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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 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.[Footnote 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 organized this information into separate tables for each 
of the 16 WTO subsidiary bodies with a role in reviewing China's WTO 
commitments (encs. I through XVI).[Footnote 2] 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,[Footnote 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.

Table 1: WTO Member Participation in China's Transitional Review 
Mechanism, 2003:

WTO subsidiary body: Committee on Agriculture;
Date of meeting: 9/25/2003;
WTO members that submitted written questions: U.S., Chinese Taipei;
WTO members that participated in meeting: U.S., EC, Chinese Taipei;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Committee on Import Licensing;
Date of meeting: 10/2/2003;
WTO members that submitted written questions: U.S., EC, Japan, Chinese 
Taipei;
WTO members that participated in meeting: U.S., EC, Japan, Chinese 
Taipei;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Rules of Origin;
Date of meeting: 10/3/2003;
WTO members that submitted written questions: Chinese Taipei;
WTO members that participated in meeting: Chinese Taipei;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Committee on Trade-Related Investment Measures;
Date of meeting: 10/3/2003;
WTO members that submitted written questions: U.S., EC;
WTO members that participated in meeting: U.S., EC, Japan, Brazil;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Customs Valuation;
Date of meeting: 10/6/2003;
WTO members that submitted written questions: U.S., Chinese Taipei;
WTO members that participated in meeting: U.S., EC, Chinese Taipei;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Market Access;
Date of meeting: 10/20/2003;
WTO members that submitted written questions: U.S., EC, Japan;
WTO members that participated in meeting: U.S., EC, Japan;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Safeguards;
Date of meeting: 10/20/2003;
WTO members that submitted written questions: Japan;
WTO members that participated in meeting: U.S., EC, Japan;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Antidumping Practices;
Date of meeting: 10/23/2003;
WTO members that submitted written questions: U.S., Japan;
WTO members that participated in meeting: U.S., Japan;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Committee on Subsidies and Countervailing 
Measures;
Date of meeting: 10/28/2003;
WTO members that submitted written questions: U.S., EC, Mexico;
WTO members that participated in meeting: U.S., EC, Japan, Mexico;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Sanitary and Phytosanitary Measures;
Date of meeting: 10/29/2003;
WTO members that submitted written questions: U.S., EC, Chinese 
Taipei;
WTO members that participated in meeting: U.S., EC, Chinese Taipei;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Committee on Technical Barriers to Trade;
Date of meeting: 11/7/2003;
WTO members that submitted written questions: U.S., EC, Japan;
WTO members that participated in meeting: U.S., EC, Japan;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Balance-of-Payments Restrictions;
Date of meeting: 11/13/2003;
WTO members that submitted written questions: Chinese Taipei;
WTO members that participated in meeting: Chinese Taipei;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Council on Trade-Related Aspects of Intellectual 
Property Rights;
Date of meeting: 11/18/2003;
WTO members that submitted written questions: U.S., EC, Japan, Chinese 
Taipei;
WTO members that participated in meeting: U.S., EC, Japan, Chinese 
Taipei, Korea, Pakistan;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Council for Trade in Goods;
Date of meeting: 11/26/2003;
WTO members that submitted written questions: U.S., EC, Japan;
WTO members that participated in meeting: U.S., EC, Japan, Canada;
Chinese submission of required TRM information: Yes.

WTO subsidiary body: Committee on Trade in Financial Services;
Date of meeting: 12/1/2003;
WTO members that submitted written questions: U.S., EC, Japan, Chinese 
Taipei, Canada;
WTO members that participated in meeting: U.S., EC, Japan, Chinese 
Taipei, Canada, Australia, Norway;
Chinese submission of required TRM information: N/A.

WTO subsidiary body: Council for Trade in Services;
Date of meeting: 12/5/2003;
WTO members that submitted written questions: U.S., EC, Japan, Chinese 
Taipei, Australia;
WTO members that participated in meeting: U.S., EC, Japan, Chinese 
Taipei, Australia;
Chinese submission of required TRM information: Yes.

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.

[End of table]

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,[Footnote 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.[Footnote 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.[Footnote 6] Second, China's accession agreement calls for China 
to provide a broad 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.[Footnote 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.[Footnote 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 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.[Footnote 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 yagerl@gao.gov, or Adam Cowles, Assistant Director, at 
(202) 512-9637 or cowlesa@gao.gov. Victoria Lin, Bradley Hunt, and 
Jamie McDonald were the principal contributors to this report.

Signed by: 

Loren Yager:

Director, International Affairs and Trade:

Enclosures:

Contents: 

Enclosure I: Committee on Agriculture; 

Enclosure II: Committee on Anti-dumping Practices; 

Enclosure III: Committee on Balance-of-Payments Restrictions; 

Enclosure IV: Committee on Customs Valuation; 

Enclosure V: Committee on Import Licensing; 

Enclosure VI: Committee on Market Access; 

Enclosure VII: Committee on Rules of Origin; 

Enclosure VIII: Committee on Safeguards; 

Enclosure IX: Committee on Sanitary and Phytosanitary Measures; 

Enclosure X: Committee on Subsidies and Countervailing Measures; 

Enclosure XI: Committee on Technical Barriers to Trade; 

Enclosure XII: Committee on Trade in Financial Services; 

Enclosure XIII: Committee on Trade-Related Investment Measures; 

Enclosure XIV: Council for Trade in Goods; 

Enclosure XV: Council for Trade in Services; 

Enclosure XVI: Council for Trade-Related Aspects of Intellectual 
Property Rights.

Trade in soybeans:

Summary of issues by theme: Disagreement that China's State 
Administration for Quality Supervision, Inspection and Quarantine 
(AQSIQ) identified valid scientific basis for suspension of soybean 
imports from companies based on detections of phytophthora sojae in 
shipments of soybeans; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Reason for China's delayed announcement of 
its plans for a suspension of soybean shipments from companies in 
question; 
Raised by the United States: Written[A], Verbal[C]; 
Summary of issues by theme: Purpose of announcing plans for a 
suspension of shipments without setting a date on which the suspension 
would become effective; 
Raised by the United States: Written[A], Verbal[C]; 
Summary of issues by theme: Existence and result of risk assessment in 
accordance with the requirements of the Agreement on Sanitary and 
Phytosanitary Measures (SPS Agreement); 
Raised by the United States: Written[A], Verbal[C]; 
Summary of issues by theme: Explanation of how suspending shipments of 
soybeans from the companies in question would address the identified 
risk; 
Raised by the United States: Written[A], Verbal[C]; 
Summary of issues by theme: Explanation of how China is ensuring, 
consistent with its obligations under the SPS Agreement, that any 
measures addressing Phytophthora sojae are not arbitrarily or 
unjustifiably discriminating between Members; 
Raised by the United States: Written[A], Verbal[C]; 
China's response: Concerning quarantine of agricultural products, China 
stated that in formulating and implementing Sanitary and Phytosanitary 
(SPS) measures, China strictly abided by the SPS Agreement and all 
other World Trade Organization (WTO) rules, especially the science-
based and transparency principles. Since 1999, China had identified 
several cases of soybean epidemic in imports shipped from the United 
States. China had notified the U.S. authorities nine times, but no 
improvement had been made on the part of the United States. For the 
time being, China had not banned any foreign companies to export 
soybeans to China. China hoped that the U.S. authorities would take 
strict quarantine measures with respect to its exports of soybean to 
China so as to ensure soybean shipments were free from this epidemic or 
any other diseases. (Verbal[C]) China had discovered soybean rust in 
the U.S. shipments but so far China had not and was not planning to 
take any actions to suspend U.S. or other Members' exports of soybeans 
to China. China was seeking solutions to solve this problem and 
suggested that discussions continue at a technical level. (Verbal[C]).

Transparency of tariff-rate quotas (TRQ):

Summary of issues by theme: Information on the fill rate of TRQs by 
product and the average quota amount that each quota holder obtains; 
Raised by other WTO members: Chinese Taipei - Written[B], Verbal[C]; 
Summary of issues by theme: Public availability of information on quota 
holders; 
Raised by other WTO members: Chinese Taipei - Written[B], Verbal[C]; 
Summary of issues by theme: Criteria China uses in TRQ allocation 
decision; 
Raised by other WTO members: Chinese Taipei - Written[B], Verbal[C]; 
China's response: Tariff quota fill rates (in percent) provided for 
wheat, corn, rice, soybean oil, rape-seed oil, palm oil, sugar, cotton, 
wool, and wool tops for 2002, and January through August of 2003. 
(Verbal[C]).

Other:

Summary of issues by theme: Export subsidies on corn and possible 
discriminatory value-added tax policies; 
Raised by the United States: Verbal[C].

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/AG/W/59; dated 9/12/03.

[B] Communication from Chinese Taipei: G/AG/W/60; dated 9/12/03.

[C] Committee report detailing verbal statements made during meeting: 
G/AG/R/36; meeting dated 9/25/03.

[End of table]

[End of Enclosure I]

Enclosure II: Committee on Anti-dumping Practices:

General:

Summary of issues by theme: Lack of access to, and lack of completeness 
of, the public record in Chinese anti-dumping investigations; type of 
documents in official record in an investigation or review; 
Raised by the United States: Written[A], Verbal[C]; 
China's response: 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. (Verbal[C]); Actually, access to information on 
injury and causal link was made possible under Article 8 of the Anti-
Dumping Regulations of China, as well as in Articles 6 and 9 under the 
rules on the investigation and the determination of injury to the 
industries. Here, there was a particular circumstance already referred 
to, that is the Government's restructuring process. The functions of 
the former State Economic and Trade Commission (SETC) with regard to 
the investigation of injury had already been incorporated into the 
newly established Ministry of Commerce (MOFCOM). Therefore, the 
information relating to both the analysis of dumping and the 
determination of the injury was now provided by MOFCOM, and the 
interested parties may access MOFCOM for that information. (Verbal[C]).

Summary of issues by theme: Availability, on a regular basis, of 
documents related to the injury aspects of anti-dumping proceedings; 
Raised by the United States: Written[A], Verbal[C]; 
China's response: The process of government restructuring was still 
going on. Of course, it was China's intention to make such documents or 
information available in the public reading room in the future. Even 
before the Ministry of Commerce was established, SETC already had a 
statutory requirement to disclose such information to the interested 
parties, which can be found in Article 43 of the Rules on the 
investigation and determination of industry and injury. (Verbal[C]).

Summary of issues by theme: Mechanisms for judicial, arbitral or 
administrative review are in place to allow parties to challenge a 
final determination by the Ministry of Commerce (MOFCOM); details of 
steps taken to ensure the relevant tribunal is independent of the 
authorities; 
Raised by the United States: Written[A]; 
China's response: Judicial review and administrative review are 
stipulated in the Administrative Proceedings Law and Administrative 
Review Law. Article 53 of the AD Regulations provides for 
administrative review and judicial review for AD investigations. 
Judicial review of AD determination was further clarified by the 
Supreme People's Court in its judicial interpretation. Such reviews 
also apply to Customs enforcement. (Verbal[C]).

Summary of issues by theme: Unclear role of the State Council Tariff 
Commission in China's anti-dumping proceedings; Tariff Commission's 
amendment of MOFCOM determination in proceeding; criteria applied in 
amendment; stage at which Tariff Commission is consulted; public 
available actions taken by Tariff Commission in proceedings; 
Raised by the United States: Written[A], Verbal[C]; 
China's response: According to Article 38 of AD Regulations, it makes 
decisions on the level of tariff duties on the proposal of MOFCOM. So 
far, it has not modified any such proposal by MOFCOM. (Verbal[C]).

Summary of issues by theme: Procedures to ensure that the General 
Customs Administration properly assesses and collects the anti-dumping 
duties imposed by MOFCOM; procedures for importers when seeking redress 
if the General Customs Administration makes an error in duty collection 
or product classification; 
Raised by the United States: Written[A]; 
China's response: With regard to such complaints, judicial review and 
administrative review were possible and could be resorted to by the 
relevant parties. China also had special laws and regulations governing 
the enforcement and the levying of customs duties by the General 
Customs Administration. (Verbal[C]).

Summary of issues by theme: Notification of implementing rules for 
expiration reviews to Committee; 
Raised by the United States: Written[A]; 
China's response: Chapter 5 of China's AD Regulations focuses on the 
time-limits and review of AD duties and price undertakings. The 
provisions were formulated in compliance with the WTO Anti-Dumping 
Agreement (ADA). The expiration reviews will be conducted in strict 
conformity with the AD Regulations and the WTO ADA. (Verbal[C]).

Summary of issues by theme: Relevant agency that China notified about 
the initiation of the investigation instead of directly notifying the 
exporters or producers in the following countries; some investigations 
initiated without notification to the responding party; 
Raised by other WTO members: Japan - Verbal[C]; 
China's response: In practice, what the authorities did in China was to 
send the notification prior to the public notice of initiation to the 
diplomatic mission of the country of those companies whose products 
were subject to the investigation. So, in the particular cases referred 
to in the question posed by Japan, that diplomatic mission should be 
the Japanese Embassy in Beijing. The view that this was compliance with 
Article 6.1.3 of the WTO ADA. (Verbal[C]).

Summary of issues by theme: China's notification to the Committee the 
relevant portions of law and regulation that dictate how Customs 
Administration applies anti-dumping duties, collects anti-dumping 
duties and provides for judicial review; 
Raised by the United States: Verbal[C]; 
China's response: In regard to the request to notify relevant laws and 
regulations, China would of course consider it, and try to see if this 
was actually required by WTO in accordance with China's obligations. 
One additional note--even now, if someone was interested in gaining 
access to the information on injury they could directly approach the 
Ministry of Commerce for such information if they could not find such 
information in the public reading room. (Verbal[C]).

Summary of issues by theme: In response to China's notification of 
initiation of investigation to the Japanese Embassy, the Japanese 
Government has no obligation to notify the initiation of the 
investigation to the Japanese company. In accordance with the AD 
Agreement, it was the investigating authority that was obliged to 
notify the companies that are subject to the investigation.

Raised by other WTO members: Japan - Verbal[C]; 
China's response: 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 is to be provided only to the 
authorities of the exporting member or the relevant trade association". 
This might not apply in all dimensions to the fact that China was only 
notifying the Japanese diplomatic mission in China. He had quoted it 
just to indicate the difficulty the investigating authority may have in 
notifying all the interested parties, because the parties have to be 
known to the investigating authority. This was a practical difficulty 
and he did not think there was any specific or very clear direct 
requirement set forth in the ADA. (Verbal[C]).

Chinese cases against coated paper, Phthalic Anhydride (PA), Styrene 
Butadiene Rubber (SBR), Polyvinyl Chloride (PVC), Toluidine Di 
Isocyanate (TDI), and Phenol:

Summary of issues by theme: Application of "facts available" to 
determine anti-dumping measures against Japanese "all other" companies 
without serving a notice of initiation or questionnaires to companies; 
Raised by other WTO members: Japan - Written[B]; 
China's response: 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 interested parties, 
hearings were organized in some cases to allow interested parties to 
further express their opinions. The Chinese investigation authority has 
in all the investigations provided companies with adequate opportunity 
to access the relevant information via either public channels or their 
diplomatic missions in China. Therefore, the above anti-dumping 
determinations made by China are consistent with the requirements of 
Article 6.8 of the ADA and its Annex II. It is proper that the Chinese 
Authority applied facts available to determine AD measures against "all 
other" companies of a country that failed to respond and were unknown 
to the Chinese authority or if the information is not provided within a 
reasonable period. All of these measures adopted by the Chinese 
Authorities are fully consistent with the AD Agreement. (Verbal[C]).

Summary of issues by theme: Determinations in investigations did not 
meet requirements of "positive evidence" and "objective examinations"; 
considerations of data accuracy, evaluation of injury factors not in an 
unbiased manner, evaluation of all economic factors, causal 
relationships in terms of price and between dumping and injury to 
domestic industry.

Raised by other WTO members: Japan - Written[B]; 
China's response: While establishing industry injuries and the causal 
links between other factors, Chinese authorities strictly abide by the 
WTO ADA and the Chinese legislations in the following aspects: 
conducting a full and comprehensive analysis and assessment of all 
indicators determining injury as recognized by WTO; demonstrating by 
positive evidence that the volume of imports from each country is not 
negligible and conducting an analysis of competition conditions between 
imported products and between imported products and domestic like 
products while cumulatively assessing the effects of imports from more 
that one country, conducting an analysis of other causes of industry 
injuries and clarify in the Notice of Determination; and so on. 
(Verbal[C]).

Summary of issues by theme: Insufficient data disclosure in determining 
injury and dumping margins in investigations; adequate remedies; 
Raised by other WTO members: Japan - Written[B]; 
China's response: In all the anti-dumping investigations in which 
preliminary determinations have been made, the Chinese authorities 
expounded in Notices of Determination on the data and facts based on 
which the injury determinations were made, to facilitate the comments 
by interested parties on the determinations to protect their own 
interests. (Verbal[C]).

Summary of issues by theme: Inadequate examination of physical 
characters and uses of products for determination of "like products.":

Raised by other WTO members: Japan - Written[B]; 
China's response: 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 account of the physical characteristics, chemical 
characteristics, uses and means of distribution of the products and 
other factors according to Article 2.6 of the ADA in the 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. (Verbal[C]).

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/ADP/W/436; dated 10/22/03.

[B] Communication from Japan: G/ADP/W/434; dated 9/30/03.

[C] Committee report detailing verbal statements made during meeting: 
G/ADP/12; meeting dated 10/23/03-10/24/03.

[End of table]

[End of Enclosure II]

Enclosure III: Committee on Balance-of-Payments Restrictions:

Restrictions:

Summary of issues by theme: China's intention to lift restrictions on 
retention of foreign exchange earnings and settlement of current 
account transactions; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: 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 and 
transfer of the current international transactions (in China, current 
transactions with Hong Kong, Macao and Chinese Taipei are also 
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. 
(Verbal[B]).

Summary of issues by theme: Rationale behind Regulation Governing Small 
Value Trade between Chinese Taipei and China stipulating that the only 
means allowed for settlement of small value bilateral trade transaction 
is convertible currencies; 
Raised by other WTO members: Chinese Taipei - Written[A].

Summary of issues by theme: National treatment of foreign-invested 
enterprise in allowing foreign exchange deposit accounts to open in a 
place other than place of registration; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: According to the Notice to State Administration of 
Foreign Exchange (SAFE) Regarding the Related Issues of the Further 
Adjustment of the Foreign Exchange Account for Current International 
Transactions (Huifa (2002) No. 87), the qualifications for opening 
foreign exchange account for current international transactions of 
foreign-invested enterprises (FIEs) and Chinese enterprises have been 
converged. (Verbal[B]).

Summary of issues by theme: Plans to simplify foreign-invested 
enterprise's qualification procedure in respect of outward remittance 
of earnings or dividends; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: 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 are allowed to be remitted out. The 
relevant documents to the authorized banks are required for the bona 
fide test of the earnings by the foreign partners, and it is 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. (Verbal[B]).

Source: GAO analysis of WTO documents.

[A] Communication from Chinese Taipei: WT/BOP/W/25; dated 10/31/03.

[B] Committee report detailing verbal statements made during meeting: 
WT/BOP/R/71; meeting dated 11/13/03.

[End of table]

[End of Enclosure III]

Enclosure IV: Committee on Customs Valuation:

China's responses to WTO checklist:

Summary of issues by theme: China consideration of a transaction 
involving related parties (as defined in the Agreement on Customs 
Valuation, CVA) to be prima facie grounds for determining that the 
price has been influenced by the relationship; 
Raised by the United States: Written[A]; 
China's response: On the use of the transaction value among related 
parties, Article 3.6 and 42 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 set forth guidelines on 
the issue, which was in conformity with WTO rules. (Verbal[D]).

Summary of issues by theme: Availability of revisions to Customs Law 
and Regulations for WTO member review, including status of Regulations 
on Import and Export Tariff of the People's Republic of China," 
relating to CVA.

Raised by the United States: Written[A]; 
Raised by other WTO members: Chinese Taipei - Written[B]; 
China's response: Fulfilling the commitments it made upon accession to 
the WTO and to meet the requirement of Article 12 the Customs Valuation 
Agreement, China published the Customs Law and the Rules Regarding 
Determination on Customs Value of Imported and Exported Goods. Besides, 
an official journal, "Gazette of China Customs" is also to be 
established in the near future. Interested parties may also visit the 
web site of the General Administration of Customs of China for 
information (http://www.customs.gov.cn). (Written[C]).

Notification of China's implementing law:

Summary of issues by theme: Discrepancy between Decree and WTO 
Agreement's definition of transaction value; 
Raised by the United States: Written[A]; 
China's response: 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 
Import and Export Tariff of the People's Republic of China (hereinafter 
referred to as Tariff Regulations), and in The Rules of General 
Administration of the People's Republic of China Regarding 
Determination on Customs Value of Imported and Exported Goods 
(hereinafter referred to as Rules for Valuation). The entire Chinese 
Customs valuation law framework has been set up in line with the 
principle of respecting trade reality and based on the transaction 
value. The minimum value or reference prices have definitely been 
banned. (Written[C]).

Summary of issues by theme: Request for China to incorporate WTO CVA 
definition of "price actually paid or payable," different from 
definition in Decree No. 95, into all relevant laws and regulations; 
Raised by the United States: Written[A]; 
China's response: After China entered the WTO, the Chinese Customs 
Administration made an overall revision to the valuation laws and 
regulations, and also abided by the stipulations of the WTO Valuation 
Agreement in the aspect of valuation methods, the adjustments for the 
price paid or payable, and the rights and interests of the interested 
parties. It is clearly stipulated in the Rules for Valuation that if 
the transaction value cannot be determined, the customs value for the 
goods should be determined, in turn on the basis of the transaction 
value of the identical goods, the transaction value of the similar 
goods, and the method of deduction (Article 7) and so on, all of which 
are quite in line with the stipulations of the WTO Valuation Agreement. 
(Written[C]).

Summary of issues by theme: Clarification of customs administration 
calculation of freight, insurance, and other charges by fixed 
percentage.

Raised by other WTO members: Chinese Taipei - Written[B]; 
China's response: 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 
principle, which applied broadly to the calculation of freight, 
insurance and other charges in the customs value of imported and 
exported goods. Article 26 and 28 of the Rules set 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, which was rarely the case in the course of 
trade. In the drafting of these provisions, the practice and standards 
for transportation and insurance industry had been taken into adequate 
consideration. The percentage basis calculation was the result of broad 
experience and statistics. Generally, these designated percentages were 
lower than prices in actual trading practice. In line with the market 
situation, however, the level of the percentage was a variant rather 
than a constant figure. (Verbal[D]).

Summary of issues by theme: Information that importer is required to 
submit when requesting change to sequential order of application of 
deductive method and computed method; 
Raised by other WTO members: Chinese Taipei - Written[B]; 
China's response: With regard to the application of the computed value 
method and the deductive value method, China was committed to fully 
applying the Agreement and refrained from any reservations. According 
to the Agreement, the computed value shall include the cost or value of 
materials and processing, profit, general expenses and other expenses 
like freight and insurance. Chinese legislation required importers to 
provide the necessary information for the application of the computed 
value. In the absence of the information, the request to use the 
computed value could only be objected by the custom authority. 
(Verbal[D]).

Summary of issues by theme: Clarification about whether China made a 
reservation to Article 4 of CVA; 
Raised by other WTO members: Chinese Taipei - Written[B].

Related parties-circumstances of sales test:

Summary of issues by theme: Decree No. 95's lack of reference to and 
application of Circumstances of Sales Test; 
Raised by the United States: Written[A].

Summary of issues by theme: Discrepancy between Decree and WTO CVA's 
method used to determine customs value if imported goods cannot be 
determined under provision; 
Raised by the United States: Written[A]; 
China's response: After China entered the WTO, the Chinese Customs 
Administration made an overall revision to the valuation laws and 
regulations, and also abided by the stipulations of the WTO Valuation 
Agreement in the aspect of valuation methods, the adjustments for the 
price paid or payable, and the rights and interests of the interested 
parties. It is clearly stipulated in the Rules for Valuation that if 
the transaction value cannot be determined, the customs value for the 
goods should be determined, in turn on the basis of the transaction 
value of the identical goods, the transaction value of the similar 
goods, and the method of deduction (Article 7) and so on, all 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. (Written[C]).

Summary of issues by theme: Discrepancy between Decree and CVA's scope 
of "identical goods" and "similar goods.":

Raised by the United States: Written[A].

Summary of issues by theme: Discrepancy between Decree and CVA's 
deductions for commissions, profit, and general expenses; 
Raised by the United States: Written[A].

Summary of issues by theme: Request for China to add provision that 
deduction for profit and general expenses be taken as a whole and 
determined on the basis of information supplied by the importer unless 
the importer's figures are inconsistent with those obtained in sales in 
the country of importation of the imported goods of the same class or 
kind.

Raised by the United States: Written[A].

Summary of issues by theme: Chinese law lacking provision that the 
amount for profit and general expenses is to be taken as a whole and 
determined on the basis of information supplied by or on behalf of the 
producer unless the producer's figures are inconsistent with those 
"usually reflected in sales of the goods of the same class or kind.":

Raised by the United States: Written[A].

Summary of issues by theme: Decree's lack of information about currency 
conversion; 
Raised by the United States: Written[A]; 
China's response: Currently, the U.S. Dollar, the Japanese Yen, the 
Hong Kong Dollar and the Euro were four fully exchangeable currencies 
used for most international transactions. The SAFE published the 
exchange rates against 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 was generally taken by 
SAFE as the basis in the determination of the exchange rate for other 
foreign currencies versus the RMB. In the calculation, the exchange 
rate of the currency against the U.S. Dollar at the time of the 
transaction (could be specified by the date) in the international 
currency market was taken as the reference and its rate against RMB 
could be determined. Authorities were convinced that the exchange rate 
through this approach was a reliable and WTO-consistent basis for the 
calculation of the value of foreign currencies. (Verbal[D]).

Summary of issues by theme: Availability of information on "relevant 
regulations" citing requirements needed for importer/exporter to 
request goods to be released from customs custody; 
Raised by the United States: Written[A]; 
China's response: Provisions in Chinese law for withdrawal of goods 
under guarantee, in accordance with Article 13 of the Agreement, was a 
basic custom practice to speed up customs clearance. As a condition for 
this provision, the required guarantee was only requested when the 
custom value was difficult to determine. The guarantee should cover the 
ultimate payment of custom duties for which the goods might be liable. 
In that spirit, it was rational for the sum of the guarantee to be 
larger than the declared value. Given the variety of imported goods, 
determining the guarantee differed under the specific circumstances. 
(Verbal[D]).

Summary of issues by theme: Information on "sufficient guarantees" and 
its legal obligations for Customs to release goods to importer/
exporter; 
Raised by the United States: Written[A].

