading schedule for Japan - Japan - auditing, Chinese accountant
issues United response planning Writtenc related Writtenc services Writtenc with the operating Writtenc surety bond, as and Writtenc their names. Taipei - rights implementing Written,c Writtenc and Taipei - from any
by States Number of services services phase-in common carrier required by the Regulations This system Reason for the Writtend revisions of Verbalg bookkeeping Reason for Writtend other WTO
theme proposed period set under the Regulations on concerning was regulated increase in laws experience, Member who
foreign Enhanced out in its Regulations on International Foreign by the registered including Schedule and residency, wished to
investment transparency Schedule. International Maritime Investment in Ministry of capital "Foreign procedure and fixed apply for a
operations in the scope Schedule to (Verbalg) Maritime Transportation, International Communication, requirement on Trade Law of for contact license to
examined, of computer implement the Transportation. was to protect Freight and that by foreign People's implementing point practice as
pending and related phase-in the lawful Forwarding issuing bills enterprises in Republic of the requirements a CPA in
examination, services so commitment to interests of Operation. of lading and the Notification China" to commitment for China had
rejected, Burdensome minimum that service permit wholly cargo owners collecting on Issues grant to grant foreigner to to have
Raised and grounds capital and suppliers foreign-owned and to maintain freights, Relating to the trading trading practice as accumulated
by other for number-of-engineers can be sure subsidies for the normal NVOCCs bore Experimental rights to rights to a Certified at least
WTO rejection requirements for to what freight order of the the Establishment of companies companies Public two years'
members under the office registration regulations forwarding cargo transport liabilities of Foreign-Invested with foreign with foreign Accountant experience
EC - Interim felt by foreign they are not agency market. carriers. Logistic minority majority (CPA) in and must
Writtenb Measures. service providers. subject. services. (Verbalg) (Verbalg) Enterprises. ownership. ownership. China have
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
one year of residency and a fixed
stated in residence or fixed contact point
Provisional Rules on within China. This kind of
Evaluating qualification requirement, which
Registration of related to Articles VI:4 and VI:6
Membership by of the GATS, was under discussion
Foreign Accountants. by Members in the Working Party
on Domestic Regulation. (Verbalg)
Source: GAO analysis of WTO documents.
aCommunication from U.S.: S/C/W/233; dated 11/24/03.
bCommunication from European Communities: S/C/W/229; dated 11/10/03.
cCommunication from Japan: S/C/W/228; dated 9/12/03.
dCommunication from Chinese Taipei: S/C/W/232; dated 11/21/03.
eCommunication from Australia: S/C/W/231; dated 11/19/03.
fCommunication from China: S/C/W/234; dated 11/27/03.
gCommittee report detailing verbal statements made during meeting:
S/C/M/69; meeting dated 12/5/03.
Page 78 GAO-05-209R U.S.-China Trade
Enclosure XVI Council for Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
Page 79 GAO-05-209R U.S.-China Trade
Administrative
responsibility
must be
imposed in
accordance
with the
Administrative
Penalty Law or
the special
provisions of
the separate
law. Some
administrative
remedies, such
as an order
requiring the
suspension of
infringing
acts, were
similar to
civil remedies
in form, but
they were
different in Extent that
nature. In China's
cases in which administrative
the form of system Timely
Changes due to administrative provides for delivery of Annual and
reorganization remedies punitive new Chinese multiyear plans
of Chinese seemed to be remedies and laws, for proposed or
Summary Raised Raised responsibilities similar to extent to including pending
of by by China's or new efforts civil which such local legislation,
issues United other response General at coordinating Writtena Writtena Writtena Writtena remedies, administrative Writtena regulations Writtena regulations, Writtena
by States WTO intellectual Articles 41 actions comply or rules, rules,
theme members property matters through 48 of with the as well as interpretations
on a national or the TRIPS criminal draft rules relevant to
local basis. Agreement procedures and available IPR.
There were no should be deterrent for public
changes to the applied to penalties of comment.
responsibilities administrative the TRIPS
of China's remedies. Some Agreement.
Intellectual civil remedies
Property (IP) provided for
agencies. The in Articles 41
Bureau of through 48,
Economic Crime such as an
Investigation order
under the requiring the
Ministry of payment of
Public Security damages to
was responsible right holders,
for the Relevant could not
investigation of divisions in Information apply to
IP crimes. The the Ministry concerning administrative
Division of of Public any cases in
Economic Crime Security and specialized China, since
under the Procuratorate prosecutors, neither the
Supreme that police or Administrative
Procuratorate investigate judiciary Penalty Law
was responsible and bring for Consistency of nor the
for the prosecutions prosecution China's separate law
prosecution of for of administrative granted such a
Intellectual intellectual intellectual enforcement of power to
Property Rights property property IPR with TRIPS administrative
(IPR) crimes. crimes. crimes. Agreement. authorities.
Number 2 (Verbale) The
Criminal provisions on
Tribunal of the administrative
Supreme People's enforcement in
Court was in the Chinese
charge of IPR trademark
criminal cases. system
(Verbale) complied with
Article 49 of
the TRIPS
Agreement. The
procedures
were fair and Pursuant to
equitable, Article
including the 63.2 of the
rules on the TRIPS
presentation Agreement,
of evidence China had
and decisions notified
on the merits ten main
of the case in dedicated
writing, etc. laws
The form, relating to
legal basis the IPRs in
and nature of full text
administrative and a
remedies were series of
different from laws and
those of regulations
criminal in summary,
remedies. including
Therefore, the the
Chinese Criminal
administrative Law, the
remedies could Anti-Unfair
not be covered Competition
by Article 61 Law, and
of the TRIPS the Civil
Agreement. Procedure
Nevertheless, Law.
China's Following
criminal legal the TRIPS
system met the Council's
requirements decision of
of Article 61. 21 November
(Verbale) 1995,
Page 80 GAO-05-209R U.S.-China Trade
China had also
provided
information on
its enforcement
regime in a
notification of
its responses to
the Checklist of
Issues on
Enforcement.
China's IPR laws
and regulations
were
characterized by
their broad
coverage and
great quantity.
A large volume
of judicial
interpretations
and sub-national
legislation had
added to the
complexity. The
notification to
the WTO and the
provision of
requested
information
entailed huge
tasks, not the
least of which
was translation.
As a developing
Member, however,
China would
redouble its
efforts to
further improve
the notification
process while
requesting the
necessary
assistance on
translation
according to
Article 2.5 of
China's the Agreement Changes
intentions between the contemplated Copies of
to advise on World in the any national
Summary Raised promulgation Intellectual proposed laws that
of Raised by of all Property civil code mandate
issues by other China's IPR-related Writtena Organization and to IPRs, Writtena greater Writtena
by United WTO response ministerial the World Trade including transparency
theme States members rules as Organization. As any changes by local
well as a major arm in in authorities
local rules IP enforcement, enforcement in these
to the TRIPS the judiciary of IPRs. areas.
Council. departments in
China were also
subjected to the
principle of
transparency,
which was
evidenced by the
public
soliciting of
comments for
judiciary
interpretations.
