RESTRICTED WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/ACC/SPEC/CHN/1/Rev.7
12 July 2001
(01-3459)
Working Party on the
Accession of ChinaOriginal:  English/
                  anglais/
 inglés
DRAFT REPORT OF THE WORKING PARTY
ON THE ACCESSION OF CHINA TO THE WTO1
Revision
Groupe de travail del'accession de la Chine
PROJET DE RAPPORT DU GROUPE DE TRAVAIL DE
L'ACCESSION DE LA CHINE À L'OMC
1
Révision
Grupo de Trabajo sobre la
Adhesión de China
PROYECTO DE INFORME DEL GRUPO DE TRABAJO
SOBRE LA ADHESIÓN DE CHINA A LA OMC1
Revisión
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/ACC/SPEC/CHN/1/Rev.7
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TABLE OF CONTENTS
I. INTRO DUCTION ................................................................................................................. ...1
1. Documentation Provided....................................................................................................... ...1
2. Introductory  Statements ...................................................................................................... ....1
II. ECONOMIC POLICIES..........................................................................................................4
1. Non-Discrimination (includi ng national treatment) ..............................................................4
2. Monetary and Fiscal Policy................................................................................................... ...7
3. Foreign Exchange and Payments ............................................................................................74. Balance-of-Payments Measures.............................................................................................10
5. Investment Regime ............................................................................................................ .....11
6. State-Owned and State-Invested Enterprises.......................................................................12
7. Pricing Policie s ............................................................................................................. ...........14
8. Competitio n Policy........................................................................................................... .......16
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES....................................17
1. Structure and Powers of the Government ............................................................................17
2. Authority of Sub-Central Governments ...............................................................................18
3. Uniform Administration of the Trade Regime.....................................................................18
4. Judicial Review .............................................................................................................. .........20
IV. POLICIES AFFECTING TRADE IN GOODS ...................................................................21
A. TRADING RIGHTS ............................................................................................................... ..21
1. General...................................................................................................................... ...............21
2. Designated Trading........................................................................................................... ......23
B. IMPORT RE GULATIO N.........................................................................................................24
1. Ordinary Customs Duties...................................................................................................... .24
2. Other Duties and Charges..................................................................................................... .25
3. Rules of  Orig in .............................................................................................................. ..........25
4. Fees and Charges for Services Rendered..............................................................................26
5. Application of Internal Taxes to Imports .............................................................................26
6. Tariff Exemptions............................................................................................................ .......27
7. Tariff Rate  Quotas ........................................................................................................... .......29
8. Quantitative Import Restrictions, including Prohibitions and Quotas..............................31
9. Import Licensing............................................................................................................. ........40
10. Customs Valuation........................................................................................................... .......42
11. Other Customs Formalities................................................................................................... .43
12. Preshipment Inspec tion...................................................................................................... ....43
13. Anti-Dumping, Countervailing Duties..................................................................................44WT/ACC/SPEC/CHN/1/Rev.7
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14. Safeguards .................................................................................................................. .............47
C. EXPORT RE GULATI ONS ......................................................................................................48
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of
Internal Taxes to Exports...................................................................................................... .48
2. Export Licensing and Export Restrictions ...........................................................................483. Export Subsidies ............................................................................................................. ........50
D. INTERNAL POLICIES AFFECTI NG FOREIGN TRADE  IN GOODS.................................51
1. Taxes and Charges Levied on Imports and Exports ...........................................................51
2. Industrial Policy, including Subsidies...................................................................................51
3. Technical Barriers to Trade.................................................................................................. .53
4. Sanitary and Phytosanitary Measures..................................................................................59
5. Trade-Related Investment Measures ....................................................................................606. State Trading Entities....................................................................................................... ......61
7. Special Economic Areas ....................................................................................................... ..63
8. Government Procurement......................................................................................................6 6
9. Transit...................................................................................................................... ................67
10. Agricultural  Poli cies ....................................................................................................... ........67
11. Trade in Ci vil Ai rcraft ..................................................................................................... ......69
12. Textiles .................................................................................................................... .................69
13. Measures Maintained  Against China....................................................................................71
14. Transitional Safeguards ..................................................................................................... ....71
V. TRADE-RELATED INTELLECTUAL  PROPERTY REGIME.......................................74
A. GENE RAL...................................................................................................................... ..........74
1. Overview..................................................................................................................... .............74
2. Responsible agencies for policy formulation and implementation.....................................80
3. Participation in international in tellectual proper ty agreements ........................................81
4. Application of national and MFN treatment to foreign nationals......................................81
B. SUBSTANTIVE STANDARDS OF PROTECTION, INCLUDING PROCEDURES
FOR  THE ACQUISITION AND MAINTENANCE OF INTELLECTUAL
PROPERTY RIGHTS...............................................................................................................8 2
1. Copyright protection ......................................................................................................... .....82
2. Trademarks, including service marks...................................................................................83
3. Geographical indications, includ ing appellations of origin.................................................84
4. Industrial designs........................................................................................................... .........85
5. Patents...................................................................................................................... ................85
6. Plant variet y protection..................................................................................................... .....89
7. Layout designs of integrated circuits ....................................................................................89WT/ACC/SPEC/CHN/1/Rev.7
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8. Requirements on undisclosed information, including trade secrets and test data............90
C. MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROP ERTY RIGHTS ...........91
D. ENFORC EMENT.................................................................................................................. ...91
1. General...................................................................................................................... ...............91
2. Civil judicial proced ures and remedies.................................................................................92
3. Provisiona l meas ures ......................................................................................................... .....93
4. Administrative procedures and remedies.............................................................................94
5. Special border measures...................................................................................................... ...95
6. Criminal procedures.......................................................................................................... .....96
VI. POLICIES AFFECTING TRADE IN SE RVICES..............................................................96
1. Licensing.................................................................................................................... ..............96
2. Choice of Partner ............................................................................................................ ......100
3. Modification of the Equity Interest.....................................................................................101
4. Prior Experience Requirement for Establishment in Insurance Sector ..........................101
5. Inspection  Services.......................................................................................................... ......101
6. Market Research.............................................................................................................. .....101
7. Legal Services............................................................................................................... .........102
8. Minority Shareholder Rights...............................................................................................102
9. Schedule of Specific Commitments .....................................................................................102
VII. OTHER ISSUES ............................................................................................................... ....102
1. Notifica tions................................................................................................................ ...........102
2. Special Trade Arrangements ...............................................................................................1023. Transparency ................................................................................................................. .......103
VIII. CONCLUSIONS ............................................................................................................... ....105WT/ACC/SPEC/CHN/1/Rev.7
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1I. INTRODUCTION
1. At its meeting on 4 March 1987, the Council established a Working Party to examine the
request of the Government of the People's Republic of China ("China") (L/6017, submitted on10 July 1986) for resumption of its status as a GATT contracting party, and to submit to the Council
recommendations which may include a Draft Protocol on the Status of China.  In a communication
dated 7 December 1995, the Government of China applied for accession to the AgreementEstablishing the World Trade Organization ("WTO Agreement") pursuant to Article XII of the WTOAgreement.  Following China's application and pursuant to the decision of the General Council on31 January 1995, the existing Working Party on China's Status as a GATT 1947 Contracting Partywas transformed into a WTO Accession Working Party, effective from 7 December 1995.  The termsof reference and the membership of the Working Party are reproduced in documentWT/ACC/CHN/2/Rev.8.
2. The Working Party on China's Status as a Contracting Party met on 20 occasions between
1987 and 1995 under the Chairmanship of H.E. Mr. Pierre-Louis Girard (Switzerland).  The Working
Party on China's Accession to the WTO Agreement met on _________________ and_________________ under the same Chairman.  At meetings held on 9 November 2000,8 December 2000 and 17 January 2001, Mr. Paul-Henri Ravier, Deputy Director-General of theWTO, served as Acting Chairman.
1. Documentation Provided
3. The Working Party had before it, to serve as a basis for its discussion, a Memorandum on
China's Foreign Trade Regime (L/6125) and questions posed by members of the Working Party on the
foreign trade regime of China, together with replies of the Chinese authorities thereto.  In addition, the
Government of China made available to the Working Party a substantial amount of documentation,which is listed in document WT/ACC/CHN/23.
2. Introductory Statements
4. In statements to the GATT 1947 Working Party and subsequently to the Working Party on
China's Accession to the WTO, the representative of China stated that China's consistent efforts toresume its status as a contracting party to GATT and accession to the WTO were in line with itsobjective of economic reform to establish a socialist market economy as well as its basic nationalpolicy of opening to the outside world.  China believed that its WTO accession would increase its
economic growth and enhance its economic and trade relations with WTO Members.WT/ACC/SPEC/CHN/1/Rev.7
Page 2
5.  Members of the Working Party welcomed China's accession to the WTO and considered that
its accession would contribute to a strengthening of the multilateral trading system, enhancing theuniversality of the WTO, bringing mutual benefits to China and to the other Members of the WTO,and ensuring the steady development of the world economy.
6. The representative of China said that China had a territory of 9.6 million square kilometres
and, at the end of 1998 a population of 1.25 billion.  Since 1979, China had been progressivelyreforming its economic system, with the objective of  establishing and improving the socialist market
economy.  The reform package introduced in 1994, covering the banking, finance, taxation,investment, foreign exchange ("forex") and foreign trade sectors, had brought about majorbreakthroughs in China's socialist market economy.  State-owned enterprises had been reformed by aclear definition of property rights and responsibilities, a separation of government from enterprise,and scientific management.  A modern enterprise system had been created for the state-owned sector,and the latter was gradually getting on the track of growth through independent operation, responsible
for its own profits and losses.  A nation-wide unified and open market system had been developed.
An improved macroeconomic regulatory system used indirect means and market forces to play acentral role in economic management and the allocation of resources.  A new tax and financial systemwas functioning effectively.  Financial policy had been separated from commercial operations of the
central bank, which now focussed on financial regulation and supervision.  The exchange rate of theChinese currency Renminbi (also "RMB") had been unified and remained stable.  The Renminbi hadbeen made convertible on current account.  Further liberalization of pricing policy had resulted in themajority of consumer and producer products being subject to market prices.  The market now played a
much more significant role in boosting supply and meeting demand.
7. The representative of China further noted that as a result, in 1999, the Gross Domestic
Product (GDP) of China totaled RMB 8.2054 trillion yuan (approximately US$ 990 billion).  In 1998,
the net per capita income for rural residents was RMB 2,160 yuan (approximately US$ 260), and theper capita dispensable income for urban dwellers was RMB 5,425 yuan (approximately US$ 655).  Inrecent years, foreign trade had grown substantially.  In 1999, total imports and exports of goodsreached US$ 360.65 billion, of which exports stood at US$ 194.93 billion, and imports, US$ 165.72billion. Exports from China in 1998 accounted for 3.4 per cent of the world's total.
8. The representative of China stated that although important achievements have been made in
its economic development, China was still a developing country and therefore should have the right to
enjoy all the special and preferential treatment accorded to developing country Members pursuant tothe WTO Agreement.WT/ACC/SPEC/CHN/1/Rev.7
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39. Some members of the Working Party indicated that because of the significant size, rapid
growth and transitional nature of the Chinese economy, a pragmatic approach should be taken indetermining China's need for recourse to transitional periods and other special provisions in the WTOAgreement available to developing country WTO Members.  Each agreement and China's situation
should be carefully considered and specifically addressed.  In this regard it was stressed that this
pragmatic approach would be tailored to fit the specific cases of China's accession in a few areas,which were reflected in the relevant provisions set forth in China's Draft Protocol and Working PartyReport.  Noting the preceding statements, Members reiterated that all commitments taken by China inher accession process were solely those of China and would prejudice neither existing rights andobligations of Members under the WTO Agreement nor on-going and future WTO negotiations andany other process of accession.  While noting the pragmatic approach taken in China's case in a fewareas, Members also recognized the importance of differential and more favourable treatment fordeveloping countries embodied in the WTO Agreement.
10. At the request of interested members of the Working Party, the representative of China agreed
that China would undertake bilateral market access negotiations with respect to industrial andagricultural products, and initial commitments in services.
11. Some members of the Working Party stated that in addition to undertaking market access
negotiations in goods and services, close attention should also be paid to China's multilateralcommitments, in particular China's future obligations under the Multilateral Agreements on Trade inGoods and the General Agreement on Trade in Services ("GATS").  This was of vital importance toensure that China would be able to take full benefit of WTO membership as quickly as possible, as
well as to ensure that the value of any market access conditions undertaken were not adversely
affected by inconsistent measures such as some types of non-tariff measures.
12. The representative of China stated that the achievement of balance between rights and
obligations was the basic principle in its negotiation of WTO accession.
13. Some members of the Working Party expressed concern over discrepancies in statistical
information supplied by the Government of China on trade volume/value.  Members and Chinapursued this issue separately in an Informal Group of Experts on Export Statistics.
14. The Working Party reviewed the foreign trade regime of China.  The discussions and
commitments resulting therefrom are contained in paragraphs … below and in the Draft Protocol of
Accession ("Draft Protocol") and in China's Schedules annexed to the Draft Protocol.WT/ACC/SPEC/CHN/1/Rev.7
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II. ECONOMIC POLICIES
1. Non-Discrimination (including national treatment)
15. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals and enterprises (whether wholly or partly foreign
funded).  Those members stated that China should enter a commitment to accord non-discriminatory
treatment to all foreign individuals and enterprises and foreign-funded enterprises in respect of theprocurement of inputs and goods and services necessary for production of goods and the conditionsunder which their goods were produced, marketed or sold, in the domestic market and for export.  Inaddition, those members said that China should  also enter a commitment to guarantee non-
discriminatory treatment in respect of the prices and availability of goods and services supplied bynational and sub-national authorities and public or state enterprises, in areas including transportation,energy, basic telecommunications, other utilities and factors of production.
16. Some members of the Working Party also raised concerns over China's practice of
conditioning or imposing restrictions upon participation in the Chinese economy based upon the
nationality of the entity concerned.  Those members in particular raised concerns over such practicesin relation to the pricing and procurement of goods and services, and the distribution of import andexport licences.  Members of the Working Party requested that China enter into a commitment not tocondition such practices on the nationality of the entity concerned.
17. In response, the representative of China emphasized the importance of the commitments that
the government was undertaking on non-discrimination.  The representative of China noted, however,that any commitment to provide non-discriminatory treatment to Chinese enterprises, including
foreign-funded enterprises, and foreign enterprises a nd individuals in China, would be subject to other
provisions of the Draft Protocol and, in partic ular, would not prejudice China's rights under the
GATS, China's Schedule of Specific Commitments or commitments undertaken in relation to trade-related investment measures.
18. The representative of China further confirmed that China would provide the same treatment to
Chinese enterprises, including foreign-funded enterprises, and foreign enterprises and individuals inChina.  China would eliminate dual pricing practices  as well as differences in treatment accorded to
goods produced for sale in China in comparison to those produced for export.  The Working Partytook note of these commitments.
19. The representative of China confirmed that, consistent with China's rights and obligations
under the WTO Agreement and the Draft Protocol, China would provide non-discriminatory treatmentWT/ACC/SPEC/CHN/1/Rev.7
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5to all WTO Members, including Members of the WTO that were separate customs territories.  The
Working Party took note of this commitment.
20. Members of the Working Party expressed concern about certain provisions of Chinese laws,
regulations, administrative notices and other requirements which could, directly or indirectly, result in
less favourable treatment of imported products in contravention of Article III of the General
Agreement on Tariffs and Trade ("GATT 1994").  Such requirements included product registrationand certification, internal taxation, price and profit controls and all distinct forms of licensing forimports, and distribution or sale of imported goods.  Even where such requirements existed in relationto domestically produced goods, Members re-iterated that any de facto or de jure less favourabletreatment of imported goods had to be eliminated in order to ensure full conf ormity with the principle
of national treatment.
21. Some members of the Working Party drew China's attention to the variety of types of
requirements which could contravene GATT Article III. Specific reference was made to the
procedures, charges and conditions for granting of business licences, whether to import, distribute, re-
sell or retail goods of non-Chinese origin.  Reference was also made to taxes and fiscal provisionswhose impact depended, directly or indirectly, upon the Chinese or non-Chinese origin of the goodsimported or traded.  Those members drew the attention of China to its obligation to ensure thatproduct testing and certification requirements, including procedures for in situ inspections, posed nogreater burden – whether financial or practical - on goods of non-Chinese origin than on domestic
goods.  Those members underlined that conformity assessment procedures and standards, includingsafety and other compliance requirements, had to respect the terms of the WTO Agreement on
Technical Barriers to Trade ("TBT Agreement") as well as GATT Article III.
22. The representative of China confirmed that the full respect of all laws, regulations and
administrative requirements with the principle of non-discrimination between domestically producedand imported products would be ensured and enforced by the date of China's accession to the WTOunless otherwise provided in the Draft Protocol or Draft Report.  The representative of China declaredthat, by accession, China would repeal and cease to apply all such existing laws, regulations and othermeasures whose effect was inconsistent with WTO rules on national treatment.  This commitment wasmade in relation to final or interim laws, administrative measures, rules and notices, or any other formof stipulation or guideline. The Working Party took note of these commitments.
23. In particular, the representative of China confirmed that measures would be taken at national
and subnational level, including repeal or modification of legislation, to provide full GATT nationalWT/ACC/SPEC/CHN/1/Rev.7
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treatment in respect of laws, regulations and other measures applying to internal sale, offering for
sale, purchase, transportation, distribution or use of the following:
- After sales service (repair, maintenance and assistance), including any conditions applying to
its provision, such as the MOFTEC third Decree of 6 September 1993, imposing mandatory
licensing procedures for the supply of after-sales service on various imported products;
- Pharmaceutical products, including regulations, notices and measures which subjected
imported pharmaceuticals to distinct procedures and formulas for pricing and classification,
or which set limits on profit margins attainable and imports, or which created any otherconditions regarding price or local content which could result in less favourable treatment ofimported products;
- Cigarettes, including unification of the licensing requirements so that a single licence
authorized the sale of all cigarettes, irrespective of their country of origin, and elimination of
any other restrictions regarding points of sale for imported products, such as could be
imposed by the China National Tobacco Corporation ("CNTC"). It was understood that in the
case of cigarettes, China could avail itself of a transitional period of two years to fully unifythe licensing requirements.  Immediately upon accession, and during the two year transitionalperiod, the number of retail outlets selling imported cigarettes would be substantiallyincreased throughout the territory of China;
- Spirits, including requirements applied under China's "Administrative Measures on Imported
Spirits in the Domestic Market", and other provisions which imposed distinct criteria and
licensing for the distribution and sale of different categories of spirits, including unification of
the licensing requirements so that a single licence authorized the sale of all spirits irrespective
of their country of origin;
- Chemicals, including registration procedures applicable to imported products, such as those
applied under China's "Environmental Control Regulations for Initial Imports of Chemical
Products and Imports and Export s of Toxic Chemical Products";
- Boilers and pressure vessels, including certification and inspection procedures which had to
be no less favourable than those applied to goods of Chinese origin, and fees applied by the
relevant agencies or administrative bodies, which had to be equitable in relation to thosechargeable for like products of domestic origin.WT/ACC/SPEC/CHN/1/Rev.7
Page 7
7The representative of China stated that in the cases of pharmaceuticals, spirits and chemicals cited
above, China would reserve the right to use a transitional period of one year from the date ofaccession in order to amend or repeal the relevant legislation.  The Working Party took note of thesecommitments.
2. Monetary and Fiscal Policy
24. The representative of China stated that through the reform and opening up in the last two
decades, China had established a fiscal management system which was compatible with the principlesof a market economy.  With respect to fiscal revenue, a taxation system with a value-added tax as themain element had been established since the taxation reform in 1994. With respect to fiscalexpenditure, over recent years the government had, in line with the public fiscal requirement generallyexercised by market economies, strengthened its adjustment of the structure of expenditure and givenpriority to public needs so as to ensure the normal operations of the government.
25. The representative of China further stated that in recent years, while pursuing proactive fiscal
policy, China had implemented proper monetary policy and had taken a series of adjusting and reform
measures which included lowering the interest rate for loans from financial institutions, improving thesystem of required deposit reserves and lowering the ratio of required reserves, positively increasingthe input of base money and encouraging the commercial banks to expand their credit.
26. In respect of future fiscal policy, the Government of China would further improve its taxation
system and would continue to improve the efficiency of fiscal expenditure through implementingreform measures such as sectoral budget, centralized payment by the national treasury and zero basebudget, as well as improving management of fiscal expenditure. With respect to future monetary
policy, the central bank would continue to pursue a prudent policy, maintain the stability of RMB,
promote interest rate liberalization and establish a modern commercial banking system.