Summary of issues by theme: Incorporation of Interpretative Notes to 
CVA into Chinese laws and regulations; 
Raised by the United States: Written[A].

Summary of issues by theme: Absence of CVA's definition of goods of the 
same class or kind in Decree; 
Raised by the United States: Written[A].

Summary of issues by theme: Explanation and application of Decree's 
Article 19; 
Raised by the United States: Written[A].

China's submission on information required under Annex 1A:

Summary of issues by theme: Availability of "Rules of General 
Administration of the People's Republic of China Regarding 
Determination on Customs Value of Imported and Exported Goods.":

Raised by the United States: Written[A]; 
China's response: Fulfilling the commitments it made upon accession to 
the WTO and to meet the requirement of Article 12 the Customs Valuation 
Agreement, China published the Customs Law and the Rules Regarding 
Determination on Customs Value of Imported and Exported Goods. Besides, 
an official journal, "Gazette of China Customs" is also to be 
established in the near future. Interested parties may also visit the 
web site of the General Administration of Customs of China for 
information (http://www.customs.gov.cn). (Written[C]).

Summary of issues by theme: Legal steps planned to implement provisions 
of the WTO Decision on the Treatment of Interest Charges in the Customs 
Value of Imported Goods; 
Raised by the United States: Written[A]; 
Raised by other WTO members: Chinese Taipei - Written[B]; 
China's response: China committed itself to the full application of the 
WTO Agreement on Customs Valuation, including valuation methodologies 
set forth in Articles 1 through 8 thereof, upon its accession. In 
addition, China would apply the provisions of the two Decisions taken 
by the Committee on Customs Valuation concerning the treatment of 
interest charges in the customs value of imported goods and valuation 
of carrier media bearing software for data processing equipment as soon 
as practicable, but in any event no later than two years from the date 
of accession, as referred to in paragraph 143 of the Working Party 
Report on Accession of China. (Written[C]).

Summary of issues by theme: Legal steps planned to implement provisions 
of the Decision on the Valuation of Carrier Media Bearing Software for 
Data Processing Equipment; 
Raised by the United States: Written[A]; 
Raised by other WTO members: Chinese Taipei - Written[B].

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/VAL/W/127; dated 10/3/03.

[B] Communication from Chinese Taipei: G/VAL/W/126/Rev.1; dated 9/25/
03.

[C] Communication from China: G/VAL/W/125; dated 9/22/03.

[D] Committee report detailing verbal statements made during meeting: 
G/VAL/M/36; meeting dated 10/6/03.

[End of table]

[End of Enclosure IV]

Enclosure V: Committee on Import Licensing:

Inspection permits:

Summary of issues by theme: Enforcement by China's State General 
Administration of Quality Supervision and Inspection and Quarantine 
Procedures (AQSIQ) to control the pace and quantity of agricultural 
imports; 
Raised by the United States: Written[A], Verbal[E]; 
China's response: 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 January 1997 
(which had been notified to the WTO in documents G/SPS/N/CHN/P/4 and G/
SPS/N/CHN/P/5, respectively). The said procedures were not newly 
developed, and applied equally to all countries exporting animals and 
plants as well as their products to China, not aimed at a certain 
country. China wanted to make it clear that the import permit regime 
concerned SPS measures and was not related to import licensing 
procedures applied to control the quantity in trade. (Verbal[E]).

Summary of issues by theme: Steps to ensure fair treatment of import 
process for agricultural products.

Raised by the United States: Written[A]; 
China's response: The import permit procedures were neutral in 
application and administered in a fair and equitable manner in 
conformity with Article 1.3 of the Agreement on Import Licensing 
Procedures. (Verbal[E]).

Summary of issues by theme: Steps to ensure that the administration of 
import process is not having trade-restricting effects.

Raised by the United States: Written[A], Verbal[E]; 
China's response: This regime was also set up in line with Article 2.2 
of the Agreement and did not have trade-restricting effects. 
(Verbal[E]).

Summary of issues by theme: Reason for 90-day valid period for import 
inspection permits.

Raised by the United States: Written[A]; 
China's response: All applications would be accepted and approved 
within nine to 30 days by AQSIQ, as long as they were in conformity 
with the provisions of the quarantine law and its implementation rules 
as well as AQSIQ Decree No. 25. This ensured that China's import permit 
regime was fair and just. (Verbal[E]).

Summary of issues by theme: Duplicative requirements for facilities 
inspections of an enterprise that processes agricultural commodities by 
AQSIQ and State Administration of Industry and Commerce.

Raised by the United States: Written[A].

Summary of issues by theme: Reason for requirement for importers to re-
apply for a new import inspection permit rather than permit extension.

Raised by the United States: Written[A].

Summary of issues by theme: Reason for requirement for importer to 
specify commodity weight, country of origin, and port of entry before 
entering into an import contract; reapplication for license if any of 
the elements listed above change by more than 10 percent.

Raised by the United States: Written[A].

Summary of issues by theme: Conflicting import requirements for 
genetically modified organism (GMO) products: (1) requirement for an 
Interim Safety Certificate, which requires an existing contract, to 
obtain an import inspection permit and (2) requirement for an 
inspection permit before entering into a contract with supplier; 
Raised by the United States: Written[A], Verbal[E]; 
China's response: The import permit procedures related to entry of 
animal and plant quarantine did not come under automatic registration 
procedures, given the differences in the epidemic situation of the 
source nations and the relevant preventive and treatment measures, as 
well as the risk and management thereof concerning disease 
introduction. However, importers qualified to apply for import permits 
could submit applications to AQSIQ on an equitable basis. Concerning 
the questions on import requirements for GMO products, the Ministry of 
Agriculture of China had decided to extend Circular No. 222 to 20 April 
2004, wherein contents concerning application requirements and approval 
procedures for genetically modified (GM) products remained unchanged. 
The Ministry of Agriculture had entertained the idea of indicating on 
an Interim Safety Certificate the names of importers whose applications 
were submitted after 20 September. However, when they found that such a 
measure, were it to be implemented, would contradict that adopted by 
AQSIQ, they had not in fact carried out this idea. Therefore to reply 
to the question, China had not promulgated such a policy as had been 
mentioned in the questions presented, namely a policy which required 
the provision of the importer's name upon application of the Interim 
Certificate for GMO products; therefore the alleged contradiction 
contained in the questions had not actually taken place. (Verbal[E]).

Summary of issues by theme: Reason for requirement for inspections of 
facilities that import processed agricultural goods but not for 
domestic processing enterprises.

Raised by the United States: Written[A].

Trading rights:

Summary of issues by theme: Applicability of Provisional Rules on 
Establishment of Sino-Foreign Foreign Trade Companies to all joint 
ventures with minority share foreign-investment; 
Raised by other WTO members: European Communities (EC) - Written[B]; 
China's response: The liberalization of distribution rights would be 
executed in accordance with the Schedule of Specific Commitments on 
Services. Currently, enterprises in China with foreign investment had 
the right to import equipment, technology, raw material and other goods 
for self-use, and export their products, while for the importation of 
goods and technology other than the above-listed, enterprises should 
change the scope of their business as required by relevant legislation. 
The Foreign Trade Law of the People's Republic of China was being 
revised to reflect that specific requirement. In January 2003, the 
former Ministry of Foreign Trade and Economic Cooperation (MOFTEC) 
promulgated the Interim Rules for Establishing Sino-Foreign Trade Joint 
Ventures, endowing legally incorporated Sino-foreign joint ventures 
with the right of import and export for the goods, technology and 
services within the approved scope, and the right to conduct domestic 
wholesale of the goods imported by the joint ventures themselves. With 
distribution also included, the scope of the rights granted by the 
Interim Rules went beyond what China had committed to in the Protocol. 
In that spirit, the Interim Rules had 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. 
(Verbal[E]).

Summary of issues by theme: Elimination of the requirement for prior 
experience and minimum capital when granting trading rights.

Raised by other WTO members: EC - Written[B]; 
China's response: 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 and individuals, including 
sole proprietorships of other WTO Members, 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 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. 
(Verbal[E]).

Summary of issues by theme: Time frame for adopting definitive 
legislation and information on its scope; 
Raised by other WTO members: EC - Written[B].

Quotas and tariff-rate quotas:

Summary of issues by theme: Large parts of automobile and fertilizer 
quotas not allocated to genuine importers but to other parties not 
involved in import activities; 
Raised by other WTO members: EC - Written[B]; 
China's response: With regard to the alleged problem of license trade, 
i.e. selling quota for profit, such practice was against the Chinese 
law and subject to severe punishment. China hoped that Members would 
provide relevant information and evidence on this illegal trade. His 
authorities would deal with the offenders according to the law and 
slashing their quotas for the next year. (Verbal[E]).

Summary of issues by theme: Transparency issue-assurance that full 
quantity of auto and fertilizer quotas and tariff-rate quotas are 
allocated to genuine importers.

Raised by other WTO members: EC - Written[B]; 
China's response: In strict accordance with their commitments upon 
accession and the Regulations on the Administration of Import and 
Export of Goods of the People's Republic of China, his 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. 
(Verbal[E]).

Summary of issues by theme: Publication of criteria applied for the 
allocation of the licenses for automobile and fertilizer quotas and 
tariff-rate quotas; 
Raised by other WTO members: EC - Written[B]; 
China's response: 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 servicing, as well as the qualifications of importers 
required by the Agreement on Import Licensing Procedures. The 
allocation criteria for quotas of automobiles imported for sale were as 
follows: first, verify the importer's qualification to conduct 
automobile trade in China; second, check the operational ability of the 
importer (i.e. the venue for sale and maintenance); and third, examine 
the business performances of the importer. The Chinese Government would 
not allocate quotas for sale to importers without sale qualification 
and operational ability. Importers with prominent operational ability 
and historical performance would receive more quotas. Importers might 
decide the composition of products for their quotas at their own 
discretion, i.e. they could themselves determine the type, 
specification and model of automobiles of their choice. The Chinese 
Government would grant import quotas in light of their selections. 
(Verbal[E]).

Summary of issues by theme: Interchangeability of import licenses 
between different types of models; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Specific measures to ensure that quota-
holders are able to obtain necessary import license.

Raised by other WTO members: Chinese Taipei - Written[D].

Automobile:

Summary of issues by theme: Actual auto imports significantly lower 
than import quota; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: The volume of import quotas was not necessarily equal 
to actual import volume, and the fill rate of quotas depended on actual 
demand for imported automobiles on the Chinese market. Over recent 
years, automobiles produced by Chinese enterprises (including joint 
ventures) had satisfied the needs of Chinese consumers with enhanced 
quality, diversified models and lower prices. Therefore, although the 
need for automobiles on the Chinese market had considerably increased, 
the need for imported high-price automobiles was still limited. In 
particular, 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. (Verbal[E]).

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 
these parts of the products which had been imported should 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. (Verbal[E]).

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. (Verbal[E]).

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 
included, because in the past two years in the initial period of 
production of new car models by Chinese domestic manufacturers, they 
had to import a considerable amount of knock-down kits for assembly 
production; for the import of these parts they had to be granted 
certain quotas; however, as regarded customs statistics, because these 
parts arrived at the customs in the form of component parts, they had 
not been incorporated in the statistics for complete automobiles. The 
final aspect could be attributed to the restrictions placed by certain 
suppliers in Japan. According to their information, some manufacturers 
and suppliers in Japan had placed restrictions on the number of Chinese 
importers, mainly limiting the number of Chinese importers who could 
sign contracts with suppliers in Japan. According to their 
understanding from these importers, Japanese suppliers had also placed 
restrictions on the amount of automobiles to be exported to China on a 
monthly basis. (Verbal[E]).

Summary of issues by theme: Disparity between reported Customs-cleared 
auto imports and nominal quota for 2003; measures to improve 
implementation of quota; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Confirmation from China that no items are 
subject to import quotas other than 44 items under complete vehicles 
and one item--bodies--under auto parts.

Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: According to China's understanding, the automobiles 
and key parts covered by the quota administration should be 65 HS codes 
instead of 45. (Verbal[E]).

Summary of issues by theme: Actual quotas for 2003 by item and by 
country of origin; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Number of quota holders to whom China 
applied provision for quota holders not having imported their full 
allocation would receive a proportional reduction in their quota 
allocation in the subsequent year unless the quantity is returned for 
allocation by 1 September; total reduction in quota; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: With regard to punitive measures against importers 
failing to return unused quotas, Regulations on Import and Export of 
Goods of People's Republic of China specified that in the event that an 
importer did not use all quotas in its possession for the year, he 
should return remaining quotas to the administrative authority for 
import quotas before 1 September of the current year; if he failed to 
do so and failed to use the remaining quotas by the end of that year, 
the quota authority would reduce his quotas for the next year 
accordingly. Considering that import quotas of 2002 could be extended 
to 31 March 2003, there were no quotas returned in 2002. If a quota 
holder failed to use all quotas in his possession by the end of 2003 
and failed to return the unfilled quotas within the specified time 
limit, the Chinese authorities would reduce his quotas for the next 
year. (Verbal[E]).

Summary of issues by theme: Concern with method that Chinese government 
controls the number of auto import licenses to be granted by category; 
licenses not granted impartially.

Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: Regarding the alleged control by the Chinese 
Government of granting import licenses for automobiles below 2000 cc 
displacement, the Chinese delegate said that according to China's WTO 
commitments importers had the 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. (Verbal[E]).

Measures for administration of licenses for import of goods:

Summary of issues by theme: Reason for requirement that one license be 
used at one customs office that appears to place restrictions on 
traders going against the principle of trade facilitation.

Raised by other WTO members: Chinese Taipei - Written[D].

Summary of issues by theme: Circumstances in which license for multiple 
entries is granted.

Raised by other WTO members: Chinese Taipei - Written[D].

Summary of issues by theme: Laws protecting license applicant's right 
of appeal or review if application is not approved.

Raised by other WTO members: Chinese Taipei - Written[D].

Measures on the administration of automatic import licensing of goods:

Summary of issues by theme: Requirement to submit an import contract in 
the case of automatic import licensing.

Raised by other WTO members: Chinese Taipei - Written[D].

Summary of issues by theme: Requirement of other necessary documents 
specified in China's Measures on the Administration of Automatic Import 
Licensing of Goods.

Raised by other WTO members: Chinese Taipei - Written[D].

Summary of issues by theme: Justification for article stipulating that 
the entire application be made over again if automatic import licenses 
need to be extended or changed.

Raised by other WTO members: Chinese Taipei - Written[D].

Source: GAO analysis of WTO documents.

Note: An additional document source is a communication from China: G/
LIC/W/20; dated 9/23/03.

[A] Communication from U.S.: G/LIC/Q/CHN/9; dated 9/25/03.

[B] Communication from European Communities: G/LIC/Q/CHN/5; dated 8/14/
03.

[C] Communication from Japan: G/LIC/Q/CHN/6; dated 9/1/03.

[D] Communication from Chinese Taipei: G/LIC/Q/CHN/7; dated 9/19/03.

[E] Committee report detailing verbal statements made during meeting: 
G/LIC/11; meeting dated 10/2/03.

[End of table]

[End of Enclosure V]

Enclosure VI: Committee on Market Access:

Trading rights:

Summary of issues by theme: Measures governing trading rights of 
foreign-invested enterprises; 
Raised by the United States: Written[A].

Summary of issues by theme: Conditions required to be fulfilled by 
foreign-invested enterprise to obtain trading rights, relating to 
minimum registered capital, past import and export levels and prior 
experience; 
Raised by the United States: Written[A]; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Time schedule for China to implement 
automatic availability of trading rights to all enterprises in China 
and foreign enterprises and individuals, including sole 
proprietorships, by 11 December 2004.

Raised by the United States: Written[A].

Summary of issues by theme: Applicability of "Provisional Rules on the 
Establishment of Sino-Foreign Foreign Trade Companies" to all joint 
ventures with minority share foreign-investment, "trading" joint 
ventures, and Sino-foreign joint venture companies that were already 
established in China when rules were implemented; 
Raised by other WTO members: EC - Written[B]; Verbal[E].

Summary of issues by theme: Time schedule and scope for adoption of 
"Provisional Rules on the Establishment of Sino-Foreign Foreign Trade 
Companies.":

Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Time schedule and reason for delay of 
revision of the Foreign Trade Law of China related to phase-in 
commitments on trading rights for joint-venture enterprises with 
minority share of foreign investment; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Time schedule and implementation procedures 
for phase-in commitment on trading rights of joint-venture enterprises 
with majority share of foreign investment; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: 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 and individuals, including 
sole traders from WTO Member countries, to export and import all goods 
with the exception of products outlined in Annex 2A of the Protocol 
reserved for importation and exportation by state run enterprises 
throughout the custom territory of China. Trading rights in this 
context only referred to the right of importation and exportation, and 
did not include the right of distribution in China. The liberalization 
of distribution rights would be exacted in accordance with the schedule 
of specific commitments on services at the time enterprises in China 
with foreign investment had the right to 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. (Verbal[E]).

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. 
(Verbal[E]).

Value-added tax:

Summary of issues by theme: Reason for differential treatment of 
reduced value-added tax (VAT) applied to integrated circuits designed 
or manufactured in China and full VAT on imported integrated circuits; 
status of review of measures by Chinese ministries and agencies.

Raised by the United States: Written[A], Verbal[E]; 
China's response: China implemented "VAT drawback upon Levy" measures 
on ordinary VAT payers producing and selling integrated circuits. The 
refunded tax represented the part of total tax levied in excess of 
three percent of the taxable value. This measure was a part of China's 
policies on the integrated circuits industry, and did not violate WTO 
national treatment principle. A 17 percent VAT was imposed on both 
imported and domestically produced integrated circuit products when 
they entered the market. No extra VAT was levied on imported products 
directly or indirectly. Thus this policy was consistent with Article 
III.2 of General Agreement on Tariffs and Trade (GATT) 1994. Based on 
such understanding, the rebate was a kind of subsidy paid to domestic 
producers allowed by Article III.8(b) of GATT. (Verbal[E]).

Work was underway on a further study of the issue, but according to 
preliminary conclusions, the policy of rebate upon collection adopted 
by the Chinese government was a subsidies payment to its national 
products and was allowed under Article XIII. B of GATT which stated 
that the provisions of that article should not prevent the payment of 
subsidies exclusively to domestic producers, including payments to 
domestic producers which were derived from the proceeds of internal 
taxes or charges applied consistently with the provisions of the 
article and the subsidies effected through governmental purchases of 
domestic products. In accordance with that provision, China believed 
that its VAT policy with regard to integrated circuits was not in 
violation of the national treatment principle of GATT. (Verbal[E]).

Summary of issues by theme: Reason for differential treatment of 
diammonium phosphate (DAP) produced in the United States, which 
competes with similar phosphate fertilizers produced in China, such as 
monoammonium phosphate (MAP); 
Raised by the United States: Written[A], Verbal[E]; 
China's response: 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 fertilizer products of China. 
MAP and DAP were two different products with different uses and users. 
Although the reserves of Chinese phosphorite mines were quite abundant, 
most of them were lean ores, so the cost of ore concentration was quite 
high. As a result, in order to fully apply phosphate resources and 
protect the environment, China implemented VAT exemption measures 
encouraging the production of MAP directly from relatively lean ores. 
Producers were also encouraged to produce compound fertilizers. 
(Verbal[E]).

Article III of GATT 1994 stated that same duties should be levied on 
identical or similar, mutually substitutable and directly competitive 
products. However, MAP and DAP were goods of a different nature and 
were not directly competitive nor substitutable products in China. They 
were not identical or similar goods due to their different natures. 
They were not substitutable products due to their different use. In 
China, DAP was directly applied in manufacturing, while MAP was mainly 
used to produce compound or special fertilizers. They were not 
competitive products. China had been producing DAP since 1965. 
Currently, VAT was levied on both imported and domestically-produced 
DAP. In 2001, prima facie consumption of DAP was 4,970,000 tons, 
including 3,290,000 tons of imports which represented a 66 percent of 
total consumption. These statistics showed that production and 
consumption of DAP in China had increased instead of having decreased 
as a consequence of a tax exemption measure on MAP. There was no 
comparative relation between the two kinds of products. Consequently, 
VAT measures on these two kinds of products were not in violation of 
Article III of GATT 1994. (Verbal[E]).

Summary of issues by theme: Information on VAT regime applied to copper 
raw materials; 
Raised by other WTO members: EC - Written[B].

Automobile (non-quota issues):

Summary of issues by theme: Status and implementation of new automobile 
industrial policy "Guidelines for Current Development of Automobile 
Industry" that may discourage the importation of auto parts; 
Raised by the United States: Written[A], Verbal[E].

Summary of issues by theme: Information on China's new automotive 
policy and clarification on the policy's WTO compatibility; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Implementation of new automobile industrial 
policy seeking to restrict imports of CKDs.

Raised by the United States: Written[A].

Summary of issues by theme: Possible establishment of a dual 
distribution network for domestically produced and imported vehicles; 
China's plan to establish a "Law Controlling the Monopolization of 
Automobile Brands" to prohibit dealers from selling both imported and 
domestic cars; 
Raised by the United States: Written[A]; 
Raised by other WTO members: EC - Written[B], Verbal[E]; Japan - 
Written[C], Verbal[E].

Summary of issues by theme: Time schedule for legislation on car 
financing and confirmation that China will not impose any performance 
rule or excessive capital requirements; 
Raised by other WTO members: EC - Written[B]; 
China's response: With regard to questions in relation to new 
automobile policies, the Chinese delegation had clarified the issue in 
the Trade Review Mechanism (TRM) under the TRIMS Committee. Given that 
issues in relation to automobile financing and the separate operation 
network for new automobiles would be discussed under the Council for 
Trade in Services they would not address those issues here. 
(Verbal[E]).

Tariff-rate quotas (TRQ) and quotas:

Summary of issues by theme: Information on the total quantity of each 
fertilizer TRQ for 2003 that was allocated for importation through 
state trading enterprises and quantity allocated for importation 
through non-state trading entities; 
Raised by the United States: Written[A]; 
China's response: In 2003, the volume of non-state trading quotas for 
urea was 180,000 tons, while that of state trading quotas was 
1,620,000; the volume of DAP non-state trading quotas was 1,190,000 
tons while that of state trading quotas was 4,760,000 tons; the volume 
of non-state trading quotas for compound fertilizers was 600,000 tons 
while that for state trading was 2,380,000 tons. (Verbal[E]).

Summary of issues by theme: China's implementation of its commitments 
regarding reallocation of 2003 TRQ on fertilizer and wool tops; 
Raised by the United States: Written[A]; 
China's response: On 27 August 2003, MOFCOM published the notice on 
application for reallocation of 2003 fertilizer TRQ through some media, 
requiring importing entities to return unfilled quotas before September 
15 of that year, and stating that applications for reallocation would 
be accepted from September 15 to September 30 and that reallocation 
would be completed before 15 October 2003. On October 14, MOFCOM 
circulated the public notice for fertilizer TRQs reallocation as of the 
year 2003, amongst which the volume for compound fertilizers was 
350,000 tons, that for DAP was 12,000 tons and for urea, 20,000 tons. 
(Verbal[E]).

Summary of issues by theme: Confirmation that China has fully allocated 
DAP TRQs for 2003 and has not sought to control the level of DAP 
imports through administrative means; 
Raised by the United States: Written[A]On 10 October 2003, MOFCOM made 
public the total volume, the principles of allocation and the 
application procedures of TRQs for fertilizer import as of the year 
2004. The competent Chinese authorities had already distributed all 
5,950,000 tons of DAP for 2003, and had not adopted import controlling 
measures. Enterprises could, at their own discretion, decide on the 
time and import volume in light of market demands, without government 
interference. (Verbal[E]).

Summary of issues by theme: Information on 2003 quota allocation for 
autos and other products: total quantity of quotas applied for; number 
of requests for quotas denied; total quantity of quotas allocated to 
end-users; minimum size of individual quota allocation; fill rates for 
the quotas; total quantity of quotas allocated to entities that had not 
previously been allocated quotas; and total quantity of quotas 
allocated to enterprises with foreign ownership; 
Raised by the United States: Written[A].

Summary of issues by theme: Large parts of the quotas for automobile 
and fertilizer not allocated to the genuine importers (state-owned or 
not) but to other parties not involved in import activities, from which 
the genuine importers have to "buy" the licenses; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Quotas officially announced as issued 
conform to China's commitments but quantities actually allocated are 
smaller, including import quotas on automobiles; 
Raised by other WTO members: EC - Written[B], (Verbal[E]); Japan - 
Written[C], Verbal[E].

Summary of issues by theme: Request for China to publish the criteria 
applied for the allocation of the licenses for quotas and tariff-rate 
quotas for automobile and fertilizer; 
Raised by other WTO members: EC - Written[B].

China's response: 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 goods entered at the over 
quota rate, time taken to grant a quota or TRQ allocation - specified 
for wheat, maize, rice, soybean oil, rape seed oil, palm oil, sugar, 
cotton, wool, wool top, urea, diammonium phosphate, nitrogen, 
phosphorous, potassium (NPK). (Written[D]).

With regard to TRQ allocation for automobiles in 2003, in accordance 
with China's WTO commitments, China had fully allocated the US$ 9.125 
billion worth of quotas for automobiles. No return quotas had been 
received before 10 September 2003 and therefore the government 
authority in charge of quota administration did not exercise any 
reallocation in this regard. (Verbal[E]).

In accordance with Public Notice No. 58 issued by the former MOFTEC in 
2002, China eliminated import quota administration for motorcycles and 
crane lorries ahead of schedule, while automobiles and its key parts 
remained under quota administration in 2003. In line with its accession 
commitments, the Chinese government had already distributed US $9.1 
billion worth of quotas. Given that they had not come to the end of 
2003, it would be impossible to calculate the filled rate of quotas at 
the present stage. (Verbal[E]).

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 Chinese 
legislation this was an illegal act and one to be combated seriously. 
The Chinese government firmly cracked down on all kinds of reselling 
activities and they requested that the European Communities provide 
then with any relevant information they may have concerning reselling 
so that the Chinese authorities could deal with it. (Verbal[E]).

The administration of imported automobiles, with regard to the 
disparity existing 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. (Verbal[E]):

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.