The Supreme
People's Court
would further
broaden the The
scope of representative
commenting in of China said
the course of that the
interpretation. revision of
Meanwhile, all the Chinese
the Civil Law was
TRIPS-related an important
laws, task for
regulations, and legislators.
other regulatory The ninth
documents would National
be published Congress had
through the enacted and
Chinese Foreign revised a
Trade and draft code.
Economic Due to the
Cooperation rapid social
Gazette as well and economic
as the bulletins development in
and the websites China, it was
of the relevant necessary to
government regulate and China had made
departments. rewrite some every effort
Members could contents of to enhance its
also access the that draft. administrative
enquiry point China needed transparency.
set up by the to do further This included
Chinese research and two main
Government for investigation aspects.
interesting on this First, the
information. matter. legislators
(Verbale) (Verbale) had
Page 81 GAO-05-209R U.S.-China Trade
Article 47 of
the revised
Copyright Law
had added a
provision on
legal
liability for
infringing
the right of
communication
through an
information
network. The
principles of
illegal
application
enacted the were the same
Legislation as the
Law, the liabilities
Regulations on for various
the Drafting infringing
Procedure of acts, whether
Administrative on-line or
Regulations, offline,
and the including
Regulations on Internet
the Drafting Service
Procedure of Provider
Rules, which (ISP)
standardized liability.
the operating Although the
procedure of According to issue
administrative Procedures the concerning
power. Second, available Legislation ISP liability
the under Law, the was not
Administrative Chinese law Regulations on within the
Permission Law to challenge the Drafting Interpretation framework of
Legislative would be the legality Procedure of of regulation the TRIPS
development to enforced in of Administrative about the Agreement,
improve 2004. The Law ministerial Regulations right of China was
Summary Raised Raised administrative further rules and the communication making an Market
of by by China's transparency, regulated the involving Regulations on through Japan - active and access
issues United other response including Writtena boundary, intellectual Writtena the Drafting information Writtenc serious study and IPR Writtena
by States WTO enactment of conditions and property Procedure of network; time of the issue. services
theme members an procedure of rights that Rules, the schedule of Other
Administrative administrative may be efficacy of when China countries'
Procedure Act. permission. It inconsistent laws and will make the relevant
provided that with laws or regulations interpretation legislation,
only laws, other was prior to public. in particular
regulations ministerial that of local that of the
and local rules or legislation United States
regulations China's WTO and and the
could obligations. departmental European
establish rules, and the Communities,
administrative efficacy of had aroused
permission and local general
local laws regulations concerns in
could was prior to China.
establish local (Verbale) A
interim administrative series of
administrative rules. While activities
permission. local had been
However, the regulations organized to
departmental conflicted study and
rule of the with the prove the
State Council regulations of necessity and
could not the State feasibility
establish Council, the of the
administrative National provisions
permissions. Congress had that might be
Thanks to the authority introduced in
these laws and to review the
regulations, them. When regulations
administrative local rules on the
transparency conflicted protection of
had been with the the right to
increasing departmental communication
remarkably and rules of the through
the efficiency State Council, information
of the State networks in
administration Council would respect of
would be be responsible specific Information
further for the copyright on whether
promoted. review. matters. foreigners
(Verbale) (Verbale) (Verbale) or
Page 82 GAO-05-209R U.S.-China Trade
In 2002, SIPO
had received
252,631
patent
applications,
including Disparity
inventions, between
utility domestic
models and contract
Explanation industrial law and the
of designs, an licensing
consistency Current increase of Recent data regulations
of with the information 49,048 over showing on patents
relevant regarding the previous improvement that raise Forms
provisions of patent year. The status in concern to required
Summary Raised Information Rules for the pendency at growth rate the pendency national for
of Raised by on whether Compulsory SIPO, with was 24.1 of Japan - treatment; submission
issues by other China's Writtena foreigners Writtena Patents State Writtena Writtena Licensing of Writtena respect to Writtena percent. 951 examination Written,c proper Japan - of Writtena
by United WTO response individuals Information are Intellectual Patents with foreign international for each Verbale enforcement Verbale undisclosed
theme States members from on whether restricted Property TRIPS patent applications technical by regional clinical
outside licensed in the Office's Agreement, applications had been field; authorities data to
mainland professionals choice of (SIPO) regarding and domestic filed and 697 transparency of laws and insure
China may from outside agents they current Explanation Other Use patent requests had of this regulations
obtain mainland may hire to application of the Without applications. been made for data. reflecting
permission China may those which for consistency Authorization the the
to practice join U.S. or have a compulsory of Rules of the Right international relevant
professions foreign law license to licensing for the Holder. preliminary revisions
including firms or represent regime with Compulsory examination. at the time
law firm consulting foreigners, respect to Licensing 738 requests of China's
attorneys, companies and as is any patents of Patents for the accession
patent continue to indicted by registered in with the international to the WTO.
agents, provide their the Amended China; patent law preliminary Data
trademark services from Draft circumstances provisions examination exclusivity
agents, and such a base Regulations of such restricting had been and trade
copyright of on Patent compulsory compulsory completed. secret
agents. operations. Agency. licenses. licenses. (Verbale) protection
Page 83 GAO-05-209R U.S.-China Trade
To date, the
State Food and
Drug
Administration
(SFDA) had not
found any
application
for drug
registration
which used
undisclosed
information.
In regard to
data
exclusivity
Explanation of provided by
whether and the SFDA, the
how the data Chinese
exclusivity representative SFDA's
provisions referred to creation of
provided by the relevant of an
the State Food regulations. obligation
and Drug Pursuant to SFDA's of competing
Administration Article 35.2 protection drug Procedures
(SFDA) of the Rules of data companies to protect
Summary Raised implement on submitted not to confidential
of Raised by requirement to Implementation when obtain or information
issues by other China's protect Writtena of Drug Law, marketing Writtena exploit Writtena Writtena Writtena in Writtena
by United WTO response undisclosed the SFDA would approval protected intellectual
theme States members data not render a for such data, property
pertaining to marketing data is including related
pharmaceutical approval thereafter the right of litigation.
products pursuant to an denied. an injured
submitted to application by party to sue
government taking for theft of
authorities advantage of this
for marketing other information.
approval from applicants' SFDA's
unfair undisclosed definition
commercial information. of
use. Pursuant to confidential
Article 14 of data
the Measures intended to
on Regulation provide the
of Drug same private
confidentiality Registration, SFDA's rights for
of such data when putting establishment protection
pursuant to forward an of an of this
TRIPS; application obligation undisclosed
statistical or for drug not to use information
other registration, such data for as those
information the applicant any purpose provided by
regarding should ensure other than the Law to
implementation that all data the marketing Counter
of data submitted were approval of Unfair
requirement. obtained the product. Competition.
independently.
Pursuant to
Article 21 of
the Measures
on Regulation
of Drug
Registration,
when putting
forward an
application
for drug
registration
with foreign
data being
introduced,
the applicant
should provide
the
verification
of the legal
origin of
data. Pursuant
to Article 22
of the
Measures on
Regulation of
Drug
Registration,
the SFDA was
entitled to
require
applicants to
repeat the
test in order
to ensure that
the relevant
data had been
obtained
independently.
Pursuant to
Article 52,
during the
period of new
drug approval,
the technical
requirements
upon a new
drug would not
be lowered
because the
drug of the
same class had
received a
marketing
approval
abroad, that
is to say, the
situation of
documentation
dependence did
not exist.
