RESTRICTEDWORLD TRADE
ORGANIZATIONG/TMB/R/89
31 July 2002
(02-4239)
Textiles Monitoring Body
REPORT OF THE NINETIETH MEETING
1. The Textiles Monitoring Body held its ninetieth meeting on 10 and 11 June 2002.
2. Present at this meeting were the following members and/or alternates:
Messrs. Alvarado/Ms. Miranda; Messrs. Ekawat; Farahat/Dalela; Karapinar; Moroz;  Shin; Sorensen;
Messrs. Tagliani; Yamagami; Ms. Zhang/Ms. Lu.
3. The TMB adopted the report of its eighty-ninth meeting (G/TMB/R/88).
Notification under Article 2.2 of the ATC
4. The TMB began its consideration of a notification received from China pursuant to
Article 2.2 (G/TMB/N/445/Add.1), in response to the TMB's request for comments and observations
regarding the additional notifications received from the United States1 concerning the restrictions
maintained on imports from China of the products falling under the coverage of the ATC.  The TMBdecided to seek clarifications from China as regards (i) possible arguments in support of China's
statement (related to the cap being placed by the United States on the combined use of carryover and
carry forward) that "the original intention of [Article 2.16] is that quantitative limits shall be imposed
neither on the combined use of all the three of  swing, carryover and carry forward, nor on the
combined use of any two";  (ii) which particular provisions of the ATC China had in mind when itstated that the fact that the United States maintains both specific and group limits on the imports of
certain ATC products from China "shall be examined under WTO framework, specifically the ATC";
and (iii) whether the consultations referred to in Article 4.4 of the ATC with respect to the downward
adjustment of US quota levels as a result of the partial integration of certain products that had taken
place, were requested or were scheduled, and if relevant, what were the results of such consultations.
5. The TMB began its consideration of a further notification received from China pursuant to
Article 2.2 (G/TMB/N/445/Add.2) regarding the addi tional notification made by the United States
pursuant to Article 2.1 of the ATC on the restrictions it maintained on imports from China of the
products falling under the coverage of the ATC.
2  The TMB decided to draw the attention of the
United States to the observation contained in the notification of China, related to the manner in which
the United States should implement the growth-on- growth provisions of the ATC with respect to
China.
Notifications under Article 2.17 of the ATC
6. The TMB reviewed, pursuant to Article 2.21, the notification made by Canada of
administrative arrangements contained in an administrative Memorandum of Understanding agreed
between Canada and China, pursuant to Article 2.17 of the ATC, "in order to implement the textiles
and clothing restraints between Canada and China to be notified pursuant to Article 2.1 of the ATC"(G/TMB/N/440 and Add.1).  Recall ing that according to Article 2.17 "[a]dministrative arrangements
deemed necessary in relation to the implementation of  any provision of [Article 2], shall be a matter
for agreement between the Members concerned", the TMB noted that the administrative arrangements
notified by Canada had been bilaterally agreed between Canada and China.
                                                     
1 See G/TMB/N/63/Add.12/Suppl.1 and Suppl.2.
2 See G/TMB/N/63/Add.12/Suppl.1.G/TMB/R/89
Page 2
7. The TMB observed that the arrangements contained, inter alia , provisions regarding an
export control system operated by China, the implementation of the flexibility provisions related to
swing, carryover and carry-forward, exchange of statistics, the treatment of re-exports and
consultations.  It sought clarifications from both Members regarding certain elements of the
notification, including how the provision of statisti cs on export or import of products not contained in
the Article 2.1 notification of Canada's quantitative restrictions on imports from China was deemed
necessary in relation to the implementation of any provision of Article 2 of the ATC 3 and on the
possible credit by Canada to the appropriate restraint limit of quantities covered by export licences for
which the corresponding goods had not been shipped.
