RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/212
1 October 2002
(02-5248)
Council for Trade in Services Original:  English
COMMUNICATION FROM THE UNITED STATES
Transitional Review Mechanism Pursuant to Section 18 of the
Protocol on the Accession of the People’s Republic of China
Questions from the United States to China concerning Services
The attached paper has been received from the delegation of the United States with the
request that it be circulated to Members of the Council for Trade in Services.
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I. GATS NOTIFICATIONS
1. The General Agreement on Trade in Services (GATS) requires WTO Members to make
several notifications to the Council for Trade in Services.  To date, China has not made any of the
notifications listed below.  For each of them, please indicate when the notification will be supplied.
(a) Article III:3 notification of  laws, regulations, or administrative guidelines;
(b) Article III:4 notification of  inquiry points;
(c) Article IV:2  notification of  contact points to facilitate access of LDC service
suppliers to market info (required of developed country Members, and to the extentpossible other Members).
2. The GATS also requires notifications when certain circumstances exist.  Please confirm that
the circumstances that would warrant th e following notifications do not exist.
(a) Article V:7(a)  notification of  economic integration agreements;
(b) Article V bis notification of  agreements on integration of the labor markets;
(c) Article VII:4 notification of existing recognition measures;
(d) Article VII:4 notification of new or  modified recognition measures;
(e) Article VII:4 notification of commencement of negotiation of recognition measures;
and
(f) Article VIII:4 notification of grant of monopoly rights.S/C/W/212
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II. LEGAL SERVICES
On December 27, 2001, the Ministry of Justice (MOJ) issued Regulations on the Management
of Foreign Law Firm Representative Offices .  On July 4, 2002, MOJ published Implementing
Rules for the Regulations on the Management of Representative Offices of Foreign Law Firms
in China .  Like several other Chinese agencies, MOJ issued these measures without providing
an opportunity for interested WTO Members and foreign companies to comment before the
measures were implemented, despite China’s commitment in Part I, Section 2(C)2 of China’s
Protocol of Accession.
3. Article XVI of the GATS bars a Member from imposing an economic needs tests in a services
sector in which a Member has made market access commitments, as China did with legal services.
Article 7(3) of the Regulations  and Article 4 of the Implementing Rules  appear to permit MOJ to
determine whether there is a need for a representative office based on demand and other factors.Please justify these provisions in light of China’ s obligations under the GATS.  If you cannot do so,
please describe China’s plans for amending the provisions in question.
4. Foreign lawyers practising in China have traditionally been able to represent their clients
before arbitral tribunals.  Article 32(4) of the Implementing Rules  defines participation in arbitrations
involving Chinese law as the conduct of “Chinese legal affairs,” which is proscribed for representativeoffices and their representatives by Article 15 of the Regulations .  Please explain how China interprets
these provisions and how China will apply them in a manner consistent with China’s Services
Schedule commitment not to make more restrictive the scope of activities for a licenced service
supplier after China's accession to the WTO.
5. The broad definition of “Chinese legal affairs ” contained in Article 32 of the Implementing
Rules  potentially restricts the ability of foreign law fi rms to continue to advise their clients on the
impact of the Chinese legal environment.  Please explain how the Implementing Rules  will be
administered in a manner consistent with China’s Services Schedule commitment to allow foreign law
firms to provide such advice.
6. In its Services Schedule, China committed to remove quantitative limitations on foreign law
firms within one year after China’s accession (i.e., by December 11, 2002).  However, Article 10 of
the Implementing Rules  requires that the most recently established representative office of a foreign
law firm have practiced for three years before the firm may apply to open another representative
office.
(a) How will China administer or modify this requirement in the Implementing Rules  so
that it is consistent with its commitment to remove quantitative limitations on foreign
law firm representative offices?
(b) In addition, Articles 18 of the Regulations  provides that “representatives of a
representative office may not assume representation in two or more representative
offices.”  Please confirm that this provision will not be applied to restrict a foreign
lawyer from working out of more than one representative office if that lawyer’s firm
has established multiple offices in China.
7. Article 9 of the Regulations  allows the relevant authorities a total of nine months to consider
an application to establish a representative office in China.   This period is excessively long, given the
type of requirements that a representative office of a foreign law firm must meet.  China’s WTO
Working Party Report (in paragraph 308(f)) requires that, for those services included in China’s
Services Schedule, “Decisions would be taken promptly on all applications.”  In addition, with thisnine-month period, China appears to have increased the burdens on foreign law firms wishing toS/C/W/212
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establish an office in China.  Under the Interim Provisions of the Ministry of Justice and the State
Administration of Industry and Commerce on the Setting Up of the Offices of Foreign Law Firms in
China , MOJ previously was required to decide on an application within 60 days.  The nine-month
period is also much longer than what appears to be the comparable period for approval of
establishment of Chinese law firms under the Lawyer’s Law , which provides for a 30-day approval
process.  From a WTO perspective, the increased burdens for foreign law firms are of concern.