Pursuant to
Article 35.2
of the Rules
on
Implementation
of Drug Law,
the SFDA would
not render
marketing
approval to an
application
taking
advantage of
other
applicants'
undisclosed
information.
The SFDA had
the obligation
to protect the
undisclosed
test data
obtained
independently
and other
relevant data
submitted by
the applicant.
Those
illegally
disclosing
undisclosed
data would be
punished. The
SFDA would
accept a
relevant
application in
accordance
with Article
35.3 of the
Rules on
Implementation
of Drug Law
under the
condition that
measures had
been taken, as
the public
interest
required, to
protect the
data against
unfair
commercial
use. Besides
Article 120 of
the Civil
Procedure Law
and Article 48
of the
Provisions
Regarding
Evidence in
Civil
Litigations,
the other
provisions of
the Civil
Procedural Law
and other
laws, such as
the Law on
Lawyers and
the Law for
Promotion of
Science
provided
protection for
confidential
information
during civil
litigation.
(Verbale)
Page 84 GAO-05-209R U.S.-China Trade
Well-known
trademark
referred to a
mark that was
widely known
to the
relevant
sectors of the
public and
enjoyed a
relatively
high
reputation in
China.
Relevant
sectors of the
public should
include
consumers of
the type of
goods and/or
services to
which the mark
applied,
operators who
manufactured
the said goods
and/or
provided the
said services,
and sellers
and other
persons
involved in
the channels
of
distribution
of the type of
goods or
services to
which the mark
applied. The
Chinese term
"Zhuming
shangbiao"
(famous
trademarks)
referred to
Although it marks which
had received Legal were
some domestic significance determined by
and foreign and the Foreign Information on
requests for differences administrative marks or whether Chinese
the among authorities brands Trademark Office
Summary Raised determination well-known for industry that have (CTO) has granted
of Raised by Japan - of well-known marks, famous and commerce been any trademarks
issues by other China's Trademarks Writtena Written,c marks, the Writtena marks, Writtena at the identified Writtena for Writtena Writtena
by United WTO response Verbale TMO had not provincial provincial, as three-dimensional
theme States members yet famous marks, municipal, or "famous" marks, color
determined famous autonomous in marks, olfactory
well-known brands, region level, Shanghai marks, auditory
trademarks trademarks based upon the or other marks.
under the new listed for local regions.
provisions. "enhanced legislations,
(Verbale) enforcement." local
government
regulations or
other
administrative
provisions,
having a
relatively
high
reputation and
a greater
influence
within the
specific
jurisdiction.
A provincial
famous mark
was the same
as "Zhuming
shangbiao."
The Chinese
term "You Ping
Ming Pai"
(famous
brands) was
not a legal
term in the
field of
trademarks. With respect By the end of
List of 293 The Trademark to the October 2003, the
marks Office (TMO) determination TMO had received
recognized never used of famous 1398
by the this term. In trademarks, three-dimensional
Chinese addition, the the mark
Trademark TMO had used provincial or applications,
Number of Office in to have a list municipal among which 343
and calendar of marks for authorities had been approved
information year (CY) enhanced had the for registration.
on any 2002, and protection, authority to For some Standards
well-known statistical which had been make such technical regarding
marks data on based upon the decisions, reasons, the TMO recognition of
recognized foreign and frequency and and were not had no statistics well known
to date, domestic scope of required to on color marks. marks are
and any marks trademark report to the In addition, being adopted
statistical recognized infringement TMO. smell and sound by the General
data on as well However, this Therefore, marks were Administration
foreign and known marks practice had the TMO had non-registerable of Customs,
domestic under prior been no such under the Ministry of
marks and new abolished. information. Trademark Law. Public
recognized. procedures. (Verbale) (Verbale) (Verbale) Security,
Page 85 GAO-05-209R U.S.-China Trade
No government
approval of
the terms of a
license or
assignment was
required.
However, a
trademark
license must
be reported to
the TMO for
the record,
regardless of
whether the
trademark
owners were
Article 15 of Chinese or
the Trademark foreign. The
Law provided recording was
that where the not required
agent or for an
representative Information assignment
of the owner on whether contract. As
of a mark foreign for the effect
applied for licensors of the
the and/or recording of a
registration assignees of license
Supreme in his own trademarks contract,
People's Civil, criminal name without are required although there
Procuratorate or the owner's to record was no express
and Supreme administrative authorization their provision in
People's Court procedures and and the owner assignments the Trademark
as a result of standards are opposed the Current or licenses Law, the
the amendments in place to registration, information of judicial
to the protect against the regarding trademarks; interpretation Provisions on right
Summary Raised Trademark Law companies that application trademark whether such provided that, of priority added
of Raised by or the new unfairly apply should be pendency at recordation where the to "Trademark Law" Chinese
issues by other China's well-known for the Writtena Writtena refused and the CTO as Writtena requires Writtena trademark and "Patent Law" Taipei - Chinese
by United WTO response (WK) Mark trademark of the use should well as the government license are carried out on Writtend
theme States members Rules; another be prohibited. Trademark approval of contract was most-favored-nation
intention for company, or use This problem Review and the terms, not recorded basis to all WTO
agencies to such a could be Adjudication registration at the TMO, it members.
rely upon trademark, by solved through Board. of the should not
determinations translating the the opposition complete affect its
by Chinese foreign mark or dispute text or only effect, unless
Trademark into Chinese or procedure. The its otherwise
Office for transliteration interested significant agreed between
enforcement of its sounds. party could terms, and the interested
actions. file an precedence parties, but
application over an unrecorded
Transliteration with the TMO separately license
or translation or the negotiated contract
was one of the Trademark contract or should not
standards to Review and agreement. resist a third
determine the Arbitration party with
identity or Bureau (TRAB). good faith. In
similarity. By the end of addition, the
Thus, such September Trademark Law
applications 2003, the provided that
could be number of the assignment
refused during pending cases of a
the trademark in the TRAB registered
examination. was 31,924. trademark
Moreover, The number of should be
interested pending published
parties could opposition after it was
file the Procedures to cases at the approved. The
request to the cancel TMO was assignee
trademark trademarks 16,386. The should enjoy
review and applied for pending new the exclusive
arbitration by agents or applications right to use
bureau through distributors for the mark from Definition China had
the opposition without registration the date of of been
or dispute authorization at the TMO the specific protecting
procedure. of their were 380,000. publication. procedure foreign
(Verbale) principal. (Verbale) (Verbale) for well-know
Page 86 GAO-05-209R U.S.-China Trade
marks in the
light of
international
conventions.