3. Foreign Exchange and Payments
27. Some members of the Working Party raised concerns about China's use of forex controls to
regulate the level and composition of trade in goods and services.  In response, the representative ofChina stated that its system of forex had undergone rapid change and that China was now a memberof the International Monetary Fund ("IMF").  Significant moves had been taken to reform, rationalizeand liberalize the forex market.  The practice of multiple exchange rates in swap centres had beenabolished.  China had already unified its forex market and removed many of the restrictions on the use
of forex.WT/ACC/SPEC/CHN/1/Rev.7
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28. Outlining the historical development of China' s forex reform, the representative of China
stated that the purpose of China's forex reform was to reduce administrative intervention and increasethe role of market forces.  From 1979, a forex retention system was applied in China, although forexswap was gradually developing.  In early 1994, official RMB exchange rates were unified with the
market rates. The banking exchange system was adopted and a nationwide unified inter-bank forex
market was established, with conditional convertibility of the Renminbi on current accounts.  Since1996, foreign investment enterprises ("FIEs") were also permitted into the banking exchange system,and the remaining exchange restrictions on current accounts were eliminated. On 1 December 1996,China had formally accepted the obligations of Article VIII of the IMF's Articles of Agreement,removing exchange restrictions on current account transactions.  Accordingly, since then theRenminbi had been fully convertible on current accounts.  It was confirmed by the IMF in its StaffReport on Article IV Consultations with China in 2000 that China had no existing forex restrictionsfor current account transactions.
29. The representative of China stated that the State Administration of Foreign Exchange
("SAFE") was under the auspices of the People's Bank of China ("PBC"), and was the administrativeorgan empowered to regulate forex.  Its main functions were to monitor and advise on balance-of-payments and forex matters.  SAFE was also requir ed to draft appropriate regulations and monitor
compliance.  He further noted that domestic and foreign banks, and financial institutions could engagein forex business, with the approval of the PBC.
30. In response to requests from members of the Working Party for further information, the
representative of China added that for forex payments under current accounts, domestic entities
(including FIEs) could purchase forex at market exchange rates from designated banks or debit their
forex accounts directly upon presentation of valid documents.  For payments such as pre-payment,commission, etc., exceeding the proportion or limit, the entities could also purchase forex from thebanks upon meeting the bona fide test administered by SAFE.  Forex for personal use by individualscould be purchased directly from the banks upon presentation of valid documents (within a specifiedlimit).  For amounts exceeding the limit, individuals able to prove their need for additional forex
could purchase it from the banks.  He also noted that current account forex receipts owned bydomestic entities had to be repatriated into China, some of which could be retained and some sold to
the designated banks at market rates.  A verification system for forex payment (imports) and forex
receipt (exports) had also been adopted.
31. Concerning the exchange rate regime in particular, the representative of China noted that
since the unification of exchange rates on 1 January 1994, China had adopted a single and managedfloating exchange rate regime based on supply and demand.  PBC published the reference rates ofWT/ACC/SPEC/CHN/1/Rev.7
Page 9
9RMB against the US dollar, the HK dollar and Japanese yen based on the weighted average prices of
forex transactions at the interbank forex market during the previous day's trading. The buying andselling rates of RMB against the US dollar on the inter-bank forex market could fluctuate within 0.3per cent of the reference rate. For the HK dollar and Japanese yen, the permitted range was 1 per cent.
Designated forex banks could deal with their clients at an agreed rate.  Under such contracts the
exchange rate of the US dollar was required to be within 0.15 per cent of the reference rate, whereasfor the HK dollar and Japanese yen, the permitted range was 1 per cent.  The exchange rates for otherforeign currencies were based on the rates of RMB against the US dollar and cross-exchange rates ofother foreign currency on the international mark et. The permitted margin between the buying and
selling rate could not exceed 0.5 per cent.
32. The representative of China further noted that since 1 January 1994, designated forex banks
had become major participants in forex transactions.  On 1 April 1994, the China Foreign ExchangeTrading System was set up in Shanghai and branches were opened in dozens of cities.  The Shanghai
Foreign Exchange Trading System had adopted a system of membership, respective quotation,
concentrated trading and forex market settlement.  Designated forex banks dealt on the inter-bankmarket according to the turnover position limit on ba nking exchange stipulated by SAFE and covered
the position on the market. Depending on its macro-economic objectives, the PBC could intervene inthe forex open market in order to regulate market supply and demand, and maintain the stability of theRMB exchange rate.
33. The representative of China noted that since 1 July 1996, forex dealing of the FIEs was
carried out through the banking exchange system.  He further noted that to encourage foreign direct
investment, China had granted national treatment to FIEs in exchange administration.  Accordingly,
FIEs were allowed to open and hold forex settlement accounts to retain receipts under currentaccounts, up to a maximum amount stipulated by SAFE.  Receipts in excess of the maximum amountwere required to be sold to designated forex bank s.  No restrictions were maintained on the payment
and transfer of current transactions by FIEs, a nd FIEs could purchase forex from designated forex
banks or debit their forex accounts for any payment under current transactions, upon the presentationof valid documents to the designated forex banks or SAFE for the bona fide test.  FIEs could alsoopen forex accounts to hold foreign-invested capital, and they could sell from these accounts upon theapproval of SAFE.  FIEs  could also borrow forex directly from domestic and overseas banks, but
were required to register with SAFE afterwards, and obtain approval by SAFE for debt repayment and
services.  FIEs could make payments from their forex accounts or in forex purchased from designatedforex banks after liquidation, upon approval by SAFE according to law.WT/ACC/SPEC/CHN/1/Rev.7
Page 10
34. The representative of China further noted that the laws and regulations mentioned above
were:  Law of the People's Republic of China on Chinese-Foreign Equity Joint Venture;  Law of thePeople's Republic of China on Chinese-Foreign Contractual Joint Venture;  Regulations on theExchange System of the People's Republic of China; and Regulations on the Sale and Purchase of and
Payment in Foreign Exchange.
35. Some members of the Working Party stated that China should undertake appropriate
commitments on its reform of forex.
36. In response, the representative of China stated that China would implement its obligations
with respect to forex matters in accordance with the provisions of the WTO Agreement and relateddeclarations and decisions that concerned the IMF.  The representative further confirmed China'sacceptance of the obligations of Article VIII of the IMF's Articles of Agreement, which provided that"no member shall, without the approval of the Fund, impose restrictions on the making of paymentsand transfers for current international transactions ".  He stated that, in accordance with these
obligations, and unless otherwise provided for in the IMF's Articles of Agreement, China would not
resort to any laws, regulations or other measures, including any requirements with respect tocontractual terms, that would restrict the availability to any individual or enterprise of forex forcurrent international transactions within its customs territory to an amount rela ted to the forex inflows
attributable to that individual or enterprise.  He stated, moreover, that China would not subjectindividual requests for forex for the making of payments and transfers for current internationaltransactions, including the issuance of credit or cr edit guarantees for current international transactions
(e.g., letters of credit; direct loans; guarantees of loans by financial institutions or other entities; or
insurance of financing by financial institutions or other entities), to any form of approval or restriction
(including a requirement for the presentation of an invoice), in a manner inconsistent with itsobligations under the IMF's Articles of Agreement.  The Working Party took note of thesecommitments.
37. In addition, the representative of China stated that China would provide information on
exchange measures as required under Article VIII, Section 5 of the IMF's Articles of Agreement, andsuch other information on its exchange measures as was deemed necessary in the context of thetransitional review mechanism.  The Working Party took note of this commitment.
4. Balance-of-Payments Measures
38. Some members of the Working Party stated that China should apply balance-of-payments
("BOPs") measures only under the circumstances provided for in the WTO Agreement and not as ajustification for imposition of restrictions on imports for other protectionist purposes.  Those membersWT/ACC/SPEC/CHN/1/Rev.7
Page 11
11stated that measures taken for BOPs reasons should have the least trade disruptive effect possible and
should be limited to temporary import surcharges, import deposit requirements or other equivalentprice-based trade measures, and those measures should not be used to provide import protection forspecific sectors, industries or products.
39. Those members further stated that any such measures should be notified pursuant to the
Understanding on the Balance-of-Payments Provis ions of the GATT 1994 ("BOPs Understanding")
and to the General Council not later than the im position of the measures, together with a time
schedule for their elimination and a programme of external and domestic policy measures to be usedto restore BOPs equilibrium.  Those members also stated that following deposit of such a notification,the Committee on Balance-of-Payments Restrictions ("BOPs Committee") should meet to examinethe notification.  It was noted that paragraph 4 of the BOPs Understanding would be available toChina in the case of "essential products".  Some members stated that the BOPs Committee shouldreview the operation of any BOPs measures taken by China, if so requested by China or a WTO
Member.
40. Some other members considered that, in respect of measures taken for BOP purposes, China
should enjoy the same rights as those accorded to other developing country WTO Members, asprovided in GATT Article XVIII:B and the BOPs Understanding.
41. In response, the representative of China stated that China considered that it should have the
right to make full use of WTO BOPs provisions to protect, if necessary, its BOPs situation.  Heconfirmed that China would fully comply with the provisions of the GATT 1994 and the BOPsUnderstanding.  Further to such compliance, China would give preference to application of price-
based measures as set forth in the BOPs Understanding.  If China resorted to measures that were not
price-based, it would transform such measures into  price-based measures as soon as possible.  Any
measures taken would be maintained strictly in accordance with the GATT 1994 and the BOPsUnderstanding, and would not exceed what was necessary to address the particular BOPs situation.The representative of China also confirmed that measures taken for BOPs reasons would only beapplied to control the general level of imports and not to protect specific sectors or industries.  TheWorking Party took note of these commitments.
5. Investment Regime
42. The representative of China stated that since the inception of the reform and opening up
policy in the late 1970's, China had carried out a series of reforms of its investment regime. TheWT/ACC/SPEC/CHN/1/Rev.7
Page 12
highly centralized investment administration under the planned economy had been progressively
transformed into a new pattern of diversification of investors, multi-channelling of capital sources anddiversification of investment modalities. The gove rnment encouraged foreign investment into the
Chinese market and had uninterruptedly opened and expanded the scope for investment. At the same
time, the Government of China also encouraged the development of the non-state-operated economy
and was speeding up the opening of areas for non-st ate investment. With China's programme in the
establishment of its market economy, the construction projects of various enterprises utilizing freecapital and financed by the credit of the enterprise would be fully subject to the decision-making ofthe enterprise concerned and at their own risk. The commercial banks' credit activities to all kinds ofinvestors would be based on their own evaluation and decision-making, and would be at their own
risk.  The business activities of intermediate invest ment agencies would be fully subject to the market
and would provide service at the instruction of the investors. These agencies would break up theiradministrative relations with government agencies and the service activities financed by the
government would also be subject to the terms a nd conditions agreed in the contracts concerned.
43. The representative of China further stated that China had promulgated investment guidelines
and that the Government of China was in the process of revising and completing these guidelines.Responding to concerns raised by certain members of the Working Party, he confirmed that theseinvestment guidelines and their implementation would be in full conformity with the WTO
Agreement.  The Working Party took note of this commitment.
6. State-Owned and State-Invested Enterprises
44. The representative of China stated that the state-owned enterprises of China basically
operated in accordance with rules of market economy.  The government would no longer directly
administer the human, finance and material resources, and operational activities such as production,supply and marketing.  The prices of commodities produced by state-owned enterprises were decidedby the market and resources in operational areas were fundamentally allocated by the market.  Thestate-owned banks had been commercialized and lending to state-owned enterprises took place
exclusively under market conditions.  China was furthering its reform of state-owned enterprises andestablishing a modern enterprise system.
45. In light of the role that state-owned and state-invested enterprises played in China's economy,
some members of the Working Party expressed concerns about the continuing governmental influence
and guidance of the decisions and activities of such enterprises relating to the purchase and sale of
goods and services. Such purchases and sales should be based solely on commercial considerations,without any governmental influence or application of discriminatory measures.  In addition, thoseWT/ACC/SPEC/CHN/1/Rev.7
Page 13
13members indicated the need for China to clarify its understanding of the types of activities that would
not come within the scope of Article III:8(a) of GATT 1994.  For example, any measure relating tostate-owned and state-invested enterprises importing materials and machinery used in the assembly ofgoods, which were then exported or otherwise made available for commercial sale or use or for non-
governmental purposes, would not be considered to be a measure relating to government procurement.
46. The representative of China emphasized the evolving nature of China's economy and the
significant role of FIEs and the private sector in the economy.  Given the increasing need anddesirability of competing with private enterprises in the market, decisions by state-owned and state-
invested enterprises had to be based on commercial considerations as provided in the WTOAgreement.
47. The representative of China further confirmed that China would ensure that all state-owned
and state-invested enterprises would make purchases and sales based solely on commercialconsiderations, e.g. price, quality, marketability and availability, and that the enterprises of other
WTO Members would have an adequate opportunity to compete for sales to and purchases from these
enterprises on non-discriminatory terms and conditions.  In addition, the Government of China wouldnot influence, directly or indirectly, commercial decisions on the part of state-owned or state-investedenterprises, including the quantity, value or country of origin of any goods purchased or sold, exceptin a manner consistent with the WTO Agreement.  The Working Party took note of thesecommitments.
48. The representative of China confirmed that, without prejudice to China's rights in future
negotiations in the Government Procurement Agreement, all laws, regulations and measures relating
to the procurement by state-owned and state-invested enterprises of goods and services for
commercial sale, production of goods or supply of services for commercial sale, or for non-governmental purposes would not be considered to be laws, regulations and measures relating togovernment procurement. Thus, such purchases or sales would be subject to the provisions ofArticles II, XVI and XVII of the GATS and Arti cle III of the GATT 1994.  The Working Party took
note of this commitment.
49. Certain members of the Working Party expressed concern about laws, regulations and
measures in China affecting the transfer of technol ogy, in particular in the context of investment
decisions.  Moreover, these members expressed concern about measures conditioning the receipt of
benefits, including investment approvals, upon t echnology transfer.  In their view, the terms and
conditions of technology transfer, particularly in the context of an investment, should be agreedWT/ACC/SPEC/CHN/1/Rev.7
Page 14
between the parties to the investment without gove rnment interference.  The government should not,
for example, condition investment approval upon technology transfer.
50. The representative of China confirmed that China would only impose, apply or enforce laws,
regulations or measures relating to the transfer of technology, production processes, or other
proprietary knowledge to an individual or enterprise in its territory that were not inconsistent with the
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") andthe Agreement on Trade-Related Investment Measures ("TRIMs Agreement").  China confirmed thatthe terms and conditions of technology transfer, production processes or other proprietary knowledge,particularly in the context of an investment, woul d only require agreement between the parties to the
investment.  The Working Party took note of these commitments.
7. Pricing Policies
51. Some members of the Working Party noted that China had made extensive use of price
controls, for example in the agricultural sector.  Those members requested that China undertake
specific commitments concerning its system of state pricing.  In particular, those members stated that
China should allow prices for traded goods and services in every sector to be determined by marketforces, and multi-tier pricing practices for such goods and services should be eliminated.  Thosemembers noted, however, that China expected to ma intain price controls on the goods and services
listed in Annex 4 to the Draft Protocol, and stated that any such controls should be maintained in amanner consistent with the WTO Agreement, in particular Article III of the GATT 1994 and Annex 2,paragraphs 3 and 4, of the Agreement on Agriculture.  Those members noted that except inexceptional circumstances, and subject to notification to the WTO Secretariat, price controls should
not be extended to goods or services beyond those listed in Annex 4, and China should make its best
efforts to reduce and eliminate those controls.  They also asked that China publish in the appropriateofficial journal the list of goods and services subject to state pricing and changes thereto.
52. Members expressed the view that price controls and state pricing in China also encompassed
"guidance pricing" and  regulation of the range of profits that enterprises could enjoy.  Such policiesand practices would also be subject to China's commitments.  In their view, price controls should beadopted only in extraordinary circumstances and should be removed as soon as the circumstancesjustifying their adoption were addressed.
53. The representative of China said that China currently applied a mechanism of market-based
pricing under macro-economic adjustment.  He noted that national treatment was applied in the areas
of government pricing for all imported goods.  There were presently three types of prices:government price, government guidance price and ma rket-regulated price.  The government price wasWT/ACC/SPEC/CHN/1/Rev.7
Page 15
15set by price administration authorities and could not be changed without the approval of these
authorities. Products and services subject to government pricing were those having a direct bearing onthe national economy and the basic needs of the people's livelihood, including those products thatwere scarce in China.
54. [The representative of China stated that when the government prices or government guidance
prices needed to be adjusted or reset, the agenci es concerned should apply to the competent pricing
authorities for that purpose. He further stated th at in accordance with the Pricing Law of China, a
system of public hearing on resetting of government price and government guidance price had beenestablished. Under this system, the competent pric ing authorities would hold public hearings and
invite all parties concerned to comment and debate on the necessity and impact of price adjustment.This mechanism had helped to significantly improve the rationality and transparency of governmentpricing.  All enterprises in China, regardless of their nature and ownership, were free to participate insuch hearings and voice their opinions and concerns which would be taken into consideration by the
competent pricing authorities. Meanwhile, government pricing was product- or service-specific,
regardless of the ownership of enterprises concerned.  All the enterprises and individuals in Chinaenjoyed the same treatment in the process of government pricing.]
55. He added that the government guidance price mechanism was a more flexible form of pricing.
The price administration authorities stipulated either a basic price or floating ranges. The floatingrange of guidance pricing was generally 5 per cent to 15 per cent.  Enterprises could, within the limitsof the guidance and taking into account the market situation, make their own decisions on prices.With market-regulated prices, enterprises were free to set prices in accordance with supply and
demand to the extent permitted by generally applicable laws, regulations and policies concerning
prices.
56. The representative of China stated that in formulating government prices and government
guidance prices, the following criteria were taken into account:  normal production costs, supply anddemand situation, relevant government policies and prices of related products. When fixing prices ofconsumer goods, consideration was given to the limits of consumers' purchasing power.  He notedthat due to the continued reform of China's price system, the share of government prices had droppedsubstantially and that of market-regulated prices had increased;  of social retailing products, the shareof government prices was about 4 per cent, that of government guidance prices 1.2 per cent, and that
of market-regulated prices 94.7 per cent.  For agri cultural products, the share of government prices
was 9.1 per cent, government guidance prices 7.1 per cent, and market-regulated 83.3 per cent.  Forproduction inputs, the share of government prices was 9.6 per cent, that of government guidanceWT/ACC/SPEC/CHN/1/Rev.7
Page 16
prices 4.4 per cent, and market-regulated prices 86 per cent.  The share of directly government-
controlled prices had been much reduced.  The Government of China considered that China's pricesystem was becoming increasingly rationalized, creating a relatively fair marketplace for allenterprises to compete on an equal footing.
57. The representative of China recalled that Annex 4 of the Draft Protocol contained a
comprehensive listing of all products and services presently subject to government guidance pricingand government pricing.
58. The representative of China confirmed that it would publish in the official journal the list of
goods and services subject to state pricing and changes thereto, together with price-settingmechanisms and policies.  The Working Party took note of these commitments.
59. The representative of China confirmed that the official journal providing price information
was the Pricing Monthly of the People's Republic of China, published in Beijing.  It was a monthly
magazine listing all products and services priced by the State.  He further stated that China would
continue to further its price reform, adjusting the catalogue subject to state pricing and further
liberalize its pricing policies.
60. The representative of China further confirmed that price controls would not be used for
purposes of affording protection to domestic industries  or services providers.  The Working Party took
note of this commitment.
61. In addition, the representative of China confirmed that China would apply its current price
controls and any other price controls from the entry into force of the Draft Protocol in a WTO-consistent fashion, and would take account of the interests of exporting WTO Members as provided
for in Article III:9 of the GATT 1994.  The Working Party took note of these commitments.
8. Competition Policy
62. The representative of China noted that the Government of China encouraged fair competition
and was against acts of unfair competition of all kinds. The Law of the People's Republic of China onCombating Unfair Competition, promulgated on 2 September 1992 and implemented on1 December 1992, was the basic law to maintain the order of competition in the market. In addition,the Price Law, the Law on Tendering and Bidding, the Criminal Law and other relevant laws alsocontained provisions on anti-monopoly and unfair co mpetition. China was now formulating the Law
on Anti-Monopoly.WT/ACC/SPEC/CHN/1/Rev.7
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17III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
1. Structure and Powers of the Government
63. The representative of China informed members of the Working Party that in accordance with
the Constitution and the Law on Legislation of the People's Republic of China, the National People's
Congress was the highest organ of state power.  Its permanent body was its Standing Committee.  The
National People's Congress and its Standing Committee exercised the legislative power of the State.They had the power to formulate the Constitution and laws.  The State Council, i.e., the Central
People's Government of China, was the executive body of the highest organ of state power.  The State
Council, in accordance with the Constitution and relevant laws, was entrusted with the power to
formulate administrative regulations.  The minist ries, commissions and other competent departments
(hereinafter referred to as "departments'') of the State Council could issue departmental rules within
the jurisdiction of their respective departments an d in accordance with the laws and administrative
regulations.  The provincial people's congresses and their standing committees could adopt local
regulations.  The provincial governments had the power to make local government rules.  The
National People's Congress and its Standing Comm ittee had the power to annul the administrative
regulations that contradicted the Constitution and laws as well as the local regulations thatcontradicted the Constitution, laws and administrative regulations.  The State Council had the powerto annul departmental rules and local government rules that were inconsistent with the Constitution,laws or administrative regulations.  The Government of China believed that these features of theChinese legal system would ensure an effective and uniform implementation of the obligations afterChina's accession.