Summary of issues by theme: Interchangeability of import licenses 
between different types of models (e.g., engine specifications) with 
regard to automobiles; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Confirmation that no other items subject to 
automobile import quotas for 2003 other than 44 items under complete 
vehicles and one item under auto parts; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Status of China's quota allocation and 
reallocation for 2003 in light of ensuring a transparent system; actual 
quotas for 2003, not only item by item, but also by country of origin; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Provision that quota holders not having 
imported their full allocation would receive a proportional reduction 
in their quota allocation in the subsequent year unless the quantity is 
returned for reallocation by 1 September; number of quota holders to 
whom this provision applied in China's allocation of import quotas in 
fiscal year (FY) 2003; total number of reductions in quotas; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Method for granting import licenses that 
China uses to control the number of import licenses granted by 
category; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: 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. (Verbal[E]):

Consumption tax:

Summary of issues by theme: Reason for different and higher tax base 
used to compute consumption tax for imported and domestic goods; 
Raised by the United States: Written[A]; 
China's response: 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 calculation method 
applied to both imported goods and domestic goods. The consumption tax 
factor was put into the taxable value while calculating and levying 
consumption tax on either imported or domestic products. Due to such a 
method, the consumption tax factor was taken into account when the 
selling price of domestic products was being determined. Thus, since 
the taxable value of domestic products already included a consumption 
tax factor, the corresponding consumption tax was the taxable value 
multiplied by the tax rate. Since the import value of imported goods 
did not include a consumption tax factor, such a value was converted 
into a taxable value that contained a consumption tax factor. The 
consumption tax was then worked out based on the converted taxable 
value. Otherwise, the value of imported goods would not contain a 
consumption tax factor, while that of domestic goods would, which would 
lead to unfair treatment in relation to tax imposition on imported and 
domestic products. (Verbal[E]).

Tariffs:

Summary of issues by theme: Reason for specific duties using excessive 
tariff rates imposed on photographic products instead of ad valorem 
duties; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The relevant WTO Agreement did not stipulate the 
types of duties that should be levied by WTO Members, nor did it 
require WTO Members to implement the same types of duties as those 
contained in the schedule of concessions. The agreement only required 
that the duties be imposed at a level no higher than the committed duty 
rates. This had been recognized in previous WTO Understanding on 
Dispute Settlement (DSU) cases by the Appellate Body. Therefore, 
although China had made commitments in relation to ad valorem duties on 
the 35 kinds of photographic products, it still had the right to apply 
specific duties on these products. In 2003, China had lowered the 
specific duty rates on the 35 kinds of photographic products. Specific 
duties imposed on these products were within the committed tariff rate 
level and were therefore not in violation of China's commitments. 
However, China wished to continue the technical consultations with 
Japan to ensure that specific duty rates remained at a reasonable 
level. (Verbal[E]).

Summary of issues by theme: Time schedule for tariff amendments to 
apply China's tariff concessions for 35 items of photographic products; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Prohibition on sale of imports:

Summary of issues by theme: Information about China's plan to limit the 
scope of "management right to passenger vehicles," required of retail 
dealers in passenger vehicles, either to domestic cars or imported 
cars; belief that such regulation should not be introduced; 
Raised by other WTO members: Japan --Written[C], Verbal[E].

Summary of issues by theme: China's prohibition on used goods, 
including worn clothing and automobiles; possibility to abolish 
measures; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: 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 prohibited. Therefore, it could be seen that China did not 
generally prohibit the importation of all used goods or wastes. 
(Verbal[E]).

China prohibited the importation of used clothing and automobiles in 
line with the "general exception" 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. (Verbal[E]).

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/MA/W/51; dated 10/10/03.

[B] Communication from European Communities: G/MA/W/49; dated 8/14/03.

[C] Communication from Japan: G/MA/W/50; dated 9/8/03.

[D] Communication from China: G/MA/W/52; dated 10/15/03.

[E] Committee report detailing verbal statements made during meeting: 
G/MA/M/35; meeting dated 10/20/03.

[End of table]

[End of Enclosure VI]

Enclosure VII: Committee on Rules of Origin:

Imported goods:

Summary of issues by theme: Method of calculating percentage of 
substantial transformation; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: The method applied was that the value-added component 
was more than 30 percent in the total value of a new product, the 
calculation of which was that the CIF value of non-original component 
was 70 percent or less in FOB value of the product after being 
processed. (Verbal[B]).

Summary of issues by theme: Review of origin by judicial, arbitral, or 
administrative procedures; importer's appeal procedures for ruling on 
origin; authority that assesses appeal; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: 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. In accordance with Article 6, the 
review had the right to change or annul specific pre-determination of 
origin made by the Customs. The application of administrative or 
judicial review was based on Administrative Review Law of the People's 
Republic of China, Provisions for the Implementation of Administrative 
Review Law of the Customs of the People's Republic of China, and 
Administrative Procedure Law of the People's Republic of China. 
(Verbal[B]).

Summary of issues by theme: Regulations concerning confidentiality of 
information; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: In accordance with Article 9 of Announcement No.17, 
2001 of the General Administration of Customs, the Customs would not 
disclose the information for origin pre-determination without the 
specific permission of the person concerned, except to the extent that 
it may be required to be disclosed in the context of judicial 
proceedings. (Verbal[B]).

Summary of issues by theme: Punishment for import of products whose 
origin is falsely reported or counterfeited; published records of 
punishment; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: Actions such as false declaring of country or faking 
certificate of origin were dealt with by Customs according to relevant 
stipulations of Customs Law of the People's Republic of China and the 
Rules of Administrative Penalties for the Implementation of the Customs 
Law. (Verbal[B]):

Exported goods:

Summary of issues by theme: Customs list for manufacturing and 
processes, application of rules, and calculation of assembly ratio; 
Raised by other WTO members: Chinese Taipei - Written[A]; 
China's response: China's existing non-preferential rules of origin for 
exports were promulgated on 8 March 1992 and came into effect on May 1, 
1992. The rules were applied in issuing Chinese certificate of origin 
for non-preferential exports upon request of consignee of the export 
and had no binding on importing side. There was no origin declaration 
requirement by Customs for exports. (Verbal[B]).

Source: GAO analysis of WTO documents.

[A] Communication from Chinese Taipei: G/RO/W/99; dated 9/22/03.

[B] Committee report detailing verbal statements made during meeting: 
G/RO/56; meeting dated 10/3/03.

[End of table]

[End of Enclosure VII]

Enclosure VIII: Committee on Safeguards:

Measures on steel:

Summary of issues by theme: Detailed explanation on legality of 
provisional and definitive safeguard measures on certain steel products 
and China's schedule aiming at totally repealing these measures; 
Chinese measures not in conformity with Safeguards Agreement; 
Raised by other WTO members: Japan - Written[A], Verbal[B]; 
China's response: 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 apply such measures, thus having fulfilled its 
notification obligations under the Agreement on Safeguards. China's 
investigating authorities also made adequate information disclosures 
regarding findings of the investigation, and notified disclosed 
information to Members having a substantial interest, including Japan. 
Moreover, pursuant to the rules set out in Articles 12.3 and 12.4 of 
the Agreement on Safeguards, China had held consultations with those 
Members having substantial interest, including Japan, furnished the 
relevant information, and exchanged views on the measures. China's 
safeguard measures on certain imported steel products had been, and 
would continue to be, applied according to the timetables stipulated in 
China's Official Bulletin on definitive measures. (Verbal[B]).

Summary of issues by theme: Legal basis enabling the Government to 
retain measures on products that the State Economic and Trade 
Commission (SETC) determined do not cause injury; immediate repeal or 
plans of mitigating measures, and schedule aiming at repealing measures 
to these products; 
Raised by other WTO members: Japan - Written[A], Verbal[B]; 
China's response: Article 16 of China's safeguards regulations provided 
that in a case where a preliminary determination established the 
existence of an increase in the quantity of an imported product and 
injury and a causal link between the two, MOFTEC and the State Economic 
and Trade Commission (SETC) should continue with their investigations 
and, on the basis of the findings of such investigations, make a final 
determination which should be published by MOFTEC. Accordingly, a final 
determination was published by MOFTEC on 19 November 2002. Relevant 
information could be found in the Official Notice published by the 
Ministry of Foreign Trade and Economic Cooperation, now the Ministry of 
Commerce. (Verbal[B]).

Summary of issues by theme: Inconsistencies in China's measures; 
possibility that China might review its measures before their three-
year expiry and China's consideration of a review in the event that the 
U.S. and E.C. steel safeguard measures were revoked in the coming 
months.

Raised by other WTO members: EC - Verbal[B]; 
China's response: The EC questions concerning the review of China's 
safeguard measures would be referred to capital for further 
consideration. (Verbal[B]).

General safeguard measures:

Summary of issues by theme: Delay in China notifying rules to the WTO 
in light of China having undertaken a safeguard investigation before 
all the necessary rules had been issued and notified; 
Raised by the United States: Verbal[B]; 
China's response: Concerning any delay in the submission of China's 
legislative notifications, that was attributable to government 
restructuring which China has been engaged in starting from March or 
April 2003. China considered that it was only appropriate for it to 
make the necessary modifications and changes to the original 
legislations because of the restructuring of the Chinese government 
departments. (Verbal[B]).

Summary of issues by theme: Lack of transparency in China's decision-
making process for the safeguard measures (e.g. unclear process for 
allocating quotas); 
Raised by the United States: Verbal[B].

Summary of issues by theme: Criteria China had used in determining 
which WTO Members would be accorded the status of a developing country 
or region for purposes of Article 9.1 of the Agreement (provision 
requiring non-application of safeguard measures to developing country 
WTO Members where import share criteria were met), and whether those 
criteria were clear and transparent.

Raised by the United States: Verbal[B].

Summary of issues by theme: China's treatment of non-WTO Members under 
Article 9.1, given that it did not provide for the exclusion of 
countries that were not WTO Members.

Raised by the United States: Verbal[B].

China's response: With regard to the specific issues raised by the 
United States, such as the standards or criteria that China had used 
for defining developing countries, at least for the purpose of China's 
safeguard investigations, and other issues such as the treatment of 
non-WTO Members, these were already covered by China's written replies 
to written questions. (Verbal[B]).

Summary of issues by theme: Protection of confidential data submitted 
during the course of a safeguard investigation, especially when outside 
experts were employed.

Raised by the United States: Verbal[B].

Summary of issues by theme: 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; 
Raised by the United States: Verbal[B].

Summary of issues by theme: Refunding of safeguard duties collected 
pursuant to provisional measures when definitive measures were not 
imposed on the relevant products.

Raised by the United States: Verbal[B].

Summary of issues by theme: Terms and conditions covering China's 
extension of safeguard measures; 
Raised by the United States: Verbal[B].

Source: GAO analysis of WTO documents.

Note: An additional document source is a communication from China: G/
SG/W/195; dated 10/17/03.

[A] Communication from Japan: G/SG/Q2/CHN/2; dated 9/19/03.

[B] Committee report detailing verbal statements made during meeting: 
G/SG/66; meeting dated 10/20/03.

[End of table]

[End of Enclosure VIII]

Enclosure IX: Committee on Sanitary and Phytosanitary Measures:

Notification of measures/transparency:

Summary of issues by theme: Role of State General Administration of 
Quality Supervision, Inspection and Quarantine (AQSIQ) in monitoring 
the development and implementation of China's regulatory controls for 
seafood, including Decree 31, Certification Requirements for Fresh/
Chilled, Frozen and Processed Aquatic Products; 
Raised by the United States: Written[A].

Summary of issues by theme: Time schedule for AQSIQ to notify Degree 
31; 
Raised by the United States: Written[A].

Summary of issues by theme: Explanation of how comments were taken into 
account when China notifies changes in SPS measures after the proposed 
date of entry into force of the legislation; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Explanation of steps taken to ensure that 
other Member Countries are given a realistic opportunity to comment on 
notified measures in advance of their application; 
Raised by other WTO members: EC - Written[B]; 
China's response: 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 Point and then are 
notified to WTO through China's WTO Notification and Enquiry Center. 
(Verbal[D]).

To date in 2003, China has made 24 SPS notifications. Some of these 
were specific detailed implementation rules corresponding to laws or 
regulations that had been previously notified to WTO. The regulations 
enacted and revised under the auspices of the Ministry of Health are 
national food safety standards at the draft stage. The first 17 drafts 
have been notified to the WTO, for comments from Members. (Verbal[D]).

Summary of issues by theme: Full list of products subject to mandatory 
health certification; 
Raised by other WTO members: EC - Written[B]; 
Science-based measures:

Summary of issues by theme: Results of risk assessments conducted for 
China's plans to suspend soybean imports from companies in U.S., 
Argentina and Brazil, based on detections of Phytophthora sojae in 
shipments of soybeans; 
Raised by the United States: Written[A]; 
China's response: On the issue of soybean quarantine measures, China 
had provided the necessary clarifications during the transitional 
review by the Committee on Agriculture. No single foreign company's 
soybeans were suspended or prohibited from being imported into China on 
SPS grounds. (Verbal[D]).

Summary of issues by theme: Risks that Decree 31 is endeavoring to 
mitigate; 
Raised by the United States: Written[A].

Summary of issues by theme: Scientific justification for Decree 31 
certification requirement; 
Raised by the United States: Written[A].

Summary of issues by theme: Role of AQSIQ in monitoring the 
development, implementation, and notification of laws and regulations 
covering food, forestry and fishery products published by Ministry of 
Health (MOH); 
Raised by the United States: Written[A].

Summary of issues by theme: Risk assessments completed on the products 
for which standards and tolerances are established at levels more 
restrictive than the relevant international standards regarding MOH's 
new draft regulations on food, forestry, and fishery products; 
Raised by the United States: Written[A].

Summary of issues by theme: Concern that the notification MOH draft 
regulations would compel the initiation of an immense set of complex 
testing, grading and risk assessment reviews, which may unjustifiably 
deny imports of products, such as grain, processed foods, dairy, meat 
and poultry into China; 
Raised by the United States: Written[A].

Summary of issues by theme: Measures to ensure that sanitary and 
phytosanitary measures are based on scientific principles and are not 
maintained without scientific evidence; 
Raised by other WTO members: EC - Written[B]; 
China's response: China fully respects the principles identified in the 
SPS Agreement, especially the principle of a scientific basis, in the 
process of developing and implementing its SPS measures. China's SPS 
measures are all based on risk assessments. In December 2002, China 
published Regulatory Measures on Import Risk Analysis for Animals and 
Animal Products (AQSIQ Decree No. 40) and Regulatory Measures on Import 
Risk Analysis for Plants and Plant Products (AQSIQ Decree No. 41), 
which were notified to WTO. (Verbal[D]).

Summary of issues by theme: China's implementation of European and 
Chinese experts' scientific assessment applied to cosmetics, including 
finding that substances banned in China, or those subject to specific 
import measures, were actually safe; 
Raised by other WTO members: EC - Written[B]; 
China's response: Chinese experts have received and are now studying 
the experts' report on cosmetics which was drafted by the EC panel. 
China pays great attention to the work done by Chinese and European 
experts. China will consider the revision of the control measure if the 
experts from both sides can achieve consensus on the scientific basis 
and technical issues. (Verbal[D]).

National treatment:

Summary of issues by theme: Equal application of MOH's new regulations 
covering food, forestry, and fishery products between domestic and 
imported products; 
Raised by the United States: Written[A]; 
China's response: China respects the principle of non-discrimination in 
the course of developing and implementing SPS measures. For products 
with identical risks, China's SPS measures, especially end product 
criteria, are applied equally to domestic and imported products. The 
recent standards revised or developed by the Ministry of Health, in 
which some Members are interested, will also apply equally to domestic 
and imported products once they are approved. (Verbal[D]).

China is a centralized country, and all the SPS measures (including 
national standards related to SPS) developed by the central government 
are enforced nation-wide. The Constitution of China and the current 
legal and standards framework can effectively ensure the uniform 
implementation of SPS measures across the country. (Verbal[D]).

Summary of issues by theme: Risk assessment supporting differing 
treatment under AQSIQ's Decree 44, Certification Requirements for Live 
Aquatic Products, which mandates different practices for imports; 
Raised by the United States: Written[A].

Summary of issues by theme: Concern that certain meat and poultry 
standards are significantly stricter than those set by Codex and are 
blocking the entry of imports; standards for domestically produced meat 
and poultry; scientific rationale and risk assessments for standards 
for imported products; 
Raised by the United States: Written[A]; 
China's response: The standards applied to domestic meat and poultry 
products are the same as those applied to imported ones. These 
standards are all established on the basis of relevant international 
standards. The standards for poultry meat were notified to the 
Technical Barriers to Trade (TBT) Committee in 2002 and modification to 
them is underway in accordance with the comments made by Members. 
(Verbal[D]).

Summary of issues by theme: Extent to which China has unified sanitary 
and phytosanitary measures applied to domestic and imported products.

Raised by other WTO members: EC - Written[B]; 
China's response: China respects the principle of non-discrimination in 
the course of developing and implementing SPS measures. For products 
with identical risks, China's SPS measures, especially end product 
criteria, are applied equally to domestic and imported products. 
(Verbal[D]).

Summary of issues by theme: Steps taken to ensure that the principle of 
non-discrimination with regard to expanded list of products subject to 
health certification system is fully respected; 
Raised by other WTO members: EC - Written[B]; 
China's response: The recent standards revised or developed by the 
Ministry of Health, in which some Members are interested, will also 
apply equally to domestic and imported products once they are approved. 
(Verbal[D]).

Summary of issues by theme: Steps taken to eliminate multiple or 
duplicative control procedures and to avoid imposing requirements 
exclusively on imported products subject to health certification 
system; 
Raised by other WTO members: EC - Written[B]

Summary of issues by theme: Steps taken to ensure that the same 
conformity assessment procedures apply to both imported and domestic 
products subject to health certification system; 
Raised by other WTO members: EC - Written[B]; 
Inspection and approval procedures:

Summary of issues by theme: Description of the steps to ensure that 
Administrative Measures for the Entry-Exit Inspection and Quarantine 
for Grains and Feed Stuff, and Administrative Measures for Entry Animal 
and Plant Quarantine, comply with its obligations of the Agreement on 
the Application of Sanitary and Phytosanitary Measures; 
Raised by the United States: Written[A]; 
China's response: 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 to all countries exporting 
animals and plants as well as their products to China. (Verbal[D]).

The procedures and processing periods for the application and issuance 
of import permits are clearly specified in Decree No. 7 and Decree 
No. 25, that also stipulate that all importers are equally eligible to 
submit application as long as they fulfill the requirements of applying 
for import permits. All the applications will be accepted and approved 
within 9 to 30 working days by AQSIQ if they are in conformity with the 
regulations identified in the Quarantine Law and its Regulation of 
Implementation as well as AQSIQ Decree No. 25. To facilitate the 
application for the import permit, since 1 September 2003, AQSIQ has 
introduced on-line application whereby importers may file the 
application through internet access from their own office. This 
practice has remarkably reduced the cost of application and improved 
the efficiency of approvals. This makes the issuance of import permit 
conform to the regulations identified in Article 8 and Annex C of the 
SPS Agreement. (Verbal[D]).

Summary of issues by theme: Information on the content of 
Administrative Regulations on the Review and Permission for Entry of 
Quarantined Imported Animal and Plant Products and compliance both with 
China's accession commitments and with the SPS Agreement.

Raised by other WTO members: Chinese Taipei - Written[C]; 
International standards and consistency:

Summary of issues by theme: Policy and schedule to align Chinese 
sanitary and phytosanitary measures with relevant international 
standards where appropriate; 
Raised by other WTO members: EC - Written[B]; 
China's response: The Government of China attaches great importance to 
the principle that SPS measures shall be based on international 
standards. In December 2001, AQSIQ issued "Regulatory Measures 
Governing the Adoption of International Standards" (AQSIQ Decree No. 
10), which stipulates clearly the principles and procedures for 
adopting international standards. (Verbal[D]).

Summary of issues by theme: Risk assessment as basis for sanitary and 
phytosanitary measures when measures do not conform to international 
standard guidelines or recommendations; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Measures to ensure consistent and uniform 
application of China's sanitary and phytosanitary measures throughout 
the country, avoiding unnecessary additional regional/local 
regulations and standards imposed by regional/local authorities; 
Raised by other WTO members: EC - Written[B]; 
China's response: China is a centralized country, and all the SPS 
measures (including national standards related to SPS) developed by the 
central government are enforced nation-wide. The Constitution of China 
and the current legal and standards framework can effectively ensure 
the uniform implementation of SPS measures across the country. 
(Verbal[D]).

Less trade restrictive measures:

Summary of issues by theme: Consideration of other less trade 
restrictive means to achieve the objective of consumer protection and 
information for food and cosmetics; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Consideration of relevant international 
standards by the Codex Alimentarius and International Office of 
Epizooties/Office International de Epizooties (OIE); 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Consideration for steps to improve the 
coordination of the different administrations that have a regulatory 
competence in the SPS field (which are, inter alia, AQSIQ, the Ministry 
of Agriculture, the Ministry of Health and the State Food and Drug 
Administration); 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Consideration for adopting measures 
rationalizing the repartition of competence between the different 
administrations that have an overlapping role in SPS issues; 
Raised by other WTO members: EC - Written[B]; 
Bovine Spongiform Encephalopathy (BSE) related measures:

Summary of issues by theme: China's belief that the internationally 
recognized standards (WHO and OIE) in connection with ingredients 
derived from cattle and sheep tissues coming from countries and regions 
affected by BSE do not fulfill the level of protection set up by China; 
Raised by other WTO members: EC - Written[B]; 
China's response: In March 2002, to protect the health and life 
security of the people of China, the Ministry of Health and AQSIQ 
issued a joint decree which prohibits the import and sale of cosmetics 
containing ingredients derived from cattle and sheep tissues coming 
from countries and regions affected by BSE. At the same time, China 
classified the raw materials with BSE risks and takes different 
measures on those with lower risk, thus reducing the burden on 
cosmetics importers to some extent. (Verbal[D]).

Summary of issues by theme: Scientific basis for deviating from the 
existing international standards, as required in Article 2 of the SPS 
Agreement, for measures introduced which relate to import restricting 
on a range of products related to BSE; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Level of protection and scientific 
justification applied by China to the imports in comparison with the 
level of protection applied to national production; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Consideration of other less trade 
restrictive alternatives on BSE related measures; 
Raised by other WTO members: EC - Written[B]; 
Proportionality of measures:

Summary of issues by theme: Steps to ensure that proportional response 
in accordance with Article 5 of the SPS Agreement is adapted to risk, 
including a measure restricting imports on all foodstuffs of animal 
origin from another member country as a response to a single positive 
interception of a veterinary drug residue in a single consignment of 
casings and with no positive interceptions having been reported in 
other food products before the measure was introduced; 
Raised by other WTO members: EC - Written[B]; 
China's response: 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 also in salted casings from the 
Netherlands by China at a later stage. It is a provisional emergency 
measure taken following unsuccessful consultations with the 
Netherlands. Even after the measure came into force, China still 
detected chloramphenicol in animal products originating from the 
Netherlands in a number of cases. In addition, some other Members have 
also identified chloramphenicol in poultry meat and aquatic products 
imported from the Netherlands. According to the explanation by the 
Netherlands, the reason for the existence of chloramphenicol in casings 
exported to China is that there is chloramphenicol in feedstuffs 
imported from Eastern European countries. (Verbal[D]).

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 with the professional 
findings. (Verbal[D]).

Summary of issues by theme: China's citation of Article 5.7 when 
defending proportional response measure; 
Raised by other WTO members: EC - Written[B].

Application of the principle of regionalization:

Summary of issues by theme: Justification for non-application of 
measures in line with Article 6 of the SPS Agreement (the application 
of the principle of regionalization) when China introduced a measure 
restricting imports of porcine origin from France due to Classical 
Swine Fever; circumstance under which provisions related to principle 
of regionalization would be applied; 
Raised by other WTO members: EC - Written[B]; 
China's response: China respects and follows the principle of 
regionalization provided for in Article 6 of the SPS Agreement and 
treats animal and plant diseases on the basis of this principle. China 
encourages Members to submit applications for regionalization in 
written form and provide the necessary documents to prove their status 
as indicated in Article 6.3 of the SPS Agreement. China will make the 
decisions after evaluation and inspection tours to the applicant's 
territory in a timely manner. (Verbal[D]).

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.

[A] Communication from U.S.: G/SPS/W/139; dated 10/3/03.

[B] Communication from European Communities: G/SPS/W/137; dated 9/30/
03.

[C] Communication from Chinese Taipei: G/SPS/W/138; dated 10/1/03.

[D] Communication from China (verbal statement): G/SPS/GEN/452; dated 
10/29/03-10/30/03.

[End of table]

[End of Enclosure IX]

Enclosure X: Committee on Subsidies and Countervailing Measures (SCM):

Subsidies notification:

Summary of issues by theme: Status of China's collection of information 
for its subsidy notification, and submission of its subsidy 
notification; 
Raised by the United States: Written[A], Verbal[D]; 
Raised by other WTO members: EC -Written[B], Verbal[D]; 
Summary of issues by theme: Description of problems preventing China 
from making its notification under Article 25.1 of the Agreement; 
Raised by the United States: Written[A].

Summary of issues by theme: Type of information China relies upon to 
assemble its notification; 
Raised by the United States: Written[A]; 
China's response: China attached great importance to making such 
notifications because it was their view, and they believed that it was 
also the view shared by many, that making such notifications was 
conducive to the sharing of information and also for improving the 
transparency of the domestic processes of different countries. China 
wished to reaffirm its commitment to fulfilling its notification 
obligation. (Verbal[D]).

Concerning the notification obligation of China, China stated that it 
was very serious about fulfilling its notification obligations and that 
it was in the process of improving its notification system so as to be 
up to the standard set by the WTO. (Verbal[D]).

General:

Summary of issues by theme: Details on subsidies available in the 
textile industry for manufacture with raw materials, financing of mill 
establishments and purchase of raw materials--type of subsidy, timeline 
of the program and recipients, role the China National Textile Industry 
Council plays to support subsidy programs for the textile industry; 
Raised by the United States: Written[A]; 
China's response: 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 Council referred to in 
the questions had not engaged in any work related to subsidy schemes. 
The delegate of China stressed that the reports were not true. Since 
accession to the WTO, China had embarked upon extensive efforts in the 
collection of subsidy information. A number of difficulties had been 
encountered during the process, including the partial understanding of 
the WTO notification requirements by local officials, under-performance 
of the domestic information collection system and varied criteria on 
statistics. Measures were being taken to address these issues, both on 
the national and sub-national level, for example, the strengthening of 
the communications between ranks of officials, briefings by WTO 
experts, and the translation of the technical cooperation handbook on 
WTO notification requirements. China was vigorously pushing forward 
work but that they were not in a position to give a specific time frame 
for the completion of it. (Verbal[D]).

Summary of issues by theme: List and explanation of all subsidies 
granted at the national and sub-national level to enterprises in the 
following sectors: leather and footwear; textiles and clothing; 
electric and electronic products; iron and steel; chemical; automotive 
industry; 
Raised by other WTO members: Mexico -Written[C].

Summary of issues by theme: Information on VAT rebate program granted 
for imports of scrap copper in accordance with required subsidy 
notification format, including the recipients of the rebate, the amount 
of the rebate and how the administering authorities ensure that rebates 
granted are not in excess of rebates paid; 
Raised by the United States: Written[A]; 
Raised by other WTO members: EC - Written[B], Verbal[D]; Japan - 
Verbal[D].