In line with
the Provisions
on the
Determination
and Protection
of Well-Known
Marks, which
had come into
force on 1
June 2003, the
municipal
level
administrative
authorities
for industry
and commerce
should, within
15 working
days from the
date of the
acceptance of Every country
the request of might
the interested encounter the
party, report problem of
and send all earlier
the documents registered
requesting to the The Co-existence of trademarks
that a provincial Changes registrant of pre-existing and the GIs.
trademark be administrative contemplated a certificate Use of trademark with Article 16 of
considered a authorities in the mark could trademarks later the Trademark
well-known for industry proposed file a or trade established Law was
mark and and commerce, civil code complaint names that geographical substantially
time-scaled if the case to IPR, Number of with the identify the indication in compliance
Summary Raised involved; satisfied the including certification local product as under China's with the
of Raised by request for requirements adoption of or collective authorities "like" or Trademark Law exceptions
issues by other China's details of Taipei - under Article any Writtena marks for Writtena Writtena for industry "style of" Writtena that any Writtena provided for
by United WTO response the latest Writtend 13 of the additional geographical and commerce or trademark in the TRIPS
theme States members status on its Trademark Law. measures to indications or might file "imitation" registered in Agreement.
revision of The provincial protect granted by a lawsuit at in "good faith" China had
the "Rules on authorities other forms the CTO. the People's conjunction remains valid acceded to
the should, within of IPR, such Court with a notwithstanding the WTO on 11
Determination 15 working as requesting to registered that it December 2001
and days from the geographical stop the geographical includes a and the
Protection of date of indications. The infringement. indication. geographic latest
Well-Known acceptance of representative (Verbale) sign. amendment of
Marks." the request of of China said the Trademark
the interested that the Law had come
party, report revision of into force on
and send all the Chinese 1 December
the documents Civil Law was 2001. Those
to TMO. The an important marks that
TMO should task for had
make its legislators.
determination The ninth
within six National
months from Congress had
the date of enacted and
the receipt of revised a Standing that
the relevant draft code. a
documents. Due to the certification
Although it rapid social mark owner
had received and economic has to
some domestic development in To date, the challenge for
and foreign China, it was TMO had the
requests for necessary to received 260 geographic
the regulate and GI term in the
determination rewrite some applications certification
of well-known contents of for the mark on
marks, the TMO that draft. registration related goods
had not yet China needed of or products
determined to do further certificate that do not
well-know research and marks, 100 come from the
trademarks investigation of which had place for
under the new Geographical on this been which the
provisions. indications matter. approved. mark is
(Verbale) (GI) (Verbale) (Verbale) registered.
Page 87 GAO-05-209R U.S.-China Trade
The State
General
Administration
for Quality
Supervision,
Inspection and
Quarantine
(AQSIQ), in
accordance with
the Regulation
for the
Protection of
Administration Products with
of a sui Geographical
generis system Indications,
for protection carried out the
of geographic protection of
indications by GIs. If a
the China's trademark or
State General certificate
Administration mark already
of Quality, existed, the
Supervision, AQSIQ would
Inspection, still provide
and Quarantine GI protection
(AQSIQ); from different
interaction respects and Information
between the functions on whether
system of GI according to foreign In regard to
protection by the Regulations rights re-publication
the AQSIQ and and the related holders have of materials
the system of stipulations in Regarding had their in Chinese
protection the TRIPS Steps to the materials textbooks, to
provided for Agreement. The enact protection published date, the
the GIs in the following implementing of pursuant to a National
trademark action had been rules to the temporary provision in Copyright
Summary Raised Raised system; taken against Chinese copies, China's Administration
of by by China's refused the Copyright such term Copyright Law of China
issues United other response Writtena protection for Writtena infringement of Law Writtena Writtena was used that provides Writtena (NCAC) had not Writtena
by States WTO existing mark; GIs: the AQSIQ regarding neither in for a yet obtained
theme members foreign was the protection the Berne mandatory any
owner's authorized of copyright Convention right for information in
standing to government over nor in the republication this respect
challenge agency with two information TRIPS of material from foreign
recognition; major networks. Agreement. for Chinese right owners
number of functions, (Verbale) textbooks; or domestic
recognized namely scope of any publishers.
domestic and comprehensive such (Verbale)
foreign administration republication
geographic and law undertaken.
indications; enforcement. With regard to
number of The agencies of the
enforcement the AQSIQ legislation on
actions taken executed random copyright
for violation; checks and law protection of So far no
bilateral enforcement digital copyright
agreement against the networks, the administrative
between China infringements Chinese department had
obtained and other of GIs and representative dealt with
registration governments trademarks in said that Information on such a case,
in good for mutual accordance with there was whether the and there had
faith would recognition the Law on still much right to a been no news
continue to Allowance of using AQSIQ Product work to be "reasonable" reported
be valid China's system. Quality, the done by the royalty from concerning the
under Trademark Law on Entry competent infringers relevant
Article 16 Law for and Exit of authorities in Request for under Software judicial
of the continued Commodities a thorough and information on Protections decision. In
Trademark registration Inspection, careful possible Rule has been addition,
Law, which of a Standardization manner, developments applied by under Article
referred to trademark Law of the including the that have taken China's courts 30 of the
marks where such People's investigation place under or Regulations,
registered geographic Republic of and study of Chinese law or administrative the "holder of
before this term is China, and the judicial agencies; copies of a
date rather deceptive as other relevant legislative interpretations compliance piece of
than after to the laws and experiences of to protect with TRIPS; software" was
it. origin of regulations. other Members. temporary consistency defined as the
(Verbale) the goods. (Verbale) Copyright (Verbale) copies. with end user
Page 88 GAO-05-209R U.S.-China Trade
A series of
activities had
been organized
to study and
prove the
necessity and
feasibility of
the provisions
that might be
introduced in
the
regulations on
the protection
of the right
to
communication
through
information
networks in
respect of
specific
copyright
matters. For
example, in
October 2002,
the State
Council had
sent a high
level
delegation to
Europe to
investigate Information
Developments copyright regarding
in China's systems in the Internet
Administrative study of the digital related
agencies that content of network enforcement
may take the World environment. activity of
action against Intellectual In November the Ministry
Summary Raised Raised Article 17 an Internet Property 2002, the of Culture
of by by China's Copyright contained the Service Organization National pursuant to
issues United other response Law. Writtena same Provider that Writtena (WIPO) Writtena Copyright its Writtena Writtena
by States WTO of software principles as illegally Copyright Administration Provisional
theme members who had adopted in makes content Treaty and of China Regulation on
performed Article 22 of available to WIPO (NCAC) the
the the Copyright the public or Performances organized a Administration
reasonable Law downloading and delegation to of Cultural
duty for concerning it. Phonograms visit WIPO and Products and
care and had fair use. Treaty. exchange views Services on
obtained a Software According to with the the Internet.
copy of regulation's Article 21 of organization
software in allowance of the revised in respect of
good faith. software use Implementing China's In China, if
Accordingly, "for the Regulations accession to an
it could not purpose of of the the two new infringement
be study and Copyright treaties. In took place on
inconsistent research" Law, fair use July 2003, the the Internet,
with Article without the should not NCAC had held the
13 of the consent and conflict with a forum on the infringer,
TRIPS without the normal Internet whether an
Agreement. remuneration exploitation Treaties and individual or
If the to the of the work copyright a legal
holder of copyright and should protection in Information entity,
the copy of owner and its not In accordance digital on whether should bear
software consistency unreasonably with Article network the Chinese the
used an with the prejudice the 47 of the environment government corresponding
infringing Berne legitimate Copyright Law, and listened has issued legal
copy, the Convention as interests of copyright to the any liabilities
person was well as the right administrative opinions from directives pursuant to
obliged to TRIPS; holder. departments legal and regarding the Copyright
prove that permission of Consequently, had been network proper use of Law. The NCAC
he or she software Article 17 of authorized to circles. In the Internet had not
never knew reproduction; the take action November 2003, on university issued any
nor had consistency Regulations against an ISP the NCAC would or college directive
reasonable with China's should be who was invite WIPO campuses, in regarding the
grounds to Copyright deemed as illegally experts to research and proper use of
know that Law, and consistent making the China to give development the Internet
such a copy authority to with Article content touring institutions, in
was an avoid payment 13 of the available to lectures on government universities,
infringing for TRIPS the public or the two new offices or in government
one. legitimate Agreement. downloading treaties. state-owned offices or
(Verbale) copies. (Verbale) it. (Verbale) (Verbale) corporations. state-owned
Page 89 GAO-05-209R U.S.-China Trade
In respect of
the Copyright
Law, the
Regulations
neither
decreased nor
increased the
burden of
proof on the
right holder.