64. The representative of China stated that China had been consistently performing its
international treaty obligations in good faith.  According to the Constitution and the Law on the
Procedures of Conclusion of Treaties, the WTO Agreement fell within the category of "importantinternational agreements" subject to the ratification by the Standing Committee of the NationalPeople's Congress.  China would ensure that its laws  and regulations pertaining to or affecting trade
were in conformity with the WTO Agreement and with its commitments so as to fully perform its
international obligations.  For this purpose, China had commenced a plan to systematically revise itsrelevant domestic laws.  Therefore, the WTO Agreement would be implemented by China in aneffective and uniform manner through revising its existing domestic laws and enacting new ones fully
in compliance with the WTO Agreement.WT/ACC/SPEC/CHN/1/Rev.7
Page 18
2. Authority of Sub-Central Governments
65. Several members of the Working Party raised concerns about the continued presence of
multiple trade instruments used by different levels of government within China.  Those membersconsidered that this situation resulted in a lessening  of the security and predictability of access to the
Chinese market. These Members raised specific concerns regarding the authority of sub-national
governments in the areas of fiscal, financial and budgetary activities, specifically with respect to
subsidies, taxation, trade policy and other issues covered by the WTO Agreement and the DraftProtocol.  In addition, some members expressed conc erns about whether the central government could
effectively ensure that trade-related measures introduced at the sub-national level would conform toChina's commitments in the WTO Agreement and the Draft Protocol.
66. The representative of China confirmed that administrative regulations, departmental rules and
other central government measures would be promulgated in a timely manner so that China'scommitments would be fully implemented within the relevant time frames.  If administrative
regulations, departmental rules or other measures were not in place within such time frames,
authorities would still honour China's obligations under the WTO Agreement and Draft Protocol.  Therepresentative of China further confirmed that th e central government would undertake in a timely
manner to revise or annul administrative regulations or departmental rules if they were inconsistentwith China's obligations under the WTO and Draft Protocol.  The Working Party took note of thesecommitments.
3. Uniform Administration of the Trade Regime
67. Members of the Working Party stated that it should be made clear that China would apply the
requirements of the WTO Agreement and its other accession commitments throughout China's entire
customs territory, including border trade regions, minority autonomous areas, Special EconomicZones ("SEZs"), open coastal cities, economic and technical development zones and other specialeconomic areas and at all levels of government.
68. The representative of China stated that sub-national governments had no autonomous
authority over issues of trade policy to the extent  that they were related to the WTO Agreement and
the Draft Protocol.  The representative of China confirmed that China would in a timely manner annullocal regulations, government rules and other loca l measures that were inconsistent with China's
obligations.  The representative of China further confirmed that the central government would ensure
that China's laws, regulations and other measures, including those of local governments at the sub-
national level, conformed to China's obligations undertaken in the WTO Agreement and the DraftProtocol.  The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 19
1969. Those members of the Working Party also raised concerns about whether China's central
government would be sufficiently informed about non-uniform practices and would take necessaryenforcement actions.  Those members stated that China should establish a mechanism by which anyconcerned person could bring to the attention of the central government cases of non-uniform
application of the trade regime and receive prompt and effective action to address situations in which
non-uniform application was established.
70. The representative of China confirmed that the provisions of the WTO Agreement, including
the Draft Protocol, would be applied uniformly throughout its customs territory, including in SEZsand other areas where special regimes for tariffs, taxes and regulations were established and at alllevels of government.  The Working Party took note of this commitment.
71. In response to questions from Members, the representative of China confirmed that laws,
regulations and other measures included decrees, orders, directives, administrative guidance andprovisional and interim measures.  He stated that in China, local governments included provincial
governments, including autonomous regions and municipalities directly under the central government,
cities, counties and townships.  The representative of China further stated that local regulations, rulesand other measures were issued by local governments at the provincial, city and county levels actingwithin their respective constitutional powers and functions and applied at their corresponding local
level.  Townships were only authorized to implement measures.  Special economic areas were alsoauthorized to issue and implement local rules and regulations.
72. The representative of China further confirmed that the mechanism established pursuant to
Section 2(A) of the Draft Protocol would be operative upon entry into force of the Draft Protocol.  All
individuals and entities could bring to the attention of central government authorities cases of non-
uniform application of China's trade regime, including its commitments under the WTO Agreementand the Draft Protocol.  Such cases would be referred promptly to the responsible government agency,and when non-uniform application was established, the authorities would act promptly to address thesituation utilizing the remedies available under China's laws, taking into consideration China'sinternational obligations and the need to provide a meaningful remedy.  The individual or entitynotifying China's authorities would be informed promptly in writing of any decision and action taken.The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 20
4. Judicial Review
73. Some members of the Working Party stated that China should designate independent
tribunals, contact points, and procedures for the prompt review of all administrative actions relating tothe implementation of laws, regulations, judicial decisions and administrative rulings of general
application referred to in Article X:1 of the GATT 1994, including administrative actions relating to
import or export licences, non-tariff measures and tariff-rate quota administration, conformityassessment procedures and other measures.  These members sought explicit confirmation that certaintypes of measures, such as decisions relating to standards and chemical registration, would be subjectto judicial review.  Some members of the Working Party also stated that the administrative actionssubject to review should also include any actions required to be reviewed under the relevantprovisions of the TRIPS Agreement and the GATS.  These members stated that such tribunals shouldbe independent of the agencies entrusted with administrative enforcement of the matter and should nothave any substantial interest in the outcome of the matter.
74. Those members of the Working Party stated that such review procedures should include the
opportunity for appeal, without penalty, by individuals or enterprises affected by any administrativeaction subject to review.  If an initial right of appeal were to an administrative body, there should bean opportunity to choose to make a further appeal to a judicial body.  Any decision by any appellatebody and the reasons therefore would be communicated in writing to the appellant, together withnotification of any right to further appeal.
75. The representative of China confirmed that it would revise its relevant laws and regulations so
that its relevant domestic laws and regulations would be consistent with the requirements of the WTO
Agreement and the Draft Protocol on procedures for judicial review of administrative actions.  He
further stated that the tribunals responsible for such reviews would be impartial and independent ofthe agency entrusted with administrative enforcement, and would not have any substantial interest inthe outcome of the matter.  The Working Party took note of this commitment.
76. In response to questions from members of the Working Party, the representative of China
confirmed that administrative actions related to measures covered under Section 2(D)(1) of the DraftProtocol included those relating to national treatment, conformity assessment, the regulation, control,supply or promotion of a service, including the grant or denial of a licence to provide a service andother matters, and that such administrative actions would be subject to the procedures established for
prompt review under Section 2(D)(2) of the Dr aft Protocol, and information on such procedures
would be available through the enquiry point that China would establish upon accession.  TheWorking Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 21
21IV. POLICIES AFFECTING TRADE IN GOODS
A. TRADING RIGHTS
1. General
77. Some members of the Working Party noted that China was in the process of liberalizing the
availability of the right to import and export goods  from China, but that such rights were now only
available to some Chinese enterprises (totalling 35,000).  In addition, foreign-invested enterprises hadthe right to trade, although this was restricted to the importation for production purposes and
exportation, according to the enterprises’ scope of  business.  Those members stated their view that
such restrictions were inconsistent with WTO requirements, including Articles XI and III of GATT1994, and welcomed China's commitment to progressively liberalize the availability and scope of theright to trade so that within three years of the en try into force of the Draft Protocol all enterprises
would have the right to import and export all goods (except for the share of products listed in Annex2a to the Draft Protocol reserved for importation and exportation by state trading enterprises)throughout the customs territory of China.  Those members requested that China provide detailedinformation on the process and criteria that it would use to increase the number of enterprises withtrading rights and the scope of products that enterprises could import and export during the transition
period.
78. Some members also noted China's commitment to accord foreign enterprises and individuals,
including those not invested or registered as enterp rises in China, no less favorable treatment than that
accorded enterprises in China with respect to the righ t to trade except as otherwise provided for in the
Draft Protocol. Members of the Working Party requested that China provide detailed informationregarding the process for such enterprises and i ndividuals to obtain the right to import and export
goods.
79. Some members of the Working Party expressed concerns that after the transition period any
linkage between an enterprise's scope of business or business licence and the right to trade would
constitute a restriction on the right to import and export.  Those members noted that within three years
after entry into force of the Draft Protocol, China would have to permit all enterprises in China totrade in all goods throughout the customs territory of China (except as otherwise provided in the DraftProtocol).
80. The representative of China confirmed that during the three years of transition, China would
progressively liberalize the scope and availability of trading rights.WT/ACC/SPEC/CHN/1/Rev.7
Page 22
(a) Upon accession, the representative of China confirmed that China would eliminate for both
Chinese and foreign-invested enterprises any e xport performance, trade balancing, foreign
exchange balancing and prior experience requirements, such as in importing and exporting,as criteria for obtaining or maintaining the right to import and export.
(b) With respect to wholly Chinese-invested ente rprises, the representative of China stated that
although foreign-invested enterprises obtained limited trading rights based on their approvedscope of business, wholly Chinese-invested en terprises were now required to apply for such
rights and the relevant authorities applied a threshold in approving such applications.  Inorder to accelerate this approval process and increase the availability of trading rights, therepresentative of China confirmed that China would reduce the minimum registered capitalrequirement (which applied only to wholly Chin ese-invested enterprises) to obtain trading
rights to RMB 5,000,000 for year one, RMB 3,000,000 for year two, RMB 1,000,000 foryear three and would eliminate the examination and approval system at the end of the phase-
in period for trading rights.
(c) The representative of China also confirmed that during the phase-in period, China would
progressively liberalize the scope and availability of trading rights for foreign-investedenterprises.  Such enterprises would be granted new or additional trading rights based on thefollowing schedule.  Beginning one year after entry into force of the Draft Protocol, joint-venture enterprises with minority share foreig n-investment would be granted full rights to
trade and beginning two years after entry into force of the Draft Protocol majority shareforeign-invested joint-ventures would be granted full rights to trade.
(d) The representative of China also confirmed th at within three years after entry into force of
the Draft Protocol, all enterprises in China would be granted the right to trade. Foreign-invested enterprises would not be required to establish in a particular form or as a separateentity to engage in importing and exporting nor would new business licence encompassingdistribution be required to engage in importing and exporting.
[The Working Party took note of these commitments.]81. (a) The representative of China reconfirmed that China would eliminate its system of
examination and approval of trading rights within three years after entry into force of theDraft Protocol.  At that time, China would permit all enterprises in China and foreign
enterprises and individuals, including sole proprietorships of other WTO Members, to
export and import all goods (except for the share of products listed in Annex 2a to the DraftProtocol reserved for importation and exportation by state trading enterprises) throughoutWT/ACC/SPEC/CHN/1/Rev.7
Page 23
23the customs territory of China.  Such right, however, did not permit importers to distribute
goods within China.   Providing distribution services would be done in accordance withChina’s Schedule of Specific Concessions under GATS.
(b) With respect to the grant of trading rights to foreign enterprises and individuals, including
sole proprietorships of other WTO members, the representative of China confirmed that
such rights would be granted in a non-discriminatory and non-discretionary way.  He furtherconfirmed that any requirements for obtaining trading rights would be for customs and fiscalpurposes only and would not constitute a barrier to trade.  The representative of Chinaemphasized that foreign enterprises and individuals with trading rights had to comply withall WTO-consistent requirements related to importing and exporting, such as thoseconcerning import licensing, TBT and SPS, but confirmed that requirements relating tominimum capital and prior experience would not apply.
The Working Party took note of these commitments.
2. Designated Trading
82. The representative of China stated that China would adjust and expand its list of enterprises
under its designated trading regime annually during the transition period, leading up to fullimplementation of the commitment contained in Annex 2b.  The current criteria for enterprises underthe designated trading regime included registered capital, import and export volume and the importvolume of products subject to designated trading in the previous year, bank credit rating and profits
and losses.
83. Members of the Working Party noted China's commitment that it would phase out the
limitation on the grant of trading rights for goods specified in Annex 2b of its Draft Protocol withinthree years of its entry into force.  In responding to questions raised by WTO members, therepresentative of China confirmed that China would progressively liberalize the right to trade in suchgoods by increasing the number of designated entities permitted to import goods in each of the threeyears of the transition period specified in Annex 2b.  The representative of China added that Chinawould eliminate import and export volume as a criteria for obtaining the right to trade these products,reduce minimum capitalization requirements and extend the right to register as designated importing
and exporting enterprises to enterprises that used such goods in the production of finished goods and
enterprises that distributed such goods in China.  At the end of three years, all enterprises in Chinaand all foreign enterprises and individuals would be permitted to import and export such goodsthroughout the customs territory of China.  The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 24
B. IMPORT REGULATION
1. Ordinary Customs Duties
84. Members of the Working Party welcomed China's decision to bind tariffs for all products in
its schedule on market access for goods.  This action would increase the certainty and predictability ofthis aspect of China's trade regime.  Members also noted the substantial unilateral tariff reductionsmade in many sectors by China in recent years.
85. The representative of China provided members of the Working Party with a copy of the
Customs Import and Export Tariff of the People's Republic of China ("Customs Tariff") and relatedlaws and regulations.  He noted that the Customs Tariff of China was a charge imposed on importedgoods. The purpose of levying tariffs was twofold:  (a) to regulate imports so as to promote and
support domestic production;  and (b) to serve as an important source of revenue for the treasury of
the central government.  China's tariff policy was to promote economic reform and opening of theeconomy.  The basic principles for establishing dut y rates were as follows.  Duty-free or low duty
rates were applied to imported goods which were needed for the national economy and the people'slivelihood but which were not produced sufficiently domestically.  Import duty rates on raw materialswere generally lower than those on semi-manufactured or manufactured products.  For parts orcomponents of machinery, equipment and instrument s which were not produced domestically, or at a
sufficiently high standard, the import duty was lower than the duty on finished products.  Higher dutyrates were applied to products which were produced domestically or which were considered non-
essential for the national economy and the people's livelihood.   A higher duty was applied to
imported products, the equivalent of which were produced domestically and the local manufacturer ofwhich needed protection.
86. The representative of China said that China had adopted the Harmonized Commodity
Description and Coding System (HS) as from 1 January 1992 and joined the International Conventionon the Harmonized Commodity Description and Coding System in the same year.  There were21 sections, 97 chapters and 7062 eight-digit tariff headings based on the six-digit HS'96 version inthe Customs Tariff for the year 2000.  Tariff rates were fixed by the State Council.  Partial adjustmentto the duty rates was subject to deliberation and final decision by the State Council Tariff
Commission.  The simple average of China's import duties in 2000 was 16.4 per cent.  Among the
7062 tariff headings, tariff rates for 525 headings were below 5 per cent, 1488 were between 5 percent (inclusive) and 10 per cent (exclusive), 2022 between 10 per cent (inclusive) and 15 per cent(inclusive) and 3027 were above 15 per cent.  Information on tariff rates for specific products andimport statistical data for recent years had been provided to the Working Party.WT/ACC/SPEC/CHN/1/Rev.7
Page 25
2587. He also noted that currently there were two columns of import duty rates: general rates and
preferential rates.  The preferential rates applied to imports originating in countries and regions withwhich China had concluded reciprocal tariff agreements, whereas the general rates applied to importsfrom other sources.
88. The representative of China confirmed that upon accession China would participate in the
Information Technology Agreement ("ITA") and would eliminate tariffs on all informationtechnology products as set out in China's schedule.  Furthermore, upon accession, China wouldeliminate all other duties and charges for ITA products.  The Working Party took note of thesecommitments.
89. Certain members of the Working Party expressed particular concerns about tariff treatment in
the auto sector.  In response to questions about the tariff treatment for kits for motor vehicles, Chinaconfirmed that it had no tariff lines for completely knocked-down kits for motor vehicles or semi-knocked down kits for motor vehicles.  If China cr eated such tariff lines, the tariff rates would be no
more than 10 per cent.  The Working Party took note of this commitment.
90. China undertook bilateral market access negotiations on goods with members of the Working
Party.  The results of those negotiations were contained in the Schedule of Concessions andCommitments on Goods and formed Annex 10 to the Draft Protocol.
2. Other Duties and Charges
91. The representative of China confirmed that China had agreed to bind at zero other duties and
charges in its Schedule of Concessions and Commitments, pursuant to Article II:1(b) of the GATT1994.  The Working Party took note of that commitment.
3. Rules of Origin
92. Some members of the Working Party requested information about the adoption and
application of rules of origin in China, whether in the context of free trade agreements or otherwise,and also requested China to confirm that its rules of origin for both preferential and non-preferentialtrade complied fully with the WTO Agreement on Rules of Origin.
93. The representative of China noted that the criteria for making the determination of substantial
transformation was:  (a) change in tariff classification of a four-digit tariff line in the Customs Tariff;or (b) the value-added component was 30 per cent or more in the total value of a new product.WT/ACC/SPEC/CHN/1/Rev.7
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94. He further noted that under current arrangements, and in accordance with the criteria outlined
above, when an imported product was processed and manufactured in several countries, the country oforigin of the product was determined to be the last country in which the product underwent substantialtransformation.  The rules of origin applied for statistical purposes were the same.
95. The representative of China stated that China's rules of origin for import and export were non-
preferential rules of origin.  Once the international harmonization of non-preferential rules of originwas concluded, China would fully adopt and apply the internationally harmonized non-preferentialrules of origin.  A mechanism that met the requirements of Articles 2(h) and 3(f), and Annex II,paragraph 3(d) of the Agreement, which required provision upon request of an assessment of theorigin of an import [or an export] and outlined the terms under which it would be provided, would beestablished in China's legal framework by the date of accession.  The Working Party took note ofthese commitments.
96. The representative of China further stated that China would not use the rules of origin as an
instrument to pursue trade objectives directly or indirectly.  He also confirmed that China would apply
rules of origin equally for all purposes.  The Working Party took note of these commitments.
97. The representative of China confirmed that from the date of accession, China would ensure
that its laws, regulations and other measures relatin g to rules of origin would be in full conformity
with the WTO Agreement on the Rules of Origin a nd that it would implement such laws, regulations
and other measures in full conformity with that Agreement.  The Working Party took note of thiscommitment.
4. Fees and Charges for Services Rendered
98. Members of the Working Party noted that as a condition of accession, China should undertake
a commitment to ensure conformity of Customs fees and charges with Article VIII of the GATT 1994.The representative of China confirmed that China would comply with Article VIII of GATT 1994 inthis regard.  The Working Party took note of this commitment.
5. Application of Internal Taxes to Imports
99. Some members of the Working Party expressed concern that some internal taxes applied to
imports, including a value-added tax ("VAT") were not administered in conformity with therequirements of the GATT 1994, particularly Article III.  Those members of the Working Party notedthat China appeared to permit the application of discriminatory internal taxes and charges to imported
goods and services, including taxes and charges applied by sub-national authorities.  Those membersWT/ACC/SPEC/CHN/1/Rev.7
Page 27
27requested that China reaffirm that all such internal  taxes and charges would be in conformity with the
requirements of the GATT 1994.
100. In response, the representative of China noted that there were three major types of taxes
levied on products and services:  (a) VAT levied on goods and services for processing, maintenance
and assembling;  (b) the Consumption Tax on some se lected consumer products;  and (c) the Business
Tax on providing services, transferring intangible assets and selling real estate.   Both the VAT andthe Consumption Tax were applicable to entities importing goods.  VAT and the Consumption Tax onimported goods were collected by Customs at the poin t of entry.  He noted that VAT was  reimbursed
once goods were exported.  Exported goods were exempted from the Consumption Tax.
101. He further noted that the State Council determined all policies concerning the levying of VAT
and the Consumption Tax, adjustment of tax types and tax rates (tax value), as well as the taxexemption of VAT, the Consumption Tax and the Business Tax.  The laws and regulations wereinterpreted and implemented by the Ministry of Finance and the State Administration of Taxation.
VAT and the Consumption Tax were levied and administered by the State competent departments of
taxation, while the Business Tax was collected and administered by the local competent departmentsof taxation.
102. The representative of China confirmed that from the date of accession, China would ensure
that its laws, regulations and other measures relating to internal taxes and charges levied on importswould be in full conformity with its WTO oblig ations and that it would implement such laws,
regulations and other measures in full conformity with those obligations.  The Working Party tooknote of this commitment.