(a) Please explain why China needs nine months to consider an application to establish a
representative office.
(b) Would China be willing to adopt a 30-day period for Chinese authorities to decide on
a foreign law firm’s application, as is done with Chinese law firms?
8. Article 34 of the Regulations  contemplates the issuance of separate rules governing
representative offices of law firms of separate customs territories.  If those rules provide differentialtreatment to firms from Hong Kong, China, Macao, China, and Chinese Taipei, they are likely to run
afoul of China’s non-discrimination obligation under GATS Article II:1 as well as China’s
commitment in paragraph 19 of the Working Party Report (in which China committed to “provide
non-discriminatory treatment to all WTO Members, including Members of the WTO that were
separate customs territories”).
(a) What are China’s plans for implementing Article 34 of the Regulations ?  If China has
issued any rules for representative offices of Hong Kong, China, Macao, China, and
Chinese Taipei law firms, please identify them.
(b) Please explain how China will ensure that any rules issued will be consistent with the
GATS and China’s Working Party Report commitment.
9. China committed in its Services Schedule to permit representative offices to entrust, on behalf
of foreign clients, Chinese law firms to deal with Chinese legal affairs and also to enter into contracts
to maintain long-term entrustment relations with  Chinese law firms for legal affairs.  However,
Article 40 of the Implementing Rules restrict representative offices from paying Chinese lawyers
remuneration or fees.  Please explain how China will implement these provisions in a mannerconsistent with its commitments on entrustment.
10. Article 16 of the Regulations  provides that representative offices may not employ “lawyers
who practice Chinese law.”  This differs from the language that China agreed to in its Services
Schedule, which states that the representative office shall not employ “Chinese national registered
lawyers.”  The meaning of the term “Chinese national registered lawyers” was clarified in the
Working Party Report (at paragraph 319), as “Chinese nationals who had obtained a lawyer’s
certificate and were holding a Chinese practising permit and were registered to practice in a Chineselaw firm.”  The term used in the Services Schedule (“Chinese national registered lawyers”) should be
used in Article 16 (rather than “lawyers who practice Chinese law”), and it should be defined as it is
defined in the Working Party Report.
(a) Please provide China’s interpretation of Article 16.
(b) What plans does China have to revise Article 16 or otherwise clarify this matter?
11. Please clarify whether Article 20 of the Regulations  requires that fees be paid in RMB.S/C/W/212
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III. TELECOMMUNICATIONS
12. In paragraph 309 of the Working Party Report, China agreed that, upon its accession to the
WTO, the organizations regulating services industries in China would be independent of the services
suppliers they regulate.   Section 5 of the Basic Telecommunications Reference Paper also specifically
calls for an independent telecommunications regulator that is separate from, and not accountable to,any supplier of basic telecommunications and makes decisions on an impartial basis.  In the
telecommunications sector, however, China has not yet established an independent regulator, as the
Ministry of Information Industries is not structurally and financially separate from all
telecommunications operators and providers.  Please explain China’s plans for establishing an
independent regulator in the telecommunications sector.
13. China’s Administrative Measures for International Gateway Facilities , which were issued on
June 26, 2002, limit the ownership and operation of international telecommunications gatewayfacilities to wholly state-owned telecommunications providers.  However, in its market-access
commitments for telecommunications services, as set forth in its Services Schedule, China committed
to allow minority foreign investment in basic telecommunications providers on a phased-in basis, and
it did not include any limitation on foreign ownership with regard to gateway services.  Please explain
how this measure is consistent with China's commitments.
IV. EXPRESS DELIVERY SERVICES
Shortly after acceding to the WTO, China issued two problematic notices in the area of
express delivery services, i.e., Notice No. 629 , issued by the Ministry of Information
Industries (MII), the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and
the State Post Office (SPO) on December 24, 2001, and Notice No. 64 , issued by the SPO in
February of 2002.  These notices placed restrictions on the operation of foreign express
delivery companies despite China’ s commitment not to make more restrictive the operation
or scope of activities of a licensed service provider (as set forth in the horizontal
commitments in China’s Services Schedule).  China has also sought to implement many of
these restrictions through proposed changes to its Postal Law.  Despite the many concernsraised by the United States and other WTO Members and affected Chinese and foreign
companies and their associations, MII, MOFTEC and SPO issued a new notice on
September 5, 2002, i.e., Supplement Notice on the Engagement in Postal and Delivery
Services for Cross-border Letters and Materials of Letters in Nature  (No. 472).