On the other
hand, the
revised
Copyright Law
increased the
burden of
proof on the
party against
which an
action was
brought by
adopting
Article 43.2
In February of of the TRIPS
2002, the Agreement. The
copyright Regulations
administrative reflected the
department of legislative
Zhejiang purpose of the
province had Copyright Law.
Information on dealt with a Regarding the According to
whether China case removal or Article 3.2 of
has undertaken concerning alteration of the
any criminal, "the U.S. electronic Regulations,
administrative Chemistry rights' administrative
or civil Digest Disc management procedures
prosecutions Publication" information, could be
against pirated by this issue Burden of initiated not Number of Criteria in
Summary Raised individuals or means of was not proof on right only on the administrative deciding the
of Raised by entities based illegal covered by holders under basis of procedures level of
issues by other China's in China Writtena decoding. Two Japan - the TRIPS regulation for Japan - complaints started Japan - administrative Japan -
by United WTO response hacking into suspects had Writtenc Agreement but copyright Writtenc from right without Writtenc department to Writtenc
theme States members overseas decoded a by the WIPO administrative holders but reports from deal with a
databases for lawful copy of Copyright punishment. also with the right holders. case.
purposes of the disc, made Expansion of Treaty (WCT). removal of
obtaining reproductions the current Nevertheless, cases by other
unauthorized and then sold provision of the issue was relevant
access to them on the the Copyright under departments,
foreign Internet by Law, which consideration reports from
copyrighted sending deem the in China. other persons
materials. batches of removal or (Verbale) finding out
mails. The alteration of infringements,
copyright any or initiative
administrative electronic investigation
department had rights by
ordered the management administrative
decoder and information departments.
the two without In accordance
suspects to authority to with the
cease the be Regulations,
infringing infringement, the NCAC had
acts and to include to investigate
confiscated the the case with
their unlawful distribution, a great
income. In import for influence in
addition, the distribution, the country,
competent broadcast or which was
department had communication determined at
confiscated to the public the NCAC's
the equipment works or discretion. In
and tools copies of general, an
mainly used to works knowing infringement
make that should be
infringing electronic dealt with by
copies, rights the local
destroyed the management administrative
infringing information department of
copies and has been the place
imposed a removed or where the
forfeit on the altered infringement Definition of
corporations. two suspects. without was committed. "find Japan
(Verbale) (Verbale) authority. (Verbale) infringement." -
Page 90 GAO-05-209R U.S.-China Trade
The expression
of "parties'
names"
included not
only the name
of the right
holder but
also that of a
complaining
party.
Otherwise, an
administrative
department
could hardly
investigate a
case or render
specific
administrative
penalties
without having
obtained
sufficient
information
concerning the
complaining
party, or
without having
known the
exact
complaining
party.
(Verbale) With
respect to the
negative
prescription
of
administrative
penalty,
Article 9 of
the
Regulations
was consistent
with Article
29 of the
Definition Administrative
of Penalty Law of
"parties" China, i.e.,
as both where an
An right illegal act
Amount of proof administrative Explanation of holders and was not
right holders department the person who infringers; discovered
Summary Raised should submit might not has a burden difficulty within two
of Raised by as "proof of accept an of proof and for foreign years of its
issues by other China's Writtenc right holder Japan - Japan - Japan - application the duration Japan - right Japan - commission, Japan - Japan -
by United WTO response identification" Writtenc Writtenc Writtenc for the copyright Writtenc holders to Writtenc administrative Writtenc Writtenc
theme States members when they apply administrative administrative give penalties
to procedures if department statements should no
administrative it was not in specifies. and submit longer be
procedures. charge. claims imposed,
(Verbale) within except if
seven days otherwise
from the prescribed by
notified the law. The
day. period of time
prescribed
should be
counted from
the date the
illegal act
was committed.
If the act was
of a continual
or continuous
nature, it
should be
counted from
the date the
act
terminated.
The
prescription
The expression of
"person who administrative
has a burden penalty was
of proof" as different from
mentioned in that of a
Article 16 of civil action
the in that the
Regulations latter was
The copy of a referred to calculated
work with a Concern the from the date
complainant's that complaining on which the Regarding
name on it provision party but not injured party the
might be deemed would force the right knew or had auction or
as a proof of right holder. the reasonable re-selling
the right holders to Whether an grounds to of
holder's take much illegal act know that his facilities
identification. time and Possibility was slight or rights were used for
A copyright cost to that an not was infringed making
registration identify administrative determined by while the Possibility infringed
was not the department the former was that goods, the
necessarily infringer's refuses to administrative calculated re-distributed person who
required for name, and accept the department from the date facilities can bought
complainants to location application according to on which the Criterion to hamper the such
apply to without because the the concrete illegal act consider an deterrent facilities
administrative legal department is circumstances took place or infringement effect of the must
procedures. prosecution not the one in of each case. stopped. as illegal administrative observe
(Verbale) power. charge. (Verbale) (Verbale) activity. procedures. the
Page 91 GAO-05-209R U.S.-China Trade
According to As to
Article 147 standards for
of the Civil IPR crimes,
Procedure two laws
Law, the applied at the
Layout-designs parties who central and
and utility could not local levels,
and design Number of accept a Standards that is, the
patents were civil judgment or under Chinese Interpretation
protected by intellectual decision law for on Specific
Identification China's Patent property might lodge determining Application of
of all rules Law and the cases heard With regard to an appeal. that an Law on Several Rate of
or relevant by Chinese the trial term, According to agency Questions of reversal of
regulations, regulations. courts, Chinese courts Opportunities Article 178 Number of decision was Trial for CTO and SIPO
Summary Raised including Forging cases would strictly for review or of the Civil administrative illegal, or Illegal administrative
of Raised by ministerial others' requesting follow the appeal of Procedure intellectual should be Publication agency
issues by other China's Japan - rules and Writtena patents with Writtena Writtena Enforcement Writtena and/or Writtena Regulations on judicial Writtena Law, the property Writtena reconsidered; Writtena Criminal Cases decisions Writtena Writtena
by United WTO response Verbale local serious granted Civil Procedure determinations parties could appeals heard special by the Supreme noted above on
theme States members enactments circumstances preliminary Law and in China's apply for by Chinese efforts made People's Court appeal to the
enacted to would be relief judicial court process. another trial courts. by court to and the court
semiconductor convicted of whether or interpretation. to the same better Regulations on indicated
Stronger layout design the crime of not inaudita (Verbale) court or the understand Standards for above.