China's response: Questions in this regard had already been addressed 
in the TRM of the Committee on Market Access on 20 October 2003. China 
felt it preferable not to repeat those responses in the SCM Committee 
meeting due to the limited time. (Verbal[D]).

Summary of issues by theme: Status of elimination of "subsidies 
provided to certain state-owned enterprises which are running at a 
loss"; decree or government document that ended subsidies; 
Raised by the United States: Written[A], Verbal[D]; 
China's response: 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 eliminating 
this program instead of terminating the whole program by the year 2002. 
Request made for the U.S. delegation to provide China with more 
detailed information with regard to these press reports, such as the 
source of the reports, the time when the reports had been published and 
the sectors, industries or enterprises which were involved in such 
reports, so as to facilitate China's efforts in making appropriate 
responses to the question. (Verbal[D]).

Summary of issues by theme: Identification items reduced from or added 
to the list of products or services subject to price controls, and 
explanation of extraordinary circumstances supporting each added 
product or service; 
Raised by the United States: Written[A]; 
China's response: China had reduced the scope of products and services 
and the government price control and that vegetable oil had been lifted 
from the list of Annex 4 of China's Accession Protocol in 2001. China 
had not, and did not, plan to expand the scope of products in services 
subject to state pricing or guidance pricing and that any changes to 
the scope of these products and services would be published in the 
China Foreign Trade and Economic Cooperation Gazette. (Verbal[D]).

Summary of issues by theme: Information on measures granted to 
companies to fulfill export requirements stated on the Shanghai Foreign 
Investment Center website; explanation of how measures for companies 
fulfilling export requirements are compatible with obligations; 
Raised by other WTO members: EC - Written[B]; 
China's response: The web site of the so-called Shanghai Foreign 
Investment Centre was not a government web site and information it 
posted was not authoritative and did not have binding power. Members 
could get access to the relevant laws and regulations through the 
government designated journal: the China Foreign Trade and Economic 
Cooperation Gazette. (Verbal[D]).

Summary of issues by theme: Implication on the Shanghai Foreign 
Investment Center website that state owned companies enjoy preferential 
supply of water, electricity, transport and telecommunication; 
Raised by other WTO members: EC - Written[B]; 
China's response: There was no such practice as different pricing for 
energy, water, power, transportation and telecommunications between 
state-owned enterprises and other types of enterprises. The practice of 
multiple pricing for one commodity or service had been entirely 
eliminated in China. State pricing and government guidance pricing only 
applied to goods and services, regardless of the ownership of the 
enterprises. Enterprises of all types, including state-owned 
enterprises, foreign investment enterprises and foreign enterprises in 
China were treated on an equal footing in the process of determining 
government pricing and guidance pricing. (Verbal[D]).

Summary of issues by theme: Requirements for a company to be considered 
a foreign direct invested enterprise devoted to exports; availability 
of income tax exemptions or rebates, and availability of additional 
exemptions and rebates granted to such companies set up in the special 
economic zones; relation between rebates and export results.Mexico -
Written[C]; 
China's response: Article 3 of the Law of the People's Republic of 
China (PRC) on Wholly Foreign-owned 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 stipulated 
that wholly foreign-owned enterprises shall pay taxes in accordance 
with relevant state regulations and may enjoy preferential treatment of 
tax reduction or redemption. Paragraphs 7 and 8 of Article 75 of the 
Rules of Implementation of the Income Tax Law of the PRC for 
Enterprises with Foreign Investment and Foreign Enterprises stipulated 
that after expiration of the period of income tax exemption and the 
reduction the foreign investment enterprises whose export volume for a 
year exceeded 7 percent of their production for the same year were 
entitled to a 50 percent rebate of the normal rate of income tax as 
provided by tax law. The enterprises located in special economic zones, 
or economic and technology development zones, or any other exporting 
enterprises that already enjoyed an income tax rate of 15 percent, 
would pay income tax at the rate of 10 percent if they also met the 
above requirements. The consistency of this provision with the SCM 
Agreement was currently being reviewed. (Verbal[D]).

Summary of issues by theme: Explanation of stipulation in the Foreign 
Investment Enterprise Law, which appear to require enterprises with 
foreign capital to export a percentage of their production in order to 
be eligible for tax breaks.

Raised by other WTO members: Mexico -Written[C]; 
China's response: There were three laws governing foreign investment 
enterprises, namely the Law on Chinese Foreign Equity Joint Ventures, 
the Law on Chinese Foreign Contractual Joint Ventures, and the Law on 
Wholly Foreign-Owned Enterprises. Among these three laws, only the Law 
on Wholly Foreign-Owned Enterprises used to contain the requirement on 
export performance. As part of the preparations for joining the WTO in 
October 2000, Article 3.1 of the Law on Wholly Foreign-Owned 
Enterprises was amended as follows: 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. The original provision, that the establishment 
of a foreign invested enterprise must adopt advanced technology or 
export all or most of its products, had been replaced. (Verbal[D]).

Countervailing Duty Laws (CVD):

Summary of issues by theme: Gaps in CVD legal structure, including in 
the areas of interim and expiration reviews, rules and procedures on 
access to non-confidential information, and undertakings.

Raised by the United States: Verbal[D]; 
China's response: So far, China had not initiated any countervailing 
investigations but that China was, however, in the process of making 
such legislation just in case such an investigation might be initiated 
in the future. That delegates could be reassured that China would honor 
its commitments in the WTO and continue to bring its legislation in 
line with WTO rules, including in the field of countervailing 
investigations. (Verbal[D]).

Summary of issues by theme: Notification of all laws and regulations 
that had a bearing on countervailing duty investigations and reviews.

Raised by the United States: Verbal[D]; 
China's response: 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 not yet been notified in the TRM report of 
the Committee to the Council for Trade in Goods, as well as that the 
relevant minutes, Members' 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 
request. (Verbal[D]).

Summary of issues by theme: Clarification of the oversight role of the 
State Council Tariff Commission, including when it may exercise 
discretion in the course of an investigation; encouragement for China 
to establish procedures for publicizing the Tariff Commission's 
decisions in countervailing duty actions.

Raised by the United States: Verbal[D]; 
China's response: 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 Tariff Commission was quite clear, 
as referred to, or provided for, in the three regulations that China 
had so far promulgated, namely the regulations on anti-dumping 
investigations, the regulations on countervailing investigations and 
the regulation on safeguards. The role, to put it simply, was for the 
Tariff Commission to make determinations on the rates of the anti-
dumping, 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. (Verbal[D]).

Source: GAO analysis of WTO documents.

Note: An additional document source is a communication from China: G/
SCM/N/104; dated 10/24/03.

[A] Communication from U.S.: G/SCM/Q2/CHN/6; dated 10/27/03.

[B] Communication from European Communities: G/SCM/Q2/CHN/5; dated 9/
30/03.

[C] Communication from Mexico: G/SCM/Q2/CHN/4; dated 10/31/02.

[D] Committee report detailing verbal statements made during meeting: 
G/SCM/111; meeting dated 10/28/03.

[End of table]

[End of Enclosure X]

Enclosure XI: Committee on Technical Barriers to Trade (TBT):

Notifications:

Summary of issues by theme: Steps to ensure China notifies all 
regulations meeting TBT Agreement criteria, not just those issued by 
China's State Administration of Quality, Supervision, Inspection, and 
Quarantine (AQSIQ); 
Raised by the United States: Written[A], Verbal[E]; 
China's response: The content of mandatory standards in China conforms 
to the definition of technical regulations under the TBT Agreement and 
forms a main component of Chinese technical regulations. Since 
accession to the WTO, China has notified 19 mandatory standards to the 
WTO Secretariat under Article 2 of the TBT Agreement. Relevant terms 
are also used according to the TBT Agreement in the modification of 
existing measures. (Written[D]).

Summary of issues by theme: Notification of changes to the Chinese 
Compulsory Certification System (CCC) Mark certification scheme, which 
permit applicants to conduct factory self-inspection and to proceed 
with CCC Mark issuance on an interim basis while awaiting a full 
factory inspection by designated certification bodies; request for 
catalogue of products subject to CCC certification; 
Raised by the United States: Written[A].

Summary of issues by theme: Notification of proposals under TBT 
Agreement; 
Raised by the United States: Verbal[E]; 
China's response: As to transparency and coordination among domestic 
agencies involved in TBT notifications, the Chinese representative 
informed the Committee that on 30 October 2003, China had replied to 
the same question during the SPS Annual Transitional Review (TRM). 
(Verbal[E]).

International standards:

Summary of issues by theme: Plans to address China's limited definition 
of international standards to those promulgated by the International 
Organization for Standardization (ISO), International Electrotechnical 
Commission (IEC) and International Telecommunications Union (ITU); 
reason for limiting options to only three standardizing bodies; 
Raised by the United States: Written[A]; 
China's response: China recognized the importance of adopting 
international standards, which had been used as a basis for the 
development of its technical regulations, standards and conformity 
assessment procedures (CAPs). A publication of AQSIQ had recognized as 
international the standards issued by 42 international organizations. 
(Verbal[E]).

Conformity assessment procedures:

Summary of issues by theme: Status of China's work with conformity 
assessment bodies to implement commitments to undertake conformity 
assessments for imported and domestic products; 
Raised by the United States: Written[A], Verbal[E]; 
China's response: The same technical regulations, standards and 
conformity assessment procedures are applied to both imported and 
domestic products. For imported and domestic products, all bodies and 
agencies shall issue the mark and charge the same fee, and provide the 
same processing periods and complaint procedures. The choice of the 
conformity assessment bodies is at the discretion of the applicant. 
(Written[D]).

Summary of issues by theme: Updated list of domestic and foreign 
conformity assessment bodies that are recognized by China; 
Raised by the United States: Written[A]; 
China's response: China Quality Certification Center, China 
Certification Center for Electromagnetic Compatibility, China 
Certification Center for Security and Protection, China Certification 
Center for Agricultural Machinery, China Certification Center for 
Safety Glazing, Beijing Zhong Hua Combination Quality Certification Co. 
Ltd., Certification Center for Fire Products, Ministry of Public 
Security, China Certification Center for Automotive Products, Center of 
Boiler and Pressure Vessel Inspection and Research, the National 
Institute for the Control of Pharmaceutical and Biological Products, 
the Maritime Administration of the People's Republic of China and 
Register of Shipping at all levels, Register of Fishing Vessels of the 
People's Republic of China and Local Register of Fishing Vessels. 
(Written[D]).

Summary of issues by theme: Steps taken and planned to eliminate 
duplicative conformity assessment requirements, such as between the CCC 
Mark requirements and those of the Ministry of Information Industry, or 
Health/ Food and Drug Administration; 
Raised by the United States: Written[A]; 
China's response: There was no discrimination, nor multiplication or 
duplication of CAPs between imported and domestic products. 
(Verbal[E]).

Chinese Compulsory Certification (CCC) system:

Summary of issues by theme: Emphasis that National Treatment should be 
ensured in the implementation of the new Compulsory Certification 
system; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Request for China to grant spare parts and 
components an exemption, following a procedure as clear and easy as 
possible; 
Raised by other WTO members: EC - Written[B]; 
China's response: The spare parts and components to which the CCC 
system applied and that were listed in the First Catalogue of Products 
were exempted from a separate certification; but if those goods were 
imported and sold separately, they would require a separate mandatory 
certification. Those goods, whether produced domestically or imported, 
for maintenance, end-use, or the maintenance of products that were no 
longer manufactured, were exempted from the mandatory certification. 
(Verbal[E]).

Summary of issues by theme: Concern with the issue of spare parts and 
components, especially when spare parts were supplied separately for 
the purposes of repair or maintenance, or when components were 
assembled in China; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Request for China to avoid subjecting end 
products and their components to separate certification; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Request for China to make clear with which 
authority the ultimate decision lies as to whether or not the mandatory 
certification is required, in cases of uncertainty; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Clarification whether fixed fees and 
conformity assessment fees reflect the real cost of certification and 
do not discriminate between domestic and imported products; 
Raised by other WTO members: EC - Written[B]; 
China's response: Specific conditions were set out to apply for an 
exemption from the CCC system; a unified fee scheme applied to both 
imported or domestic goods, and any difference in fees was due to the 
different testing costs. (Verbal[E]).

Summary of issues by theme: Concern with the issue of fees for 
conformity assessment that were rather expensive; there appeared to be 
variations according to the specific product under question that could 
lead to discrimination between the fees applied to domestic and to 
importing producers; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Specification if and when so-called factory 
inspections included in conformity assessment procedures are 
compulsory; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Request for China to ensure local 
manufacturer of like products are subject to similar treatments and 
conditions; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Procedures implemented to ensure that 
confidentiality of technical information about products is dealt in a 
manner that legitimate commercial interests are protected at both 
national and local levels; 
Raised by other WTO members: EC - Written[B]; 
China's response: The certification bodies were obliged to protect the 
confidentiality and non-disclosure of the technical information and 
trade secrets that were required to obtain certificates. Mutual 
recognition of results should be based on bilateral or multilateral 
agreements between governments or organizations duly authorized by the 
government. China supported the recognition of certification/testing 
results on an equal basis; in this sense China had joined the 
International Electrotechnical Commission for Electrical Equipment 
(IECEE); and, therefore, recognized the CB certificates issued in the 
context of the IECEE system. (Verbal[E]).

Summary of issues by theme: Concern with the issue of confidentiality 
of the detailed technical documentation support to be supplied by 
manufacturers; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Confirmation about whether products already 
certified according to the previous regime (for instance, Law on Import 
and Export Commodity Inspection (CCIB) certification) need to undergo 
the new certification system; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Concern with the issue of the recognition 
of different conformity assessment procedures, particularly where 
products had already been certified according to the previous system; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Explanation of how far foreign conformity 
assessment will be taken into consideration in the Chinese procedures, 
notably in sectors where similar requirements apply.

Raised by other WTO members: EC - Written[B]; 
Automobile:

Summary of issues by theme: Hurdles caused by the repetition of tests 
for several parts and/or components; China's willingness to accept the 
results of foreign conformity assessment procedures based on 
practically the same standards; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Concern that the approval marks for 
automobiles - while it seemed that China did not accept United Nations 
Economic Commission's (UNEC) approval marks, China's standards were 
basically the same standards as UNEC--could lead to a repetition of 
tests for several parts, and to different certificates for identical 
products when produced in different plants; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Trade obstacle created by China's Unit 
Classification Guidelines, which deviate from international practices; 
recommendation that China accede to the 1958 United Nations Economic 
Commission for Europe (UN/ECE) Agreement and sign up to the majority of 
the existing Geneva regulations; 
Raised by other WTO members: EC - Written[B]; 
Pharmaceuticals:

Summary of issues by theme: Implementation of newly enacted rules in 
conformity with the requirements stemming from the WTO-TBT Agreement 
rather than requiring higher quality standards on imported drugs 
compared to domestic products standards and international standards; 
Raised by other WTO members: EC - Written[B]; 
China's response: The import registration for pharmaceutical products 
exported to China required those products to meet both the Chinese and 
the national standards of the country of origin. Therefore, domestic 
and foreign pharmaceutical producers were treated equally. (Verbal[E]).

Summary of issues by theme: Consistency of standards used for active 
pharmaceutical ingredients (API) in the import drug license 
registration (IDL) requirements and request for China to respect 
transparency obligations.

Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Concern on the so-called "active 
pharmaceutical ingredients," given the hurdles encountered by EC 
producers when exporting to China, and the import drug license 
registration that was required, the specifications of which had been 
the subject of frequent changes without external communication or 
consultation; 
Raised by other WTO members: EC - Verbal[E]; 
Cosmetics:

Summary of issues by theme: Discrimination of importers required to 
file an application to the Ministry of Health to obtain a pre-market 
registration, which is lengthy and onerous and requires the disclosure 
of confidential data, whereas domestic producers notify the local 
authorities two months after the launch of the product; 
Raised by other WTO members: EC - Written[B]; 
China's response: Imported cosmetics were subject to an assessment and 
approval of their safety and hygiene qualities and to a labeling 
approval. (Verbal[E]).

Summary of issues by theme: Concern that the pre-market registration 
for cosmetics, performed by the Ministry of Health, was lengthy and 
onerous, and appeared to be different from the one required for 
domestic producers. There was another pre-import registration for 
imported cosmetics, required by AQSIQ, which apparently established a 
double registration system for imported products; 
Raised by other WTO members: EC - Verbal[E].

Summary of issues by theme: Request for China to phase out current 
expensive and time-consuming double registration system by AQSIQ, 
before import and repeated at local level, for imported cosmetics; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Request for China to reconsider its 
legislation on labeling and advertising in order to achieve 
transparency, compliance with global practice and a rule-based system; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Request for the Chinese authorities to 
formally endorse the important achievements in de facto removal of BSE-
related trade impediments; 
Raised by other WTO members: EC - Written[B]; 
Food labeling:

Summary of issues by theme: Request for China to ensure that 
registration procedure for a label be no more time-consuming than 
necessary (currently, it takes more than 90 days); 
Raised by other WTO members: EC - Written[B]; 
China's response: The approval of food labels had been regularly 
completed within the time limits set out in the pertinent regulations. 
(Verbal[E]).

Summary of issues by theme: Request for China to apply transparent 
criteria for the approval of labels. In particular, the best before 
indication for wines and spirits should follow international practice; 
Raised by other WTO members: EC - Written[B]; 
China's response: The Chinese regulations on food labeling applied to 
all pre-packaged food to be sold in China, including wines and spirits; 
and the information to be provided was not discretionary, since it had 
to meet the pertinent regulations. (Verbal[E]).

Summary of issues by theme: Request for China to allow economic 
operators to decide how to present the required Chinese-language 
information on the product label(s) as long as the objective of 
consumer information is met; 
Raised by other WTO members: EC - Written[B]; 
China's response: Food labels for imported food products were subject 
to approval in the Chinese language. (Verbal[E]).

Summary of issues by theme: Request for China to accept that approved 
labels are attached after the goods enter China, but before the AQSIQ 
inspection takes place; 
Raised by other WTO members: EC - Written[B]; 
China's response: Under Chinese regulation that food labels for 
imported food products are subject to approval in the Chinese language, 
there is a requirement to accompany the request with the sales 
certificate of the country of production. (Verbal[E]):

Summary of issues by theme: Request for China to clarify the labeling 
requirements for products in "large-scale" or bulk packaging; 
Raised by other WTO members: EC - Written[B]; 
China's response: Imports of bulk products for food processing did not 
require a label. (Verbal[E]).

Summary of issues by theme: Request for China to guarantee that only 
the trademark owner/producer could apply for the label, in order to 
protect products against counterfeiting; 
Raised by other WTO members: EC - Written[B]; 
Chemicals and environment:

Summary of issues by theme: Reason why China did not submit WTO 
notification regarding Provisions on the Environmental Administration 
of New Chemical Substances; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Reason why China will not accept eco-
toxicological data of new chemical substance data obtained by reliable 
laboratories in other countries which conduct the same tests as those 
in China; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The data testing of foreign certification bodies was 
accepted in China, provided that these bodies had been accredited by 
the competent national institution. The ecological and toxicological 
information on those products should include the information and data 
obtained from tests carried out in China. (Verbal[E]):

Summary of issues by theme: Detailed time schedule, including the time 
for the compilation of the accurate inventory of existing chemicals, 
the establishment of detailed administrative rules, and the time for 
the Chinese authority to start receiving the notification under this 
law; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The inventory of existing chemical substances 
consisted of the chemical substances produced, sold, utilized in or 
imported into China from 1 January 1992 to 30 April 2003. Foreign 
chemical companies could access the inventory through the Internet. 
(Verbal[E]).

Summary of issues by theme: Progress made in consideration of comments 
from interested parties on draft Import and Export Registration 
Regulations of Dangerous Chemicals; request for China to take necessary 
procedures with regard to the regulation in question, including WTO 
notification; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: Currently, the General Administration of Environment 
Protection is revising the Regulatory Provisions on Initial Imports of 
Chemical Products and Import and Export Environmental Requirements on 
Hazardous Chemical Products. At present, this draft is publicly 
available so as to invite comments from related parties and is in full 
compliance with the WTO national treatment principle and relevant 
international practice on regulatory provisions. (Written[D]).

As to hazardous chemicals, China was in the process of revising a final 
text. (Verbal[E]).

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/TBT/W/231; dated 10/20/03.

[B] Communication from European Communities: G/TBT/W/227; dated 10/6/
03.

[C] Communication from Japan: G/TBT/W/229; dated 10/15/03.

[D] Communication from China: G/TBT/W/235; dated 11/6/03.

[E] Committee report detailing verbal statements made during meeting: 
G/TBT/M/31; meeting dated 11/7/03.

[End of table]

[End of Enclosure XI]

Enclosure XII: Committee on Trade in Financial Services:

Insurance:

Summary of issues by theme: Geographic restriction of foreign non-life 
firms as branches to be lifted 3 years after accession; foreign-
invested insurance firms' ability to expand geographically; 
Raised by the United States: Written[A], Verbal[F]; 
Raised by other WTO members: Canada - Written[E]; Australia - 
Verbal[F]; Japan - Verbal[F]; 
Summary of issues by theme: Ability of domestic insurers to apply to be 
licensed at the city level or the provincial level, and a provincial 
license allows a firm to offer services to any city or area within the 
province; 
Raised by other WTO members: Canada - Written[E]; 
Summary of issues by theme: Limited number of foreign insurance 
branches that can open at one time and in the types of geographic 
licenses granted; justification for differential treatment; 
Raised by the United States: Written[A]; 
China's response: 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 insurance 
companies meeting certain qualifications will be allowed to apply for 
the establishment of operational institutions nationwide. However, they 
must approach China Insurance Regulatory Commission (CIRC) for 
approval. This approval procedure was based on the prudential 
supervision of the regulatory body over insurance enterprises and 
applied to both foreign and domestic insurers, thus granting national 
treatment to all foreign insurance companies. Furthermore, three years 
after China's accession to the WTO, when geographic restrictions are 
lifted, provincial branches of foreign insurance companies will be 
allowed to conduct insurance business in any city or area within the 
province pursuant to relevant regulations of CIRC. (Verbal[F]).

Summary of issues by theme: Reduction of requirement for registered 
capital for low risk insurance models, with the RMB 200 million 
registered capital requirement becoming a ceiling rather than a uniform 
requirement; 
Raised by the United States: Written[A].

Summary of issues by theme: High minimum capital requirements for 
foreign insurance companies; 
Raised by other WTO members: Canada - Written[E]; 
Summary of issues by theme: Concern about extremely high level of 
minimum capital requirement; 
Raised by the United States: Verbal[F]; 
China's response: The minimum capital requirements of an insurance 
company, be it domestic or foreign-invested, were set out in the 
"Insurance Law", which was adopted by the National People's Congress of 
China. These requirements were integral parts of the prudential 
regulatory framework and applied to both domestic and foreign insurers. 
The determination of minimum capital requirements was a legitimate 
right of a WTO Member's regulatory authorities and went beyond the 
scope of General Agreement on Trade in Services (GATS) rules and 
China's accession commitments in the insurance sector. Therefore, it 
was not appropriate to discuss it under the Transitional Review 
Mechanism. (Verbal[F]).

Summary of issues by theme: Confirmation of minimum capital 
requirement; 
Raised by other WTO members: Japan - Verbal[F]; 
Summary of issues by theme: Elimination of the redundant RMB 20 million 
capital requirement for branching; 
Raised by the United States: Written[A]; 
China's response: Regarding the capital requirement for the 
establishment of new branches, China was currently drafting the 
detailed rules of the Administrative Regulation on Foreign-Invested 
Insurance Companies and working on the revision of the Administrative 
Regulation on Insurance companies, where consideration was being given 
to the possible relaxation of capital requirements for the 
establishment of new branches. However, this capital requirement was 
aimed at prudential regulation and was irrelevant to China's accession 
commitments. (Verbal[F]).

Summary of issues by theme: Time schedule for China's issuance of 
Regulations on the Administration of Foreign-Invested Insurance 
Companies; 
Raised by the United States: Written[A].

Summary of issues by theme: Allowance of geographic expansion of joint 
venture insurers with more than 50 percent foreign ownership in the 
current ownership structure.

Raised by the United States: Written[A], Verbal[F]; 
China's response: The representative of China referred to the question 
by the United States--whether a joint venture with foreign ownership 
exceeding 50 percent would be allowed to set up branches. He replied in 
the affirmative, and added that after geographical restrictions had 
been lifted three years after accession, according to relevant laws and 
regulations, all joint venture insurance companies would be allowed to 
establish branches. (Verbal[F]).

Summary of issues by theme: China's implementation of its commitment to 
open its pension market to international participation by 
11 December 2004.

Raised by the United States: Written[A], Verbal[F]; 
Raised by other WTO members: Australia - Verbal[F]; 
China's response: Concerning future liberalization of insurance 
services, China had made enormous efforts to comply with the broad and 
substantive commitments in this sector. For the phase-in commitments in 
the insurance sector (e.g. elimination of geographical restrictions and 
the opening of pension services), China would implement its commitments 
in due time. It was not appropriate to discuss future liberalization in 
the context of the TRM. (Verbal[F]).

Summary of issues by theme: Foreign life operations' ability to receive 
several branch licenses at one time or on a "one application for one 
city" basis, unlike domestic companies; 
Raised by other WTO members: EC - Written[B], Verbal[F]; 
China's response: With regard to the so-called national treatment for 
the approval of the number of branches of foreign insurers, it was not 
appropriate to set up a compulsory number of licenses to be issued to 
foreign insures by CIRC at one time. Licenses were issued on the basis 
of prudential principle. China did not agree that the national 
treatment meant that CIRC had to issue licenses to branches of foreign 
insurers as many as their domestic counterpart. And there was not such 
a commitment in China's schedule. (Verbal[F]).

Summary of issues by theme: Application of contemplated reduction in 
minimum capital requirements to reinsurance branches.

Raised by other WTO members: EC - Written[B], Verbal[F]

Summary of issues by theme: Permission for licensed foreign-invested 
insurers in Shanghai, Guangzhou, Dalian, Shenzhen and Foshan to provide 
services nationally based on existing licenses.

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Relationship between different capital and 
license requirements; relationship between regional and national 
licenses under Insurance Company Administrative Measures and Rules of 
Regulations on Administration of Foreign-Funded Insurance Companies; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Permission of all joint-venture insurers to 
issue insurance contracts denominated by foreign currency; reason for 
regulation that foreign-denominated insurance contracts are 
prohibited, and on specific criteria upon which approval is based; 
Raised by other WTO members: Japan - Written[C], Verbal[F]

Summary of issues by theme: Consistency between (1) a regulation 
prohibiting foreign-invested insurers to engage in cross-border 
reinsurance with their associated enterprises unless they are otherwise 
approved by CIRC, and (2) a regulation requiring a simple approval from 
CIRC to engage in this line of service, with China's commitments that 
licensing procedures and conditions would not act as barriers to market 
access and would not be more trade restrictive than necessary; 
justification for prohibition and criteria CIRC uses to base 
consideration; 
Raised by other WTO members: Japan - Written[C]; 
Summary of issues by theme: Approval requirements and procedures for 
new life insurance products for foreign-invested firms and domestic 
firms; requirement for prior approval by CIRC for each new life 
insurance product; requirement for product's re-approval for sale in 
each separate city that a foreign-invested life insurance firm operates 
in; differences in actual approval times for foreign-invested and 
domestic firm.

