WORLD TRADE
ORGANIZATIONG/VAL/W/127
3 October 2003
(03-5223)
Committee on Customs Valuation Original:  English
TRANSITIONAL REVIEW UNDER ARTICLE 18 OF THE PROTOCOL OF
ACCESSION OF THE PEOPLE’S REPUBLIC OF CHINA
Written Questions from the United States on
documents G/VAL/N/2/CHN/1, G/VAL/N /1/CHN/1, and G/VAL/W/125
The following communication, dated 3 October 2003, has been received from the Permanent
Mission of the United States.
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Regarding China's Responses to the WTO Checklist (G/VAL/N/2/CHN/1)
With regard to the Checklist, we note that China's answer to Question 1(a)(ii) does not appear
to be responsive to the question.  The question is whether China considers a transaction involving
related parties (as defined in the CVA) to be prima facie grounds for determining that the price has
been influenced by the relationship, not whether China applies the Article 15 CVA definition for
related parties.  We would appreciate clarification of this matter.
China's responses to Questions 9 and 10 refer to various Chinese Laws and Regulations that
purportedly contain some provisions relating to the CVA.  China noted that the “Regulations on
Import and Export Tariff of the People's Republic of China” are in the process of revision and shall be
published upon the date of its approval.  When will these Customs Law and Regulations be available
for Members to review?
Regarding China's Notification of its Implementing Law (G/VAL/N/1/CHN/1)
In the Decree, transaction value is defined as “the price actually paid or payable for the goods
by the buyer adjusted in accordance with Articles 4 and 5 (i.e., the Article 8 CVA adjustments).”  This
differs from the definition of transaction in the WT O Agreement:  "the price actually paid or payable
for the goods when sold for export to the country of importation, adjusted in accordance with theprovisions of Article 8."  We ask China to ad dress this important discrepancy immediately.
The definition of “price actually paid or payable” in Decree No. 95 differs from the definition
in the WTO Agreement.  Article 41 of China’s Decree No. 95 states that “Price actually paid or
payable" means the total payment, as a condition for the sale of the imported goods from the seller,directly or indirectly made, or to be made, by the buyer to or for the benefit of the seller to the third
party.”  The phrase “price actually paid or payable” is defined in the Note to Article 1, in the WTO
CVA as “the total payment made or to be made by the buyer to or for the benefit of the seller for the
imported goods.”  The “price actually paid or payable” concept is one of the cornerstones of
transaction value.  We ask China to incorporate th e WTO CVA definition into all relevant laws and
regulations.G/VAL/W/127
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Regarding Related Parties - Circumstances of Sale Test
The Decree lacks the language of Article 1.2 and the corresponding Interpretative Notes of
the CVA.  There is no reference to the Circumstances of Sale Test and how it is to be applied.
Article 6 of the Decree simply states that where the seller and the buyer are related within themeaning of Article 42, the transaction value shall be accepted whenever the customs administration
considers that the relationship did not influence the price.   Are provisions for the Circumstances of
Sale Test addressed elsewhere in Chinese legislation or regulations?
The Decree does not appear to fully implement Articles 2 and 3 of the WTO CVA.  Article 2
of the CVA provides that if the customs value of the imported goods cannot be determined under the
provisions of Article 1, the customs value shall be “the transaction value of identical goods sold forexport to the same country of importation and exported at or about the same time as the goods being
valued.”  Article 3 of the CVA provides that “if the customs value of the imported goods cannot be
determined under the provisions of Article 1 and 2, the customs value shall be the transaction value of
similar goods sold for export to the same country of importation and exported at or about the same
time as the goods being valued.”  In contrast, Article 8 of the Decree states that in applying thetransaction value method of identical or similar goods,  “customs value shall be based on the
transaction value of identical or similar goods imported at or about the same time as the goods being
valued.”  We request that China address these discrepancies.
In addition, the scope of identical goods and similar goods covered in the Decree differs from
the CVA.  Whereas Articles 15 CVA states that goods shall not be regarded as “identical goods” or
“similar goods” unless they were produced in the same country as the goods being valued, Article 41
of the Decree defines “identical goods” and “similar goods” as goods with specified characteristics
that are produced in the same country or region.  We ask that the reference to “region” should be
deleted.