6. Tariff Exemptions
103. The representative of China stated that the tariff exemption policy of China was developed
and implemented in accordance with the Customs Law of the People's Republic of China and theRegulations of the People's Republic of China on Import and Export Duties. The coverage of specifictariff reduction or exemption was provided for by the State Council. All the tariff reductions andexemptions were applied on an MFN basis.
104. The representative of China noted that in accordance with international practices and
provisions of China's Customs Law, import duty reductions or exemptions were available for thefollowing goods:WT/ACC/SPEC/CHN/1/Rev.7
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(a) A consignment of goods, on which customs duties were estimated below
RMB 10 yuan;
(b) advertising articles and samples, which were of no commercial value;(c) goods and materials, which were rendered gratis by international organizations or
foreign governments;
(d) fuels, stores, beverages and provisions for use en route loaded by any means of
transport, which were in transit across the border;
(e) exported goods being replaced;(f) goods damaged prior to Customs release;(g) goods covered by international treaties providing for tariff reductions and exemptions
which China had entered into or acceded to;
(h) goods temporarily imported;(i) goods imported under inward processing programmes;
(j) goods imported at zero cost for replacement purposes;
(k) domestic- or foreign-funded projects encouraged by China;(l) articles for scientific research, education and the disabled.
He noted that goods so imported were required to be put under Customs supervision and control. The
Customs duty was required to be recovered if such goods were sold, transferred or used for otherpurposes during the time period of supervision and control.
105. Some members of the Working Party expressed concerns over the availability and application
of tariff reductions and exemptions for a variety of enterprises and other entities, including state
trading enterprises, state-owned enterprises, foreig n-invested enterprises and not-for-profit entities.
Similar concerns also existed for exemptions from application of other duties, taxes and charges.These members noted the negative effect such reductions or exemptions could have on revenues andpredictability and certainty in application of tariff and other trade measures.WT/ACC/SPEC/CHN/1/Rev.7
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29106. The representative of China confirmed that upon entry into force of the Draft Protocol, China
would adopt and apply tariff reductions and exemp tions so as to ensure MFN treatment for imported
goods.  The Working Party took note of this commitment.
7. Tariff Rate Quotas
107. Several members of the Working Party expressed concern over the lack of transparency,
uniformity and predictability of China's administration of its tariff rate quota (TRQ) regime.  Thosemembers requested that China enter a commitment to administer TRQs in a simple, transparent,timely, predictable, uniform, non-discriminatory, and non-trade restrictive manner, and in a way thatwould not cause trade distortions.  Those members as ked that China ensure that its TRQ arrangements
be no more administratively burdensome than absolutely necessary, and also expressed the hope thatChina would move as quickly as possible to a market-based TRQ allocation process.
108. Those members of the Working Party also raised concerns regarding the administration of
China's TRQ system and the practices of state trading enterprises in relation to importing such
products.  These concerns included the current lack of transparent regulations for administering
TRQs;  use of administrative guidance;  distortions introduced into the market due to allocationsbased on government determinations of subnational supply and utilization rather than consumerpreferences and end-user demand;  failure to establish and publish annual TRQ quantities;  trade-restrictive and non-competitive practices of state trading enterprises;  and general uncertainty,inconsistency and discrimination in trade of bulk commodities.  Those members expressed similarconcerns about the operation of China's TRQ system for products subject to designated trading.Those members requested that China reduce tariffs for commodities subject to TRQs, enter into
access commitments for these commodities, improv e the administration of the TRQ regime, and
ensure that trade would not be distorted by unjustified government regulation.  Certain members ofthe Working Party also requested that a number of specified products be removed from China's TRQsystem and that, upon import, these products be subject only to tariffs.
109. The representative of China noted that in 1996, for the first time, China published a list of
import products subject to TRQs, together with the tariff rates applicable to imports both in and out
quota.  Allocation of TRQ was based on historical  performance and state trading administration,
although China had also tried several other ways of administration, including import at applied tariffrates, first-come-first-served at the point of entry, and bonded import which was strictly monitored by
Customs.  China was trying to simplify the TRQ administration regime and procedures in a bid to
facilitate use, enhance efficiency and implement further reform.WT/ACC/SPEC/CHN/1/Rev.7
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110. The representative of China further noted that, in undertaking market-oriented reform in the
agricultural sector, China had made progress in freeing agricultural products from state pricing and inguiding farmers to adjust the structure of agricultural production based on the demands of the market.In connection with that reform process, in the bi lateral negotiations with Members, China committed
that as soon as it became a Member of the WTO, it would eliminate TRQs on a number of products
and subject these only to tariffs.  The products concerned were barley, soybeans, rapeseed, peanut oil,sunflower seed oil, corn oil, and cottonseed oil.  In addition, China would replace quantitative importrestrictions on sugar, cotton and three types of fertilizers (DAP, NPK and urea) by TRQs.  TheWorking Party took note of these commitments.
111. The representative of China stated that from entry into force of the Draft Protocol, China
would ensure that TRQs were administered on a transparent, predictable, uniform, fair and non-discriminatory basis using clearly specified timeframes, administrative procedures and requirementsthat would provide effective import opportunities;  that would reflect consumer preferences and end-
user demand;  and that would not inhibit the fill ing of each TRQ.  China would apply TRQs fully in
accordance with WTO rules and principles and with the provisions set out in China's Schedule ofConcessions and Commitments on Goods.  The Work ing Party took note of these commitments.
112. The representative of China confirmed that for the goods listed in Annex 2 of the Draft
Protocol that were subject to a TRQ, China would also apply the provisions of its Schedule relating to
TRQ administration and related commitments in the Draft Protocol, including the grant of trading
rights to non-state trading entities to import the TRQ allocations set aside for importation by suchentities.  For products in Annex 2 of the Draft Protocol that were subject to designated trading, China
confirmed that it would ensure that additional enterprises granted trading rights in accordance with
China's commitments to phase out designated trading would not be disadvantaged in the allocation ofTRQ.  The Working Party took note of these commitments.
113. Some members of the Working Party expressed the view that allocation decisions were based,
in large part, on government-determined provincial  supply and utilization rather than on commercial
market criteria that reflected consumer preferences and end-user demand.  Those members expressedconcern that China's stated intention to allocate quota to sub-central authorities and to authorize thoseauthorities to then allocate that quota to end-users in separate processes would add an unnecessary,burdensome step in the procedures and reduce the likelihood that quotas would be filled.  Further,
those members stated that China's stated intent ion with regards to TRQ procedures would not be
consistent with China's commitments to uniform administration of its trade regime.  Those memberssought confirmation that China would not establish a separate process of allocation to sub-centralWT/ACC/SPEC/CHN/1/Rev.7
Page 31
31authorities, as well as confirmation that all allocation and reallocation decisions would be made by a
single, central authority in China.
114. The representative of China confirmed that the role of sub-central bodies would be limited to
purely administrative operations, such as receiving applications from end-users and forwarding them
to the central authority;  receiving queries and transmitting these to the central authority;  reporting on
allocation and reallocation decisions made by the central authority and providing informationregarding such allocations and reallocations upon request;  checking the information in the
applications to verify that it met the published criteria;  notifying applicants of any deficiencies intheir applications;  and providing applicants with an opportunity to cure deficiencies in theirapplications.  After the central authority decided on allocations of quota to end-users, the sub-centralbodies would issue TRQ certificates accordingly.  The representative of China also confirmed thatChina would administer a consistent national allocation (and reallocation) policy for TRQs, that itwould not establish a separate process of allocation to sub-central authorities and that decisions
regarding all allocations and reallocations to end-users would be made by a single, central authority.
The Working Party took note of these commitments.
115. The representative of China further confirmed that China would grant to any enterprise
possessing the right to trade any product pursuant to Section 5 of the Draft Protocol, the right toimport goods in Annex 2a (of the Draft Protocol) that were subject to a TRQ or to an agreed volumeof imports by non-state trading enterprises.  Such right to import would not extend to the quantity ofgoods specifically reserved for importation by state trading enterprises.  Any enterprise possessing the
right to trade pursuant to Section 5 of the Draft Protocol would also have the right to import that
portion of a TRQ reallocated to non-state trading enterprises pursuant to the agreed rules on TRQ
administration.  The representative of China also confirmed that for goods in Annex 2a (of the DraftProtocol) subject to a TRQ, any enterprise granted the right to trade, pursuant to Section 5 of the DraftProtocol, would be permitted to import such goods at the out-of-quota rate.  The Working Party took
note of these commitments.
8. Quantitative Import Restrictions, including Prohibitions and Quotas
116. In response to requests for information from members of the Working Party, the
representative of China noted that China prohibited or restricted the importation of certaincommodities, including weapons, ammunition and explosives, narcotic drugs, poisons, obscene
materials and those foodstuffs, medicines, animals and plants which were inconsistent with China's
technical regulations on food, medicines, animals and plants.WT/ACC/SPEC/CHN/1/Rev.7
Page 32
117. Some members of the Working Party noted that there were a large number of non-tariff
measures in existence in China, both at the national and sub-national levels, which appeared to have atrade restrictive or trade distorting effect.  Those members requested that China undertake acommitment to eliminate and not to introduce, re-introduce or apply non-tariff measures other than
those specifically identified and subject to phased elimination in Annex 3 to the Draft Protocol.  The
representative of China confirmed that China would not introduce, re-introduce or apply non-tariffmeasures other than listed in Annex 3 of the Draft Protocol unless justified under the WTOAgreement.  The Working Party took note of this commitment.
118. Some members of the Working Party also raised concerns that many non-tariff measures were
imposed by sub-national authorities in China on a non-transparent, discretionary and discriminatorybasis.  Those members of the Working Party asked that China undertake a commitment to ensure thatnon-tariff measures would only be imposed by the central government or by sub-national authoritieswith clear authorization from the central governme nt.  Actions lacking authorization from the national
authorities should not be implemented or enforced.  The representative of China clarified that only the
central government could issue regulations on non-tariff measures and that these measures would beimplemented or enforced only by the central government or sub-national authorities withauthorization from the central government.  He further stated that sub-national authorities had no rightto formulate non-tariff measures.  The Working Party took note of these commitments.
119. Some members of the Working Party noted that China had provided a list of non-tariff
measures in respect of which China was prepared to commence phased elimination, contained inAnnex 3 of the Draft Protocol.  Those members stated that China should eliminate the measures listed
in accordance with the schedule provided in Annex 3, during the periods specified in Annex 3.  For
measures subject to phased elimination, China s hould provide for growth in the quota over the
relevant period specified in Annex 3.  Those members also noted that the protection afforded by themeasures listed in Annex 3 should not be increased or expanded in size, scope, or duration, nor anynew measures be applied, unless justified under the provisions of the WTO Agreement.
120. Those members of the Working Party noted that all non-tariff measures administered by
China, whether or not referred to in Annex 3 of the Draft Protocol, which were applied after China'saccession to the WTO, should be allocated and otherwise administered in strict conformity with theprovisions of the WTO Agreement, including Article XIII of the GATT 1994 and the Agreement on
Import Licensing Procedures, including notification requirements.
121. The representative of China stated that China had modified Annex 3 on the basis of the
comments raised by certain members of the Workin g Party.  He confirmed that only the machineryWT/ACC/SPEC/CHN/1/Rev.7
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33and electronic products listed in Annex 3 were subject to specific tendering requirements and that
these requirements would be administered pursuant to Chapter III of the Regulation entitled "InterimMeasures for Import Administration of Machinery and Electronics Products" (approved by the StateCouncil on 22 September 1993 and promulgated in Order No. 1 by the State Economic and Trade
Commission and Ministry of Foreign Trade and Economic Cooperation on 7 October 1993).  He also
confirmed that Annex 3 contained all of the products subject to quotas, licences and such tenderingrequirements in China and  that, during the relevant phase-out period, China would implement thegrowth rates for quotas as indicated in Annex 3.  The Working Party took note of these commitments.
122. Some members of the Working Party requested  information on how China would implement
the quota and licensing requirements for products listed in Annex 3, in particular the procedures andcriteria for grant of quota allocations and licensing during the phase-out period for these restrictions.Members expressed concern about requirements for obtaining a licence or quota allocation whichoften required approvals from various authorities with in an organization as well as approval from both
the central and sub-national level.  Those members sought a transparent, streamlined system that
would issue quota allocations and licences through a simple, consolidated approval process that would
ensure full use of the quota and its equitable distribution among importers.  Those members alsorequested information on how China would establis h the value of imports for those products whose
quota was established in terms of value of imports.  The representative of China confirmed that theadministration of quotas and import licences would be consistent with the WTO Agreement, includingArticle XIII of the GATT 1994 and the Agreement on Import Licensing Procedures. The allocation of
quotas and issuance of import licences would go through a simple and transparent procedure, so as to
ensure the full utilization of quota.  He further stated that the establishment of value of imports would
be based on the information collected by the Customs authorities and provisions of the WTO CustomsValuation Agreement.    For quota quantities specified in terms of value, China would determine thevalue of any shipment based on the c.i.f. ship valu e listed on the bill of lading.  The Working Party
took note of these commitments.
123. The representative of China confirmed that the products currently covered under the HS
categories listed in Annex 3 as of the date of accession were the only products that would be subjectto these quotas during the agreed phase-out periods.  Any non-tariff measures covering additionalproducts would need to be justified under the WTO Agreement.  Further, the representative of China
stated that for products listed in Annex 3 as bein g subject to quota and licensing requirements, any
entity that will possess the right to trade in the quota year, including enterprises possessing trading
rights to import such products or inputs for production purposes under a particular quota category,WT/ACC/SPEC/CHN/1/Rev.7
Page 34
could apply for a quota allocation and licence to import products listed in Annex 3.  The Working
Party took note of these commitments.
124. The representative of China further confirmed that for products listed in Annex 3, China's
system for quota allocation and licensing would ensure that those entities with quota allocations
would also receive any necessary import licence.   This system would conform to WTO rules,
including the WTO Agreement on Import Licensing Procedures, and would be transparent, timely,responsive to market conditions and would minimize the burden on trade.  Applications for a quotaallocation would need to be submitted to only one organization, at one level (central or sub-national)for approval.  The relevant organization would then issue an import licence based on the quotaallocation, in most cases within 3 working days and,  in exceptional cases, within a maximum of 10working days after a request for the licence.  A licence would be issued for the full amount of the
quota and would be valid for the calendar year issued.  Such licence would be extended once, uponrequest,  for up to 3 months, if the request was made before 15 December of the current quota year.
Imports occurring under an extended licence would be counted against the relevant quota amount for
the year in which the allocation took place.  The representative of China confirmed that the relevantorganization for issuing quota allocations and licences, amount of quota, including the growth inquota provided for in Annex 3, the eight-digit tariff codes and full descriptions of all products coveredby each quota and procedures for application for a quota allocation and licence, including thebeginning and end date of the application period a nd any other relevant procedures or criteria, would
be published in the official journal referred to in paragraph 2(C)(2) of the Draft Protocol at least 21days prior to the beginning of the application period.  Such application period would be from 1-31
August.  Quotas would be allocated to applicants no later than 60 days after closure of the application
period.  The Working Party took note of these commitments.
125. The representative of China stated that China would allocate quotas in accordance with the
following criteria and procedures which would be published in advance and would be applied inconformity with WTO requirements, including th e Agreement on Import Licensing Procedures.  In
applying these criteria, China would consider the need to allow for equitable participation byproducers from WTO Members and take into account the need to maximize the potential for quotafill.
– If the relevant quota quantity exceeded total requests for quota allocations, all requests would
be approved.
– In other cases, the criteria for allocation would be as follows:WT/ACC/SPEC/CHN/1/Rev.7
Page 35
35– Historical  performance of applicants where relevant (in cases in which average imports over
the 3-year period immediately prior to the year of China’s accession, for which data wasavailable, amounted to less than 75 per cent of the relevant quota, it would be necessary totake into account other criteria inter alia  as set forth below);
– Production or processing capacity, in the case of intermediate products and raw materials;
– Experience and ability in producing,  importing,  marketing, or servicing in international
markets, in the case of finished products or products destined for wholesale or retaildistribution;
– In cases in which average imports over the 3-year period immediately prior to the year of
China’s accession, for which data was available, exceeded 75 per cent of the relevant quota,applicants that had not previously been allocated quota would be allocated 10 per cent of thetotal quota in the first year and the majority of any quota growth in any subsequent year.
In other cases :
– In the first year, twenty- five per cent of the total quota would be allocated to applicants that
had not previously been allocated quota;  however, an applicant that had imported under aquota on the relevant products in the year prior to China’s accession would not receive adecrease in the absolute amount of its quota allocation.
– In the second year, for the amount of the quota growth as well as an amount equivalent to the
amount of any quota that had not been filled in the previous year, China would give priorityconsideration to requests from enterprises with foreign ownership equal to or less than fiftyper cent.
– In the third and fourth year, if relevant, for the amount of the quota growth as well as an
amount equivalent to the amount of any quota that  had not been filled in the previous year,
China would give priority consideration to requests from enterprises with foreign ownershipgreater that fifty per cent.
– In all cases, a quota-holder receiving an initial allocation that had fully utilized or contracted
for its quota allocation would, upon application, rece ive an allocation in the following year for
a quantity no less than the quantity imported in the previous year.  A quota-holder that did notWT/ACC/SPEC/CHN/1/Rev.7
Page 36
import its full allocation would receive a proportional reduction in its quota allocation in the
subsequent year unless the quantity was returned for reallocation by1 September.
 The Working Party took note of these commitments.
126. The representative of China confirmed that all commercial terms of trade, including product
specifications, product mix, pricing, and packaging, would be at the sole discretion of the quota
holder, so long as the products are within the relevant quota category.   Allocations would be valid for
any article or mixture of articles subject to the same quota as specified in Annex 3 of the DraftProtocol.  Allocations would be valid for a period  of one calendar year from the opening of the quota
import period.  However, if the holder of a quota allocation had not contracted for import of the totalquantity allocated to by 1 September,  the holder was to immediately return the unused portion of theallocation to the relevant authority which would re allocate the quota immediately, if unfilled requests
were pending, or otherwise within 10 days after receipt of a request for an allocation.  The relevantorganization would publish notice of the availability of additional allocations after collecting any
unused quotas returned by the quota holders.  Licences for goods imported under reallocated quota
would be extended once, upon request,  for up to 3 months, if the request was made before 15December of the current quota year.  Imports occurring under an extended licence would be countedagainst the relevant quota amount for the year in which the re-allocation took place.  The WorkingParty took note of these commitments.
127. In response to requests for information from members of the Working Party, the
representative of China noted that China prohibited or restricted the importation of certaincommodities, including weapons, ammunition and explosives, narcotic drugs, poisons, obscene
materials and those foodstuffs, medicines, animals and plants which were inconsistent with China's
technical regulations [and standards] on food, medicines, animals and plants.
128. Some members of the Working Party noted that there were a large number of non-tariff
measures in existence in China, both at the national and sub-national levels, which appeared to have atrade restrictive or trade distorting effect.  Those members requested that China undertake acommitment to eliminate and not to introduce, re-introduce or apply non-tariff measures other thanthose specifically identified and subject to phased elimination in Annex 3 to the Draft Protocol.  The
representative of China confirmed that China would not introduce, re-introduce or apply non-tariffmeasures other than listed in Annex 3 of the Draft Protocol unless justified under the WTO
Agreement.  The Working Party took note of this commitment.
129. Some members of the Working Party also raised concerns that many non-tariff measures were
imposed by sub-national authorities in China on a non-transparent, discretionary and discriminatoryWT/ACC/SPEC/CHN/1/Rev.7
Page 37
37basis.  Those members of the Working Party asked that China undertake a commitment to ensure that
non-tariff measures would only be imposed by the central government or by sub-national authoritieswith clear authorization from the central governme nt.  Actions lacking authorization from the national
authorities should not be implemented or enforced.  The representative of China clarified that only the
central government could issue regulations on non-tariff measures and that these measures would be
implemented or enforced only by the central government or sub-national authorities withauthorization from the central government.  He further stated that sub-national authorities had no rightto formulate non-tariff measures.  The Working Party took note of these commitments.
130. Some members of the Working Party noted that China had provided a list of non-tariff
measures in respect of which China was prepared to commence phased elimination, contained inAnnex 3 of the Draft Protocol.  Those members stated that China should eliminate the measures listedin accordance with the schedule provided in Annex 3, during the periods specified in Annex 3.  Formeasures subject to phased elimination, China s hould provide for growth in the quota over the
relevant period specified in Annex 3.  Those members also noted that the protection afforded by the
measures listed in Annex 3 should not be increased or expanded in size, scope, or duration, nor anynew measures be applied, unless justified under the provisions of the WTO Agreement.