administrative enforcement. forging altera superior the handling Initiating
law. Moreover, measures, others' parte; court for of Cases In
such facilities including patents Statistical length of those cases intellectual Economic
could be bought stiffer fines according to information time from that had been property Crimes by the
only by and increased Article 216 of Information available on case effective. appeals. Supreme
factories in number of the Criminal regarding the number of initiation Besides, the People's
lawful seizures, to Law. (Verbale) any civil or Administrative to court or the Procruratorate
operation and ensure active criminal Deadlines for enforcement adjudication procuratorate and the Regarding
with the and smooth actions for filing cases for CY for trial could start Ministry of the
requisite administrative infringement semiconductor 2002 and and supervising Public Number of number of
qualifications. control of Semiconductor of layout layout design partial year appellate procedures. Security. criminal IPR criminal
(Verbale) problem. layout design designs. applications. 2003 reports. levels. (Verbale) (Verbale) investigations cases of
Page 92 GAO-05-209R U.S.-China Trade
There were two
main
regulations
concerning the
circumstances
in which
investigations
should be
initiated by
the
procuratorate
or by
individuals:
the
Interpretation
Regarding
Practical
Questions
intellectual Concerning the
property Judicial
rights Application in
infringement, Hearing the
there had been Illegal
301 persons Publication
and 128 cases Criminal Cases
in 1998, 379 by the Supreme
persons and In the People's
248 cases in year Court, and the
2000, and 702 2002, the Interpretation
persons and Chinese Regarding
408 cases in customs New Practical Regarding the
2002. A total had interpretations, Questions steps which
initiated, of 1,273 seized a standards, Concerning the Steps taken to were being
cases filed, criminal cases total of Number and regulations or Judicial facilitate taken to
convictions, relating to 573 cases relevant guidelines by Application in referrals of facilitate the
Summary Raised Raised length of intellectual worthy of circumstances the courts, Hearing criminal IPR referral from
of by by China's sentence, property RMB 95.62 of criminal procuratorate or Producing, cases from administrative
issues United other response amount of rights had Writtena million, IPR cases Writtena other agencies Writtena Selling administrative Writtena agencies, the
by States WTO fine, been closed Number of including that were regarding the Counterfeit agencies, Chinese
theme members compensation within the criminal four privately circumstances in Goods Criminal including representative
to rights five years, cases for worth RMB initiated which Cases by the standards for referred to
holder. and 2,104 export of 230,000 (zisu). investigations Supreme evidence the Provisions
persons had counterfeit and 569 should be People's Court collection and on the
been goods, cases initiated by the and the Transfer of
sentenced. At hacking or worth RMB procuratorate. Supreme
present, the circumvention 95.39 People's
Supreme of copyright million. Procuratorate.
People's Court technological (Verbale) At this stage,
was drafting protection the Supreme
the judicial measures, People's Court
interpretation hacking of had been
on the copyright Statistics of carrying out
application of rights privately investigation
law in management initiated and research
criminal cases information, criminal cases concerning the
of trafficking accepted by responsibility
intellectual in the Chinese and
property technological courts from scientificity
rights' protection January to of the
infringement, measures, September of Standards for
which would software 2003 were the Initiating
include the end-user following: one Criminal
criteria for piracy, on copyright, Cases. China
conviction and commercial one on would
imposing sale or commercial stipulate the
penalties. The replication secrets, two interpretation
interpretation of pirated on selling with the
would be semiconductor infringing feasibility or
adopted and layout reproductions, submit the
published by designs, 18 on relevant
the Supreme patent producing and law-making
People's Court infringement selling suggestions in
after strict of utility or counterfeit the near
examination. design products. future.
(Verbale) patents. (Verbale) (Verbale)
Page 93 GAO-05-209R U.S.-China Trade
Chapter 3 of
the Chinese
Criminal Law,
revised in
1997,
criminalized
the destruction
of the
socialist
market economic
order. Section
7 of Chapter 3
was set to
target the
infringement of
IPRs and listed
seven crimes in
detail,
covering
trademarks,
patents,
copyright and
confidential
information. In
addition, on 17
December 1998,
the Supreme
Court's
Interpretation
on the
Practical
Problems on
Application of
Laws Against
Illegal
Publications
clarified the
standards of
penalty
regarding
copyright
offences,
including the
penalty against
a crime of
illegal
business
operation.
Moreover, the
Regulations of
the Standards
for Litigating
Cases in
Economic
Crimes, which
was promulgated
by the Supreme
People's
Procuratorate
and the
Ministry of
Public Security
on 18 April
2001, set the
standards of
Guidelines prosecution in
established IPR offences Information on
apart from except whether
those in copyright criminalization
China's crimes. Section Definition is provided
Susceptible criminal code 7 of Chapter 3 of only of
Summary Raised Raised Criminal Cases regarding the of the Criminal counterfeit identical goods
of by by China's by the penalties to Law and these trademarks or whether
issues United other response Administration be provided Writtena two in China's Writtena counterfeiting Writtena
by States WTO Organs for Law for willful above-mentioned Criminal of goods of the
theme members Enforcement. trademark Interpretations Code and same class or
(Verbale) counterfeiting constituted the conformity other classes
or copyright most with TRIPS. in which the
piracy on a fundamental trademark is
commercial basis for the registered may
scale. protection of be prosecuted.
IPRs in terms
of the criminal
law. In
addition,
Section 1 of
Chapter 3 of
the Criminal
Law, which
criminalized
the production
and
distribution of
counterfeiting
products, and
the Supreme
Court's and the
Supreme
People's
Procuratorate's
Interpretation
of Practical
Problems
Concerning
Criminal Cases
of Production
and
Distribution of
Counterfeiting
Products were
applicable to
some of the IPR
infringement
cases, mainly
trademark
offences.
Relevant
regulations
could also be "Goods of the
found in same class"
Articles 54 and meant goods
59 of the that were
Trademark Law, completely
Article 58 of identical, or
the Patent Law, of the same
Article 47 of category and
the Copyright class, or
Law, Article 24 with the same
of the Software name, that
Regulations, share
Article 40 of basically the
the New Species same nature
preservation, of Plant and function.
standards for Regulations, "Goods of the
referral to and Article 21 same class"
criminal of the had bigger
prosecution, Anti-Unfair extension
standards for Competition than
referral back Laws. Those "identical
to infringing goods." The
administrative offences, once practical
punishment if proved judgment of
a case is not criminal, would "goods of the
initiated by be brought to same class"
criminal justice by the was usually
justice Criminal Law. subject to
authorities. (Verbale) comprehensive
Page 94 GAO-05-209R U.S.-China Trade
Article 5 of
the Advice on
the Practical
Problems
Concerning
Administrative
Enforcement
Regarding
Trademark,
which had been
promulgated by
the State
Administration
for Industry
and Commerce,
provided that
"identical
trademark
means the
characters,
pictures and
patterns or
the
combinations
of the
characters and
pictures on
two trademarks
are identical
or have no
visual
difference by
comparison."