Raised by other WTO members: Canada - Written[E]; 
Summary of issues by theme: Reason for recent changes introducing 
stricter reserving requirements for life insurance products; request 
for overview of recent changes to reserving requirements; request for 
information on further revisions to its life insurance reserving 
regulations and whether China has ensured that it is complying with its 
national treatment commitments in the design and implementation of 
these new reserve requirements; 
Raised by other WTO members: Canada - Written[E]; 
Summary of issues by theme: Rationale behind regulations such as 
multiple product requirements for the same insurance product; reasons 
for the reserving requirement for life insurance products; 
Raised by other WTO members: Canada -Verbal[F]; 
Summary of issues by theme: Complex multi-stage approval process for 
foreign establishment at new locations in the insurance sector.

Raised by other WTO members: Canada - Written[E]; 
Summary of issues by theme: Streamline of insurance product approval 
process to avoid multiple approvals for insurance product in separate 
areas; 
Raised by other WTO members: Australia - Verbal[F]

Summary of issues by theme: Ability of Chinese owned vessel to buy 
insurance directly from an insurance company not incorporated or 
present in China; taxes applicable to such cross-border business; 
restrictions on the ability of a Chinese company to obtain foreign 
exchange to buy direct non-life insurance from insurance companies not 
incorporated or present in China; 
Raised by other WTO members: Norway - Verbal[F]; 
China's response: Regarding insurance, China said that several 
questions related to CIRC's daily regulatory work over foreign-invested 
insurance companies. For example, the questions raised by Australia and 
Canada on approval requirements and procedures for new life insurance 
products, on reserving requirements for life insurance products, on 
outward and inward cross-border insurance with associated enterprises, 
and on the management of foreign exchange control of insurance 
business. These regulatory measures were based on prudential principles 
and 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. 
(Verbal[F]).

Summary of issues by theme: Requirement that an insurance company must 
have senior management personnel for the branch office who speak 
Chinese; criteria used to assess this qualification.

Raised by other WTO members: Canada - Written[E]; 
China's response: Regarding the questions on language requirements for 
senior management personnel of foreign-invested insurance companies, 
China said that CIRC had already changed the related qualification 
requirements contained in the measures governing the qualifications of 
senior management personnel of insurance companies. The language 
requirement was no longer in force. (Verbal[F]).

Summary of issues by theme: Requirement that foreign-invested firms 
obtain special written permission from the regulator before they can 
negotiate contractual deposits with local banks; 
Raised by other WTO members: Canada - Written[E]

Banking:

Summary of issues by theme: High minimum working capital requirements 
for direct branches of foreign banks; 
Raised by the United States: Written[A], Verbal[F]; 
Raised by other WTO members: EC - Written[B]; Japan - Verbal[F]; 
Chinese Taipei - Written[D], Verbal[F]; Canada - Verbal[E]; Australia - 
Verbal[F]; 
Summary of issues by theme: Requirements for minimum working capital 
and capital adequacy ratios required for each direct branch in China 
from the same bank; 
Raised by other WTO members: EC - Written[B], Verbal[F]; Canada - 
Written[E]

China's response: 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 
prudential requirement, which was set up according to the development 
level of its financial sector and the regulatory capacity of the 
financial authority. The requirement also tried to cater for the 
demands of foreign bank branches in terms of their business operation. 
Thirdly, along the same line, China also had working capital 
requirements for branches of domestic banks. However, with the 
improvement of the risk management system of foreign banks and the 
development of China's regulatory framework, China Banking 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. (Verbal[F]); 
Summary of issues by theme: Draft regulation that would limit inter-
bank financing to 40 percent of RMB liabilities of a bank; 
Raised by other WTO members: EC - Written[B]; Japan - Written[C], 
Verbal[F]; Canada - Written[E]; 
China's response: With regard to the 40 percent limitation on interbank 
borrowing, the Chinese representative said that at present there was no 
such regulation for foreign banks. The requirement did not exist at 
this moment. China was of the view that future liberalization should 
not be discussed in the context of TRM. (Verbal[F]); 
Summary of issues by theme: Requirement for 30 percent of the working 
capital of foreign branches to be deposited at a local bank listed by 
Chinese authorities or used to buy Government bonds.

Raised by other WTO members: EC - Written[B]; 
China's response: Some of the questions raised were related to CBRC's 
prudential regulation and administration of foreign invested banks 
(e.g., the requirement to deposit 30 percent of working capital of 
foreign banks at a local bank). These measures were for the purpose of 
regulating the operations of foreign banks, and were based on 
prudential principles. The objective was to keep away financial risks 
arising from the operation of foreign banks. These prudential 
regulations to prevent financial risks should also be respected. 
(Verbal[F]).

Summary of issues by theme: Reason for limited opening of foreign banks 
to one new branch per year, unlike Chinese banks; prudent restrictions 
in its licensing regime.

Raised by other WTO members: EC - Written[B], Verbal[F]; Japan - 
Verbal[F]; Canada - Written[E], Verbal[F]; Australia - Verbal[F].

Summary of issues by theme: Procedures and criteria used in determining 
the extent of local currency services that a foreign financial 
institution is allowed to engage in; 
Raised by other WTO members: Japan - Written[C]; 
China's response: On the questions concerning the commitment to permit 
foreign financial institutions to provide local currency business to 
Chinese enterprises two years after accession. In that regard, China 
would implement those commitments in due time according to what was 
stated in the schedule. (Verbal[F]).

Summary of issues by theme: Multi-stage licensing process for banks as 
trade barrier for market access; 
Raised by other WTO members: Chinese Taipei - Written[D], Verbal[F]; 
Canada - Written[E], Verbal[F]; 
China's response: 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. This licensing procedure applied equally to 
foreign-invested banks and domestic banks. Secondly, according to 
China's research, many WTO Members had similar requirements with regard 
to licensing procedures for the approval of foreign banks. Certain 
developed-country Members also required a "preliminary review" or "pre-
review" stage before final approval. Thirdly, at present, Members were 
engaged in discussions on a possible multilateral discipline on 
licensing procedures, and therefore it was inappropriate for the 
Committee to review China's licensing procedures before any possible 
discipline in the future. (Verbal[F]); 
Summary of issues by theme: Plan and time schedule to introduce more 
flexibility into China's capital rules to help smaller firms compete on 
a more even footing; 
Raised by other WTO members: Canada - Written[E]

Summary of issues by theme: Reason for requirement that the value of a 
foreign bank's foreign currency deposits received within China shall 
not exceed 70 percent of the value of its foreign currency assets 
within China; request for any details of China's plans to remove 
restrictions; 
Raised by other WTO members: Canada - Written[E]; 
China's response: There was one question on the requirement that the 
value of foreign banks' foreign currency deposits within China should 
not exceed 70 percent of the value of the banks' foreign currency 
assets within China. In reply, the representative of China said that 
prior to his country's accession, the ratio was 40 percent. After 
accession, the ratio was increased substantially, up to 70 percent. 
China would further relax this ratio during the five-year phase-in 
period mentioned in the schedule. (Verbal[F]).

Motor vehicle financing:

Summary of issues by theme: Plans to expedite applications submitted to 
obtain motor vehicle financing licenses.

Raised by the United States: Written[A].

Summary of issues by theme: Deregulation of interest rate charged by 
motor vehicle financing entities.

Raised by the United States: Written[A], Verbal[F]; 
Summary of issues by theme: Condition that direct branching from abroad 
is not allowed; 
Raised by other WTO members: EC - Written[B]; 
China's response: 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 
system, the administration of which was conducted by CBRC pursuant to 
relevant regulations governing financial institutions. However, 
companies engaging in the auto financing business were regulated by 
different regulatory authorities in other Members. Therefore, China 
could not establish effective communication with foreign regulatory 
authorities. As a result CBRC's found it extremely difficult to 
exchange information with foreign regulatory bodies and to regulate. 
Secondly, this requirement applied to both domestic and foreign 
companies. For the purpose of prudential regulation, domestic auto 
financing enterprises were also not permitted to establish branches. 
(Verbal[F]).

Summary of issues by theme: Requirements that a shareholder of an auto-
financing company must meet for certain level of total assets, 
revenues, and profitability.

Raised by other WTO members: EC - Written[B]; 
China's response: On the issue of the requirements imposed on auto-
financing institutions (e.g. minimum capital requirements and others), 
the representative of China said that they were of a prudential nature, 
based on the fact that the auto-financing market in China was just at a 
beginning stage. The regulatory body had insufficient risk control 
capacity and lacked supervision experience. Besides, all these 
requirements, including minimum capital requirements, were non-
discriminatory and applied to both foreign and domestic auto-financing 
companies. (Verbal[F]).

Summary of issues by theme: Conditions imposed on car financing 
institutions in order to be eligible to get a license, such as 
restrictions on total assets.

Raised by other WTO members: EC - Verbal[F]

Summary of issues by theme: Condition of high minimum capital 
requirements; 
Raised by the United States: Written[A], Verbal[F]; 
Raised by other WTO members: EC - Written[B], Verbal[F]

Summary of issues by theme: Condition that auto-finance companies are 
not allowed to set up internal branches or subsidiaries; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Condition that deposit-taking from local 
car manufacturers does not seem to be allowed; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: 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; 
Raised by other WTO members: EC - Written[B]; 
Securities:

Summary of issues by theme: Limitation that securities fund management 
companies manage assets of retail investors but are not allowed to 
manage assets of institutional investors; 
Raised by other WTO members: EC - Written[B]; 
China's response: In accordance with China's existing laws and 
regulations, a fund management company, whether domestically-owned or 
joint-venture, was not allowed to manage assets for institutional 
investors because this service did not exist in China due to the 
special situation of the Chinese securities market. In other words, 
this service for institutional investors was a new service in China, 
and was therefore not covered by China's commitments. (Verbal[F]).

Summary of issues by theme: Limitation that only domestic securities, 
fund management or investment trust companies may hold the highest 
capital contribution, limiting the choice of partners for foreign 
investors in joint ventures.

Raised by other WTO members: EC - Written[B], Verbal[F]; 
China's response: The questions on minimum capital requirements and 
licensing procedures, which were similar to the ones raised with regard 
to banking and insurance services, had already been answered. 
(Verbal[F]).

Summary of issues by theme: Complex multi-stage approval process for 
establishment of new locations for foreign participation in the fund 
management sector; 
Raised by other WTO members: Canada - Written[E]

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: S/FIN/W/35; dated 11/24/03.

[B] Communication from European Communities: S/FIN/W/32; dated 11/12/
03.

[C] Communication from Japan: S/FIN/W/30; dated 9/29/03.

[D] Communication from Chinese Taipei: S/FIN/W/34; dated 11/19/03.

[E] Communication from Canada: S/FIN/W/33; dated 11/12/03.

[F] Committee report detailing verbal statements made during meeting: 
S/FIN/M/43; meeting dated 12/1/03.

[End of table]

[End of Enclosure XII]

Enclosure XIII: Committee on Trade-Related Investment Measures (TRIMS):

Automotive sector:

Summary of issues by theme: Status of China's research and study to 
issue new automobile industrial policy and issuance of new Guidelines 
for Current Development of Automobile Industry; 
Raised by the United States: Written[A]; 
Raised by other WTO members: Japan - Verbal[D]; 
China's response: 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 from all walks of the society. General Motors, Association 
of Automobile Industry in Japan and some companies in the European 
Union (EU) are among those who submitted comments. Afterwards, we have 
sent the draft directly to the companies in the industry, the research 
institute and scholars alike for their inputs, and explicitly require 
the Chinese parties of joint ventures to solicit the opinions of their 
foreign partners. Beside that, extensive and in-depth exchanges of 
ideas, discussions and consensus building have been conducted with many 
foreign auto makers on a number of specific issues. (Verbal[D]).

Summary of issues by theme: Legal steps to completely remove all 
restrictions on the categories, types or models of motor vehicles 
permitted for production; 
Raised by the United States: Written[A]; 
China's response: According to Paragraph 205 of the Working Party 
Report on the Accession of China, the category authorizations by the 
Chinese Government could continue to distinguish between trucks and 
buses, light commercial vehicles and passenger cars. In the Policy on 
the Development of Automobile Industry, which is in the process of 
revision, the measures restricting the production under each category 
will be eliminated. The new Policy is now waiting for the approval from 
the State Council and will be enforced as soon as the legislative 
procedures are completed. (Written[C]).

Summary of issues by theme: Legal steps to raise the limit within which 
investments in motor vehicle manufacturing could be approved at the 
provincial level; 
Raised by the United States: Written[A]; 
China's response: The draft of the upcoming development policy on 
automobile industry is characterized by its provisions on deregulation 
and transfer of approval authority to governments at provincial levels. 
After the issuance of the new Policy, the invest limits on auto 
manufacturing that could be approved at provincial level will be 
increased as required in the Working Party Report. (Written[C]).

General:

Summary of issues by theme: Revisions to investment guidelines in 
conformity with the WTO Agreement, especially as regards the status of 
the Catalogue on Investment and the categorization of restricted; 
permitted; and encouraged investments, and requirements relating to 
transfer of technology; 
Raised by other WTO members: EC - Written[B]; 
China's response: Before accession to the WTO, China had already 
modified three basic laws in respect of foreign direct investment - Law 
of People's Republic of China on Sino-Foreign Equity Joint Ventures, 
Law of People's Republic of China on Sino-Foreign Cooperative Joint 
Ventures and Law of People's Republic of China on Foreign-invested 
Enterprises as well as their implementing rules. The revised 
legislation has eliminated or ceased the implementation of provisions 
on foreign currency balancing, local content, export performance 
requirement and mandatory technology transfer. (Written[C]).

On February 11, 2002, State Council of China promulgated newly-amended 
the Regulation on Guiding the Foreign Investments. Afterwards, strictly 
according to WTO rules and commitments upon accession to WTO, China 
amended the original Guiding Industrial Catalogue for Foreign 
Investment in a comprehensive manner. It was made effective as of April 
1, 2002. The Catalogue lists 371 industries and divides them into three 
categories including "encouraged," "restricted" and "prohibited" for 
foreign investment, of which 262 are encouraged, 75 restricted and 34 
prohibited. All the industries not listed in the Catalogue are 
considered as permitted. The contents in relation to liberalization 
committed by China upon accession are listed in the Attachment to the 
Catalogue. In addition, requirement for technology transfer has been 
eliminated in approving the foreign investment. (Verbal[D]).

Summary of issues by theme: Amendment of contractual arrangements that 
contain TRIMs-incompatible commitments and obligations in such a way 
that they will contain obligations which are fully compatible with the 
TRIMs Agreement; indication of how China might institute such 
amendments; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Contracts which may contain TRIMs 
incompatible commitments and obligations will not be enforced before 
domestic law courts or other administrative tribunals or bodies and 
that the TRIMs-incompatible commitments and obligations are to be 
considered null and void; 
Raised by other WTO members: EC - Written[B]; 
China's response: China has revised the Law of the People's Republic of 
China on Chinese-Foreign Equity Joint Venture; Law on Chinese-Foreign 
Contractual Joint Venture; and Law on Wholly Foreign Owned Enterprises 
and their respective implementing regulations. The revision includes 
the elimination and cessation of enforcement of requirements on trade 
and foreign exchange balancing, local content, export performance, 
compulsory technology transfer, and etc. This revision has got 
extensive media coverage. Chinese government respects freedom of 
contract. If the articles of association or contract of enterprises 
with foreign investment approved before amendment of the relevant laws 
contain the terms on foreign exchange balance, local contents, and 
export performance, and the investors on both sides can reach an 
agreement, they may file the application to relevant authorities to 
alter or nullify those terms. The application will be processed timely 
and in a manner consistent with TRIMs agreement. (Verbal[D]).

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: G/TRIMS/W/32; dated 9/23/03.

[B] Communication from European Communities: G/TRIMS/W/31; dated 8/14/
03.

[C] Communication from China: G/TRIMS/W/34; dated 10/1/03.

[D] Committee report detailing verbal statements made during meeting: 
G/L/648; meeting dated 10/3/03.

[End of table]

[End of Enclosure XIII:

Enclosure XIV: Council for Trade in Goods:

Trading rights:

Summary of issues by theme: Measures governing trading rights of 
foreign-invested enterprise; China's limited availability of trading 
rights for foreign-invested enterprises by imposing conditions on the 
eligibility of those enterprises.

Raised by the United States: Written[A]; Verbal[D]; 
China's response: 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. (Verbal[D]); 
Given the above-mentioned commitments and relevant laws and regulations 
governing foreign-invested enterprises, the enterprises in China with 
foreign investment had the right to import equipment, technology, raw 
material and other goods for self-use, and export their products. While 
for the importation and domestic distribution of the goods other than 
the above 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. 
(Verbal[D]).

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 and services to be distributed within 
Chinese territory they needed firstly to file the application for 
changing their business scope and after doing that they could undertake 
distribution business in China. (Verbal[D]).

Summary of issues by theme: Explanation of how conditions of foreign-
invested enterprises relate to minimum registered capital, past import 
and export levels, and prior experience, consistent with China's 
commitments to provide full rights to trade to foreign-invested 
enterprises.

Raised by the United States: Written[A]; 
Raised by other WTO members: EC - Written[B],; 
China's response: With regard to the capital requirements of trading 
companies set up by foreign investment, one was referring to foreign 
trade companies only. Regarding the question raised by the U.S. about 
holding companies, their functions were much more than trading, and 
China imposed capital requirements on those companies. With regard to 
logistics companies set up by foreign investment, these companies were 
actually involved in distribution, purchasing and a series of other 
activities. So with this expanded business scope China had to impose 
capital requirements for these companies. China was now revising its 
foreign trade law. According to the draft of the foreign trade law 
China would further specify the trading rights and their availability 
to foreign invested companies. (Verbal[D]); 
Raised by other WTO members: Verbal[D].

Summary of issues by theme: Exclusion of conditions relating to minimum 
registered capital, past import and export levels and prior experience 
in the draft revisions to the Foreign Trade Law; 
Raised by the United States: Written[A]; 
China's response: At present, the Foreign Trade Law of China was being 
revised. The current draft of the Foreign Trade Law did not contain the 
requirements on minimum registered capital, import or export 
performance and history experience. (Verbal[D]).

Summary of issues by theme: Distinction between so-called "trading 
joint ventures (JVs)" and "manufacturing" JVs; 
Raised by other WTO members: EC - Written[B],; Verbal[D].

Value-added tax policies:

Summary of issues by theme: Measure that implements the policy for 
rebates of the VAT on imported copper; 
Raised by the United States: Written[A]; 
China's response: China currently applied 17 percent VAT on both 
domestic and imported goods, which was fair and non-discriminatory in 
terms of the value of goods. The current VAT rebate policy was 
consistent with the national treatment rule under Article III of GATT 
1994. (Verbal[D]).

Summary of issues by theme: Explanation of VAT rebate program works, 
i.e. amount of VAT originally paid, entity that pays VAT, entity to 
which VAT rebate is paid, amount of a rebate received by entity, 
availability of rebate upon the exportation of finished or 
semi-finished products copper products, application and differences in 
application of VAT rebate to imported scrap or domestically sourced 
copper scrap; 
Raised by the United States: Written[A], Verbal[D]; 
China's response: In China, customs imposed duties and VAT for the 
importation of copper scraps, copper ore concentrates and raw copper by 
copper-smelting enterprises reaching a certain production scale. After 
paying the duty and tax, a company could apply for the drawback of 30 
percent VAT on presentation of duty-paid proofs. The refunded tax 
should be applied to the technological innovations of the enterprise. 
VAT rebate policy on copper materials applied to all enterprises 
reaching certain production scale, and was not conditioned on ownership 
of the enterprise or local content. Copper-smelting enterprises had to 
pay VAT while importing copper materials. The amount of VAT should be 
the total sum of dutiable value and tariff multiplied by VAT rate for 
copper materials. According to relevant policy and provisions, the 
government would refund 30 percent of the paid VAT to the enterprise. 
(Verbal[D]); 
After payment of duties, enterprises could apply for a drawback of VAT 
on presentation of duty paid proofs. This policy only applied to 
exporters of finished products and semi-finished products. This tax 
rebate system was equally applied to all enterprises reaching a certain 
production level regardless of the ownership of the enterprise. 
(Verbal[D]).

Summary of issues by theme: Measures similar to VAT rebate programs on 
imported products other than copper scrap; 
Raised by the United States: Written[A]; 
China's response: The VAT rebate policy only applied to imported copper 
scraps, copper ore concentrates and raw copper and did not apply to 
other products. China did not implement any similar policy on other 
products or adopt any other preferential policies on copper-processing 
enterprises. (Verbal[D]).

Summary of issues by theme: Preferential policies benefiting copper 
scrap, copper or semi-fabricated products such as flat-rolled products, 
long products and pipe and tube, whether those policies involve the 
VAT, other taxes, duty drawback or tariffs; 
Raised by the United States: Written[A].

Summary of issues by theme: Preferential policies benefiting copper 
scrap, copper or semi-fabricated products conditioned on domestic 
production or ownership, or on domestic or foreign content; 
Raised by the United States: Written[A]; 
China's response: VAT rebate policy on copper materials applied to all 
enterprises reaching certain production scale, and was not conditioned 
on ownership of the enterprise or local content. (Verbal[D]).

Export restrictions:

Summary of issues by theme: WTO justification for the export quota on 
fluorspar; 
Raised by the United States: Written[A]; 
Raised by other WTO members: Japan - Written[C]; 
China's response: 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 Export of 
Goods and China's commitments upon accession, China still imposed 
export quota administration on fluorspar. Due to the depleting of 
fluorspar resources and its shrinking production, the domestic 
consumption and export of fluorspar had, in turn, gradually decreased. 
China's export quota administrative measure on fluorspar was consistent 
with the "general exceptions" provided in Article XX of GATT 1994 - 
"nothing in this Agreement shall be construed to prevent the adoption 
or enforcement by any contracting party of measures: including those 
relating to the conservation of exhaustible natural resources if such 
measures are made effective in conjunction with restrictions on 
domestic production or consumption." Furthermore, according to the WTO 
rules, the general abolition of quantitative restrictions set forth by 
the Article XI did not preclude the various exemptions as contained in 
Articles XII to XXI of GATT 1994. During recent years, domestic and 
foreign prices of fluorspar had risen to various degrees. This rise in 
price was determined by the rules of market rather than the export 
quotas by the Chinese Government. (Verbal[D]).

Summary of issues by theme: Justification for export license fee on 
fluorspar; requirement for exporters to pay fees which range from 85 
percent to more than 150 percent of the fluorspar cost; 
Raised by the United States: Written[A], Verbal[D]; 
China's response: With regard to the export license, only 20 RMB was 
collected for the cost of the license itself. No other fees were 
charged. Secondly, fluorspar was a scarce resource with great market 
demand. Production was falling in recent years in China, where the 
costs of exploitation and transportation were constantly rising, which 
resulted in a surge of demand and shortage in supply. It was this gap 
between the supply and the demand that was the cause of the rise in 
price and was not the result of quota restrictions imposed by the 
Chinese Government. (Verbal[D]); 
Summary of issues by theme: Detailed information on the restriction of 
domestic fluorspar production and consumption; 
Raised by other WTO members: Japan - Written[C], Verbal[D]; 
China's response: In recent years the production of fluorspar had been 
constantly decreasing. Exports, together with domestic consumption, had 
also been decreasing significantly. (Verbal[D]); 
Border trade:

Summary of issues by theme: List of products taken off the list of 
imports from border areas that can benefit from preferential treatment 
in the form of reduced import duties and/or VAT, and measure that ended 
preferential treatment; 
Raised by the United States: Written[A], Verbal[D]; 
China's response: According to Bulletin No. 27 and No. 39 issued by the 
State General Customs Administration on 1 May 2003 and 11 June 2003 
respectively, China had removed boric acid and 19 other products from 
the list of products subject to border trade import duties policy. 
(Verbal[D]); 
Summary of issues by theme: List of the products that continue to 
receive preferential border area treatment; explanation of products' 
benefits from reduced import duties, reduced VAT, or both; 
Raised by the United States: Written[A]; 
China's response: The border trade policy of China was in line with the 
MFN principle of GATT 1994. The list of preferential treatment for 
border trade was published by the Ministry of Finance with approval by 
the State Council and the executive agency was the general customs 
administration in China. The list was published in several batches and 
up until now there had been no complete and uniform document containing 
all products subject to preferential treatment for border trade. 
(Verbal[D]).

Summary of issues by theme: China's plans to eliminate preferential 
border treatment for products; 
Raised by the United States: Written[A]; 
China's response: The WTO did not provide for the specific definition, 
forms and territorial scope of border trade, and only set forth a 
fundamental provision that "the provisions of this Agreement shall not 
be construed to prevent advantages accorded by any contracting party to 
adjacent countries in order to facilitate frontier traffic." Therefore, 
special preferential treatments for border trade were allowed by the 
WTO, and advantages and conveniences accorded by a contracting party to 
adjacent countries were not inconsistent with the basic principle of 
the WTO, i.e. Most Favored Nation (MFN). China had committed in its 
accession protocol to apply WTO Agreements and the protocol across the 
whole customs territory including border trade areas, and would develop 
and implement laws, regulations and other measures in relation to trade 
in goods in a uniform, impartial and rational manner. Border trade 
policies had been uniformly implemented and enforced in the provinces 
and regions in border areas of China as an important part of China's 
foreign trade policies. (Verbal[D]).

Transparency:

Summary of issues by theme: Time schedule to circulate draft of several 
trade-related laws, regulations, and measures, including amendments to 
the foreign trade law, amendments to commercial banking law, 
regulations on rules of origin for imports and exports, import and 
export tariff regulations, construction engineering design regulations 
and intellectual property rights customs protection regulations; 
Raised by the United States: Written[A]; 
China's response: In line with China's reform and opening up process, 
and to implement the commitments upon its accession, China was now, 
according to its arrangement of legislative plan, revising relevant 
laws and regulations mentioned by some Members in their questions. 
Amendments to these laws and regulations would be open for public 
comment pursuant to provisions of the Legislation Law and Regulations 
on the Drafting Procedure of Administrative Regulation. In addition, 
China would also notify those laws and regulations to the WTO. Above 
all, China would fully fulfill its commitments on transparency made 
upon its accession to WTO. (Verbal[D]).