131. Those members of the Working Party noted that all non-tariff measures administered by
China, whether or not referred to in Annex 3 of the Draft Protocol, which were applied after China'saccession to the WTO, should be allocated and otherwise administered in strict conformity with theprovisions of the WTO Agreement, including Arti cle XIII of the GATT 1994 and the Agreement on
Import Licensing Procedures, including notification requirements.
132. The representative of China stated that China had modified Annex 3 on the basis of the
comments raised by certain members of the Workin g Party.  He confirmed that only the machinery
and electronic products listed in Annex 3 were subject to specific tendering requirements and thatthese requirements would be administered pursuant to Chapter III of the Regulation entitled "InterimMeasures for Import Administration of Machinery and Electronics Products" (approved by the StateCouncil on 22 September 1993 and promulgated in Order No. 1 by the State Economic and TradeCommission and Ministry of Foreign Trade and Economic Cooperation on 7 October 1993).  He also
confirmed that Annex 3 contained all of the products subject to quotas, licences and such tenderingrequirements in China and  that, during the relevant phase-out period, China would implement the
growth rates for quotas as indicated in Annex 3.  The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 38
133. Some members of the Working Party requested  information on how China would implement
the quota and licensing requirements for products listed in Annex 3, in particular the procedures andcriteria for grant of quota allocations and licensing during the phase-out period for these restrictions.Members expressed concern about requirements for obtaining a licence or quota allocation which
often required approvals from various authorities with in an organization as well as approval from both
the central and sub-national level.  Those members sought a transparent, streamlined system thatwould issue quota allocations and licences through a simple, consolidated approval process that would
ensure full use of the quota and its equitable distribution among importers.  Those members alsorequested information on how China would establis h the value of imports for those products whose
quota was established in terms of value of imports.  The representative of China confirmed that theadministration of quotas and import licences would be consistent with the WTO Agreement, includingArticle XIII of the GATT 1994 and the Agreement on Import Licensing Procedures. The allocation of
quotas and issuance of import licences would go through a simple and transparent procedure, so as to
ensure the full utilization of quota.  He further stated that the establishment of value of imports would
be based on the information collected by the Customs authorities and provisions of the WTO CustomsValuation Agreement.    For quota quantities specified in terms of value, China would determine thevalue of any shipment based on the c.i.f. ship value listed on the bill of lading.  The Working Partytook note of these commitments.
134. [The representative of China confirmed that the products currently covered under the HS
categories listed in Annex 3 as of the date of accession were the only products that would be subjectto these quotas during the agreed phase-out periods.  Any non-tariff measures covering additional
products would need to be justified under the WTO Agreement.  Further, the representative of China
stated that for products listed in Annex 3 as bein g subject to quota and licensing requirements, any
entity [that possessed the right to trade in the quot a year] [possessing the right to trade], including
enterprises possessing trading rights to import such products or inputs for production purposes under aparticular quota category, could apply for a quota allocation and licence to import products listed inAnnex 3.  The Working Party took note of these commitments.]
135. The representative of China further confirmed that for products listed in Annex 3, China's
system for quota allocation and licensing would ensure that those entities with quota allocationswould also receive any necessary import licence.   This system would conform to WTO rules,
including the WTO Agreement on Import Licensing Procedures, and would be transparent, timely,
responsive to market conditions and would minimize the burden on trade.  Applications for a quotaallocation would need to be submitted to only one organization, at one level (central or sub-national)for approval.  The relevant organization would then issue an import licence based on the quotaallocation, in most cases within 3 working days and,  in exceptional cases, within a maximum of 10WT/ACC/SPEC/CHN/1/Rev.7
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39working days after a request for the licence.  A licence would be issued for the full amount of the
quota and would be valid for the calendar year issued.  Such licence would be extended once, uponrequest,  for up to three months, if the request was made before 15 December of the current quotayear.  Imports occurring under an extended licence would be counted against the relevant quota
amount for the year in which the allocation took place.  The representative of China confirmed that
the relevant organization for issuing quota allocations and licences, amount of quota, including thegrowth in quota provided for in Annex 3, the eigh t-digit tariff codes and full descriptions of all
products covered by each quota and procedures for application for a quota allocation and licence,including the beginning and end date of the application period and any other relevant procedures orcriteria, would be published in the official journal referred to in paragraph 2(C)(2) of the DraftProtocol at least 21 days prior to the beginning of the application period.  Such application periodwould be from 1-31 August.  Quot as would be allocated to applicants no later than 60 days after
closure of the application period.  The Working Party took note of these commitments.
136. The representative of China stated that China would allocate the quota in accordance with the
following criteria and procedures which would be published in advance and would be applied inconformity with WTO requirements, including the Agreement on Import Licensing Procedures. In
applying these criteria, China would consider the need to allow for equitable participation byproducers from WTO Members and take into account the need to maximize the potential for quotafill.
− If the relevant quota quantity exceeded total requests for quota allocations, all requests
would be approved.
In other cases, the criteria for allocation would be as follows:
− Historical performance of applicants where relevant (in cases in which average imports over
the 3-year period immediately prior to the year of China's accession, for which data wasavailable, amounted to less than 75 per cent of the relevant quota, other criteria would bemore important);
− Production or processing capacity, in the case of intermediate products and raw materials;
− Experience and ability in producing, importing, marketing, or servicing in international
markets, in the case of finished products or products destined for wholesale or retaildistribution;WT/ACC/SPEC/CHN/1/Rev.7
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− In cases in which average imports over the 3-year period immediately prior to the year of
China's accession, for which data was available, exceeded 75 per cent of the relevant quota,applicants that had not previously been allocated quota would be allocated 10 per cent of thetotal quota in the first year and the majority of any quota growth in any subsequent year.
− In other cases in the first year, twenty-five pe r cent of the total quota would be allocated to
applicants that had not previously been allocat ed quota, and in subsequent years, two-thirds
of quota growth would be allocated to such firms, if quota fill remained below 75 per cent.
− In all cases, a quota-holder that has fully utilized or contracted for its quota allocation
would,  upon application, receive an allocation in the following year for a quantity no lessthan the quantity imported in the previous year.  A quota-holder that did not import its fullallocation would receive a proportional reduction in its quota allocation in the subsequentyear unless the quantity was returned for reallocation by [1 September] [1 October].
The Working Party took note of these commitments.
137.  The representative of China confirmed that al l commercial terms of trade, including product
specifications, product mix, pricing, and packaging, would be at the sole discretion of the quotaholder, so long as the products are within the relevant quota category.   Allocations would be valid for
any article or mixture of articles subject to the same quota as specified in Annex 3 of the DraftProtocol.  Allocations would be valid for a period  of one calendar year from the opening of the quota
import period.  However, if the holder of a quota allocation had not contracted for import of the totalquantity allocated to by [1 September] [1 October],  the holder was to immediately return the unusedportion of the allocation to the relevant authority which would reallocate the quota immediately, if
unfilled requests were pending, or otherwise within ten days after receipt of a request for an
allocation.  The relevant organization would publish notice of the availability of additional allocationsafter collecting any unused quotas returned by the quota holders.  Licences for goods imported underreallocated quota would be extended once, upon request,  for up to three months, if the request wasmade before 15 December of the current quota year.  Imports occurring under an extended licencewould be counted against the relevant quota amount for the year in which the re-allocation took place.The Working Party took note of these commitments.
9. Import Licensing
138. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of imports would be upda ted and republished in the official journal, theWT/ACC/SPEC/CHN/1/Rev.7
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41MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of this
commitment.
139. In response to requests for additional information about its system of import licensing, the
representative of China said that the import licensing system was administered without discrimination
among countries or regions.  In 1984, the State Coun cil had promulgated the "Interim Regulations on
Licensing System for Import Commodities", and MOFTEC and Customs had issued "Detailed Rulesfor the Implementation of the Interim Regulations on Licensing System for Import Commodities".The Interim Regulations were uniformly implemented throughout China.  In 1999, of the total importvalue of US$ 165.7 billion, imports subject to licensing represented 8.45 per cent, covering US$ 14billion.  MOFTEC determined which products should  be subject to import licensing according to the
relevant provisions of the "Foreign Trade Law".
140. The representative of China further stated that in 1993, China had applied import restrictions
to 53 product categories.  By 1999, the number had been reduced to 35.  Products covered were (1)
Processed oil; (2) Wool;  (3) Polyester fibre;  (4) Acrylic fibres;  (5) Polyester fillet;  (6) Natural
rubber;  (7) Vehicles tyres;  (8) Sodium cyanide;  (9) Sugar;  (10) Fertilizer;  (11) Tobacco and its
products;  (12) Acetate tow;  (13) Cotton;  (14) Motor vehicles and their key parts;  (15) Motorcyclesand their engines and chassises; (16) Colour television sets and TV kinescope;  (17) Radios, taperecorders and their main parts;  (18) Refrigerators and their compressor;  (19) Washing machines;(20) Recording equipment and its key parts;  (21) Cameras and their bodies (without lenses);  (22)Watches;  (23) Air conditioners and their compressor;  (24) Audio and video tape duplicationequipment;  (25) Crane lorries and their chassises;  (26) Electronic microscopes;  (27) Open-end
spinning machines;  (28) Electronic colour scanners;  (29) Grain;  (30) Vegetable oil;  (31) Wine;
(32) Colour sensitive material;  (33) Chemical under supervision and control that were used forchemical weapon;  (34) Chemicals used to produce narcotics;  and (35) Laser disc productionfacilities.  He also noted that in 1999, there were 13 commodity categories which were imported bythe foreign trade companies designated by MOFTEC. These categories were as follows:  (1)Processed oil;  (2) Fertilizer; (3) Tobacco; (4) Vegetable oil; (5) Grain; (6) Natural rubber; (7) Wool;(8) Acrylic fibers; (9) Sugar; (10) Cotton; (11) Crude oil; (12) Steel; and (13) Plywood.
141. Concerning the granting and administration of import licences, the representative of China
said that the examination and approval of the lice nce took two to three working days.  Applications
for import licences could be submitted to the Qu ota and Licence Administrative Bureau of MOFTEC,
or Special Commissioner Offices in 16 provin ces, or Commissions of Foreign Economic Relations
and Trade of various provinces, autonomous regions, and municipalities directly under the centralWT/ACC/SPEC/CHN/1/Rev.7
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government and those with independent budgetary st atus. Licensing agencies authorized by MOFTEC
could issue import licences on the basis of import documents submitted by the applicants,  approvedby the competent departments. A licence could not be bought, sold or transferred, and was valid forone calendar year.  Import licences could be extended once for up to three months.
142. Some members of the Working Party expressed concern that China's Provisional Procedures
for the Administration of Automatic Registration for the Import of Special Commodities(13 August 1994), in particular the criteria for approval of registration, would act as a restraint onimports.  The representative of China emphasized that the purpose of the registration system was onlyto gather statistical information.  He confirmed that China would bring its automatic licensing systeminto conformity with Article 2 of the Agreement on Import Licensing Procedures upon entry intoforce of the Draft Protocol.  The Working Party took note of this commitment.
143. Some members of the Working Party noted that enterprises and individuals seeking to import
products subject to tariff quota administration requirements had to go through extensive procedures to
receive a quota allocation and that the quota certificate would indicate whether the subject good was
to be imported through a state trading enterprise or a non-state trading enterprise and would be validfor a certain period of time.  Moreover, the entity importing the good would need trading rights.  Inthe light of these multiple requirements, a quota allocation certificate should satisfy any importlicensing requirement that might apply.
144. The representative of China confirmed that China would not require a separate import licence
approval for goods subject to a TRQ allocation re quirement but would provide any necessary import
licence in the procedure that granted a quota allocation.  If quota were reallocated pursuant to China's
TRQ administration commitments, the provisions rela ting to licensing of such reallocated quantities
would apply.  The Working Party took note of this commitment.
10. Customs Valuation
145. Some members expressed concern regarding the methods used by China to determine duty-
paying value of goods, in particular regarding the practice of using minimum [or reference] prices forcertain goods, which would be inconsistent with the Agreement on Implementation of Article VII ofthe GATT 1994 ("Customs Valuation Agreement").  Other WTO-consistent means were available toMembers doubting the veracity of declared transaction values.
146. In response, the representative of China stated that China had ceased to use and would not
reintroduce minimum [or reference] prices as a means to determine customs value.  The Working
Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.7
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43147. The representative of China considered that there would not be situations where the "customs
value" could not be "ascertained" since the Customs Valuation Agreement provided several methodsfor valuation.
148. The representative of China recalled that the overwhelming majority of China's customs
duties were ad valorem  duties.  The customs or duty-paying value of imported goods was assessed
according to the c.i.f. price based on the transaction value, as defined in the Customs ValuationAgreement.  If the transaction value of imported goods could not be determined, the duty-payingvalue was determined based on other means provid ed for in the Customs Valuation Agreement.  He
also noted that the Customs Law provided for appeal procedures. In the event of a dispute overcalculation of duty paid or payable with the Customs, the dissatisfied importer could apply toCustoms for a reconsideration of the case. If the appeal was rejected the importer could sue at the
People's Court.
149. The representative of China confirmed that, from the entry into force of the Draft Protocol,
China would apply fully the Customs Valuation Agreement, including the customs valuation
methodologies set forth in Articles 1 through 8 of the Agreement.  In addition, China would apply theprovisions of the Decision on the Treatment of Interest Charges in Customs Value of Imported Goods,and the Decision on the Valuation of Carrier Media Bearing Software for Data Processing Equipment,adopted by the WTO Committee on Customs Valuation (G/VAL/5).  In accordance with these latterprovisions, only the cost of the carrier medium itself would be accounted for in determining thecustoms value of carrier media bearing software.  The Working Party took note of thesecommitments.
11. Other Customs Formalities
150. The representative of China said that Chin a joined the International Convention on the
Simplification and Harmonisation of  Customs System in 1988 and on 15 June 2000 signed the Draft
Protocol on the Amendment of the International Convention on the Simplification and Harmonisationof Customs System.  The Customs authorities of China had only adopted such customs formalities asdeclaration, examination, levying of duties and release which were consistent with internationalpractices.
12. Preshipment Inspection
151. The representative of China stated that, currently, there were trade and commerce inspection
agencies (including joint-venture agencies) engaged in preshipment inspection.  China committedWT/ACC/SPEC/CHN/1/Rev.7
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itself to comply with the Agreement on Preshipmen t Inspection, and would regulate the existing trade
and commerce inspection agencies and permit the qualified agencies to be engaged in preshipmentinspection in line with the government mandate or the terms and conditions of commercial contracts.
152. Some members of the Working Party requested information on whether China used the
services of a private preshipment inspection entity.  The representative of China confirmed that China
would ensure that, upon accession, any laws and regulations relating to preshipment inspection by anyinspection agency, including private entities, would be consistent with relevant WTO agreements, in
particular, the Agreement on Preshipment Inspection and the Customs Valuation Agreement.Moreover, any fees charged in connection with such preshipment inspection would be commensuratewith the service provided, in conformity with Article VIII:1 of the GATT 1994.  The Working Party
took note of these commitments.
13. Anti-Dumping, Countervailing Duties
153. Some members of the Working Party raised concerns that the current investigations by the
Chinese authority would be judged to be inco nsistent with the Agreement on Implementation of
Article VI of GATT 1994(Anti-Dumping Agreement) if  China were a Member of the WTO today.  In
certain cases, the basis for calculating dumping ma rgins for a preliminary affirmative determination
was not disclosed to interested parties.  Furthermore, the determination of injury and causation did notappear to have been made on an objective examination of sufficient evidence.  In the views of thesemembers, bringing the Chinese anti-dumping rule s into compliance with the WTO Agreement on its
face was not sufficient. WTO-consistency had to be secured substantively as well.
154. In response, the representative of China stated that China promulgated regulation on anti-
dumping and countervailing duties in 1997 with reference to the Anti-Dumping Agreement and
Agreement on Subsidies and Countervailing Measures.  He committed to revising China's currentregulation and procedures prior to its accession in order to fully implement China’s obligations underthe AD and SCM Agreements.
155. Members of the Working Party and the representative of China agreed that the term "national
law" in paragraph 4 of Section 20 of the Draft Protocol, should be interpreted to cover not only lawsbut also decrees, regulations and administrative rules.
156. Several members of the Working Party noted that China was continuing the process of
transition towards a full market economy.  Those members noted that under those circumstances, in
the case of imports of Chinese origin into a WTO Member, special difficulties could exist in
determining cost and price comparability in th e context of anti-dumping investigations andWT/ACC/SPEC/CHN/1/Rev.7
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45countervailing duty investigations.  Those members stated that in such cases, the importing WTO
Member might find it necessary to take into account the possibility that a strict comparison withdomestic costs and prices in China might not always be appropriate.
157. The representative of China expressed concern with regard to past measures taken by certain
WTO Members which had treated China as a non-market economy and imposed anti-dumping duties
on Chinese companies without identifying or publishing the criteria used, without giving Chinesecompanies sufficient opportunity to present evidence and defend their interests in a fair manner, andwithout explaining the rationale underlying their de terminations, including with respect to the method
of price comparison in the determinations.  In response to these concerns, members of the WorkingParty confirmed that in implementing paragraph (1)(b) of Article 20 of the Draft Protocol ("PriceComparability in determining Dumping and Subsid ization"), WTO Members would comply with the
following:
(a) When determining price comparability in a particular case in a manner not based on a strict
comparison with domestic prices or costs in China, the importing WTO Member should
ensure that it has established and published in advance (1) the criteria that it uses fordetermining whether market economy conditions prevail in the industry or companyproducing the like product and (2) the methodology that it uses in determining pricecomparability.  With regard to importing WTO Members other than those that have anestablished practice of applying a methodology that includes, inter alia, guidelines that theinvestigating authorities should normally utilize, to the extent possible, and where necessarycooperation is received, the prices or costs in one or more market economy countries that are
significant producers of comparable merchandise and that either are at a level of economic
development comparable to that of China or are otherwise an appropriate source for theprices or costs to be utilized in light of the nature of the industry under investigation, theyshould make best efforts to ensure that their methodology for determining pricecomparability includes provisions similar to those described above.
(b) The importing WTO Member should ensure that is has notified its market-economy criteria
and its methodology for determining price comparability to the Committee on Anti-Dumping Practices before they are applied.
(c) The process of investigation should be transparent and sufficient opportunities should be
given to Chinese producers or exporters to make comments, especially comments on the
application of the methodology for determining price comparability in a particular case.WT/ACC/SPEC/CHN/1/Rev.7
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(d) The importing WTO Member should give notice of information which it required and
provide Chinese producers and exporters ample opportunity to present evidence in writing inparticular case.
(e) The importing WTO Member should provide Chinese producers and exporters a full
opportunity for the defence of their interests in a particular case.
(f) The importing WTO Member should provide a sufficiently detailed reasoning of its
preliminary and final determinations in a particular case.
158. The representative of China stated that determinations made by China during investigations
initiated pursuant to applications made before the entry into force of the Draft Protocol should be freefrom challenge under the Anti-Dumping Agreement by the Members of the WTO.  He furtherconfirmed that, notwithstanding Article 18.3 of the Anti-Dumping Agreement,
(a) China would apply the provisions of the Anti-Dumping Agreement to:
1. proceedings under Article 9.3, including the calculation of margins of
dumping, in connection with anti-dumping measures adopted before the entry
into force of the Draft Protocol("existing measures")
2. reviews of existing measures initiated under Articles 9.5, 11.2, and 11.3
pursuant to requests made on or after the entry into force of the DraftProtocol. Any review of an existin g measure under Article 11.3 would be
initiated no later than five years from the date of its imposition.
(b) China would also provide the type of judicial review described in Article 13 of the
Anti-Dumping Agreement with regard to proceedings under Article 9.3 and reviews
under Articles 9.5, 11.2, and 11.3.
The Working Party took note of these commitments.
159. The representative of China noted that pursuant to the provisions of “Regulation on Anti-
dumping and Anti-subsidy of the People’s Republic of China”, there were four Chinese governmentbodies responsible for anti-dumping and countervailing duty investigations. Their identities andresponsibilities were as follows:WT/ACC/SPEC/CHN/1/Rev.7
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47(a) Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
Receiving anti-dumping and countervailing petitions; Conducting investigation on dumping
and dumping margin and issuing relevant preliminary determination decisions and notices;Negotiating with foreign interested parties on “Price Undertaking” if necessary;  Providing
proposal on imposition of definitive anti-dumpi ng or countervailing duties or proposals on
duty refund, etc.  There was an Anti-dumping  Division established under the Department of
Treaties and Law of MOFTEC, with responsibility to handle anti-dumping and countervailinginvestigations on alleged imports.
(b) State Economics and Trade Commission (SETC)
Responsible for the investigation of injury caused to the domestic industry by the dumped or
subsidized imports, the extent of such injury and making injury findings.