14. Do foreign-invested express couriers already licensed by MOFTEC to provide international
express delivery services (except for private letters) have to file entrustment applications with China
Post?  If so, what is the purpose of this duplicative requirement?
15. Please explain how the requirement in Supplemental Notice No. 472  that foreign-invested
express couriers already licensed by MOFTEC now obtain entrustment authority from the postal
authorities does not conflict with China's WTO commitments, particularly the horizontal commitment
in China’s Services Schedule not to reduce market access by imposing conditions on ownership,
operation or scope of activities that are more restrictive than those in place on the date of China’saccession?
16. Under paragraph 2 of Supplemental Notice No. 472 , do foreign-invested express couriers have
the option of filing for entrustment with either the provincial authorities where they are headquartered
or with the SPO?  Please explain.
17. Supplemental Notice No. 472 contains provisions that seemingly conflict with previous
notices.  For example, it states that, “[i]n case of discrepancy between this Supplemental Notice andS/C/W/212
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any previous documents issued by relevant gove rnmental authority, the Supplemental Notice shall
prevail.”  Does this mean that the weight and rate restrictions appearing in Notice No. 64  are no longer
applicable?
18. Please explain how China intends to safeguard against the possibility that the postal
authorities, in the future, will place WTO-inconsistent restrictions on foreign-invested expresscouriers, as they previously attempted to do with the weight and rate restrictions found in Notice 64 .
V. LOGISTICS
On June 20, 2002, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
issued a Notice on Establishing Foreign-invested Logistics Companies in Trial Regions , to be
effective 30 days later.
19. Logistics services is not a defined term for WTO purposes, and the actual scope of this term
as used in the Notice  is not clear.  It appears that the Notice  may include several types of services for
which China made commitments in its Services Schedule within the scope of logistics services.
Please define the term “logistic services” as used in the Notice , and explain to what extent it includes
other services addressed in China’s Services Schedule.
20. The rules in the Notice  cap foreign participation in a foreign-invested logistics company at 50
percent.  In its accession agreement, however, China committed to allow foreign majority ownershipfor freight forwarders and providers of auxiliary services within one year of accession, or by
December 11, 2002.  Please describe China’s plans for amending these rules to comply with this
commitment.
21. Are companies engaged in all or part of the activities enumerated in the Notice’s  rules
required to register as “foreign-invested logistics companies,” even if they are already registered withMOFTEC or other government agencies under different regulations?
22. Can “foreign-invested logistics companies” operate both as “international logistics
companies” and “3PL companies?”  The descriptions of the scope of business of these two types of
entities appear to overlap.  How are international logistics companies differentiated from 3PLs?
23. Do the rules in the Notice  apply only to new entrants or to firms already operating in the trial
regions?
VI. LICENSING
24. Paragraphs 307 and 322 of the Working Party Report require China to publish all of its
licensing procedures and conditions.  Please identify each services sector for which this information
has been published, and indicate where this information has been published.
VII. TRANSLATIONS OF MEASURES
25. In paragraph 334 of China’s Working Party Report, China committed that it “would make
available to WTO Members translations into one or more of the official languages of the WTO all
laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the
control of forex, and to the maximum extent possible would make these laws, regulations and other
measures available before they were implemented or enforced, but in no case later than 90 days after
they were implemented or enforced.”  To date, China has not provided translations of severalmeasures pertaining to trade in services, including those listed below, most of which were
implemented more than 90 days ago:S/C/W/212
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(a) Measures on Administration of Representative Offices of Foreign Financial
Institutions;
(b) Measures on Administration of Business Networks in Same City Set Up by
Commercial Banks;
(c) Implementing  Rules on Administration of Foreign Exchange Purchases by Domestic
Residents;
(d) Administrative Measures on International Telecommunications Entry/Exit Stations;
(e) Regulation on Foreign Investment in Civil Aviation Industry;
(f) Interim Regulation on Establishment of Foreign-Invested Printing Companies;
(g) Provisional Regulation on the Administration of Internet Publishing;
(h) State Council Decision on the Revision of the Regulations on the Administration of
Travel Agencies; and
(i) Regulation on the Administration of Overseas Intermediary Employment Agencies.
26. Please provide translations of these measures in advance of the October 21-25, 2002 meeting
at which the Council for Trade in Services and the Committee on Trade in Financial Services will be
reviewing the implementation by China of the WTO Agreement and the relevant provisions of
China’s Protocol of Accession.
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