Summary of issues by theme: Lack of transparency in China's approach to 
TRQ and quota allocation for certain products, particularly 
agricultural commodities; 
Raised by other WTO members: Canada - Verbal[D]; 
Government procurement:

Summary of issues by theme: Timetable for issuing the Measures on the 
Administration of Bidding of Government-Procured Goods and Services in 
final form; 
Raised by the United States: Written[A]; 
China's response: Opinions had been solicited extensively concerning 
the Administrative Measures on Tendering and Bidding for Goods and 
Services under Government Procurement, which was due to be promulgated 
in December 2003. (Verbal[D]).

Summary of issues by theme: Timetable for circulating and issuing sets 
of implementing rules, including measures relating to the 
administration of government software procurement, the administration 
of bidding for goods and services in government procurement, the 
administration of government procurement information, the examination 
of centralized government procurement institutions, the administration 
of complaints by suppliers, and the administration of government 
procurement experts; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Timetable for establishment and information 
on completion of the Government Procurement Agreement (GPA) working 
group; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Timetable intended for China to start 
negotiations to join the GPA; 
Raised by the United States: Verbal[D]; 
Raised by other WTO members: EC - Written[B], Verbal[D]; Japan - 
Written[C]; 
China's response: Administrative Measures on Information Publication of 
Government Procurement and Measures on Complaints by the Suppliers 
would be promulgated together with the Administrative Measures on 
Tendering and Bidding for Goods and Services under Government 
Procurement. Administrative Measures on Software Procurement by the 
Government, Administrative Measures on Expert Recruitment for 
Government Procurement and Examination Measures on Institutions of 
Government Collective Procurement were to be promulgated at the end of 
2003. Comments on these measures had also been solicited. The Ministry 
of Finance had made the accession to the Government Procurement 
Agreement (GPA) one of its research subjects in 2003. The establishment 
and composition of the panel of experts would be further decided based 
upon the results from the preliminary study, while the timetable for 
the launch of negotiations would be set in the same manner. 
(Verbal[D]).

Summary of issues by theme: All government procurement procedures are 
conducted in a transparent manner and that the MFN principle is applied 
to all foreign suppliers in practice; 
Raised by other WTO members: Japan - Written[C]; 
China's response: 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 rules. The implementing 
regulation to the Law was also being drafted. Since the Government 
Procurement Law took force, purchase activity falling under the 
provisions of the State Council had to follow government procurement 
procedures, which had to be made transparent. According to the existing 
regulations of Ministry of Finance, procurement from foreign suppliers 
had to go under international public tendering. Information relating to 
the bidding and winner had to be made public via the media designated 
by the Ministry of Finance. Up till now, no complaints from foreign 
suppliers had been filed to the Ministry. (Verbal[D]); 
Raised by other WTO members: EC - Verbal[D]; 
Customs valuation:

Summary of issues by theme: Timetable for China's response on U.S. 
questions to China raised in connection with the transitional review 
before Committee on Customs Valuation; 
Raised by the United States: Written[A]; 
China's response: With regard to the questions posed by Members 
concerning customs valuation, China had provided responses in the 
context of TRM held by the Committee of Customs Valuation on 
6 October 2003. If Members had further questions to China's responses 
during TRM, they could raise these questions under the appropriate 
agenda item in the meeting of the Committee with the mandate, to which 
China would provide answers according to due procedures. (Verbal[D]).

Automobiles:

Summary of issues by theme: China's intention to reconsider a measure 
to establish a dual distribution network for domestically produced and 
imported automobiles; the legislative process for its adoption; 
timetable for notification to the WTO; concerns about its WTO 
compatibility; 
Raised by other WTO members: EC - Written[B], Verbal[D]; 
China's response: A new automobile development policy was in the 
process of being drafted. During the drafting process China had 
extensively solicited the opinions from various parties, including U.S. 
and EU manufacturers. The final solution of this problem would have to 
wait until the final text of this new policy was ready and published. 
(Verbal[D]); 
Source: GAO analysis of WTO documents.

Note: An additional document source is a communication from China: G/C/
W/474; dated 11/21/03.

[A] Communication from U.S.: G/C/W/473; dated 11/17/03.

[B] Communication from EC: G/C/W/476; dated 11/26/03.

[C] Communication from Japan: G/C/W/471; dated 11/29/03.

[D] Committee report detailing verbal statements made during meeting: 
G/L/664; meeting dated 11/26/03.

[End of table]

[End of Enclosure XIV]

Enclosure XV: Council for Trade in Services:

Distribution services:

Summary of issues by theme: Elimination of national treatment and 
market access restrictions on foreign enterprises providing 
distribution services by 11 Dec 2004; 
Raised by the United States: Written[A].

Summary of issues by theme: Status and timetable of regulation to 
implement commitment on elimination of national treatment and market 
access restrictions on foreign enterprises providing distribution 
services; 
Raised by the United States: Written[A].

Summary of issues by theme: Measures governing the provision of 
wholesaling services and commission agents' services by foreign-
invested enterprises; 
Raised by the United States: Written[A], Verbal[G]; 
China's response: The current regulation governing this sector was the 
Pilot Measures on the Foreign-Invested Merchandising Enterprises and 
that China was drafting a new distribution regulation governing 
wholesaling and retailing services. China was starting to solicit 
opinions from industries. (Verbal[G]).

Summary of issues by theme: Explanation of conditions relating to 
registered capital, assets, past import and export levels, prior 
experience requirement on joint ventures with foreign minority 
ownership to engage in wholesaling services; 
Raised by the United States: Written[A], Verbal[G]

Summary of issues by theme: Measures governing the provision of 
retailing services by foreign-invested enterprises; 
Raised by the United States: Written[A]; 
China's response: The current regulation governing this sector was the 
Pilot Measures on the Foreign-Invested Merchandising Enterprises and 
that China was drafting a new distribution regulation governing 
wholesaling and retailing services. China was starting to solicit 
opinions from industries. (Verbal[G]).

Summary of issues by theme: Explanation of conditions relating to 
registered capital, assets, past import and export levels, prior 
experience requirement on joint ventures with foreign minority 
ownership to supply retail services; 
Raised by the United States: Written[A].

Summary of issues by theme: Status and time frame for issuance of new 
regulations may severely impact the ability of U.S. and other foreign 
retailers to expand their presence in China; concern about national 
treatment; 
Raised by the United States: Written[A].

Summary of issues by theme: Reason for delay and time schedule in 
implementing revision of the Regulations on Investment of Foreign 
Distribution Business Enterprises for wholesale trade services (foreign 
minority ownership).

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Schedule to implement commitments on 
wholesale (foreign majority ownership, no geographical or quantitative 
restrictions) and retailing services (foreign majority control, easing 
of geographical restrictions), especially for motor vehicles; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The "Pilot Measures on the Foreign-Invested 
Merchandising Enterprises," promulgated in 1999, had given foreign 
service suppliers the opportunity to possess majority ownership in the 
joint-venture wholesaling enterprises, 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 that it would provide more detailed rules on the 
opening-up of the distribution market in accordance with the phase-in 
commitments of China. China had started to solicit opinions on this 
draft from industries, including foreign-invested distribution 
enterprises. The actual market access had never been negatively 
affected. 35 foreign-invested distribution enterprises had been 
approved with 347 outlets. Carrefour and Wal-Mart had respectively 
established more than 30 chain stores in China. (Verbal[G]).

Summary of issues by theme: Schedule to implement commitment of full 
liberalization of wholesale and retail services on processed and crude 
oil; 
Raised by other WTO members: Japan - Written[C]; 
China's response: China would implement its commitments in accordance 
with the phase-in period set out in its Schedule. (Verbal[G]).

Summary of issues by theme: China's plan to establish a "Law 
Controlling the Monopolization of Automobile Brands" to prohibit 
dealers from selling both imported and domestic cars; 
Raised by other WTO members: Japan - Written[C]; 
China's response: This policy did not violate WTO rules or China's 
commitments and that foreign and domestic investors would be treated 
equally in establishing automobile distribution enterprises selling 
either imported cars or domestically produced cars. (Verbal[G]).

Summary of issues by theme: China's plans to limit the scope of the 
management right of retail dealers in passenger vehicles either to 
domestic or imported cars with acquisition of the "Management Right to 
Passenger Vehicles" and publication of criterion for granting the 
right; 
Raised by other WTO members: Japan - Written[C]; 
Express delivery services:

Summary of issues by theme: Explanation for creation of a China Post 
monopoly on the delivery of letters under 500 grams in China's draft 
amendment to its Postal Service Law; 
Raised by the United States: Written[A], Verbal[G]; 
China's response: Regarding monopoly and exclusive rights, the Chinese 
representative recalled China's reservation in its commitments, which 
stated "except for those currently specifically reserved to Chinese 
postal authorities by law". (Verbal[G]).

Summary of issues by theme: Explanation for China's consideration of 
500 gram restriction after it withdrew a similar restriction with the 
issuance of the Supplement Notice on the Engagement in Postal and 
Delivery Services for Cross-border Letters and Materials of Letters in 
Nature; 
Raised by the United States: Written[A].

Summary of issues by theme: Timetable for issuing China's draft 
amendment to its Postal Service Law; 
Raised by the United States: Written[A]; 
China's response: China took a positive attitude towards Members' keen 
interest. Enacting a new law and revising existing ones, even if they 
aimed at implementing obligations under international treaties, were 
the legitimate rights of a Member and that the TRM was not the right 
context in which to address these issues. (Verbal[G]).

Summary of issues by theme: China's plans for separating China Post's 
regulatory and operational functions; 
Raised by the United States: Written[A], Verbal[G]; 
China's response: The Chinese representative referred to paragraph 309 
of the Working Party Report, which stated "the representative of China 
confirmed that for services included in China's Schedule of Specific 
Commitments, relevant regulatory authorities would be separated from, 
and not accountable, to any service suppliers they regulated, except 
for courier and railway transportation services." (Verbal[G]).

Summary of issues by theme: Provision in the draft amendments that 
required express delivery companies to pay 4 percent of their revenues 
into a universal service fund; 
Raised by the United States: Verbal[G]; 
Summary of issues by theme: Relevant text on entrustment procedures; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Step-by-step procedure to get entrustment; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: One-time only or repeated action of 
entrustment; duration of the entrustment; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Centralization or fulfillment at Sub-State 
level of entrustment procedure; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Obligations imposed on the entrusted 
operators; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Number of operators applying for and number 
of operators obtaining entrustment; 
Raised by other WTO members: EC - Written[B]; 
Summary of issues by theme: Submission of Chinese operators to the same 
entrustment procedure as foreign operators; 
Raised by other WTO members: EC - Written[B]; 
China's response: The issue of an entrustment requirement for express 
delivery services had been discussed at the previous review. In the 
past calendar year, 167 qualified international freight forwarding 
enterprises and 362 branches had obtained entrustment and had been 
operating quite well in China. China would assure the same procedure of 
entrustment for international courier agencies as for Chinese 
operators. (Verbal[G]).

Summary of issues by theme: Relevant text defining regulator of express 
delivery services and its powers; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Extent to which Central Post Office, local 
post offices, MOFTEC, Ministry of Information Industry (MII) are 
granted regulatory powers over express delivery operators; power and 
conditions to conduct on-site inspections in facilities owned by 
express delivery operators.

Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Definition of scope of postal monopoly; 
Raised by other WTO members: EC - Written[B], Verbal[G]

Summary of issues by theme: Definition of scope of universal service; 
Raised by other WTO members: EC - Written[B], Verbal[G]

Summary of issues by theme: Independence of the regulator from 
operators; 
Raised by other WTO members: EC - Written[B], Verbal[G]

Summary of issues by theme: Information about current postal reform; 
Raised by other WTO members: EC - Written[B]; 
Telecommunications services:

Summary of issues by theme: Explanation of China's plans to establish 
an independent regulator in the telecommunications sector; 
Raised by the United States: Written[A], Verbal[G]; 
China's response: China had separated the regulatory body from the 
operational business by establishing the MII in 1998. The MII had given 
up all its management functions to China Telecom. MII could regulate in 
an impartial, fair and transparent manner and acted as an independent 
regulator. MII had always followed the principle of transparency and 
impartiality in order to promote the orderly development of China's 
telecom industry. (Verbal[G]).

Summary of issues by theme: Rationale for reclassification of several 
telecommunications services from the value-added category to the basic 
category, contrary to widely accepted international practice; 
Raised by the United States: Written[A], Verbal[G]; 
Summary of issues by theme: Explanation of the practice that certain 
basic telecom services will be managed as value added services under 
the new Telecom Catalogue of Business Categories; 
Raised by other WTO members: EC - Written[B]; 
China's response: Regarding the classification of telecommunication 
services, the Chinese representative noted that it was a complicated 
issue not only for China, but also for other WTO Members, especially 
given the rapid development of contemporary science and technology. He 
further noted that Members had their own classifications based on the 
different level of development in telecom industries, unique domestic 
situations and different approaches to regulate the market. He 
indicated that the MII had adjusted part of the previous categories and 
had republished the revised Catalogue of classification in April 2003 
in response to new developments. According to the new catalogue, some 
basic telecommunications services would be managed as value-added 
services. The operator qualifications and daily management of these 
basic telecommunications services would be administered with reference 
to relevant requirements for value-added services. (Verbal[G]).

Summary of issues by theme: Request for relevant text on Ministry of 
Finance's management of State participation in existing companies; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Timetable to revise the Regulation on the 
Administration of Foreign Invested Telecom Companies to allow foreign 
operators to choose partners in other sectors; 
Raised by other WTO members: EC - Written[B], Verbal[G]

Summary of issues by theme: Rationale for foreign investors to meet 
minimum capital and experience requirements; different requirements for 
operator owned only by Chinese nationals; 
Raised by other WTO members: EC - Written[B]; 
China's response: Due to the need for complicated expertise and the new 
services emerging in the telecom industry, this regulation required 
that the major Chinese investor in a foreign-invested enterprise should 
have technical personnel suitable for the operation of the enterprise 
in order to better protect the interest of investors and consumers and 
to ensure the sound development of the telecom industry. This 
requirement also applied to domestic enterprises, which was in line 
with the national treatment principle. This regulation required that 
the major Chinese investor should invest at least 30 percent of the 
total capital shared by all the Chinese investors in order to protect 
the interests of the Chinese and foreign-invested telecom enterprises. 
These requirements increased the liability of the Chinese investors and 
therefore alleviated the risks on the part of foreign investors. 
(Verbal[G]).

Summary of issues by theme: Treatment of existing operators under the 
regulation on foreign-invested enterprises; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Government organizations that will issue 
measures to determinate geographical scope in which foreign-invested 
telecom enterprises may operate; 
Raised by other WTO members: EC - Written[B], Chinese Taipei - 
Written[D].

Summary of issues by theme: Timetable to issue measures to determinate 
geographical scope in which foreign-invested telecom enterprises may 
operate; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Prudential and special requirements set by 
the administrative department for information industry of the State 
Council referred to in the regulation on foreign-invested enterprises; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Publication of licensing terms of existing 
operators; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Requirement applicable to the agent (an 
entity or individual that a licensed telecom operator can entrust to 
provide telecommunication services directly to customers) under the 
Administrative Measures on Telecom Business Operation Licenses; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Regulation of resale of a service like the 
corresponding service or under a separate framework; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Issuance of regulation regarding the public 
bidding for licenses of basic telecom; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Procedures for granting frequencies as part 
of China's commitment to allocate the use of scarce resources in an 
objective, timely, transparent and non-discriminatory manner; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Details on the identification of leading 
telecom operators, subject to interconnection obligations.

Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Time schedule for the enactment of a 
Telecommunications Act and information on its provisions; 
Raised by other WTO members: Japan - Written[C], Verbal[G]

Summary of issues by theme: List and criteria for identified Leading 
Telecommunications Services Providers; 
Raised by other WTO members: Japan - Written[C], Verbal[G]; 
China's response: "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 the market within local networks, and who had a substantial 
impact on the market access of other telecom operators. To date, the 
operators meeting these requirements were China Telecom and China 
Netcom. Given the actual situation of the telecom market and the rapid 
growth of mobile telecom business, the MII was considering including 
more leading telecom operators. (Verbal[G]).

Summary of issues by theme: Calculation formula for interconnection 
fees and revisions of formula decided by the Ministry in the State 
Council in charge of information industry; 
Raised by other WTO members: Japan - Written[C], Verbal[G]; 
China's response: The Chinese representative referred to the relevant 
regulations, such as Regulations on the Methods for the Settlement of 
Inter-network Call Charge, and Administrative Measures on Licensing for 
Operation of Telecommunication Services. These regulations, published 
on the website of MII (www.mii.gov.cn), were domestic regulation that 
applied to all suppliers equally. (Verbal[G]).

Summary of issues by theme: Clarification on whether the inclusion of 
categories of services other than "the Telecommunication Services 
Classification List" are fully consistent with its accession 
commitments on respective other services; 
Raised by other WTO members: Japan - Written[C], Verbal[G]; 
China's response: It was a complicated issue not only for China, but 
also for other WTO Members, especially given the rapid development of 
contemporary science and technology. Members had their own 
classifications based on the different level of development in telecom 
industries, unique domestic situations and different approaches to 
regulate the market. MII was in the process of considering and 
developing detailed rules on qualifications and procedures on recording 
new services, and that it was expected that these would be adopted in 
the near future. (Verbal[G]).

Summary of issues by theme: Information on how future new services are 
administratively allowed before a revision of the List; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The Chinese representative referred to Article 9 of 
the Regulation on Telecommunications, which stipulated that "New types 
of telecom services other than those in the Catalogue of Telecom 
Service Classifications that are carried out on a experimental basis 
using new technologies should be submitted to telecom regulatory 
authorities at the provincial level for record". (Verbal[G]).

Summary of issues by theme: Confirmation that the List covers supply of 
services on commercial basis, as well as that a notification or simple 
reporting will suffice to enable a licensed service supplier to launch 
such services; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Plans for the Ministry of Information 
Industry to develop a guideline for application or a market entry 
manual to service providers; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: China's plans to implement the Reference 
Paper on Basic Telecommunications through the Telecommunications Law; 
Raised by other WTO members: Chinese Taipei - Written[D]; 
China's response: 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 neither 
allowed to deny request for interconnection from other telecom 
operators and private network operators nor permitted to freely 
restrict the right of users to chose the telecom services provided by 
other operators. As well, in offering inter-network connections to 
other telecom operators, the service quality of leading operators 
should be as good as that of like services within their own networks or 
that of like services supplied to subsidiaries or branches. Leading 
telecom operators had an obligation to coordinate with users acquiring 
telecom network code number resources in order to realize the function 
of the resources, with necessary technical measures. (Verbal[G]).

Summary of issues by theme: Number of the Foreign-Invested 
Telecommunications Enterprises (FITE) applications lodged, approved, 
issued with a Telecom Business Operational Permit, and determined 
unsuccessful since implementing regulation.

Raised by other WTO members: Australia - Written[E], Verbal[G]; 
China's response: Number provided for licensing applications of foreign 
service supplier approved, pending, and rejected cited for various 
sectors, including telecommunications. (Written[F]).

Regarding how many FITE applications had been approved, the Chinese 
delegate suggested that Australia refer to the communication his 
delegation had recently presented pursuant to Annex 1A to the Accession 
Protocol. (Verbal[G]).

Summary of issues by theme: Reasons for applications falling short of 
requirements; 
Raised by other WTO members: Australia - Written[E].

Summary of issues by theme: Whether FITEs can only be licensed to 
supply those services listed in the "translation table," or permitted 
to supply all services listed as value added services in the 
Telecommunications Service Classification Catalogue; 
Raised by other WTO members: Australia - Written[E], Verbal[G].

Summary of issues by theme: China's intention to hold consultations on 
the drafting of the Telecommunications Law with interested foreign 
parties; 
Raised by other WTO members: Australia - Written[E], Verbal[G]; 
China's response: China took a positive attitude towards Members' keen 
interest. Enacting a new law and revising existing ones, even if they 
aimed at implementing obligations under international treaties, were 
the legitimate rights of a Member and that the TRM was not the right 
context in which to address these issues. (Verbal[G]).

Summary of issues by theme: Method to ensure that, subject to 
geographic phasing of market access commitments, regulatory 
arrangements will apply consistently across China with China's 
implementation of the Telecommunications Reference Paper; 
Raised by other WTO members: Australia - Written[E].

Summary of issues by theme: Method to ensure that interconnection rates 
are genuinely related to cost and that access, by competitors, to 
essential facilities is possible without competitive disadvantage with 
China's implementation of the Telecommunications Reference Paper; 
Raised by other WTO members: Australia - Written[E].

Summary of issues by theme: Method to ensure that the domestic body 
responsible for interconnection dispute is independent and impartial 
with respect to all market participants with China's implementation of 
the Telecommunications Reference Paper; 
Raised by other WTO members: Australia - Written[E].

Construction, architectural, and engineering services:

Summary of issues by theme: China's views on how the new Rules on the 
Establishment of Foreign-Invested Construction Enterprises are not 
making the conditions of operation, notably as regards qualification 
requirements and the scope of activities of foreign construction 
companies more restrictive than previously; 
Raised by other WTO members: EC - Written[B], Verbal[G]; 
China's response: 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 been made very clear. First, Decree No. 113 of the Ministry of 
Construction was in line with the principle of national treatment and 
China's commitments in the construction and engineering sector, which 
applied a unified qualification standard to both domestic enterprises 
and foreign invested construction enterprises. According to this 
decree, wholly foreign-owned construction enterprises had been allowed 
to be established as from 1 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 
contracts already signed by foreign companies, the Implementing Rules 
on the Qualification Management for Facilitating Foreign Enterprises to 
Invest in the Construction Sector required that "for all the 
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 Construction 
had promulgated Notice No. 193 in September 2003, which stipulated that 
those foreign enterprises with Qualifications for Contracting 
Construction Works might prolong their engineering construction 
activities in China until 1 April 2004. (Verbal[G]).

Summary of issues by theme: Reasons for residence requirements imposed 
on all architects and engineers to be accounted for in the attribution 
of a certificate, and qualifications imposed; limitations to National 
Treatment; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Policy development for establishment of 
wholly owned enterprises before the abolition of the Direct Contracting 
Scheme in accordance with the Regulation on the Administration of 
Foreign Invested Construction Enterprises; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Assurance that four types of construction 
projects allowed to be undertaken by wholly foreign-owned enterprises 
are subject to interpretation but scope will not be overly 
restrictively implemented; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Requirement of having a minimum number of 
engineers in one office for a certain category of construction 
enterprises constitute as barriers for foreign construction 
enterprises; compatibility with GATS; 
Raised by other WTO members: Japan - Written[C], Verbal[G].

Legal services:

Summary of issues by theme: Information on the conditions applying to 
the opening of the first and additional offices by foreign and Chinese 
lawyers; reason for conditions not listed in schedule; 
Raised by other WTO members: EC - Written[B]; 
China's response: There were no geographic and quantitative 
restrictions on representative offices of foreign law firms as 
indicated in China's commitments. China's representative suggested that 
the concerned Members look at this issue in terms of the actual market 
access of foreign representative offices. More than 50 representative 
offices of foreign law firms had been approved in Beijing and Shanghai 
and that none of them had been subject to a so-called "Economic Needs 
Test". (Verbal[G]).

Summary of issues by theme: Specific activities in which representative 
offices of foreign lawyers can engage in when providing information on 
the impact of the Chinese legal environment; 
Raised by other WTO members: EC - Written[B]; 
Tourism:

Summary of issues by theme: Plans to align the provision on the 
economic needs test on new travel agencies in the Regulations on 
Administration of Travel Agencies; 
Raised by other WTO members: EC - Written[B], Verbal[G]; Chinese Taipei 
- Written[D]; China's response: The Chinese representative referred to 
the Administrative Rules on Travel Agencies, which stipulated that the 
examination and approval of applications for the establishment of 
travelling agencies must be in line with the development plan of travel 
industry. This requirement, which applied equally to domestic travel 
agencies, was to regulate the whole Chinese travel agency market and 
did not constitute a market access limitation. (Verbal[G]); 
Closer Economic Partnership Arrangement between Hong Kong and China 
(CEPA):

Summary of issues by theme: Notification of the Closer Economic 
Partnership Arrangement (CEPA).

Raised by other WTO members: EC - Written[B]; 
China's response: China would notify the relevant WTO bodies of the 
CEPA in due time. (Verbal[G]).

Summary of issues by theme: China's views on compatibility of 
Arrangement with conditions set in GATS; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Information on the services part of the 
Arrangement, including its sectoral coverage and on the rules of origin 
of services, including criteria to be identified as "Hong Kong 
companies.":

Raised by other WTO members: EC - Written[B], Japan - Written[C]; 
Mergers and acquisitions:

Summary of issues by theme: Relationship between the draft Anti-
Monopoly Law of China and the Interim Measures on Equity Participation 
in or Purchase of Assets of Domestic Enterprises by Foreign Investors; 
foreign investment compliance with one or two overlapping sets of 
regulations when conducted through mergers or acquisitions; 
Raised by other WTO members: EC - Written[B]; 
China's response: China had no obligation on this issue in its WTO 
schedule. The issue of mergers and acquisitions was related to the 
context of competition policy or investment policy, which was not 
covered by existing WTO rules. The Doha Round had not concluded, and 
Members should not show haste in this regard. (Verbal[G]).

Summary of issues by theme: Scope of Interim Measures and its 
establishment of mergers and acquisitions (M&A) controls applicable 
exclusively to foreign investment; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Purpose of Interim Measures; grounds for 
developing merger controls specifically for investment by foreign 
undertakings; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Effect of Interim Measures; stricter 
requirements for foreign investment through M&A than those applicable 
to domestic M&A activity; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Number of proposed foreign investment 
operations examined, pending examination, rejected, and grounds for 
rejection under the Interim Measures; 
Raised by other WTO members: EC - Written[B]; 
Architectural and urban planning services:

Summary of issues by theme: Burdensome minimum capital and number-of-
engineers requirements for office registration felt by foreign service 
providers; 
Raised by other WTO members: Japan - Written[C]; 
Computer and related services:

Summary of issues by theme: Enhanced transparency in the scope of 
computer and related services so that service suppliers can be sure to 
what regulations they are not subject; 
Raised by other WTO members: Japan - Written[C]; 
Transport services:

Summary of issues by theme: Schedule to implement the phase-in 
commitment to permit wholly foreign-owned subsidies for freight 
forwarding agency services; 
Raised by other WTO members: Japan - Written[C]; 
China's response: China would implement its commitments in accordance 
with the phase-in period set out in its Schedule. (Verbal[G]).

Summary of issues by theme: Justification for and plans for revising 
the surety bond paid by a non vessel operating common carrier under the 
Regulations on International Maritime Transportation; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The purpose of the payment of 800,000 Yuan as surety 
bond, as required by the Regulations on International Maritime 
Transportation, was to protect the lawful interests of cargo owners and 
to maintain the normal order of the cargo transport market. 
(Verbal[G]).