The Decree does not appear to implement Article 5.1(a)(1) and the applicable Interpretative
Notes of the CVA.  Article 5.1(a)(I) CVA provides for deducting “either commissions usually paid or
the additions usually made for profit and general expenses in connection with sales in such country of
imported goods of the same class or kind.”  In c ontrast, Article 9 of the Decree provides for the
“deduction of profit, general expenses and commissi ons usually paid.”  We ask that China address this
discrepancy.
The Interpretative Notes to Article 5 CVA specify that the deduction for profit and general
expenses should be taken as a whole and should be 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. The Decree contains no suchprovision.  Therefore, we request that China make sure this provision is added to its legislation and
regulations.
Article 10 of the Decree provides that an element of the computed value is “an amount for
profit and general expenses equal to that usually reflected in sales of goods of the same class or kindas the imported goods being valued.”  However, the Chinese law is lacking a provision set forth in the
Interpretative Note to Article 6 of the WTO CVA - 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.”  Please provide additional information on this matter.
There is nothing in the Decree about currency conversion.  Although China indicates in its
WTO Checklist response that the Peoples' Bank of China publishes the official rate of exchange, there
is no indication whether the currency conversion is the rate in effect at the time of exportation or theG/VAL/W/127
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time of importation as specified in Article 9 CVA.  Please provide additional information on this
matter.
Article 39 of the Decree indicates that the importer or exporter who dissents from the decision
of the customs administration on the customs valuat ion may apply for appeal in accordance with the
relevant provisions of the Customs Law of the People's Republic of China and the  Regulations on
Import and Export Tariff of the People's Republic of China .  We have not seen either the referenced
Law or the Regulations.  Therefore, we cannot determine whether China has fully implemented the
provisions of Article 11 and the applicable interpretative notes.  We ask China to make the Customs
Law and the Regulations available for Members to review as soon as possible.
Article 37 of the Decree provides that where [the] customs administration decides that the
determination of customs value needs to be postponed, the importer (or exporter) may, after
submitting a guarantee according to the relevant regulations, request the goods be released from
customs custody.  Without reviewing the relevant regulations, we cannot determine whether they meet
the requirements of Article 13 CVA.  We ask China to make the Law and the Regulations available
for Members to review as soon as possible.
In addition, we request that China provide information on “sufficient guarantees.”  Article 66
states that "In case where the importer or exporter asks the Customs to release the goods before the
determination of goods classification of Customs Valuation, or presentation of effective declaration
documents or completion of other Customs formalities, the Customs shall release the goods againstthe securities provided by the importer or exporter which is compatible with his legal obligation
according to the law.” There is no indication of what these legal obligations are or how the requisite
security amount is determined.  China is requested to provide more information, including the
applicable laws and regulations, on the scope of these exceptions.
Pursuant to Article 14 CVA, the Interpretative Notes form an integral part of the Agreement.
Although in its responses to the Checklist of Issues , China states that the Interpretative Notes of the
Agreement were in included in Chapters 2 & 8 of the Decree, these chapters include only a few of the
Interpretative Notes.  For example, most of the interpretative notes pertaining to Articles 1, 5, 6, 7 and
8 are absent.  We ask China to ensure that the Interpretative Notes are incorporated into its laws and
regulations.
The Decree does not include the provisions of Article 15.2(c) regarding the scope of identical
and similar goods.  We ask that China address this discrepancy.
The Decree does not include Article 15.3, regarding the definition of goods of the same class
or kind.  We ask that China address this discrepancy.
We request a clarification of Article 19 of the Decree.  To what does this Article apply?
Please provide an explanation of the formula.
Regarding China’s Submission on “ Information Required under Annex 1A” (G/VAL/W/125)
In Doc. G/VAL/W/125 reference is made to the “Regulations on Import and Export Tariff of
the People's Republic of China” and the “Rules of General Administration of the People's Republic of
China Regarding Determination on Customs Value of Imported and Exported Goods.”  We request
that China make these regulations available to WTO members for review.
In its accession agreement, China committed to apply the provisions of the WTO Decision on
the Treatment of Interest Charges in the Customs Value of Imported Goods no later than
11 December 2003.  In G/VAL/W/125, China states that it will implement this commitment in aG/VAL/W/127
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timely manner.  Please describe the legal steps that China plans to take to implement this
commitment.
In its accession agreement, China committed to apply implement the provisions of the
Decision on the Valuation of Carrier Media Bearing Software for Data Processing Equipment no laterthan 11 December 2003.  In G/VAL/W/125, China states that it will implement this commitment in a
timely manner.  Please describe the legal steps that China plans to take to implement this
commitment.
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