Article 9 of
the Supreme
Court's
Interpretation
on Practical
Questions
Concerning
Applicable
Laws Governing
Civil Disputes
on Trademarks,
which had been
promulgated on
12 October,
2001, stated
that "an
identical
trademark
defined in
Item 1 of
Article 52 of
the Trademark
Law means, by
comparison,
the trademark
Information on being accused
whether the of
manufacturing, infringement
distribution, generally has
import or no visual Information
export, of difference on whether
products from the the export
bearing a mark registered of
Summary Raised that cannot be trademark of counterfeit
of Raised by distinguished the goods
issues by other China's in its Writtena plaintiff." constitutes Writtena
by United WTO response essential Article 10 of a "sale"
theme States members aspects but is this within the
not identical Interpretation meaning of
is also defined China's
criminalized the principle Criminal
in these or on judgment of Code.
other identical or
provisions of similar
China's trademarks as
criminal law. "(1) set the
attention of
the relevant
assessment by public as the
the judge standard; (2)
based upon the comparison
general should be made
knowledge of not only to
the public of trademarks as
certain a whole, but
products and also to the
the major parts of
classification them". The
of goods by process should
the only be
international undertaken
classification when the
list of goods compared
and services, objects were
with the separated and
trademark isolated.
registration. Therefore, the
The Chinese
classification representative
list was not inferred that
the only identical
benchmark for trademarks in
judgment, but legal terms
an important made a
standard for difference to
reference. To what
sum up, one of "identical"
the important meant in daily
criteria to language.
tell whether (Verbale)
two products "Identical
were of the trademark" was
same class was different from
whether they what
shared the "identical"
same product meant in daily
name, though language.
they might China's
have different standard for
practical judgment was
functions. whether marks
However, those had no visual Commercial
goods with difference. import and
different According to export actions
names could this constituted a
also be understanding, "sale" in real
defined as this standard terms.
goods of the generally However, under
same class as conformed to these
long as they the principle circumstances,
bore the same of being "not a party
practical distinguished involved could
function or in essential be criminally
scope. aspects." liable for
(Verbale) (Verbale) smuggling or
Page 95 GAO-05-209R U.S.-China Trade
Although some
infringing
acts did not
constitute
acts of crime
according to
Articles 217
and 218 of
the Criminal
Law, that did The financial
not mean that threshold was
they were not a major
criminal Regarding element, but As to the
acts. They whether China by no means so-called
could had undertaken Information the complete illegal
constitute criminal, on whether element in business
the crime of administrative certain IP-related amounts, on
intentional or civil financial crimes. The the one
property prosecutions thresholds of record of the hand, the
Information on damaging or against referring administrative illegal Provisions
whether China the crime of individuals or cases to penalty for business for Establishment
currently construction entities who criminal counterfeiting amounts landlord Tougher of a
criminalizes impediment. used the prosecution, and piracy and could be liability measures forward-looking Efficient
in its laws, China had Internet to as required serious Calculation determined for needed to enforcement and
Summary Raised Raised or has any noticed that obtain access by China's consequences of illegal using other illegal protect strategy for deterrent
of by by China's intention of some foreign to computer intellectual could all be business evidence, activities intellectual intellectual system
issues United other response criminalizing, Writtena countries, Writtena systems, property law, Writtena regarded as amount as Writtena such as taken by Writtena property property which needed for
by States WTO commercial including the though the may be factors in proof of written lessee and rights in will suit both the
theme members scale piracy, United Information on acts per se satisfied by crime guilt. documents any line with its the domestic enforcement
which is not States, the whether China did not non-monetary determination. from the instances international and of
undertaken for United has undertaken constitute the means, such On the other purchaser, of its commitments. international intellectual
private gain Kingdom, and any criminal, copyright as barter hand, witness, imposition markets.
or profit. Japan, did administrative crimes defined exchanges of financial testimony, in IP
not specify or civil by Articles pirated threshold was and matters.
the aim of prosecutions 216 and 217 of material or a generic term assessment
making against the Criminal other forms that might on goods. On
profits as a individuals or Law, their of refer to sales the other
subjective entities based following acts compensation. volume, value hand, in
element for in China who usually did. of goods, cases where
copyright use the (Verbale) illegal the illegal
crimes. China Internet to profits or business
was taking obtain access damages to the amount could
this factor to computer right owner. not be
into systems or It could also verified,
consideration databases exist in the
and weighing overseas for various forms constitution
up the purposes of like money or of crime
possibility obtaining commodities, could be
of unauthorized as they could determined
integrating access to be transferred through
illegal it into its foreign in money other
operations. legal system. copyrighted terms. factors. EC - EC - EC -
(Verbale) (Verbale) materials. (Verbale) (Verbale) Writtenb Writtenb Writtenb
Page 96 GAO-05-209R U.S.-China Trade
The guiding
ideology of
the
Activity
Plan for
Fighting
against
Pirated
Software,
which was
published
in June
2003, was
to
resolutely
crack down
on various
piracy and
infringing
acts in
respect of
The cost of software
confiscation and to
and disposal promote the
of development
counterfeiting of the
goods Chinese
undertaken by software
the Customs The Chinese industry.
shall be borne Government had Activity plan The working
by right always been to fight objective
holders. engaged in against was to
According to fighting pirated establish a
Articles 14 against software and fair and
Regulations and 15, and Steps to "localism". other pirated orderly
and other relevant eliminate The State goods; software
notifications provisions of localism Council's information on market and
Recommendation to make the Regulation that Provisions on policies to to realize
Summary Raised for creation customs and on the Customs encourages Prohibiting implement the the
of Raised by of a high Japan - other Protection of soft Japan - Regional activity plan fundamental
issues by other China's level Japan - Written,c enforcement Japan - Intellectual approach to Written,c Blockage in established in Japan - improvement
by United WTO response Coordination Writtenc Verbale bodies Writtenc Property manufacture Verbale Market June 2003; Writtenc in the
theme States members Working informed who Rights, the of Economic establishment social
Office. bear the applicant who counterfeit Activities, of activity environment
disposal requested the goods by published on plan in the of software
costs of the Customs to local 21 April 2001, other pirated copyright
infringing detain firms. showed the goods but protection.
products. suspected positive software; The
infringing attitude of legal Activity
goods should China against responsibility Plan was a
provide a bond localism in provided for provisional
to the the field of ISP. measure,
Customs. After intellectual while the
a relevant property crackdown
administrative rights. China on various
determination, protected piracy acts
judicial right holders was a
judgment or in strict long-term
adjudication accordance and
came into with the laws standing
effect, the and task. At
Customs should administrative present, a
refund the regulations on crackdown
remainder of the protection on software
the bond, from of piracy was
which the cost intellectual included in
of storage, property this Plan
custody, and rights that in the
disposal of were in light of
the goods as complete the current
Number of well as the conformity situation
criminal compensation with the WTO of China,
prosecutions fees to the TRIPS and it was
related to Changes that interested Agreement. possible
patent should be made parties for China was now for this
rights, to the the loss making every Plan to
trademark standards for induced by the effort to include
rights, criminal inappropriate implement the anti-piracy
industrial prosecutions application obligations of work in
design related to had been the TRIPS other
property EC - rights and copyright deducted. Agreement. respects
rights. Writtenb copyrights. infringements. (Verbale) (Verbale) later.