Summary of issues by theme: Demarcations of scope demarcations and 
ministry in charge of Regulations on International Maritime 
Transportation and Regulations concerning Foreign Investment in 
International Freight Forwarding Operation; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The regulatory system on non-vessel operating common 
carriers (NVOCC) was to administrate those carriers which did not 
physically operate vessels, but issued bills of lading in their names. 
This system was regulated by the Ministry of Communication, and that by 
issuing bills of lading and collecting freights, NVOCCs bore the 
liabilities of carriers. (Verbal[G]).

Summary of issues by theme: Reason for the increase in registered 
capital requirement on foreign enterprises in the Notification on 
Issues Relating to the Experimental Establishment of Foreign-Invested 
Logistic Enterprises; 
Raised by other WTO members: Chinese Taipei - Written[D]; 
Trading rights:

Summary of issues by theme: Reason for delay and schedule for 
implementing revisions of laws including "Foreign Trade Law of People's 
Republic of China" to grant trading rights to companies with foreign 
minority ownership; 
Raised by other WTO members: Japan - Written[C], Verbal[G]

Summary of issues by theme: Schedule and procedure for implementing the 
commitment to grant trading rights to companies with foreign majority 
ownership; 
Raised by other WTO members: Japan - Written[C]; 
Accounting, auditing, and bookkeeping:

Summary of issues by theme: Reason for experience, residency, and fixed 
contact point requirements for foreigner to practice as a Certified 
Public Accountant (CPA) in China stated in Provisional Rules on 
Evaluating Registration of Membership by Foreign Accountants; 
Raised by other WTO members: Chinese Taipei - Written[D]; 
China's response: Any accountant from any other WTO Member who wished 
to apply for a license to practice as a CPA in China had to have 
accumulated at least two years' experience and must have one year of 
residency and a fixed residence or fixed contact point within China. 
This kind of qualification requirement, which related to Articles VI:4 
and VI:6 of the GATS, was under discussion by Members in the Working 
Party on Domestic Regulation. (Verbal[G]).

Source: GAO analysis of WTO documents.

[A] Communication from U.S.: S/C/W/233; dated 11/24/03.

[B] Communication from European Communities: S/C/W/229; dated 11/10/03.

[C] Communication from Japan: S/C/W/228; dated 9/12/03.

[D] Communication from Chinese Taipei: S/C/W/232; dated 11/21/03.

[E] Communication from Australia: S/C/W/231; dated 11/19/03.

[F] Communication from China: S/C/W/234; dated 11/27/03.

[G] Committee report detailing verbal statements made during meeting: 
S/C/M/69; meeting dated 12/5/03.

[End of table]

[End of Enclosure XV]

Enclosure XVI: Council for Trade-Related Aspects of Intellectual 
Property Rights (TRIPS):

General:

Summary of issues by theme: Changes due to reorganization of Chinese 
responsibilities or new efforts at coordinating intellectual property 
matters on a national or local basis; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Relevant divisions in the Ministry of 
Public Security and Procuratorate that investigate and bring 
prosecutions for intellectual property crimes; 
Raised by the United States: Written[A].

Summary of issues by theme: Information concerning any specialized 
prosecutors, police or judiciary for prosecution of intellectual 
property crimes; 
Raised by the United States: Written[A].

China's response: There were no changes to the responsibilities of 
China's Intellectual Property (IP) agencies. The Bureau of Economic 
Crime Investigation under the Ministry of Public Security was 
responsible for the investigation of IP crimes. The Division of 
Economic Crime under the Supreme Procuratorate was responsible for the 
prosecution of Intellectual Property Rights (IPR) crimes. Number 2 
Criminal Tribunal of the Supreme People's Court was in charge of IPR 
criminal cases. (Verbal[E]).

Summary of issues by theme: Consistency of China's administrative 
enforcement of IPR with TRIPS Agreement; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Extent that China's administrative system 
provides for punitive remedies and extent to which such administrative 
actions comply with the criminal procedures and deterrent penalties of 
the TRIPS Agreement; 
Raised by the United States: Written[A]; 
China's response: 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 nature. In cases in 
which the form of administrative remedies seemed to be similar to civil 
remedies, Articles 41 through 48 of the TRIPS Agreement should be 
applied to administrative remedies. Some civil remedies provided for in 
Articles 41 through 48, such as an order requiring the payment of 
damages to right holders, could not apply to administrative cases in 
China, since neither the Administrative Penalty Law nor the separate 
law granted such a power to administrative authorities. (Verbal[E]); 
The provisions on administrative enforcement in the Chinese trademark 
system complied with Article 49 of the TRIPS Agreement. The procedures 
were fair and equitable, including the rules on the presentation of 
evidence and decisions on the merits of the case in writing, etc. The 
form, legal basis and nature of administrative remedies were different 
from those of criminal remedies. Therefore, the Chinese administrative 
remedies could not be covered by Article 61 of the TRIPS Agreement. 
Nevertheless, China's criminal legal system met the requirements of 
Article 61. (Verbal[E]).

Summary of issues by theme: Timely delivery of new Chinese laws, 
including local regulations or rules, as well as draft rules available 
for public comment; 
Raised by the United States: Written[A]Pursuant to Article 63.2 of the 
TRIPS Agreement, China had notified ten main dedicated laws relating to 
the IPRs in full text and a series of laws and regulations in summary, 
including the Criminal Law, the Anti-Unfair Competition Law, and the 
Civil Procedure Law. Following the TRIPS Council's decision of 21 
November 1995, 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 the 
Agreement between the World Intellectual Property Organization and the 
World Trade Organization. As a major arm in IP enforcement, the 
judiciary 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 scope of commenting in the course of interpretation. 
Meanwhile, all the TRIPS-related laws, regulations, and other 
regulatory documents would be published through the Chinese Foreign 
Trade and Economic Cooperation Gazette as well as the bulletins and the 
websites of the relevant government departments. Members could also 
access the enquiry point set up by the Chinese Government for 
interesting information. (Verbal[E]).

Summary of issues by theme: Annual and multiyear plans for proposed or 
pending legislation, regulations, rules, interpretations relevant to 
IPR.

Raised by the United States: Written[A].

Summary of issues by theme: China's intentions to advise on 
promulgation of all IPR-related ministerial rules as well as local 
rules to the TRIPS Council; 
Raised by the United States: Written[A].

Summary of issues by theme: Changes contemplated in the proposed civil 
code to IPRs, including any changes in enforcement of IPRs; 
Raised by the United States: Written[A]; 
China's response: The representative of China said that the revision of 
the Chinese Civil Law was an important task for legislators. The ninth 
National Congress had enacted and revised a draft code. Due to the 
rapid social and economic development in China, it was necessary to 
regulate and rewrite some contents of that draft. China needed to do 
further research and investigation on this matter. (Verbal[E]).

Summary of issues by theme: Copies of any national laws that mandate 
greater transparency by local authorities in these areas.

Raised by the United States: Written[A]; 
China's response: China had made every effort to enhance its 
administrative transparency. This included two main aspects. First, the 
legislators had enacted the Legislation Law, the Regulations on the 
Drafting Procedure of Administrative Regulations, and the Regulations 
on the Drafting Procedure of Rules, which standardized the operating 
procedure of administrative power. Second, the Administrative 
Permission Law would be enforced in 2004. The Law further regulated the 
boundary, conditions and procedure of administrative permission. It 
provided that only laws, regulations and local regulations could 
establish administrative permission and local laws could establish 
interim administrative permission. However, the departmental rule of 
the State Council could not establish administrative permissions. 
Thanks to these laws and regulations, administrative transparency had 
been increasing remarkably and the efficiency of administration would 
be further promoted. (Verbal[E]).

Summary of issues by theme: Legislative development to improve 
administrative transparency, including enactment of an Administrative 
Procedure Act; 
Raised by the United States: Written[A].

Summary of issues by theme: Procedures available under Chinese law to 
challenge the legality of ministerial rules involving intellectual 
property rights that may be inconsistent with laws or other ministerial 
rules or China's WTO obligations; 
Raised by the United States: Written[A]; 
China's response: According to the Legislation Law, the Regulations on 
the Drafting Procedure of Administrative Regulations and the 
Regulations on the Drafting Procedure of Rules, the efficacy of laws 
and regulations was prior to that of local legislation and departmental 
rules, and the efficacy of local regulations was prior to local 
administrative rules. While local regulations conflicted with the 
regulations of the State Council, the National Congress had the 
authority to review them. When local rules conflicted with the 
departmental rules of the State Council, the State Council would be 
responsible for the review. (Verbal[E]).

Summary of issues by theme: Interpretation of regulation about the 
right of communication through information network; time schedule of 
when China will make the interpretation public. Japan -Written[C]; 
China's response: 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 
were the same as the liabilities for various infringing acts, whether 
on-line or off-line, including Internet Service Provider (ISP) 
liability. Although the issue concerning ISP liability was not within 
the framework of the TRIPS Agreement, China was making an active and 
serious study of the issue. Other countries' relevant legislation, in 
particular that of the United States and the European Communities, had 
aroused general concerns in China. (Verbal[E]).

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. 
(Verbal[E]).

Market access and IPR services:

Summary of issues by theme: Information on whether foreigners or 
individuals from outside mainland China may obtain permission to 
practice professions including law firm attorneys, patent agents, 
trademark agents, and copyright agents; 
Raised by the United States: Written[A].

Summary of issues by theme: Information on whether licensed 
professionals from outside mainland China may join U.S. or foreign law 
firms or consulting companies and continue to provide their services 
from such a base of operations; 
Raised by the United States: Written[A].

Summary of issues by theme: Information on whether foreigners are 
restricted in the choice of agents they may hire to those which have a 
license to represent foreigners, as is indicted by the Amended Draft 
Regulations on Patent Agency; 
Raised by the United States: Written[A]; 
Patents:

Summary of issues by theme: State Intellectual Property Office's (SIPO) 
current application for compulsory licensing regime with respect to any 
patents registered in China; circumstances of such compulsory licenses; 
Raised by the United States: Written[A].

Summary of issues by theme: Explanation of the consistency of Rules for 
the Compulsory Licensing of Patents with the patent law provisions 
restricting compulsory licenses; 
Raised by the United States: Written[A].

Summary of issues by theme: Explanation of consistency of with the 
relevant provisions of Rules for the Compulsory Licensing of Patents 
with TRIPS Agreement, regarding Other Use Without Authorization of the 
Right Holder; 
Raised by the United States: Written[A].

Summary of issues by theme: Current information regarding patent 
pendency at SIPO, with respect to foreign patent applications and 
domestic patent applications; 
Raised by the United States: Written[A]; 
China's response: In 2002, SIPO had received 252,631 patent 
applications, including inventions, utility models and industrial 
designs, an increase of 49,048 over the previous year. The growth rate 
was 24.1 percent. 951 international applications had been filed and 697 
requests had been made for the international preliminary examination. 
738 requests for the international preliminary examination had been 
completed. (Verbal[E]).

Summary of issues by theme: Recent data showing improvement status in 
the pendency of examination for each technical field; transparency of 
this data; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Disparity between domestic contract law and 
the licensing regulations on patents that raise concern to national 
treatment; proper enforcement by regional authorities of laws and 
regulations reflecting the relevant revisions at the time of China's 
accession to the WTO; 
Raised by other WTO members: Japan - Verbal[E]; 
Data exclusivity and trade secret protection:

Summary of issues by theme: Forms required for submission of 
undisclosed clinical data to insure confidentiality of such data 
pursuant to TRIPS; statistical or other information regarding 
implementation of data requirement; 
Raised by the United States: Written[A].

Summary of issues by theme: Explanation of whether and how the data 
exclusivity provisions provided by the State Food and Drug 
Administration (SFDA) implement requirement to protect undisclosed data 
pertaining to pharmaceutical products submitted to government 
authorities for marketing approval from unfair commercial use; 
Raised by the United States: Written[A]; 
Summary of issues by theme: SFDA's protection of data submitted when 
marketing approval for such data is thereafter denied; 
Raised by the United States: Written[A].

Summary of issues by theme: SFDA's creation of of an obligation of 
competing drug companies not to obtain or exploit protected data, 
including the right of an injured party to sue for theft of this 
information; 
Raised by the United States: Written[A].

Summary of issues by theme: SFDA's establishment of an obligation not 
to use such data for any purpose other than the marketing approval of 
the product; 
Raised by the United States: Written[A].

Summary of issues by theme: SFDA's definition of confidential data 
intended to provide the same private rights for protection of this 
undisclosed information as those provided by the Law to Counter Unfair 
Competition; 
Raised by the United States: Written[A].

Summary of issues by theme: Procedures to protect confidential 
information in intellectual property related litigation; 
Raised by the United States: Written[A]; 
China's response: 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 provided by the 
SFDA, the Chinese representative referred to the relevant regulations. 
Pursuant to Article 35.2 of the Rules on Implementation of Drug Law, 
the SFDA would not render a marketing approval pursuant to an 
application by taking advantage of other applicants' undisclosed 
information. Pursuant to Article 14 of the Measures on Regulation of 
Drug Registration, when putting forward an application for drug 
registration, the applicant should ensure that all data submitted were 
obtained 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. (Verbal[E]).

Trademarks:

Summary of issues by theme: Number of and information on any well-known 
marks recognized to date, and any statistical data on foreign and 
domestic marks recognized; 
Raised by the United States: Written[A]; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
Summary of issues by theme: List of 293 marks recognized by the Chinese 
Trademark Office in calendar year (CY) 2002, and statistical data on 
foreign and domestic marks recognized as well known marks under prior 
and new procedures; 
Raised by the United States: Written[A]; 
China's response: Although it had received some domestic and foreign 
requests for the determination of well-known marks, the TMO had not yet 
determined well-known trademarks under the new provisions. (Verbal[E]).

Summary of issues by theme: Legal significance and differences among 
well-known marks, famous marks, provincial famous marks, famous brands, 
trademarks listed for "enhanced enforcement.":

Raised by the United States: Written[A]; 
China's response: 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 marks which were determined by the 
administrative authorities for industry and commerce at the provincial, 
municipal, or autonomous region level, based upon the local 
legislations, 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. The Trademark 
Office (TMO) never used this term. In addition, the TMO had used to 
have a list of marks for enhanced protection, which had been based upon 
the frequency and scope of trademark infringement. However, this 
practice had been abolished. (Verbal[E]).

Summary of issues by theme: Foreign marks or brands that have been 
identified as "famous" in Shanghai or other regions; 
Raised by the United States: Written[A]; 
China's response: With respect to the determination of famous 
trademarks, the provincial or municipal authorities had the authority 
to make such decisions, and were not required to report to the TMO. 
Therefore, the TMO had no such information. (Verbal[E]).

Summary of issues by theme: Information on whether Chinese Trademark 
Office (CTO) has granted any trademarks for three-dimensional marks, 
color marks, olfactory marks, auditory marks; 
Raised by the United States: Written[A]; 
China's response: By the end of October 2003, the TMO had received 1398 
three-dimensional mark applications, among which 343 had been approved 
for registration. For some technical reasons, the TMO had no statistics 
on color marks. In addition, smell and sound marks were non-
registerable under the Trademark Law. (Verbal[E]).

Summary of issues by theme: Standards regarding recognition of well 
known marks are being adopted by the General Administration of Customs, 
Ministry of Public Security, Supreme People's Procuratorate and Supreme 
People's Court as a result of the amendments to the Trademark Law or 
the new well-known (WK) Mark Rules; intention for agencies to rely upon 
determinations by Chinese Trademark Office for enforcement actions; 
Raised by the United States: Written[A].

Summary of issues by theme: Civil, criminal or administrative 
procedures and standards are in place to protect against companies that 
unfairly apply for the trademark of another company, or use such a 
trademark, by translating the foreign mark into Chinese or 
transliteration of its sounds; 
Raised by the United States: Written[A]; 
China's response: Transliteration or translation was one of the 
standards to determine the identity or similarity. Thus, such 
applications could be refused during the trademark examination. 
Moreover, interested parties could file the request to the trademark 
review and arbitration bureau through the opposition or dispute 
procedure. (Verbal[E]).

Summary of issues by theme: Procedures to cancel trademarks applied for 
by agents or distributors without authorization of their principal; 
Raised by the United States: Written[A]; 
China's response: Article 15 of the Trademark Law provided that where 
the agent or representative of the owner of a mark applied for the 
registration in his own name without the owner's authorization and the 
owner opposed the registration, the application should be refused and 
the use should be prohibited. This problem could be solved through the 
opposition or dispute procedure. The interested party could file an 
application with the TMO or the Trademark Review and Arbitration Bureau 
(TRAB). By the end of September 2003, the number of pending cases in 
the TRAB was 31,924. The number of pending opposition cases at the TMO 
was 16,386. The pending new applications for registration at the TMO 
were 380,000. (Verbal[E]).

Summary of issues by theme: Current information regarding trademark 
pendency at the CTO as well as the Trademark Review and Adjudication 
Board; 
Raised by the United States: Written[A].

Summary of issues by theme: Information on whether foreign licensors 
and/or assignees of trademarks are required to record their assignments 
or licenses of trademarks; whether such recordation requires government 
approval of the terms, registration of the complete text or only its 
significant terms, and precedence over separately negotiated contract 
or agreement; 
Raised by the United States: Written[A]; 
China's response: 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 Chinese or foreign. The recording was not required for an 
assignment contract. As for the effect of the recording of a license 
contract, although there was no express provision in the Trademark Law, 
the judicial interpretation provided that, where the trademark license 
contract was not recorded at the TMO, it should not affect its effect, 
unless otherwise agreed between the interested parties, but an 
unrecorded license contract should not resist a third party with good 
faith. In addition, the Trademark Law provided that the assignment of a 
registered trademark should be published after it was approved. The 
assignee should enjoy the exclusive right to use the mark from the date 
of the publication. (Verbal[E]).

Summary of issues by theme: Provisions on right of priority added to 
"Trademark Law" and "Patent Law" are carried out on most-favored-nation 
basis to all WTO members.

Raised by other WTO members: Chinese Taipei - Written[D].

Summary of issues by theme: Definition of specific procedure for 
requesting that a trademark be considered a well-known mark and time-
scaled involved; request for details of the latest status on its 
revision of the "Rules on the Determination and Protection of Well-
Known Marks.":

Raised by other WTO members: Chinese Taipei - Written[D]; 
China's response: China had been protecting foreign well-know 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 the request of the interested party, 
report and send all the documents to the provincial administrative 
authorities for industry and commerce, if the case satisfied the 
requirements under Article 13 of the Trademark Law. The provincial 
authorities should, within 15 working days from the date of acceptance 
of the request of the interested party, report and send all the 
documents to TMO. The TMO should make its determination within six 
months from the date of the receipt of the relevant documents. Although 
it had received some domestic and foreign requests for the 
determination of well-known marks, the TMO had not yet determined well-
know trademarks under the new provisions. (Verbal[E]).

Geographical indications (GI):

Summary of issues by theme: Changes contemplated in the proposed civil 
code to IPR, including adoption of any additional measures to protect 
other forms of IPR, such as geographical indications; 
Raised by the United States: Written[A]; 
China's response: The representative of China said that the revision of 
the Chinese Civil Law was an important task for legislators. The ninth 
National Congress had enacted and revised a draft code. Due to the 
rapid social and economic development in China, it was necessary to 
regulate and rewrite some contents of that draft. China needed to do 
further research and investigation on this matter. (Verbal[E]).

Summary of issues by theme: Number of certification or collective marks 
for geographical indications granted by the CTO; 
Raised by the United States: Written[A]; 
China's response: To date, the TMO had received 260 GI applications for 
the registration of certificate marks, 100 of which had been approved. 
(Verbal[E]); 
Summary of issues by theme: Standing that a certification mark owner 
has to challenge for the geographic term in the certification mark on 
related goods or products that do not come from the place for which the 
mark is registered; 
Raised by the United States: Written[A]; 
China's response: The registrant of a certificate mark could file a 
complaint with the local authorities for industry and commerce or might 
file a lawsuit at the People's Court requesting to stop the 
infringement. (Verbal[E]).

Summary of issues by theme: Use of trademarks or trade names that 
identify the product as "like" or "style of" or "imitation" in 
conjunction with a registered geographical indication; 
Raised by the United States: Written[A].

Summary of issues by theme: Co-existence of pre-existing trademark with 
later established geographical indication under China's Trademark Law 
that any trademark registered in "good faith" remains valid 
notwithstanding that it includes a geographic sign; 
Raised by the United States: Written[A]; 
China's response: Every country might encounter the problem of earlier 
registered trademarks and the GIs. Article 16 of the Trademark Law was 
substantially in compliance with the exceptions provided for in the 
TRIPS Agreement. China had acceded to the WTO on 11 December 2001 and 
the latest amendment of the Trademark Law had come into force on 
1 December 2001. Those marks that had obtained registration in good 
faith would continue to be valid under Article 16 of the Trademark Law, 
which referred to marks registered before this date rather than after 
it. (Verbal[E]).

Summary of issues by theme: Allowance of China's Trademark Law for 
continued registration of a trademark where such geographic term is 
deceptive as to the origin of the goods; 
Raised by the United States: Written[A].

Summary of issues by theme: Administration of a sui generis system for 
protection of geographic indications by the China's State General 
Administration of Quality, Supervision, Inspection, and Quarantine 
(AQSIQ); interaction between the system of GI protection by the AQSIQ 
and the system of protection provided for the GIs in the trademark 
system; refused protection for existing mark; foreign owner's standing 
to challenge recognition; number of recognized domestic and foreign 
geographic indications; number of enforcement actions taken for 
violation; bilateral agreement between China and other governments for 
mutual recognition using AQSIQ system.

Raised by the United States: Written[A]; 
China's response: The State General Administration for Quality 
Supervision, Inspection and Quarantine (AQSIQ), in accordance with the 
Regulation for the Protection of Products with Geographical 
Indications, carried out the protection of GIs. If a trademark or 
certificate mark already existed, the AQSIQ would still provide GI 
protection from different respects and functions according to the 
Regulations and the related stipulations in the TRIPS Agreement. The 
following action had been taken against the infringement of GIs: the 
AQSIQ was the authorized government agency with two major functions, 
namely comprehensive administration and law enforcement. The agencies 
of the AQSIQ executed random checks and law enforcement against the 
infringements of GIs and trademarks in accordance with the Law on 
Product Quality, the Law on Entry and Exit of Commodities Inspection, 
Standardization Law of the People's Republic of China, and other 
relevant laws and regulations. (Verbal[E]).

Copyright:

Summary of issues by theme: Steps to enact implementing rules to the 
Chinese Copyright Law regarding protection of copyright over 
information networks; 
Raised by the United States: Written[A]; 
China's response: With regard to the legislation on copyright 
protection of digital networks, the Chinese representative said that 
there was still much work to be done by the competent authorities in a 
thorough and careful manner, including the investigation and study of 
the legislative experiences of other Members. (Verbal[E]).

Summary of issues by theme: Request for information on possible 
developments that have taken place under Chinese law or judicial 
interpretations to protect temporary copies; 
Raised by the United States: Written[A]; 
China's response: Regarding the protection of temporary copies, such 
term was used neither in the Berne Convention nor in the TRIPS 
Agreement. (Verbal[E]).

Summary of issues by theme: Information on whether foreign rights 
holders have had their materials published pursuant to a provision in 
China's Copyright Law that provides for a mandatory right for 
republication of material for Chinese textbooks; scope of any such 
republication undertaken; 
Raised by the United States: Written[A]; 
China's response: In regard to re-publication of materials in Chinese 
textbooks, to date, the National Copyright Administration of China 
(NCAC) had not yet obtained any information in this respect from 
foreign right owners or domestic publishers. (Verbal[E]).

Summary of issues by theme: Information on whether the right to a 
"reasonable" royalty from infringers under Software Protections Rule 
has been applied by China's courts or administrative agencies; 
compliance with TRIPS; consistency with Copyright Law; 
Raised by the United States: Written[A]; 
China's response: So far no copyright administrative department had 
dealt with such a case, and there had been no news reported concerning 
the relevant judicial decision. In addition, under Article 30 of the 
Regulations, the "holder of copies of a piece of software" was defined 
as the end user of software who had performed the reasonable duty for 
care and had obtained a copy of software in good faith. Accordingly, it 
could not be inconsistent with Article 13 of the TRIPS Agreement. If 
the holder of the copy of software used an infringing copy, the person 
was obliged to prove that he or she never knew nor had reasonable 
grounds to know that such a copy was an infringing one. (Verbal[E]).

Summary of issues by theme: Software regulation's allowance of software 
use "for the purpose of study and research" without the consent and 
without remuneration to the copyright owner and its consistency with 
the Berne Convention as well as TRIPS; permission of software 
reproduction; consistency with China's Copyright Law, and authority to 
avoid payment for legitimate copies; 
Raised by the United States: Written[A]; 
China's response: Article 17 contained the same principles as adopted 
in Article 22 of the Copyright Law concerning fair use. According to 
Article 21 of the revised Implementing Regulations of the Copyright 
Law, fair use should not conflict with the normal exploitation of the 
work and should not unreasonably prejudice the legitimate interests of 
the right holder. Consequently, Article 17 of the Regulations should be 
deemed as consistent with Article 13 of the TRIPS Agreement. 
(Verbal[E]).

Summary of issues by theme: Administrative agencies that may take 
action against an Internet Service Provider that illegally makes 
content available to the public or downloading it; 
Raised by the United States: Written[A]; 
China's response: In accordance with Article 47 of the Copyright Law, 
copyright administrative departments had been authorized to take action 
against an ISP who was illegally making the content available to the 
public or downloading it. (Verbal[E]).

Summary of issues by theme: Developments in China's study of the 
content of the World Intellectual Property Organization (WIPO) 
Copyright Treaty and WIPO Performances and Phonograms Treaty; 
Raised by the United States: Written[A]; 
China's response: 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 copyright systems 
in the digital network environment. In November 2002, the National 
Copyright Administration of China (NCAC) organized a delegation to 
visit WIPO and exchange views with the organization in respect of 
China's accession to the two new treaties. In July 2003, the NCAC had 
held a forum on the Internet Treaties and copyright protection in 
digital network environment and listened to the opinions from legal and 
network circles. In November 2003, the NCAC would invite WIPO experts 
to China to give touring lectures on the two new treaties. (Verbal[E]).

Summary of issues by theme: Information regarding Internet related 
enforcement activity of the Ministry of Culture pursuant to its 
Provisional Regulation on the Administration of Cultural Products and 
Services on the Internet; 
Raised by the United States: Written[A]; 
Summary of issues by theme: Information on whether the Chinese 
government has issued any directives regarding proper use of the 
Internet on university or college campuses, in research and development 
institutions, government offices or in state-owned corporations; 
Raised by the United States: Written[A]; 
China's response: In China, if an infringement took place on the 
Internet, the infringer, whether an individual or a legal entity, 
should bear the corresponding legal liabilities pursuant to the 
Copyright Law. The NCAC had not issued any directive regarding the 
proper use of the Internet in universities, government offices or 
state-owned corporations. (Verbal[E]).