There was a non-permanent decision and policy-making body in SETC, named the Injury
Investigation and Determination Committee(“IIDC”), which was composed of sixcommissioners from the relevant departments of SETC. There was a permanent executiveoffice in charge of the investigation of injury to the industry and submitting its findings to theIIDC for approval.
(c) General Customs Administration (Customs)
Coordinating anti-dumping investigations with MOFTEC; Enforcing anti-dumping measures
such as collecting cash deposits, dumping or countervailing duties and monitoring its
implementation.
(d) Tariff Commission of State Council (TCSC)
Making final decisions on whether or not to levy the anti-dumping or countervailing duties
based on the suggestions by MOFTEC with regard to imposing anti-dumping orcountervailing duties and reimbursing excess amount of duties, respectively.
14. Safeguards
160. The representative of China stated that upon accession, China would implement its
Regulation on Safeguard by which the future safeguard measures would be regulated.  The drafting
work of this regulation was still under way.  The contents of this new regulation would be fullyWT/ACC/SPEC/CHN/1/Rev.7
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consistent with the Agreement on Safeguards.  He noted that, at present, China was in the process of
drafting safeguard legislation in accordance with Article 29 of the Foreign Trade Law and theAgreement on Safeguards.  The Working Party took note of this commitment.
C. EXPORT REGULATIONS
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of Internal Taxes
to Exports
161. Some members of the Working Party raised concerns over taxes and charges applied
exclusively to exports.  In their view, such taxes and charges should be eliminated unless applied inconformity with GATT Article VIII or listed in Annex 6 to the Draft Protocol.
162. The representative of China noted that the majority of products were free of export duty,
although 36 items, including tungsten ore, Ferrosil icon and some aluminum products, were subject to
export duties.  He noted that the duty-paying value of exported goods was the F.O.B. price of thegoods.
2. Export Licensing and Export Restrictions
163. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of expor ts would be updated and republished in the official journal, the
MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of thiscommitment.
164. The representative of China said that China applied its export licence system to certain
agricultural products, resource products and ch emicals. China's export licencing system was
administered in accordance with the "Interim Procedures for the Export Licencing System". In 1992,there were 143 categories of products subject to export licencing which accounted for 48.3 per cent ofthe total value of the China's exports, but by 1999, the total number of products subject to exportlicensing had been reduced to 58 categories and 73 items with an export value of US$ 18.5 billion,taking up only 9.5 per cent of total exports. Export licences for these products were issued accordingto the stipulated commodity scope respectively by the Administrative Bureau of Quota and Licence(ABQL), the Special Commissioner Offices (SCO) located in 16 provinces and the Commissions of
Foreign Economic Relations and Trade (COFTEC) of various provinces, autonomous regions,
municipalities directly under the central government and those with independent budgetary status.
The main criteria used in determining whether a product was subject to export licensing, as set downin the Foreign Trade Law, were:  (1) maintenance of national security or public interests;[(2) protection against shortage of supply in the domestic market or exhaustion of natural resources;]WT/ACC/SPEC/CHN/1/Rev.7
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49(3) limited market capacity of importing countries or regions;  or (4) obligations stipulated in
international treaties.  Export licensing was also used for statistical purposes.
165. He further noted that an application for an export licence had to be submitted to the licence
issuing institutions authorized by MOFTEC, together with documents approving the export by the
competent departments, and other relevant materials (such as the Export Qualification Certificate for
the enterprises, export contract and so on). The procedures were the same for all export destinations.A decision on the request for an export licence normally took three working days. Licences were validfor six months and could be extended once.  FIEs engaged in exporting products not produced bythem were required to obtain export licences if the products to be exported were subject to thelicensing requirement.  If the products were not subject to licensing, customs clearance would begiven after examination by Customs on the basis of export contracts and other relevant documents.
166. Certain members of the Working Party noted the conditions in the GATT 1994 in regard to
non-automatic licensing and export restrictions.  They  pointed out that export prohibitions, restrictions
and non-automatic licensing could only temporarily be applied under Article XI of the GATT 1994 to
prevent or relieve critical shortages of foodstuffs or other products essential to an exporting WTOMember.  Article XX of the GATT 1994 also allowed for restrictive export measures, but only if suchmeasures were made effective in conjunction with restrictions on domestic production orconsumption.
167. Members of the Working Party welcomed the steady reduction in the number products subject
to export licensing in China.  Certain members reiterated their request for the submission of acomplete list of restrictions presently applied.  These members expressed concern that the remaining
number was still high, covering about ten per cent of export trade, and requested that they be either
reduced further or eliminated by the date of accession in order to achieve full compatibility withGATT requirements.  Some members expressed particular concern about export restrictions on rawmaterials or intermediate products that could be subject to further processing, such as tungsten oreconcentrates, rare earths and other metals.
168. The representative of China confirmed that China would abide by WTO rules in respect of
non-automatic export licensing and export restrictions.  The Foreign Trade Law would also bebrought into conformity with GATT requirements.  Moreover, export restrictions and licensing would
only be applied, after the date of accession, in those cases where this was justified by GATT
provisions.  [The representative of China further confirmed that export restrictions on tungsten oreWT/ACC/SPEC/CHN/1/Rev.7
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concentrates would be eliminated upon entry into force of the Draft Protocol.]  The Working Party
took note of these commitments.
169. The representative of China stated that China prohibited export of narcotic drugs, poisons,
materials containing State secrets, precious and rare animals and plants.
170. Some members of the Working Party expressed concern about China's restrictions on exports
of silk.  Certain other members expressed concern about export restrictions on other goods, inparticular raw materials or intermediate products that could be subject to further processing, such astungsten ore concentrates, rare earths and other metals.  Members of the Working Party urged Chinato ensure that any such restrictions that were im posed or maintained complied with the terms of the
WTO Agreement and the Draft Protocol.
171. The representative of China confirmed that upon entry into force of the Draft Protocol,
[remaining non-automatic export] restrictions on exports would be [notified to the WTO annually andwould be] eliminated unless they could be justified under the WTO Agreement or the Draft Protocol.
The Working Party took note of this commitment.
3. Export Subsidies
172. Some members of the Working Party noted that China had provided a list of prohibited
subsidies falling within the scope of Article 3 of the SCM Agreement and a timetable for theirelimination, in Annex 5b of the Draft Protocol.  Those members considered this list to be incomplete.
173. The representative of China confirmed, as provided in Section 11.3 of the Draft Protocol,  that
it would eliminate all export subsidies, within th e meaning of Article 3.1(a) of the SCM Agreement,
by the time of accession.  To this end, China would, by accession, cease to maintain all pre-existing
export subsidy programmes and, upon accession, make no further payments or disbursements, nor
forego revenue or confer any other benefit, under such programmes.  This commitment coveredsubsidies granted at all levels of government, including tax exemptions, reductions, deferrals orforgiveness to enterprises, which were contingent, in law or in fact, upon an obligation to export.  TheWorking Party took note of this commitment.
174. On the same basis, the representative of China confirmed that China would eliminate, upon
accession, all subsidies contingent upon the use of domestic over imported goods, within the meaningof Article 3.1(b) of the SCM Agreement.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.7
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51D. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS
1. Taxes and Charges Levied on Imports and Exports
175. Some members of the Working Party expressed concern about the application of the VAT and
additional charges levied by sub-central governments on imports.  Non-discriminatory application ofthe VAT and other internal taxes was deemed essential.
176. The representative of China confirmed that from the entry into force of the Draft Protocol,
China would ensure that its laws and regulations relating to all fees, charges or taxes levied onimports and exports would be in full conformity with its WTO obligations, including Articles I, III:2and 4, and XI:1 of the GATT 1994, and that it would also implement such laws and regulations in full
conformity with these obligations.  The Working Party took note of this commitment.
2. Industrial Policy, including Subsidies
177. Some members of the Working Party expressed concern that the special features of China's
economy, in its present state of reform, still created the potential for a certain level of trade-distortingsubsidization;  this could have an impact not only on access to China's domestic market, but also onthe performance of Chinese exports in the markets of other WTO Members, and should be subject toeffective SCM Agreement disciplines.  In view of this, some members felt that it would beinappropriate for China to benefit from certain provisions of Articles 27 and 29.  The representative ofChina, in turn, considered that certain provisions of these Articles should be available to China, andinformed the Working Party of the efforts being undert aken, as part of its ongoing reform process, to
reduce the availability of certain types of subsidies.  China was committed to implementing the
SCM Agreement in a manner that was fair and equitable to China and to other WTO Members.  Inline with this approach, the representative of China stated his intention to reserve the right to benefitfrom the provisions of Articles 27.10, 27.11, 27.12 and 27.15 of the SCM Agreement, whileconfirming that China would not seek to invo ke Articles 27.8, 27.9 and 27.13 of the SCM Agreement.
The Working Party took note of these commitments.
178. Some members of the Working Party, in view of the special characteristics of China's
economy, sought to clarify that when state-owned enterprises (including banks) provided financial
contributions, they were doing so as government actors within the scope of Article 1.1(a) of the
SCM Agreement.  The representative of China noted, however, that such financial contributions
would not necessarily give rise to a benefit within the meaning of Article 1.1(b) of theSCM Agreement.  He pointed out that China's objective was that state-owned enterprises, includingWT/ACC/SPEC/CHN/1/Rev.7
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banks, should be run on a commercial basis and be responsible for their own profits and losses.  The
Working Party took note of this commitment.
179. Some members of the Working Party, while understanding the difficulties involved in
gathering information, raised concerns over the comprehensiveness of the subsidy notification which
China had provided in Annex 5 to the Draft Protocol, as last modified on 31 May 2000.  Some
members of the Working Party explained that, as an illustration of the above, certain types ofsubsidies did not appear in Annex 5.  Those members of the Working Party first identified statesupport through the banking system, notably governme nt-owned banks, in the form of policy loans,
the automatic roll-over of unpaid principal and interest, forgiven and non-performing loans, and theselective use of below-market interest rates.  Some members also referred to unreported tax subsidies,investment subsidies and subsidies provided by sub-central governments, some of which favouredexporting firms.  Other members mentioned subsidies granted to the telecommunications, footwearand shipbuilding sectors.  The representative of China explained that, in common with many other
Members, China had experienced difficulty in obtaining accurate data about all types of subsidies.  He
also indicated that China was attempting to reduce th e availability of certain types of subsidies, in
particular by reforming its tax system and making government-owned banks operate on a commercialbasis.  The representative of China stated that China would progressively work towards a fullnotification of subsidies, as contemplated by Article 25 of the SCM Agreement.  The Working Partytook note of this commitment.
180. Some members of the Working Party also raised  concerns regarding the subsidies that China
provided in connection with SEZs and other special economic areas.  Some of these appeared to be
contingent upon export performance or on the use of domestic goods.  The representative of China
noted that the main purpose of such subsidies was to promote regional development and foreigninvestment.  He confirmed that China would, upon accession, eliminate any such subsidies whichwere inconsistent with the SCM Agreement.  The Working Party took note of this commitment.
181. Some members of the Working Party requested information from China on the Steel Import
Substitution Programme, which appeared to provide export subsidies to the big four steel groups inChina.  In response, the representative of China clarified that China did not collect VAT on importedand domestically produced steel used as raw material for the processing trade.  Such a policy, in hisview, was consistent with WTO rules and the practices of many WTO Members, and thus should not
be considered as subsidies.
182. Some members of the Working Party requested information from China on the "China
High-Tech Product Export Catalogue", which set forth central government export policies for theWT/ACC/SPEC/CHN/1/Rev.7
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53telecommunications, computer software, aviation and aerospace, lasers, pharmaceuticals, medical
equipment, new materials and energy industries.  In response, the representative of China clarifiedthat products listed in the Catalogue would enjoy full VAT rebate treatment, while other exported
products would only be given partial VAT rebate treatment.  Such a policy, in his view, was
consistent with Article XVI of the GATT 1994 a nd relevant Annexes of the SCM Agreement.  He
further confirmed that the VAT rebates were applied only to exported products and not todomestically consumed products.
3. Technical Barriers to Trade
183. The representative of China stated that China had set up a TBT notification authority and two
enquiry points which had been notified to the TBT Committee. Upon accession, notices of adoptedand proposed technical regulations,  standards and conformity assessment procedures would be
published.  The names of the publications where this information could be found would be included inChina’s Statement of Implementation and Administration under Article 15.2 of the TBT Agreement,
which would be submitted upon entry into force of the Draft Protocol.  The Working Party took note
of this commitment.
184. The representative of China stated that, furthe r to China's implementation of WTO provisions,
internal mechanisms would exist, upon accession, to inform and consult with, on an ongoing basis,
government agencies and ministries (at national and sub-national levels), and private sector interestson the rights and obligations under the GATT 1994 and the TBT Agreement.  Concerning questionsfrom some members of the Working Party on the opportunity for public consultation and comment onproposed standards and technical regulations, the representative of China confirmed that, upon
accession, China’s procedures would clearly indicate that such opportunity existed and that comments
would be given due consideration regardless of origin.  The representative of China also confirmedthat, upon accession, China would have in place minimum timeframes for allowing public commenton proposed technical regulations, standards and conformity assessment procedures as set out in theTBT Agreement and relevant decisions and recommendations adopted by the TBT Committee.   TheWorking Party took note of these commitments.
185. Several members of the Working Party asked for information on the extent to which
international standards were used as the basis for existing Chinese standards, details on China’s plans
for using international standards as the basis fo r new standards, and details on China’s plans for
reviewing existing standards so as to harmonize  them with relevant international standards.WT/ACC/SPEC/CHN/1/Rev.7
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186. In response, the representative of China stated that, as a full member of,  for example, ISO,
IEC and ITU, China actively participated in the development of relevant international standards.With China’s efforts in restructuring government agencies, China would, not later than four monthsafter its accession to the WTO Agreement, notify acceptance of   the Code of Good Practice.  The
representative of China stated that for government standardizing bodies, a clear policy existed to
periodically review existing standards, inter alia , to harmonize them with relevant international
standards where appropriate .  Furthermore, China would speed up its process of revising the current
voluntary  national , local and sectoral standards so as to harmonize them with international standards.
The Working Party took note of these commitments.
187. Some members of the Working Party expressed concern that China’s use of the terms
"technical regulations" and "standards" was not always consistent with the definitions found in theTBT Agreement, e.g., China sometimes used the word  "standards" to refer to mandatory requirements
that fell within the definition of "technical regulations".  These members noted that China had
developed a number of different types of measures, referred to as "standards", at levels other than the
central government, in particular, regional, sectoral, and enterprise levels.
188. In response, the representative of China stated that China, in its notifications under the TBT
Agreement, including its notifications under Article 15.2 and in publications referenced therein, andin modifications of existing measures, would use the terms "technical regulations" and "standards"according to their meanings under the TBT Agreem ent.  The Working Party took note of these
commitments.
189. Some members of the Working Party also expressed concern that China did not use relevant
and available international standards as the basis for some of its existing technical regulations.
Several members asked for information on the extent to which international standards were used asthe basis for existing technical regulations, detail s on China’s plans for using international standards
as the basis for new technical regulations, and details on China’s plans for reviewing existingtechnical regulations so as to harmonize standards referenced in them with international standards or
their relevant parts.
190. In response, the representative of China stated that since 1980, China had taken the active
adoption of international standards as the basis for technical regulations as a basic policy ofaccelerating industrial modernization and promoting economic growth. The representative of China
confirmed that this policy also required technical regulations to be reviewed every five years, inter
alia, to ensure that international standards were used in accordance with Article 2.4 of the Agreement.
He also confirmed that China would provide this policy as part of its notification under Article 15.2 ofWT/ACC/SPEC/CHN/1/Rev.7
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55the Agreement .  He noted that as a result of China’s efforts in the past 20 years, the use  of
international standards as the basis for technical regulations had increased from 12 per cent to 40 percent.  China had begun formulating a standardization development programme in a bid to meet thechallenges of the 21st century and the requirements provided for in the TBT Agreement, and had
undertaken to further increase the use of international standards as the basis for technical regulations
by 10 per cent  in five years.  The representative of China also confirmed that China would makepublicly available procedures to implement Article 2.7 of the Agreement.  The Working Party tooknote of these commitments.
191. Bearing in mind the relevant provisions of the TBT Agreement, some members of the
Working Party asked China to identify local government bodies, directly below the centralgovernment level, and non-governmental organizations, that were authorized to adopt technicalregulations or conformity assessment procedures.  The representative of China replied that Chinawould provide a list of relevant local  governme ntal and non-governmental bodies upon its accession
to the WTO Agreement as part of its notification under Article 15.2 of the TBT Agreement.
192. With respect to conformity assessment procedures, several members of the Working Party
asked for information about the extent to which international guides and recommendations were usedas the basis for existing conformity assessment procedures, details on China’s plans for using suchguides and recommendations as the basis for new conformity assessment procedures, and details onChina’s plans for reviewing existing conformity assessment procedures so as to harmonize them withrelevant international guides and recommendations.
193. In response, the representative of China stated th at China played a full part in the preparation
by appropriate international standardizing bodies of guides and recommendations for conformity
assessment procedures, e.g., as a full member of ISO CASCO.  He stated that it was difficult toquantify the extent to which such guides and recommendations were used as the basis for existingconformity assessment procedures.  He confirmed that China would use relevant guides orrecommendations issued by international standa rdizing bodies as the basis for new conformity
assessment procedures in accordance with Article 5.4 of the TBT Agreement.  The representative ofChina also stated that existing conformity assessment procedures were reviewed concurrently withand under the same policy as related technical regulations, inter alia , to ensure the use of relevant
international guides or recommendations in accord ance with Article 5.4 of the TBT Agreement.  He
also confirmed that, upon entry into force of the Draft Protocol, China would ensure that the same
conformity assessment procedures were applied to both imported and domestic products.  TheWorking Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
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194. Some members of the Working Party expressed concerns about the complexity and
inconsistency of China's conformity assessment regi me with WTO TBT requirements.  In particular,
those members noted that conformity assessment on imported and domestic products was notperformed by the same governmental entities and that this situation could result in less favourable
treatment for imports.  In response, the representa tive of China stated that the Chinese government
had already decided to merge CIQ-SA and CSBTS into the State General Administration of thePeople’s Republic of China for Quality Supervision and Inspection and Quarantine (AQSIQ), underits policy of development of market economy and further reform and opening up in China. Therepresentative of China confirmed that the AQSIQ was responsible for all policies and proceduresrelated to conformity assessment in China.  He fu rther stated that other government ministries and
agencies developed conformity assessment policies and procedures but that these had to be authorizedby AQSIQ before they could be enacted.
195. Some members of the Working Party expressed concern about the consistency of the Law of
the People’s Republic of China on Import-Export Commodity Inspection (“the Law”), and the
Regulations for the Implementation of that Law (“the Implementing Regulations”), with the TBT
Agreement.  In particular, provisions for technical regulations and conformity assessment proceduresdid not adequately address fundamental obligations such as transparency, non-discrimination, nationaltreatment, and the avoidance of unnecessary barriers to trade.
196. Some members of the Working Party expressed concern about  a conformity assessment
procedure known as Statutory In spection, which was described, inter alia , in Articles 4, 5, and 6 of
the Law and Articles 4, 5, and 9 of the Implementing Regulations.  They stated that it was inconsistent
with the principle of national treatment and constituted an unnecessary obstacle to international trade.
Members of the Working Party agreed that WT/ACC /CHN/xx, a list of products subject to Statutory
Inspection, did not prejudge the legal status, nature or effects of notified technical regulations andstandards under the WTO Agreement.  The representative of China stated that China would bring theLaw and Implementing Regulations, as well as other relevant legislation and regulations, intoconformity with the TBT Agreement by the date of accession.  The Working Party took note of thiscommitment.
197. Some members of the Working Party expressed concern  about a conformity assessment
procedure, and the application thereof, known as the Safety Licence System for Import Commodities
("the System"), which was described in Article 22  of the Law and Article 38 of the Implementing
Regulations.  They stated that it was inconsistent with the principle of national treatment andconstituted an unnecessary obstacle to international trade (e.g., due to the frequent plant inspectionsrequired).  In response, the representative of China confirmed that, for technical regulations andWT/ACC/SPEC/CHN/1/Rev.7
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57conformity assessment procedures related to goods currently subject to the Safety Licence System for
Import Commodities, relevant legislation and regulations would be brought into full conformity   with
the TBT Agreement by the date of accession.  The Working Party took note of this commitment
198. Responding to the concerns of members of the Working Party, the representative of China
confirmed that to eliminate unnecessary barriers to trade, China would not maintain multiple or
duplicative conformity assessment procedures, nor would it impose requirements exclusively onimported products.  The Working Party took note of this commitment.
199. Some members of the Working Party expressed concern with respect to the confidentiality of
information in connection with conformity assessment procedures undertaken by China.  In response,the representative of China confirmed that China would fully implement the obligations of Article5.2.4 of the TBT Agreement in this regard.  The Working Party took note of this commitment.