Page 97 GAO-05-209R U.S.-China Trade
With respect
to counting
the value of
infringing
imports, the
Customs would
follow the
Customs Law,
the Customs
Regulation for
Protection of
Intellectual
Property
Rights and China was
other considering
administrative the revision
Type, value regulations. of the Customs
and The Customs Regulation for
quantity of had the Protection
Customs' cooperation of
seizures of with Intellectual
infringing traditional Property
goods; authorities, Rights
disposition including Status of according to Customs or
of goods; public any the TRIPS other agencies
nature of security, revisions to Agreement and with
Summary Raised Raised rights according to China rules to China's administrative
of by by China's Japan - Border infringed; the Regulation regarding promises upon authority over
issues United other response Writtenc measures whether Writtena on Transfer of Writtena Writtena Writtena Customs Writtena its accession the import or Writtena Writtena
by States WTO goods were Suspected Rules for to the WTO. export of
theme members being Criminal Cases Protection The customs pirated goods
imported or by the of had the over the
exported; Administrative Intellectual administrative Internet.
destination Agencies, and Property. authority over
or source other laws or the import or
of goods; regulations. export of
and nature (Verbale) pirated goods
of fine or Regarding the over the
penalty regulations of Internet. The
imposed. the export of customs and
counterfeit other IPR
and pirated Method for Steps under agencies would
goods, in the Chinese way to make a Information
year 2002, the Customs to improve decision on on whether
Chinese determine the cooperation infringement Customs or
customs had Number and type valuation of between according to other
seized a total of cases seized goods Chinese the Customs authorities
of 573 cases referred to for purposes Customs and Regulation for have
Status of worthy of RMB administrative of assessing criminal Protection of authority
operations 95.62 million, investigation; penalties or justice Intellectual over export
for including four number of cases referral to agencies, Property of
regulation worth RMB referred to and criminal such as the Rights, the counterfeit
of export of 230,000 and provision of prosecution Ministry of Patent Law, or pirated
counterfeits 569 cases criminal law under IPR laws Public the Trademark goods by
and pirated worth RMB applied to or under Security Law, and the mail or
goods made 95.39 million. criminal anti-smuggling and Copyright Law. delivery
(Verbale) in China. (Verbale) investigations. laws. Procuracy. (Verbale) services.
Page 98 GAO-05-209R U.S.-China Trade
In 2003, the
NCAC had
launched three
special
actions. In
February, the
NCAC had
launched the
Special Action
for Striking
Piracy during
the World
Intellectual
Property
Leader's
Meeting.
According to
incomplete
figures, the
copyright
administrative
departments in
Beijing,
Shanghai,
Tianjing,
Chongqing, and
the provinces
of Liaoning,
Jilin, Hainan,
Guangdong,
Fujian,
Zhejiang,
Anhui,
Jiangxi,
Jiangsu,
Yunnan,
Guizhou,
Gansu, Shanxi
and Inner
Mongolia had
checked 2,588
markets, 30
schools, and
77
enterprises,
imposed
administrative
punishments on
1,430
infringing or
pirating
entities,
Information on imposed a
whether an Steps to forfeit of RMB
administrative close down 1,339.5
punishment for or police thousand,
Summary Raised Raised Relationship an IPR markets for suppressed 816
of by by China's among civil, infringement pirate shops, and
issues United other response Writtena criminal, and precludes Writtena Writtena and/or Writtena removed five
by States WTO administrative subsequent counterfeit cases to
theme members enforcement criminal goods in judicial
enforcement popular authorities,
for the same locations. and
act. investigated
one
underground
compact disc
press. In
July, the NCAC
combined with
the General
Administration
for Press and
Publication,
Ministry of
Education, and
Theoretically the National
an Anti-Piracy
administrative and the
punishment did Pornography
not preclude Working
the subsequent Committee, had
criminal launched the
enforcement 2003 Autumn
for the same Special Action
act. According for Striking
to the Pirated
Provisions on Textbooks and
the Removal of Assistant
Suspected Teaching
Crime Cases by Materials.
Administrative This action
Method for Enforcement was still
Customs to Agencies of under way at
adjudicate 2001, which present. In
determinations had been August, the
of enacted by the NCAC had
infringement State Council, launched the
of particular cases of 2003 Special
goods by a suspected Steps to insure Action for
recorded crime of that individuals Striking
trademark, violating the are deterred from Pirated
copyright, Copyright Law pursuing Software. On
patent or should be infringing the first day
other removed to activities after of this
intellectual judicial having once action,
property authorities. committed an 250,000
rights; Consequently, offence; central infringing
information on it was registry for copies alone
any infrequent determining when of software
anticipated that a a party has been had been
changes to how criminal administratively, confiscated in
Customs enforcement criminally, or Beijing,
adjudicates came after an adjudicated to be Shanghai, and
determinations administrative civilly liable to the provinces
of punishment. have infringed IP of Sichuan and
infringements. (Verbale) rights. Guangdong. The
Summary of issues by Raised by Raised by
theme United other WTO China's response
States members
local agencies of industrial
and commercial administration
would also step up the efforts
in clamping down on trademark
infringements. Furthermore,
local administrative
authorities for industry and
commerce conducted routine
monitoring and investigation
to discourage counterfeit
markets. If any counterfeit
goods were found in the
market, they would strictly
enforce the relevant laws and
regulations. (Verbale)
Regulations regarding
approvals of markets
for the designation of
markets posting signs
that they contain no Writtena
"counterfeit products,"
as well as enforcement
actions taken against
such markets.
Regulations or
procedures involving The relevant IPR agencies
administrative or Writtena undertook enforcement actions
criminal enforcement at every year at the Canton Trade
trade fairs such as the Fair. (Verbale)
Canton Trade Fair.
Steps to deprive
exporters of
counterfeit goods of
their right to engage Writtena
in international trade
and to provide adequate
punishments against
them.
Rules that apply to the
operations of foreign
private investigations
firms in IPR matters,
and any plans to permit
these firms to more Writtena
actively assist China's
administrative,
criminal and civil
enforcement
authorities.
The revision of the Chinese
Civil Law was an important
task for legislators. The
Provisions established ninth National Congress had
under Chinese civil law enacted and revised a draft
to insure that civil code. Due to the rapid social
penalties that are Writtena and economic development in
imposed are deterrent China, it was necessary to
in nature. regulate and rewrite some
contents of that draft. China
needed to do further research
and investigation on this
matter. (Verbale)
Provisions established
in China's criminal law
to insure that
penalties are known to Writtena
the public at large and
that criminal
prosecutions influence
social behavior.
Source: GAO analysis of WTO documents.
Note: An additional document source is a communication from China:
IP/C/W/415; dated 11/17/03.
aCommunication from U.S.: IP/C/W/414; dated 11/10/03.
bCommunication from European Communities: IP/C/W/413; dated 11/7/03.
cCommunication from Japan: IP/C/W/410; dated 10/20/03.
dCommunication from Chinese Taipei: IP/C/W/411; dated 11/5/03.
eCommittee report detailing verbal statements made during meeting:
IP/C/31; meeting dated 11/18/03.
(320308)
Page 99 GAO-05-209R U.S.-China Trade
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