Summary of issues by theme: Information on whether China has undertaken 
any criminal, administrative or civil prosecutions against individuals 
or entities based in China hacking into overseas databases for purposes 
of obtaining unauthorized access to foreign copyrighted materials; 
Raised by the United States: Written[A]; 
China's response: In February of 2002, the copyright administrative 
department of Zhejiang province had dealt with a case concerning "the 
U.S. Chemistry Digest Disc Publication" pirated by means of illegal 
decoding. Two suspects had decoded a lawful copy of the disc, made 
reproductions and then sold them on the Internet by sending batches of 
mails. The copyright administrative department had ordered the decoder 
and the two suspects to cease the infringing acts and confiscated their 
unlawful income. In addition, the competent department had confiscated 
the equipment and tools mainly used to make infringing copies, 
destroyed the infringing copies and imposed a forfeit on the two 
suspects. (Verbal[E]):

Summary of issues by theme: Expansion of the current provision of the 
Copyright Law, which deem the removal or alteration of any electronic 
rights management information without authority to be infringement, to 
include the distribution, import for distribution, broadcast or 
communication to the public works or copies of works knowing that 
electronic rights management information has been removed or altered 
without authority.

Raised by other WTO members: Japan - Written[C]; 
China's response: Regarding the removal or alteration of electronic 
rights' management information, this issue was not covered by the TRIPS 
Agreement but by the WIPO Copyright Treaty (WCT). Nevertheless, the 
issue was under consideration in China. (Verbal[E]).

Summary of issues by theme: Burden of proof on right holders under 
regulation for copyright administrative punishment.

Raised by other WTO members: Japan - Written[C]; 
China's response: 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 of the TRIPS Agreement. The Regulations reflected 
the legislative purpose of the Copyright Law. According to Article 3.2 
of the Regulations, administrative procedures could be initiated not 
only on the basis of complaints from right holders but also with the 
removal of cases by other relevant departments, reports from other 
persons finding out infringements, or initiative investigation by 
administrative departments. In accordance with the Regulations, the 
NCAC had to investigate the case with a great influence in the country, 
which was determined at the NCAC's discretion. In general, an 
infringement should be dealt with by the local administrative 
department of the place where the infringement was committed. 
(Verbal[E]).

Summary of issues by theme: Number of administrative procedures started 
without reports from right holders.

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Criteria in deciding the level of 
administrative department to deal with a case.

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Definition of "find infringement.":

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Amount of proof right holders should submit 
as "proof of right holder identification" when they apply to 
administrative procedures.

Raised by other WTO members: Japan - Written[C]; 
China's response: The copy of a work with a complainant's name on it 
might be deemed as a proof of the right holder's identification. A 
copyright registration was not necessarily required for complainants to 
apply to administrative procedures. (Verbal[E]).

Summary of issues by theme: Concern that provision would force right 
holders to take much time and cost to identify the infringer's name, 
and location without legal prosecution power.

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Possibility that an administrative 
department refuses to accept the application because the department is 
not the one in charge.

Raised by other WTO members: Japan - Written[C]; 
China's response: An administrative department might not accept an 
application for administrative procedures if it was not in charge. 
(Verbal[E]).

Summary of issues by theme: Explanation of the person who has a burden 
of proof and the duration the copyright administrative department 
specifies.

Raised by other WTO members: Japan - Written[C]; 
China's response: The expression "person who has a burden of proof" as 
mentioned in Article 16 of the Regulations referred to the complaining 
party but not the right holder. Whether an illegal act was slight or 
not was determined by the administrative department according to the 
concrete circumstances of each case. (Verbal[E]).

Summary of issues by theme: Definition of "parties" as both right 
holders and infringers; difficulty for foreign right holders to give 
statements and submit claims within seven days from the notified day.

Raised by other WTO members: Japan - Written[C]; 
China's response: 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. (Verbal[E]).

With respect to the negative prescription of administrative penalty, 
Article 9 of the Regulations was consistent with Article 29 of the 
Administrative Penalty Law of China, i.e., where an illegal act was not 
discovered within two years of its commission, administrative penalties 
should no longer be imposed, except if otherwise prescribed by the law. 
The 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 of administrative penalty was different from that of a 
civil action in that the latter was calculated from the date on which 
the injured party knew or had the reasonable grounds to know that his 
rights were infringed while the former was calculated from the date on 
which the illegal act took place or stopped. (Verbal[E]).

Summary of issues by theme: Criterion to consider an infringement as 
illegal activity.

Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Possibility that re-distributed facilities 
can hamper the deterrent effect of the administrative procedures.

Raised by other WTO members: Japan - Written[C]; 
China's response: Regarding the auction or re-selling of facilities 
used for making infringed goods, the person who bought such facilities 
must observe the law. Moreover, such facilities could be bought only by 
factories in lawful operation and with the requisite qualifications. 
(Verbal[E]).

Summary of issues by theme: Stronger administrative measures, including 
stiffer fines and increased number of seizures, to ensure active and 
smooth administrative control of problem; 
Raised by other WTO members: Japan - Verbal[E]; 
Semiconductor layout design:

Summary of issues by theme: Identification of all rules or regulations, 
including ministerial rules and local enactments enacted to 
semiconductor layout design enforcement; 
Raised by the United States: Written[A]; 
China's response: Layout-designs and utility and design patents were 
protected by China's Patent Law and the relevant regulations. Forging 
others' patents with serious circumstances would be convicted of the 
crime of forging others' patents according to Article 216 of the 
Criminal Law. (Verbal[E]).

Summary of issues by theme: Information regarding any civil or criminal 
actions for infringement of layout designs; 
Raised by the United States: Written[A].

Summary of issues by theme: Deadlines for filing semiconductor layout 
design applications; 
Raised by the United States: Written[A]; 
Enforcement:

Summary of issues by theme: Statistical information available on the 
number of Administrative enforcement cases for CY 2002 and partial year 
2003 reports; 
Raised by the United States: Written[A].

Summary of issues by theme: Number of civil intellectual property cases 
heard by Chinese courts, cases requesting and/or granted preliminary 
relief whether or not inaudita altera parte; length of time from case 
initiation to adjudication for trial and appellate levels; 
Raised by the United States: Written[A]; 
China's response: With regard to the trial term, Chinese courts would 
strictly follow the Regulations on Civil Procedure Law and judicial 
interpretation. (Verbal[E]).

Summary of issues by theme: Opportunities for review or appeal of 
judicial determinations in China's court process; 
Raised by the United States: Written[A]; 
China's response: According to Article 147 of the Civil Procedure Law, 
the parties who could not accept a judgment or decision might lodge an 
appeal. According to Article 178 of the Civil Procedure Law, the 
parties could apply for another trial to the same court or the superior 
court for those cases that had been effective. Besides, the court or 
the procuratorate could start supervising procedures. (Verbal[E]).

Summary of issues by theme: Number of administrative intellectual 
property appeals heard by Chinese courts; 
Raised by the United States: Written[A].

Summary of issues by theme: Standards under Chinese law for determining 
that an agency decision was illegal, or should be reconsidered; special 
efforts made by court to better understand the handling of intellectual 
property appeals; 
Raised by the United States: Written[A]; 
China's response: As to standards for IPR crimes, two laws applied at 
the central and local levels, that is, the Interpretation on Specific 
Application of Law on Several Questions of Trial for Illegal 
Publication Criminal Cases by the Supreme People's Court and the 
Regulations on Standards for Initiating Cases In Economic Crimes by the 
Supreme People's Procruratorate and the Ministry of Public Security. 
(Verbal[E]).

Summary of issues by theme: Rate of reversal of CTO and SIPO 
administrative agency decisions noted above on appeal to the court 
indicated above; 
Raised by the United States: Written[A].

Summary of issues by theme: Number of criminal IPR investigations 
initiated, cases filed, convictions, length of sentence, amount of 
fine, compensation to rights holder; 
Raised by the United States: Written[A]; 
China's response: Regarding the number of criminal cases of 
intellectual property rights infringement, there had been 301 persons 
and 128 cases in 1998, 379 persons and 248 cases in 2000, and 702 
persons and 408 cases in 2002. A total of 1,273 criminal cases relating 
to intellectual property rights had been closed within the five years, 
and 2,104 persons had been sentenced. At present, the Supreme People's 
Court was drafting the judicial interpretation on the application of 
law in criminal cases of intellectual property rights' infringement, 
which would include the criteria for conviction and imposing penalties. 
The interpretation would be adopted and published by the Supreme 
People's Court after strict examination. (Verbal[E]).

Summary of issues by theme: Number of criminal cases for export of 
counterfeit goods, hacking or circumvention of copyright technological 
protection measures, hacking of copyright rights management 
information, trafficking in technological protection measures, 
software end-user piracy, commercial sale or replication of pirated 
semiconductor layout designs, patent infringement of utility or design 
patents; 
Raised by the United States: Written[A]; 
China's response: In the year 2002, the Chinese customs had seized a 
total of 573 cases worthy of RMB 95.62 million, including four worth 
RMB 230,000 and 569 cases worth RMB 95.39 million. (Verbal[E]).

Summary of issues by theme: Number and relevant circumstances of 
criminal IPR cases that were privately initiated (zisu); 
Raised by the United States: Written[A]; 
China's response: Statistics of privately initiated criminal cases 
accepted by the Chinese courts from January to September of 2003 were 
the following: one on copyright, one on commercial secrets, two on 
selling infringing reproductions, 18 on producing and selling 
counterfeit products. (Verbal[E]).

Summary of issues by theme: New interpretations, standards, regulations 
or guidelines by the courts, procuratorate or other agencies regarding 
the circumstances in which investigations should be initiated by the 
procuratorate; 
Raised by the United States: Written[A]; 
China's response: 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 Concerning the Judicial Application in Hearing the Illegal 
Publication Criminal Cases by the Supreme People's Court, and the 
Interpretation Regarding Practical Questions Concerning the Judicial 
Application in Hearing Producing, Selling Counterfeit Goods Criminal 
Cases by the Supreme People's Court and the Supreme People's 
Procuratorate. At this stage, the Supreme People's Court had been 
carrying out investigation and research concerning the responsibility 
and scientificity of the Standards for Initiating Criminal Cases. China 
would stipulate the interpretation with the feasibility or submit the 
relevant law-making suggestions in the near future. (Verbal[E]).

Summary of issues by theme: Steps taken to facilitate referrals of 
criminal IPR cases from administrative agencies, including standards 
for evidence collection and preservation, standards for referral to 
criminal prosecution, standards for referral back to administrative 
punishment if a case is not initiated by criminal justice authorities; 
Raised by the United States: Written[A]; 
China's response: Regarding the steps which were being taken to 
facilitate the referral from administrative agencies, the Chinese 
representative referred to the Provisions on the Transfer of 
Susceptible Criminal Cases by the Administration Organs for Law 
Enforcement. (Verbal[E]).

Summary of issues by theme: Guidelines established apart from those in 
China's criminal code regarding the penalties to be provided for 
willful trademark counterfeiting or copyright piracy on a commercial 
scale; 
Raised by the United States: Written[A]; 
China's response: 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 
prosecution in IPR offences except copyright crimes. Section 7 of 
Chapter 3 of the Criminal Law and these two above-mentioned 
Interpretations constituted the most fundamental basis for the 
protection of 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 
found in Articles 54 and 59 of the Trademark Law, Article 58 of the 
Patent Law, Article 47 of the Copyright Law, Article 24 of the Software 
Regulations, Article 40 of the New Species of Plant Regulations, and 
Article 21 of the Anti-Unfair Competition Laws. Those infringing 
offences, once proved criminal, would be brought to justice by the 
Criminal Law. (Verbal[E]).

Summary of issues by theme: Definition of counterfeit trademarks in 
China's Criminal Code and conformity with TRIPS.

Raised by the United States: Written[A].

Summary of issues by theme: Information on whether criminalization is 
provided only of identical goods or whether counterfeiting of goods of 
the same class or other classes in which the trademark is registered 
may be prosecuted; 
Raised by the United States: Written[A]; 
China's response: "Goods of the same class" meant goods that were 
completely identical, or of the same category and class, or with the 
same name, that share basically the same nature and function. "Goods of 
the same class" had bigger extension than "identical goods." The 
practical judgment of "goods of the same class" was usually subject to 
comprehensive assessment by the judge based upon the general knowledge 
of the public of certain products and the classification of goods by 
the international classification list of goods and services, with the 
trademark registration. The classification list was not the only 
benchmark for judgment, but an important standard for reference. To sum 
up, one of the important criteria to tell whether two products were of 
the same class was whether they shared the same product name, though 
they might have different practical functions. However, those goods 
with different names could also be defined as goods of the same class 
as long as they bore the same practical function or scope. (Verbal[E]).

Summary of issues by theme: Information on whether the manufacturing, 
distribution, import or export, of products bearing a mark that cannot 
be distinguished in its essential aspects but is not identical is 
criminalized in these or other provisions of China's criminal law; 
Raised by the United States: Written[A]; 
China's response: 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 being accused of infringement 
generally has no visual difference from the registered trademark of the 
plaintiff." Article 10 of this Interpretation also defined the 
principle on judgment of identical or similar trademarks as "(1) set 
the attention of the relevant public as the standard; (2) comparison 
should be made not only to trademarks as a whole, but also to the major 
parts of them". The process should only be undertaken when the compared 
objects were separated and isolated. Therefore, the Chinese 
representative inferred that identical trademarks in legal terms made a 
difference to what "identical" meant in daily language. (Verbal[E]).

"Identical trademark" was different from what "identical" meant in 
daily language. China's standard for judgment was whether marks had no 
visual difference. According to this understanding, this standard 
generally conformed to the principle of being "not distinguished in 
essential aspects." (Verbal[E]).

Summary of issues by theme: Information on whether the export of 
counterfeit goods constitutes a "sale" within the meaning of China's 
Criminal Code; 
Raised by the United States: Written[A]; 
China's response: Commercial import and export actions constituted a 
"sale" in real terms. However, under these circumstances, a party 
involved could be criminally liable for smuggling or illegal 
operations. (Verbal[E]).

Summary of issues by theme: Information on whether China currently 
criminalizes in its laws, or has any intention of criminalizing, 
commercial scale piracy, which is not undertaken for private gain or 
profit; 
Raised by the United States: Written[A]; 
China's response: Although some infringing acts did not constitute acts 
of crime according to Articles 217 and 218 of the Criminal Law, that 
did not mean that they were not criminal acts. They could constitute 
the crime of intentional property damaging or the crime of construction 
impediment. China had noticed that some foreign countries, including 
the United States, the United Kingdom, and Japan, did not specify the 
aim of making profits as a subjective element for copyright crimes. 
China was taking this factor into consideration and weighing up the 
possibility of integrating it into its legal system. (Verbal[E]):

Summary of issues by theme: Information on whether China has undertaken 
any criminal, administrative or civil prosecutions against individuals 
or entities based in China who use the Internet to obtain access to 
computer systems or databases overseas for purposes of obtaining 
unauthorized access to foreign copyrighted materials; 
Raised by the United States: Written[A]; 
China's response: Regarding whether China had undertaken criminal, 
administrative or civil prosecutions against individuals or entities 
who used the Internet to obtain access to computer systems, though the 
acts per se did not constitute the copyright crimes defined by Articles 
216 and 217 of the Criminal Law, their following acts usually did. 
(Verbal[E]).

Summary of issues by theme: Information on whether certain financial 
thresholds of referring cases to criminal prosecution, as required by 
China's intellectual property law, may be satisfied by non-monetary 
means, such as barter exchanges of pirated material or other forms of 
compensation; 
Raised by the United States: Written[A]; 
China's response: The financial threshold was a major element, but by 
no means the complete element in IP-related crimes. The record of the 
administrative penalty for counterfeiting and piracy and serious 
consequences could all be regarded as factors in crime determination. 
On the other hand, financial threshold was a generic term that might 
refer to sales volume, value of goods, illegal profits or damages to 
the right owner. It could also exist in various forms like money or 
commodities, as they could be transferred in money terms. (Verbal[E]).

Summary of issues by theme: Calculation of illegal business amount as 
proof of guilt; 
Raised by the United States: Written[A]; 
China's response: As to the so-called illegal business amounts, on the 
one hand, the illegal business amounts could be determined using other 
evidence, such as written documents from the purchaser, witness, 
testimony, and assessment on goods. On the other hand, in cases where 
the illegal business amount could not be verified, the constitution of 
crime could be determined through other factors. (Verbal[E]).

Summary of issues by theme: Provisions for landlord liability for 
illegal activities taken by lessee and any instances of its imposition 
in IP matters; 
Raised by the United States: Written[A].

Summary of issues by theme: Tougher measures needed to protect 
intellectual property rights in line with its international 
commitments.

Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Establishment of a forward-looking 
enforcement strategy for intellectual property which will suit both the 
domestic and international markets; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Efficient and deterrent system needed for 
the enforcement of intellectual property rights; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Recommendation for creation of a high level 
Coordination Working Office; 
Raised by other WTO members: EC - Written[B].

Summary of issues by theme: Number of criminal prosecutions related to 
patent rights, trademark rights, industrial design rights and 
copyrights; 
Raised by other WTO members: Japan - Written[C].

Summary of issues by theme: Changes that should be made to the 
standards for criminal prosecutions related to copyright infringements; 
Raised by other WTO members: Japan - Written[C], Verbal[E].

Summary of issues by theme: Regulations and notifications to make 
customs and other enforcement bodies informed who bear the disposal 
costs of the infringing products; 
Raised by other WTO members: Japan - Written[C]; 
China's response: The cost of confiscation and disposal of 
counterfeiting goods undertaken by the Customs shall be borne by right 
holders. According to Articles 14 and 15, and other relevant provisions 
of the Regulation on the Customs Protection of Intellectual Property 
Rights, the applicant who requested the Customs to detain suspected 
infringing goods should provide a bond to the Customs. After a relevant 
administrative determination, judicial judgment or adjudication came 
into effect, the Customs should refund the remainder of the bond, from 
which the cost of storage, custody, and disposal of the goods as well 
as the compensation fees to the interested parties for the loss induced 
by the inappropriate application had been deducted. (Verbal[E]).

Summary of issues by theme: Steps to eliminate localism that encourages 
soft approach to manufacture of counterfeit goods by local firms; 
Raised by other WTO members: Japan - Written[C], Verbal[E]; 
China's response: The Chinese Government had always been engaged in 
fighting against "localism". The State Council's Provisions on 
Prohibiting Regional Blockage in Market Economic Activities, published 
on 21 April 2001, showed the positive attitude of China against 
localism in the field of intellectual property rights. China protected 
right holders in strict accordance with the laws and administrative 
regulations on the protection of intellectual property rights that were 
in complete conformity with the WTO TRIPS Agreement. China was now 
making every effort to implement the obligations of the TRIPS 
Agreement. (Verbal[E]).

Summary of issues by theme: Activity plan to fight against pirated 
software and other pirated goods; information on policies to implement 
the activity plan established in June 2003; establishment of activity 
plan in the other pirated goods but software; legal responsibility 
provided for ISP.

Raised by other WTO members: Japan - Written[C]; 
China's response: 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 software and to promote the development of the Chinese 
software industry. The working objective was to establish a fair and 
orderly software market and to realize the fundamental improvement in 
the social environment of software copyright protection. The Activity 
Plan was a provisional measure, while the crackdown on various piracy 
acts was a long-term and standing task. At present, a crackdown on 
software piracy was included in this Plan in the light of the current 
situation of China, and it was possible for this Plan to include 
anti-piracy work in other respects later. (Verbal[E]).

Summary of issues by theme: Status of operations for regulation of 
export of counterfeits and pirated goods made in China.

Raised by other WTO members: Japan - Written[C]; 
; 
Summary of issues by theme: Type, value and quantity of Customs' 
seizures of infringing goods; disposition of goods; nature of rights 
infringed; whether goods were being imported or exported; destination 
or source of goods; and nature of fine or penalty imposed; 
Raised by the United States: Written[A]; 
China's response: 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 other 
administrative regulations. The Customs had cooperation with 
traditional authorities, including public security, according to the 
Regulation on Transfer of Suspected Criminal Cases by the 
Administrative Agencies, and other laws or regulations. (Verbal[E]).

Regarding the regulations of the export of counterfeit and pirated 
goods, in the year 2002, the Chinese customs had seized a total of 573 
cases worthy of RMB 95.62 million, including four worth RMB 230,000 and 
569 cases worth RMB 95.39 million. (Verbal[E]).

Summary of issues by theme: Number and type of cases referred to 
administrative investigation; number of cases referred to and provision 
of criminal law applied to criminal investigations; 
Raised by the United States: Written[A].

Summary of issues by theme: Method for Chinese Customs to determine the 
valuation of seized goods for purposes of assessing penalties or 
referral to criminal prosecution under IPR laws or under anti-smuggling 
laws; 
Raised by the United States: Written[A].

Summary of issues by theme: Steps under way to improve cooperation 
between Chinese Customs and criminal justice agencies, such as the 
Ministry of Public Security and Procuracy; 
Raised by the United States: Written[A].

Summary of issues by theme: Status of any revisions to China rules 
regarding Customs Rules for Protection of Intellectual Property; 
Raised by the United States: Written[A]; 
China's response: China was considering the revision of the Customs 
Regulation for the Protection of Intellectual Property Rights according 
to the TRIPS Agreement and to China's promises upon its accession to 
the WTO. The customs had the administrative authority over the import 
or export of pirated goods over the Internet. The customs and other IPR 
agencies would make a decision on infringement according to the Customs 
Regulation for Protection of Intellectual Property Rights, the Patent 
Law, the Trademark Law, and the Copyright Law. (Verbal[E]).

Summary of issues by theme: Customs or other agencies with 
administrative authority over the import or export of pirated goods 
over the Internet; 
Raised by the United States: Written[A].

Summary of issues by theme: Information on whether Customs or other 
authorities have authority over export of counterfeit or pirated goods 
by mail or delivery services; 
Raised by the United States: Written[A].

Summary of issues by theme: Method for Customs to adjudicate 
determinations of infringement of particular goods by a recorded 
trademark, copyright, patent or other intellectual property rights; 
information on any anticipated changes to how Customs adjudicates 
determinations of infringements; 
Raised by the United States: Written[A]; 
Relationship among civil, criminal, and administrative enforcement:

Summary of issues by theme: Information on whether an administrative 
punishment for an IPR infringement precludes subsequent criminal 
enforcement for the same act; 
Raised by the United States: Written[A]; 
China's response: Theoretically an administrative punishment did not 
preclude the subsequent criminal enforcement for the same act. 
According to the Provisions on the Removal of Suspected Crime Cases by 
Administrative Enforcement Agencies of 2001, which had been enacted by 
the State Council, cases of suspected crime of violating the Copyright 
Law should be removed to judicial authorities. Consequently, it was 
infrequent that a criminal enforcement came after an administrative 
punishment. (Verbal[E]).

Summary of issues by theme: Steps to insure that individuals are 
deterred from pursuing infringing activities after having once 
committed an offence; central registry for determining when a party has 
been administratively, criminally, or adjudicated to be civilly liable 
to have infringed IP rights; 
Raised by the United States: Written[A].

Summary of issues by theme: Steps to close down or police markets for 
pirate and/or counterfeit goods in popular locations; 
Raised by the United States: Written[A]; 
China's response: 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, imposed a forfeit of RMB 1,339.5 thousand, suppressed 816 
shops, and removed five cases to judicial authorities, and investigated 
one underground compact disc press. In July, the NCAC combined with the 
General Administration for Press and Publication, Ministry of 
Education, and the National Anti-Piracy and the Pornography Working 
Committee, had launched the 2003 Autumn Special Action for Striking 
Pirated Textbooks and Assistant Teaching Materials. This action was 
still under way at present. In August, the NCAC had launched the 2003 
Special Action for Striking Pirated Software. On the first day of this 
action, 250,000 infringing copies alone of software had been 
confiscated in Beijing, Shanghai, and the provinces of Sichuan and 
Guangdong. The 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. (Verbal[E]).

Summary of issues by theme: Regulations regarding approvals of markets 
for the designation of markets posting signs that they contain no 
"counterfeit products," as well as enforcement actions taken against 
such markets; 
Raised by the United States: Written[A].

Summary of issues by theme: Regulations or procedures involving 
administrative or criminal enforcement at trade fairs such as the 
Canton Trade Fair; 
Raised by the United States: Written[A]; 
China's response: The relevant IPR agencies undertook enforcement 
actions every year at the Canton Trade Fair. (Verbal[E]).

Summary of issues by theme: Steps to deprive exporters of counterfeit 
goods of their right to engage in international trade and to provide 
adequate punishments against them; 
Raised by the United States: Written[A].

Summary of issues by theme: Rules that apply to the operations of 
foreign private investigations firms in IPR matters, and any plans to 
permit these firms to more actively assist China's administrative, 
criminal and civil enforcement authorities; 
Raised by the United States: Written[A].

Summary of issues by theme: Provisions established under Chinese civil 
law to insure that civil penalties that are imposed are deterrent in 
nature; 
Raised by the United States: Written[A]; 
China's response: The revision of the Chinese Civil Law was an 
important task for legislators. The ninth National Congress had enacted 
and revised a draft code. Due to the rapid social and economic 
development in China, it was necessary to regulate and rewrite some 
contents of that draft. China needed to do further research and 
investigation on this matter. (Verbal[E]).

Summary of issues by theme: Provisions established in China's criminal 
law to insure that penalties are known to the public at large and that 
criminal prosecutions influence social behavior; 
Raised by the United States: Written[A].

Source: GAO analysis of WTO documents.

Note: An additional document source is a communication from China: IP/
C/W/415; dated 11/17/03.

[A] Communication from U.S.: IP/C/W/414; dated 11/10/03.

[B] Communication from European Communities: IP/C/W/413; dated 11/7/03.

[C] Communication from Japan: IP/C/W/410; dated 10/20/03.

[D] Communication from Chinese Taipei: IP/C/W/411; dated 11/5/03.

[E] Committee report detailing verbal statements made during meeting: 
IP/C/31; meeting dated 11/18/03.

[End of table]

[End of Enclosure XVI]

-320308: 

FOOTNOTES

[1] For 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).

[2] The 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.

[3] Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu.

[4] A 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  401, 114 Stat. 900.

[5] The 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.

[6] The final review can take place at an earlier date to be decided by 
the General Council.

[7] See GAO, World Trade Organization: First-Year U.S. Efforts to 
Monitor China's Compliance, GAO-03-461 (Washington, D.C.: Mar. 31, 
2003).

[8] For 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).

[9] For minutes of the 2003 General Council meeting, see www.wto.org, 
document symbol WT/GC/M/84.