200. Some members of the Working Party expressed concern about China's practice of not
accepting the results of conformity assessment by bodies in other WTO Members.  In this regard,
those members noted the obligation of unilateral acceptance of the results of conformity assessment as
described in Article 6.1 of the TBT Agreement.  The representative of China responded that productscertified by bodies recognized by China would require no additional conformity assessmentprocedures in China, except for random sampling of said products.  Furthermore, where randomsampling was undertaken and China’s test results differed from the test results of competent bodies inother WTO Members, the representative of China confirmed that China would act in accordance withinternational guidelines and recommendations, where these existed, or would provide a process ofreview with the objective of resolving such differences.  Some members of the Working Party
requested China to make public and update on an ongoing basis information on conformity
assessment bodies that were recognized by China.  The representative of China confirmed that Chinawould provide this information.  The Working Party took note of these commitments.
201. Concerning foreign and joint-venture conform ity assessment bodies, certain members of the
Working Party noted that China should not maintain requirements which had the effect of acting asbarriers to their operation, unless otherwise specified in China’s Schedule of Specific Commitments.The representative of China replied that China would not maintain such requirements.  Somemembers also observed that all foreign or joint venture conformity assessment bodies that metChina’s requirements should be eligible for a ccreditation and accorded national treatment.  The
representative of China confirmed that the accreditation requirements would be transparent andWT/ACC/SPEC/CHN/1/Rev.7
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provide national treatment to foreign conformity assessment bodies.   The Working Party took note of
these commitments.
202. Some members of the Working Party raised specific concerns regarding such matters as
(a) registration of initial imports of chemical products, (b) procedures to obtain and apply “CCIB”
safety mark and the "Great Wall" mark, (c) automobiles and parts, and (d) the safety and quality
licence system for boilers and pressure vessels.  In response, the representative of China stated thatChina would  implement the following measures prior to  accession to the WTO, unless otherwise
indicated:
(a) Registration of Initial Imports of Chemical Products
− Enact and implement, within one year after its accession to the WTO Agreement, a new
law and relevant regulations regarding assessment and control of chemicals for theprotection of the environment, in which complete national treatment and full consistencywith international practices would be ensured.
− Ensure that chemicals listed in the "inventory chemicals" annexed to the above new law
and its regulations would be exempted from a registration obligation and that a unifiedassessment procedure would be established for domestic and imported products under thenew law and its regulations.
(b) CCIB Safety Mark and the "Great Wall" Mark
− Unify the existing certification marks, i.e., the “CCIB” mark and the “Great Wall” mark
into a new certification mark.  For like imported and domestic goods, all bodies andagencies would issue the same mark and charge the same fee.
− Accept testing reports for products subject to the International Electrotechnical
Commission’s System for Conformity Testing to Standards for Safety of ElectricalEquipment (IECEE CB Scheme) to which Chin a was a party, and simplify the procedures
for obtaining the new, unified certification mark
− Shorten the time period needed for importers to obtain both marks regarding the same
products,   to no more than  three months .
(c) Automobiles and Parts
− Unify its laws, regulations and standards applied to domestic and imported automobiles
and parts.WT/ACC/SPEC/CHN/1/Rev.7
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59− Formulate, publish and implement laws and regulations, standards and implementing
regulations to establish a transparent system under which all the laws and regulationswould be applied so as to accord imported pr oducts treatment no less favourable than that
accorded to like products of national origin.
(d) Safety and Quality Licence System for Boilers and Pressure Vessels
− Accord imported products treatment no less fa vourable than that accorded to products of
national origin, including fees imposed for conformity assessment and the effectiveperiod of factory certification.
− Adopt international standards as the basis for technical regulations and exempt imported
products from inspection where like domestic products were not subject to suchinspection.
The Working Party took note of these commitments.203. The representative of China confirmed that, except as otherwise specified in the Draft
Protocol, China would apply all obligations under the TBT Agreement from the date of accession.
The Working Party took note of this commitment.
4. Sanitary and Phytosanitary Measures
204. Some Members of the Working Party expressed concerns in relation to the use by China of
sanitary and phytosanitary ("SPS") procedures as non-tariff barriers and raised specific instanceswhere they considered that China's measures we re not consistent with the WTO Agreement on the
Application of Sanitary and Phytosanitary Measures ("SPS Agreement").  Members sought assurancesthat China would only use SPS measures to the extent necessary to protect human, animal or plant life
or health, and that such measures would be based fully on scientific principles.
205. The representative of China stated that pursuant to the provisions of the SPS Agreement,
China applied SPS measures only to the extent nece ssary to protect the life and health of human
beings, animals and plants.  He also noted that most of China's SPS measures were based oninternational standards, guidelines and recommendations.  China would not apply SPS measures in amanner which would act as a disguised restriction on trade.  In accordance with the SPS Agreement,China would ensure that SPS measures would not be maintained without sufficient scientificevidence.  The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
Page 60
206. Members of the Working Party expressed the view that China should comply with the SPS
Agreement from the date of China's accession and should ensure conformity with the SPS Agreementof all its laws, regulations, decrees, requirements and procedures relating to SPS measures.  Inresponse, the representative of China confirmed that China would fully comply with the SPS
Agreement and would ensure the conformity with the SPS Agreement of all of its laws, regulations,
decrees, requirements and procedures relating to SPS measures from the date of accession.  TheWorking Party took note of these commitments.
207. Members of the Working Party noted that China's notification of laws, regulations and  other
SPS measures, referred to in the Draft Protocol, was provided in document WT/ACC/CHN/33.Members of the Working Party agreed that this notification did not prejudge the legal status under theWTO Agreement of the nature or effects of the notified laws, regulations and other SPS measures.
208. The representative of China said that China had set up an SPS notification authority and an
SPS enquiry point which would be notified to the SPS Committee.  SPS measures, including those
relating to inspection, had been published in public ations such as the MOFTEC Gazette.  Information
could also be gathered from the SPS notification authority or from China's SPS enquiry point.
5. Trade-Related Investment Measures
209. The representative of China confirmed that upon accession, as set forth in the Draft Protocol,
China would comply fully with the TRIMs Agreemen t, without recourse to Article 5 thereof, and
would eliminate foreign-exchange balancing a nd trade balancing requirements, local content
requirements and export performance requirements. Chinese authorities would not enforce the termsof contracts containing such requirements.  The allocation, permission or rights for importation and
investment would not be conditional upon performance requirements set by national or sub-national
authorities, or subject to secondary conditions covering, for example, the conduct of research, theprovision of offsets or other forms of industrial compensation including specified types or volumes ofbusiness opportunities, the use of local inputs or the transfer of technology.  Permission to invest,import licences, quotas and tariff rate quotas would be granted without regard to the existence ofcompeting Chinese domestic suppliers.  [The representative of China noted, however, that thefreedom of contract of enterprises should be guaranteed.]  The Working Party took note of thiscommitment.
210. In the context of discussions on the government's Industrial Policy for the Automotive Sector,
the representative of China confirmed that this pol icy would be amended to ensure compatibility with
WTO rules and principles.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.7
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61211. The representative of China added that amendments would be made to ensure that all
measures applicable to motor vehicle producers restricting the categories, types or models of vehiclepermitted for production, would gradually be lifted.  Such measures would be completely removedtwo years after accession, thus ensuring that moto r vehicle producers would be free to choose the
categories, types and models they produced.  However, it was understood that category authorizations
by the government could continue to distinguish between trucks and buses, light commercial vehicles,and passenger cars (including multi-purpose vehicles and sport utility vehicles).  The Working Partytook note of this commitment.
212. The representative of China confirmed that Chin a also agreed to raise the limit within which
investments in motor vehicle manufacturing could be  approved at provincial government level only,
from the current level of US$30 million, to US$60 million one year after accession, US$90 milliontwo years after accession, and US$150 million four years after accession.  The Working Party tooknote of this commitment.
213. With respect to the manufacture of motor vehi cle engines, the representative of China also
confirmed that China agreed to remove the 50 per cent foreign equity limit for joint-ventures uponaccession.  The Working Party took note of this commitment.
6. State Trading Entities
214. Some members of the Working Party expressed concern that the activities of China's state
trading enterprises were not sufficiently transparent and were not in accordance with WTOobligations.  The representative of China indicated, however, that China's state trading enterprises hadfull management autonomy and responsibility for their own profits and losses and that China had
undertaken broad and significant commitments to improve the transparency of state trading
enterprises' operation and the measures relating to such operation.
215. The same members of the Working Party also stat ed that China should ensure that the import
purchasing practices and procedures of state trading enterprises were fully transparent, and incompliance with the requirements of the WTO Agreement.  They considered that China should alsorefrain from taking any measure to influence or direct state trading enterprises as to the quantity,value, or country of origin of goods purchased or sold, except in accordance with the requirements ofthe WTO Agreement.  Those members also stated that as part of China's notification under theGATT 1994 and the Understanding on the Interpretation of Article XVII of the GATT 1994, ChinaWT/ACC/SPEC/CHN/1/Rev.7
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should also notify information on state trading, including, in the case of state trading of exported
goods, domestic procurement prices, contract terms for delivery and financing terms and conditions.
216. In response, the representative of China stated that its state trading enterprises had full
management autonomy and responsibility for their own profits and losses.  However, some members
of the Working Party again stated that China should undertake a commitment to ensure that all state
trading enterprises complied with the requirements  of the WTO Agreement.  The representative of
China noted that a list of products subject to state trading had been provided in Annex 2a of the DraftProtocol.  He also confirmed that information on state trading enterprises, as required by the DraftProtocol, would be supplied, but st ated that such notification should be without prejudice to the
commercial interests of the state trading enterprises.
217. Members of the Working Party took note of the specific arrangements that would apply for
fertilizers and crude and processed oil.  A key feature of those arrangements related to the annualallocation of import quantities.  The differences in the regimes that would apply to those products
were noted, in particular in regard to the obligation on state enterprises trading in fertilizers to carry
over to the next year any unused import quantities.
218. Some members of the Working Party requested assurances that, for oil products, quantities
reserved for non-state traders would be allocated in such a manner that they would be fully utilized.
In this respect, the representative of China confirmed that imports allocated to non-state traders ofcrude and processed oil, as specified in Annex 2a of the Draft Protocol, would be carried over to thenext year if they were not fully utilized.  In addition, the representative of China agreed that Chinawould publish, on a quarterly basis, the requests for imports that had been made by non-state traders,
as well as the licences granted, and would supply information relevant to such traders upon request.
The Working Party took note of these commitments.
219. Some members of the Working Party noted that prior to accession, some enterprises in China
were permitted to import goods for their production purposes, including those goods included inAnnex 2a.  The representative of China confirmed that, notwithstanding section 5, paragraph 1, of theDraft Protocol, non-state trading enterprises, including private enterprises, would still be permitted toimport such goods for production purposes and that national treatment would be provided to suchimports.  The Working Party took note of these commitments.
220. Some members of the Working Party expressed concerns about supplies of raw materials in
the textiles sector, and particularly in regard to supplies of silk, in the light of China's position as the
major world supplier of silk, currently subject to state trading rights concerning exports.WT/ACC/SPEC/CHN/1/Rev.7
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63221. In this regard, the representative of China confirmed that China would progressively abolish
the system of state trading in respect of silk by measures increasing and extending trading rights, withthe result that China would remove completely the silk products set out in numbers 10 and 11 ofAnnex 2a-2 to the Draft Protocol (list of products subject to state trading on exports) and grant the
right to trade in such products to all individuals and enterprises no later than 1 January 2005.  Pending
the implementation of this right, China undertook not  to introduce any changes of a more restrictive
nature to the existing structures in place for the supply of silk.  The representative of China furtherconfirmed that access to supplies of raw materials in the textiles sector would remain at conditions noless favorable than for domestic users, and gave his assurance that access to supplies of raw materialsas enjoyed under existing arrangements would not be adversely affected following China's accessionto the WTO.  The Working Party took note of these commitments.
222. Members of the Working Party noted that domestic prices for most agricultural commodities
in China were higher than world prices, and this differential allowed China's state trading enterprises
to import at low prices and then mark up the price when selling the product to wholesalers and
end-users. Some members expressed concern that th is practice could become more widespread when
access opportunities were created under TRQs.  Those members were particularly concerned thatmark-ups could be used to reduce the competitiveness of imported products and limit the range ofqualities and grades available to end-users in China.  The representative of China stated that currentlystate trading enterprises did not mark up imported products; instead, they only charged a nominaltransaction fee.  Consequently, China claimed that its practice was consistent with WTO obligations,did not result in any trade-distorting effect, and that under China's law limits existed on the fees that
could be charged by state trading enterprises.
223. The representative of China stated that China would ensure that no price increase in respect to
imports, in particular by state trading enterprises, would result in protection beyond that allowed in itsSchedule of Concessions and Commitments on Goods or that was not otherwise justified under WTOrules.  The Working Party took note of this commitment.
7. Special Economic Areas
224. Members of the Working Party noted that there was insufficient information available
concerning special economic areas within China's customs territory, including border trade regionsand minority autonomous areas, Special Economic Zones ("SEZs"), open coastal cities, economic and
technical development zones and other areas where special regimes for tariffs, taxes and regulationsWT/ACC/SPEC/CHN/1/Rev.7
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had been established (collectively referred to as "special economic areas"), in particular their names,
geographic boundaries, and relevant laws, regulations and other measures relating thereto.
225. In response, the representative of China stated that since 1979 China had established a
number of special economic areas where more open policies were applied.  They included five SEZs,
14 open coastal cities, six open cities along the Yangtze River, 21 provincial capital cities and 13
inland boundary cities.  Those special economic areas enjoyed greater flexibility in utilizing foreigncapital, introducing foreign technology and conducting economic cooperation overseas.  At present,foreign investors were entitled to certain preferential treatment.
226. The representative of China further stated that FIEs located in SEZs or the Economic and
Technical Development Zones of open coastal cities were entitled to a corporate income tax rate of 15per cent (the normal income tax was 33 per cent).  Profits remitted abroad by foreign investors wereexempted from income tax.  The preferential income tax rate of 15 per cent was applicable totechnology-intensive or knowledge-intensive items or projects with foreign investment of over
US$30 million, as well as enterprises that operat ed in the fields of energy, transport and port
construction.
227. The representative of China noted that throughout  the customs territory of China, a socialist
market economy system was applied.  In 1999, the foreign trade volume of SEZs accounted for nearlyone fifth of the nation's total.  The national laws and regulations on taxation were applicable to SEZsin a uniform manner.
228. In response to further requests for information, the representative of China indicated that there
was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs had
been eliminated. With the development of China's economic reform and opening up, China would
implement its tariff policy uniformly throughout its customs territory. Members of the Working Partyexpressed concern that imported products introduced from these special economic areas into otherparts of China's customs territory should be subject to the same treatment in the application of alltaxes, import restrictions and customs duties and other charges as that normally applied to importsinto the other parts of China's customs territory. The representative of China stated that China wouldundertake to ensure such non-discriminatory treatment.  The Working Party took note of thiscommitment.
229. Some members of the Working Party also raised concerns as to whether the assistance
provided to minority autonomous regions and other areas of economic poverty was consistent with
WTO requirements.  In response, the representative of China confirmed that China had a clearcommitment to uniform administration of the trad e regime within each such area and that, uponWT/ACC/SPEC/CHN/1/Rev.7
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65accession, China would ensure that such assistance would be implemented consistent with WTO
obligations.  The Working Party took note of this commitment.
230. Some members of the Working Party requested that China take steps to ensure that all
products imported into the other parts of the customs territory of China from special economic areas
would be subject to the same normal customs duties and charges as any other product imported into
the customs territory of China.  In particular, those members requested that China undertake acommitment to apply all taxes, charges and measures affecting imports, including import restrictionsand customs and tariff charges, that were normally applied to imports into the other parts of China'scustoms territory to all imported products, including physically incorporated components, enteringChina's customs territory from the special economic areas.
231. The representative of China confirmed that China would strengthen the uniform enforcement
of taxes, tariffs and non-tariff measures on trade between its special economic areas and the otherparts of China's customs territory.  China further confirmed that statistics on trade between China's
special economic areas and the other parts of its customs territory would be maintained and improved,
and would be notified to the WTO on a regular basis.  The Working Party took note of thesecommitments.
232. Some members of the Working Party requested that China notify the WTO Secretariat of all
the relevant laws, regulations and other measures relating to its special economic areas.  They askedthat the notification list and identify all those special economic areas.  Those members also requestedthat China notify the WTO Secretariat promptly, but in any case within 60 days, of any additions ormodifications to its special economic areas, including notification of the laws, regulations and other
measures relating thereto.
233. The representative of China confirmed that China would provide information in its
notifications describing how the special trade, tariff, and tax regulations applied were limited to thedesignated special economic areas, including in formation concerning their enforcement.  The
Working Party took note of this commitment.
234. In response to concerns raised by some members of the Working Party, the representative of
China confirmed that any preferential arrangements provided to enterprises located within the specialeconomic areas would be provided on a non-discriminatory basis.  The Working Party took note ofthis commitment.WT/ACC/SPEC/CHN/1/Rev.7
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8. Government Procurement
235. The representative of China stated that in order to promote China's government procurement,
the Ministry of Finance promulgated the Interim Regulations on Government Procurement inApril 1998.  The Interim Regulations were stipulated in line with the spirit of the WTO Agreement on
Government Procurement ("GPA") and on the basis of the relevant provisions of the United Nations
Model Law on Procurement of Goods, Construction and Services while making reference to the lawsand regulations of some WTO Members on government procurement. The policy and procedureregarding government procurement provided for ther ein were consistent with international practice.
China stuck to the fundamental principles of being open, fair, equitable, efficient and in the publicinterest when carrying out government procurem ent.  At present, China was formulating the
Government Procurement Law.
236. Some members of the Working Party stated that China should become a Signatory to the GPA
and that prior to its accession to the GPA, China should conduct all government procurement, within
the meaning of the Draft Protocol, in a transparent and non-discriminatory manner.  Those members
noted that China's public entities engaged exclusively in commercial activities would not beconducting government procurement and thus laws, regulations and other measures regulating theseentities' procurement practices would be fully subject to WTO requirements.
237. The representative of China stated that China intended to become a Signatory to the GPA and
that until such time, all government entities at the central and sub-central level would conduct theirprocurement in a transparent manner and provide all foreign suppliers with equal opportunity toparticipate in that procurement pursuant to the principle of MFN treatment.  Such procurements would
be subject only to laws, regulations, judicial decisions, administrative rulings of general application,
and procedures (including standard contract clauses) which had been published and made available tothe public.  The Working Party took note of these commitments.
238. Noting China's intention to become a Signator y of the GPA, some members of the Working
Party stated that China should, upon entry into force of the Draft Protocol, seek to become an observerto the GPA, and should initiate negotiations for membership in the Agreement by tabling anAppendix 1 offer within two years of accession.
239. [The representative of China responded that China would initiate negotiations for membership
in the GPA by tabling an Appendix 1 offer within  two years of accession.  The Working Party took
note of this commitment.]WT/ACC/SPEC/CHN/1/Rev.7
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67240. The representative of China stated that in 2005 and, as necessary, every two years thereafter,
there would be a review to examine China’s ability to accede to the GPA.  Until such time as China
became a member of the GPA, China committed itself to apply the MFN principle to all procurementby public authorities at all levels.  China would ensure that, if a procurement by one of its government
bodies or authorities at central or sub-central level, or any of its public entities other than those
engaged exclusively in commercial activities was open ed to foreign suppliers, it would  provide all
foreign suppliers with equal opportunity to participate in that procurement (e.g. through the biddingprocess).   The Working Party took note of these commitments.
9. Transit
241. The representative of China stated that the current regulation of transit in China, the
Regulations of the Customs of the People's Republic of China on the Supervision and Administrationof Transit Goods, was consistent with Article V of the GATT 1994.
10. Agricultural Policies
242. The representative of China stated that since  China was a country with a vast agricultural
base, as well as a vast population, agricultural security and food security in particular, was an issue ofsupreme importance. China based its policies on domestic agricultural supply, especially on balancedsupply and demand of grains.  Meanwhile, China actively sought international resources as anecessary supplement.
243. While noting this statement, some members of the Working Party expressed concerns about
China 's linkage of import policies for agriculture, including TRQ allocations, to domestic production
policy and the sub-national supply and utilization situation.  Those members requested that China
undertake an appropriate commitment to eliminate these practices.  In response China confirmed thatit would base import policies for agriculture on commercial considerations only.  The Working Partytook note of this commitment.