8. Canada explained that the provision of statistics was intended, inter alia , to address issues
concerning circumvention and transshipment.  In this context, Canada noted that Article 5.1 of the
ATC explicitly acknowledges the importance of this issue, indicating that "Members should establishthe necessary legal provisions and/or administrative procedures to address and take action against
such circumvention", and calls on all Members to cooperate fully to address these problems.  China
stated that this provision was "included in the notification mainly for the purpose of addressing and
taking action against circumvention and transshipment."  As regards the possible credit by Canada to
the appropriate restraint limit of quantities covered by export licences for which the correspondinggoods had not been shipped, Canada explained that in such situations, China would inform Canada
through an electronic verification system that the relevant export licence had been cancelled and then
it would re-credit automatically its quota so that it may re-allocate the amount to another shipment.
However, no credit would be authorized in a situation "where an exporting government were seeking
to cancel an export licence against which a shipment had already been entered into Canada".  Thiswas extremely rare in the case of China given the aforementioned electronic verification system and
the fact that usage of export licences were reported back to China on a daily basis.  China observed
that, in view of the daily exchanges of licensing in formation relating to textile and clothing products
between Canada and China, it was unnecessary for China to make additional notifications to Canada
in the event that any quantity covered by an export license had not been shipped.  In practice, Chinahad never received any such request from the Canadian side.
9. As regards the exchange of additional statistics, the TMB noted that both Members had
provided very similar reasoning and explanations.  The same applied to their respective assessment of
the impact of the electronic verification system.  The TMB also observed that while the notification of
Canada, in its Annexes, contained information on the restraint levels and related provisions to be
applied in 2002, these Annexes did not form part of the administrative arrangements notified pursuant
to Article 2.17.
10. The TMB reviewed, pursuant to Article 2.21, the notification made by the European
Communities of administrative arrangements agreed between the European Communities and Chinese
Taipei (G/TMB/N/433 and Add.1). Recalling th at according to Article 2.17 "administrative
arrangements deemed necessary in relation to the implementation of any provision of [Article 2], shall
be a matter for agreement between the Members concerned", the TMB noted that the administrativearrangements notified by the European Communities had been bilaterally agreed between the
European Communities and Chinese Taipei.
11. The TMB observed that the arrangements contained, inter alia , provisions regarding the
classification of products, export certification and import control, rules of origin, circumvention and
transshipment, outward processing and products exempt from quantitative limits.  The TMB soughtclarification from the European Communities regarding certain elements of the notification, including
(i) the obligation to adapt the definition of quantitative limits and of the categories of products to
which they apply where this proves necessary to ensure that any subsequent amendment to the
combined nomenclature or a decision amending the classification of such products does not result in a
reduction of such quantitative limits and (ii) how, in the view of the European Communities, the
                                                     
3 See G/TMB/R/87, paragraph 15.G/TMB/R/89
Page 3
provisions related to circumvention contained in the administrative arrangements were deemed
necessary in relation to the implementation of any provision of  Article 2 of the ATC.4
12. The European Communities confirmed that the adaptation of the definition of quantitative
limits following amendments of the combined nom enclature would be implemented in conformity
with Articles 4.2 and 4.4 of the ATC and stated that the provisions concerning circumvention wereconsidered as complementary information for the functioning of Article 2 of the ATC.  For
transparency reasons the two parties had agreed to include these provisions as they might affect the
way the quantitative restrictions were implemented.  Similar dispositions existed in most of  the
administrative arrangements that the European Communities had notified to the TMB under
Article 2.17.  Furthermore, the European Communities confirmed that, regarding the consultations
foreseen by Article 4.2 of the administrative arrangements, if a mutually satisfactory solution is found
between the two parties, this solution would be also subject to the provisions of Article 5 of the ATC.
13. The TMB noted that, though the opportunity was provided to it, Chinese Taipei had not made
any observation with respect to the notification submitted by the European Communities.  It was also
observed that the implementation of the circumvention provisions of the administrative arrangements
would be fully subjected to the relevant provisions of Article 5 of the ATC.
14. The TMB reverted to its review, pursuant to Article 2.21, of the notification made by the
European Communities of administrative arrangements agreed between the European Communities
and China (G/TMB/N/444), on the basis of responses received from the European Communities
(G/TMB/N/444/Add.1) and Chin a (G/TMB/N/451) to its request for clarifications.
5  The TMB
decided to seek further clarifications from both parties regarding the functioning and the scope of
application of a "reserve" available exclusively to the EC's industry, for a defined time-period, beforethe relevant quantitative restriction can be fully utilized.
15. The TMB began its review, pursuant to Article 2.21, of the notification made by the
United States of administrative arrangements with  China (G/TMB/N/450).  The TMB decided to seek
clarifications from both Members with respect to certain aspects of the notification, including the
products covered by the arrangements, the relevance for the implementation of any provision ofArticle 2 of the ATC and the operation of the prov isions regarding cooperation in the prevention of
circumvention, the ATC relevance of a provision enabling the United States to impose, in particular
circumstances, triple charges on quotas, the possibility for the United States to introduce a restraint on
such products in certain specific circumstances where a product would be transshipped through China,
and the scope of application of visa requirements.  The TMB also recalled that when it had examined
the administrative arrangements concluded by the United States with several WTO Members, in June
1997, the United States had provided written replies to the TMB’s request for clarification.  In light ofthese replies, as regards the correct understanding of the product coverage of these administrative
arrangements, the TMB "took note of the precision provided by the United States according to which
only products subject to restraints under paragraph 1 of Article 2 were subject to the administrative
arrangements".
6  Furthermore, "the United States had stated that when provisions of the administrative
arrangements were inconsistent with the ATC, the provisions of the ATC would apply.  The TMBunderstood that this statement applied to each and every provision of the arrangements notified.  The
TMB expected, therefore, that all the provisions of these administrative arrangements would be
implemented by the respective Members in conformity with the relevant provisions of the ATC".
7
Against this background, the TMB sought confirmation that the above statement made by theUnited States also applied to the administrative arrangements with China.
                                                     
4 See G/TMB/R/87, paragraph 13.
5 See G/TMB/R/87, paragraph 14.
6 See G/TMB/R/31, paragraph 10.
7 See G/TMB/R/31, paragraph 21.G/TMB/R/89
Page 4
16. The TMB began its review, pursuant to Article 2.21, of the notification made by the
United States of administrative arrangements agreed between the United States and Chinese Taipei
(G/TMB/N/449). The TMB decided to seek clarifications from both Members with respect to certain
aspects of the notification, including the products covered by the arrangements, the relevance for the
implementation of any provision of Article 2 of the ATC and the operation of the provisions regardingcooperation in the prevention of circumvention, the applicability of Article 4 of the ATC in cases
where changes in the implementation and interpretation of the administrative arrangements would be
implemented, the scope of application of the visa certification system, the ATC relevance of a
provision enabling the United States to impose, in particular circumstances, triple charges on quotas,
the possibility for the United States to introduce a restraint on such products in certain specific
circumstances where a product would be transshippe d through Chinese Taipei.  The TMB also sought
confirmation that the statement made by the United States, referred to in paragraph 15 above alsoapplied to the administrative arrangements concluded between the United States and Chinese Taipei.
Notification under Articles 2.6 and 2.7(b) of the ATC
17. The TMB reverted to its review, under Article 2.21, of the notification made pursuant to
Articles 2.6 and 2.7(b) by China, also on the basis of additional information provided by China in
response to questions put by the TM B (G/TMB/N/441/Rev.1 and Rev. 1 Add.1).
8  Having examined
the response provided, the TMB decided to seek further clarifications from China regarding its
notification.
Derestriction of WTO documents
18. Following the decision adopted by the General Council on 14 May 2002 regarding the
procedures for the circulation and derestricti on of WTO Documents (WT/L/452), the TMB considered
the implications of this decision on its working procedures.  The TMB recalled that in adopting its
own working procedures on 13 July 1995 it had agreed that it would " ... decide on the
implementation of the decision of the General Council on derestriction of documents when the
General Council has adopted its decision on this matter".9  Subsequently, the TMB had taken note of
the relevant decision of the General Council and decided that it would act in full compliance with it.10
Since the recent decision of the General Council brought about important changes, the TMB carefully
examined the decision, took note of it and decided to act in full compliance with it.
__________
                                                     
8 See G/TMB/R/87, paragraph 20.
9 See G/TMB/R/1, footnote 3 to paragraph 4 of TMB's working procedures.
10 See G/TMB/R/16, paragraph 9