244. Members of the Working Party expressed further concerns in relation to administrative
guidance provided at the national and sub-national level which could have the effect of influencingthe quantity and composition of agricultural imports.  Members considered reform of these practices
toward full WTO consistency as an essential element of China 's accession.  To ensure effective
market access opportunities were created for imported products, members requested assurances from
China that agricultural and trade policies would not discriminate in a WTO inconsistent manner
against imported products.  Consistent with China 's commitment to uniform administration, ChinaWT/ACC/SPEC/CHN/1/Rev.7
Page 68
confirmed that, by the date of accession, it would not maintain, resort or revert to guidance plans or
administrative guidance at the national or sub-national level that regulate the quantity, quality ortreatment of imports, or constitute import substitution practices or other non-tariff measures, includingthose maintained through state trading enterprises at  the national or sub-national level.  The Working
Party took note of this commitment.
245. Some members of the Working Party expressed concern that large stocks in China of grain
and cotton had been procured at relatively high prices by state-trading enterprises or other state-affiliated, state-run, or state-controlled entities a nd noted that exports of these or other government-
purchased products at prices lower than the comparable price charged for the like product to buyers inthe domestic market could be challenged as an export subsidy or as inconsistent with other WTOobligations.  These members requested that China ensure that all entities, including state tradingenterprises and any other state-affiliated, state-run, or state-controlled entity at the national or sub-national level operated in accordance with China's WTO obligations, including those on export
subsidies.  In response, the representative of China confirmed that all entities in China would operate
in accordance with China 's WTO obligations, including those on export subsidies.  Further, the
representative of China stated that national and sub-national authorities would not provide fund
transfers or other benefits to any entities in China that would be inconsistent with its WTOobligations, including to offset losses accrued through exports. The Working Party took note of thesecommitments.
246. The representative of China confirmed that by the date of accession, China would not
maintain or introduce any export subsidies on agricultural products.  The Working Party took note ofthis commitment.
247. In implementing Article 6.2 and 6.4 of the Agreement on Agriculture, the representative of
China confirmed that while China could provide support through government measures of the types
described in Article 6.2, the amount of such support would be included in China's calculation of its
Aggregate Measurement of Support (AMS).  He noted that China's Total AMS Commitment Levelwas set forth in Part IV, Section I of China's Schedule.  The representative of China further confirmedthat China would have recourse to a de minimis  exemption for product-specific support equivalent to
8.5 per cent of the total value of production of a basic agricultural product during the relevant year.The representative of China confirmed that China would have recourse to a de minimis  exemption for
non-product-specific support of 8.5 per cent of the value of China's total agricultural productionduring the relevant year.  Accordingly, these percentages would constitute China's de minimis
exemption under Article 6.4  of the Agreement on Agriculture.  The Working Party took note of these
commitments.WT/ACC/SPEC/CHN/1/Rev.7
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69248. China's concessions on agricultural tariffs, and commitments on domestic support and on
export subsidies for agricultural products were contained in the Schedule of Concessions andCommitments on Goods annexed to the Draft Protocol.
249. Some members of the Working Party noted that the domestic support tables of China in
WT/ACC/CHN/38/Rev… showed China's base total AMS as zero in DS:4.  They also noted that
product specific support was negative in DS:5.
11. Trade in Civil Aircraft
250. In response to questions from members of the Working Party, the representative of China
indicated that China was not in a position to co mmit to joining the Agreement on Trade in Civil
Aircraft at the present stage.
251. The representative of China confirmed that China would not impose any provisions of offsets
or other forms of industrial compensation when purchasing civil aircraft, including specified types orvolumes of business opportunities.  The Working Party took note of this commitment.
12. Textiles
252. Some members of the Working Party proposed and the representative of China accepted that
the quantitative restrictions maintained by WTO Members on imports of textiles and apparel productsoriginating in China that were in force on the date prior to the date of the accession of China to the
WTO should be notified to the Textiles Monitoring Body ("TMB") as being the base levels for thepurpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC").
For such WTO Members, the phrase "day prior to the date of entry into force of the WTOAgreement", contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to the
date of accession of China to the WTO.  To these base levels, the increase in growth rates provided
for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of accessionof China to the WTO.  The Working Party took note of these commitments.
253. The representative of China agreed that the following provisions would apply to trade in
textiles and clothing products until 31 December 2008 and be part of the terms and conditions forChina's accession to the WTO:
(a) In the event that a WTO Member believed that imports of Chinese origin of textiles and
apparel products covered by the ATC as of the date the WTO Agreement entered into force ,WT/ACC/SPEC/CHN/1/Rev.7
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were, due to market disruption, threatening to impede the orderly development of trade in
these products, such Member could request consultations with China with a view to easingor avoiding such market disruption.  The Me mber requesting consultations would provide
China, at the time of the request, with a detailed factual statement of reasons and
justifications for its request for consultations with current data which, in the view of the
requesting Member, showed:  (1) the existence or threat of market disruption;  and (2) therole of products of Chinese origin in that disruption;
(b) Consultations would be held within 30 days of  receipt of the request.  Every effort would be
made to reach agreement on a mutually satisfactory solution within 90 days of the receipt ofsuch request, unless extended by mutual agreement;
(c) Upon receipt of the request for consultations, China agreed to hold its shipments to the
requesting Member of textile or textile products in the category or categories subject to theseconsultations to a level no greater than 7.5 per cent (6 per cent for wool product categories)
above the amount entered during the first 12 mont hs of the most recent 14 months preceding
the month in which the request for consultations was made;
(d) If no mutually satisfactory solution were reached during the 90-day consultation period,
consultations would continue and the Member requesting consultations could continue thelimits under subparagraph (c) for textiles or textile products in the category or categoriessubject to these consultations;
(e) The term of any restraint limit established under subparagraph (d) would be effective for the
period beginning on the date of the request for consultations and ending on 31 December of
the year in which consultations were requested, or where three or fewer months remained in
the year at the time of the request for consultations, for the period ending 12 months afterthe request for consultations;
(f) No action taken under this provision would remain in effect beyond one year, without
reapplication, unless otherwise agreed between the Member concerned and China.
(g) Measures could not be applied to the same product at the same time under this provision and
the provisions of Section 19 of the Draft Protocol.
The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.7
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7113. Measures Maintained Against China
254. The representative of China stated that WTO Members should eliminate all discriminatory
non-tariff measures maintained against Chinese exports from the date of China's accession to theWTO.  In response, some members of the Working Party stated that, in their view, such measures did
not need to be phased out until such time as China's foreign trade regime fully conformed to WTO
obligations.
255. In light of the above, it was agreed that any prohibitions, quantitative restrictions or other
measures maintained against imports from China in a manner inconsistent with the WTO Agreementwould be listed in Annex 8 to the Draft Protocol.  It was further agreed that all such measures would
be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables asspecified in said annex.
14. Transitional Safeguards
256. With respect to implementation of the product-specific safeguard, the representative of China
expressed particular concern that WTO Members provide due process and use objective criteria in
determining the existence of market disruption or trade diversion, because WTO Members did nothave wide experience in implementing the provisions of this Section. He stated that with respect totrade diversion, WTO Members needed to apply objective criteria to determine whether an action byChina or another WTO Member under the product-specific safeguard to prevent or remedy marketdisruption caused or threatened to cause significant diversion of trade.  Such criteria should includethe actual or imminent increase in market share or volume of imports from China, the nature or extentof the action taken by China or the other WTO Member and other similar criteria.  In addition, WTO
Members should provide an opportunity for importers, exporters and all interested parties to submit
their views on the matter.
257. Members of the Working Party noted that the Draft Protocol included specific requirements
that WTO Members needed to follow in connection with an action under that Section.  Members ofthe Working Party confirmed that in implementing the provisions on market disruption, Members ofthe WTO would comply with thos e provisions and the following:
(a) An action to address market disruption would be taken only after an investigation by the
competent authorities of the importing WTO Member pursuant to procedures previouslyestablished and made available to the public.WT/ACC/SPEC/CHN/1/Rev.7
Page 72
(b) The competent authority of the importing Member would publish notice of the
commencement of any investigation under the product-specific safeguard provisions of theDraft Protocol and would, within a reasonable time thereafter, hold a public hearing orprovide other appropriate means  for the purpose of permitting interested parties to present
evidence and their views as to the appropriateness of whether or not to take a measure and to
respond to the presentations of other parties.
(c) In determining whether market disruption existed, including the causal link between imports
which were increasing rapidly, either absolute ly or relatively, and any material injury or
threat of material injury to the domestic i ndustry,  the competent authorities would consider
objective factors, including (1) the volume of imports of the product which was the subjectof the investigation; (2) the effect of imports of such product on prices in the importingWTO Member’s market for the like or directly competitive products; (3) the effect ofimports of such product on the domestic industry producing like or directly competitive
products.
(d) The competent authorities would publish any measure proposed to be taken and provide the
opportunity, including a public hearing, if requested, or provide other appropriate means, forimporters, exporters and other interested parties to submit their views and evidence on theappropriateness of the proposed measure and whether it would be in the public interest.
(e) The competent authority would promptly publish notice of the decision to apply a measure,
including an explanation of the basis for the decision and the scope and duration of themeasure.
(f) The period of application of the measure could be extended, provided that the competent
authorities of the importing WTO Member had determined that action continued to benecessary to prevent or remedy market disruption.  The competent authorities of theimporting WTO Member would publish notice of the commencement of any proceeding toconsider whether to extend the duration of an action and would, within a reasonable timethereafter, hold a public hearing or provide other appropriate means for the purpose ofpermitting all interested parties to have an oppo rtunity to present evidence or their views and
to respond to the presentations of other parties.
(g) Except for good cause, no investigation under Section 19 of the  Protocol on the same
subject matter could be initiated less than one year after the completion of a previous
investigation.WT/ACC/SPEC/CHN/1/Rev.7
Page 73
73(h) A WTO Member would apply a measure only for such period of time as was necessary to
prevent or remedy market disruption.
258. Trade diversion referred to an increase in imports from China of a product into a WTO
Member as the result of an action by China or other WTO Members pursuant to paragraphs 2, 3 or 7
of Section 19 of the Draft Protocol.  Members of th e Working Party also noted that the Draft Protocol
required a determination that any trade diversion was significant and that the action taken to addressmarket disruption had caused or threatened to cause the diversion.
259. Members of the Working Party agreed that objective criteria had be applied in determining
whether actions to prevent or remedy market disruption caused or threatened to cause significantdiversion of trade.   Among the factors to be examined were:
(a) the actual or imminent increase in market share of imports from China in the importing
WTO Member;
(b) the nature or extent of the action taken or proposed by China or other WTO Members;
(c) the actual or imminent increase in the volume of imports from China due to the action taken
or proposed;
(d) conditions of demand and supply in the importing WTO Member’s market for the products
at issue; and
(e) the extent of exports from China to the WTO Member(s) applying a measure pursuant to
paragraphs 2, 3 or 7 of Section 19 of the Draft Protocol and to the importing WTO Member.
260. A measure taken to address significant diversions of trade would be terminated not later than
30 days after the expiration of the action taken by the WTO Member or Members involved against
imports from China.
261. If the WTO Member or Members taking an action to address market disruption notified the
WTO Committee on Safeguards of any modification of an action, the competent authorities of theWTO Member addressing trade diversion would dete rmine whether a significant diversion of trade
continued to exist and determine whether to modify, withdraw or keep in place the action taken.WT/ACC/SPEC/CHN/1/Rev.7
Page 74
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME
A. GENERAL
1. Overview
262. The representative of China stated that China had made the protection of intellectual property
rights (IPRs) an essential component of its reform and opening-up policy and socialist legalconstruction.  The formulation of laws and regulations in this field could be traced back to the late1970s.  Since then, China had joined relevant international conventions and had actively participatedin the activities sponsored by relevant international organizations.  It had intensified its exchanges and
cooperation with countries throughout the world in the field of IPR protection.  As a result,
notwithstanding the initial stage of its developmen t, China's IPR protection system aimed at achieving
world dimension and world standards.  Lists of admi nistrative rules concerning intellectual property
rights currently in force in China were presented below in Table A. The status of ongoing reforms andother relevant information was presented in Table B in the following paragraph.
Table A:  The Administrative Rules of China Concerning Intellectual Property Rights
The following three parts were the administrative rules regarding protection of intellectual property
right, which were still in force in China. As an important part of China's IPR legal system, these ruleshave a great effect on IPR protection, enforcing the IPR law, etc.
Part I Lists of Administrative Rules Regarding Protection of Patent Right
Part II Lists of Administrative Rule s Regarding Protection of Trademark
Part III Lists of Administrative Rule s Regarding Protection of Copyright
Part I Lists of Administrative Rules Regarding Protection of Patent Right
(i) Regulations Relating to Implementation Patent Cooperation Treaty in China 
(23 November 1993)
(ii) Methods on the Showing the Identification of Right of Priority to Applicant made by Patent 
Office of China (1 March 1988)
(iii) Regulations on Patent Commissioning (4 March 1991)WT/ACC/SPEC/CHN/1/Rev.7
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75(iv) Opinions of the Patent Office of China concerning the Implementation of the Regulations 
on Patent Commissioning (19 April 1991)
(v) Explanation of the Patent Office of China on Certain Matters Relating to the 
Commissioning Involving Foreign Interests (16 November 1987)
(vi) Decree of Patent Office of China (No.26) (20 November 1989)
(vii) Decree of Patent Office of China (No.27) (21 December 1989)
(viii) Decree of Patent Office of China (No.31) (14 March 1991)
(ix) Procedures for Administrative Reconsiderati on of Patent Office of the People's Republic of 
China (for Trial Implementation) (21 December 1992)
(x) Methods of Handling the Patent Disputes by the Administrative Authorities for Patent 
Affairs (4 December 1989)
Part II Lists of Administrative Rules Regarding Protection of Trademark
(i) Rules for the Implementation of the Tradem ark Law of the People's Republic of China 
(15 July 1993)
(ii) Supplementary Provisions Concerning the Punishment of Crimes of Counterfeiting 
Registered Trademarks made by the Stan ding Committee National People's Congress 
(22 February 1993)
(iii) Circular on the Commodities Demanded to Use Registered Trademark made by the State 
Administration for Industry and Commerce (14 January 1988)
(iv) Circular on the Prohibition from Registering the Other Person's Trademark Abroad without 
Being Authorized made by State Administration for Industry and Commerce and the Ministry of Economy and Trade (19 November 1990)
(v) Interim Provisions on Claims for Priority in Applying for Registration of Trademarks made 
by State Administration for Industry and Commerce (15 March 1983)WT/ACC/SPEC/CHN/1/Rev.7
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(vi) Methods of the Application International Registration of Trademark of Madrid made by the 
State Administration for Industry and Commerce (2 March 1989)
(vii) Circular on the Stopping Using the Literal of "Xiang Bin" or "Champagne" in Varieties of 
Commodities of Alcohol made by the State Administration for Industry and Commerce (26 October 1989)
(viii) Circular on Printing and distributing " the Rules regarding the Question of Using Trademark 
in Can Food for Export" (15 October 1991)
(ix) Regulations on the Control over the Surrogate of Trademark
(x) Regulations on the Registration of and the Control over the Collective Trademark and 
Certified Trademark (issued on 30 December 1994, revised on 3 December 1998)
(xi) Interim Provisions on the Cognizance of and the Control over the Renowned Trademark 
(issued on 24 August 199, revised on 3 December 1998)
(xii) Regulations on the Control over the Printing of Trademark (issued on 5 September 1996, 
revised on 3 December 1998)
Part III Lists of Administrative Rule s Regarding Protection of Copyright
(i) Copyright Law of the People's Republic of China (7 September 1990)
(ii) Regulations for Implementation of Copyright Law of the People's Republic of China 
(30 May 1991)
(iii) Provisions on the Implementation of the International Copyright Treaty (25 September 1992)
(iv) Circular of the Supreme People's Court on Matters regarding Further Implementing the 
Copyright Law of the People's Republic of China (24 December 1993)
(v) Circular of the State Press Administration regarding Establishment the Agency of Copyright 
Management in Every Provinces Autonomous Re gions and Municipalities Directly under the
Central Government (5 February 1986)
(vi) Regulations for Management of the Audio/visual Producers (25 August 1994)WT/ACC/SPEC/CHN/1/Rev.7
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77(vii) Opinions of the National Copyright Administration on Questions Relating to Reprinting the 
Programs in Advance in Broadcast and Television (12 December 1987)
(viii) Circular of the National Copyright Administration of Printing and Distribution "Report 
Relating to Appropriate Handling the Copyright Question in the Process of Culture Communication with Taiwan" and "Interim Provis ions Relating to the Copyright Question of
Pressing the Works Written by Taiwan Compatriots" (8 February 1988)
(ix) Circular of National Copyright Administration regarding the Points for Attention of 
Transferring Copyright to Taiwan's Press Person (26 December 1987)
(x) Circular of Newspaper Management Department of the Press and Publication Administration
of the People's Republic of China on Questions Relating to Reprinting the Programs in 
Advance in Broadcast and Television (30 March 1988)
(xi) Opinions of National Copyright Administration on Matters Relating to Local Work on 
Copyright Management (5. 1988)
(xii) Circular of the National Copyright Administration concerning Procedures of Examining and 
Verifying the Copyright Trading Contract Be tween the Mainland and Hong Kong, Macao 
and Taiwan (2 November 1988)
(xiii) Opinions on Certain Matters of the Nationa l Copyright Administration concerning Handling 
Copyright Cases (27 December 1988)
(xiv) Opinion of the Press and Publication Admi nistration, the National Copyright Administration 
concerning Cooperating in Handling the Repro ducing without Consent by the Administration
of Publishing and Copyright (18 July 1989)
(xv) Circular of the National Copyright Administration concerning the Standard of Paying 
Author's Remuneration When the Press Reprint and Extract the Published Works at Present (27 August 1991)
(xvi) Interim Provisions of the Standard of Payi ng Author's Remuneration When the Press Reprint 
and Extract the Published Works with the Consent by Law (1 August 1993)WT/ACC/SPEC/CHN/1/Rev.7
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(xvii) Interim Provisions of the Standard of Paying Author's Remuneration When Perform the 
Published Works with the Consent by Law (1 August 1993)
(xviii) Interim Provisions of the Standard of Paying Author's Remuneration When Record the 
Published Works with the Consent by Law (1 August 1993)
(xix) Direction of the Chinese Center of Receiving and Transmitting Author's Remuneration 
concerning Receiving and Transmitting Remuneration About the Press Extract the Published Works
(xx) Circular of the National Copyright Admini stration concerning Enforcing "the Memorandum 
of Understanding between the Government of the People's Republic of China and the Government of the United States of America on the Protection of Intellectual Property" 
(29 February 1992)
(xxi) Urgent Circular concerning Strengthenin g Administration of Reproducing Compact Discs 
and Laser Discs (12 April 1994)
(xxii) Circular of Enforcing "Urgent Circular concerning Strengthening Administration of 
Reproducing Compact Discs an d Laser Discs" (12 May 1994)
(xxiii) Circular concerning Registration of the Organization Reproducing Compact Discs and Laser 
Discs (29 June 1994)
(xxiv) Cooperate Circular of the Ministry of Judicial and National Copyright Administration 
concerning Bringing Notary Office into Play in Dealing with the Infringing Copyright Cases 
(29 August 1994)
(xxv) Regulations for the Protection of Copy right of Computer Software (4 June 1991)
(xxvi) Measures of the Registration of Copyright of Computer Software (4 June 1992)
(xxvii) Guide to Classified Coding of Soft ware in Computer Software's Registration
(xxviii) The Item and Standard of Registration Expenses of Computer Software (18 April 1992)
263. The representative of China stated that for accession to the WTO Agreement and compliance
with the TRIPS Agreement, further amendments had been made to the Patent Law.  The amendmentsto the Copyright Law and the Trademark Law, as well as relevant implementing rules coveringWT/ACC/SPEC/CHN/1/Rev.7
Page 79
79different areas of the TRIPS Agreement, would also be accomplished upon China's accession to the
WTO Agreement.  The representative of China stated that laws adopted by the National People'sCongress and administrative regulations, including implementing rules, issued by the State Council
were applied and enforced by the people's courts. The Working Party took note of this commitment.
Table B: Revision of China's IPR Laws in Conformity with the TRIPS Agreement
The People's Republic of China had conducted an intensive work programme to examine and revise the
IPR laws, administrative regulations and department rules relating to the implementation of the WTOAgreement and China's accession commitments. A list of China's IPR laws, administrative regulationsand department rules to be revised and abolished was hereby notified to the Working Party. Part I ofthe list contained 8 laws and regulations, some of which had already been included in the listssubmitted to the Working Party at its June and July meetings. Part II of the list included 4 departmentrules to be revised or abolished for the same reason. This list gave the names of laws, regulations anddepartment rules, reasons for revision or abolishment, and dates of implementation.
Part I Laws and Administrative Regulations
Laws and Regulations Date of Implementation
1.  Copyright Law of  the People's Republic ofChinaTo be revised upon accession
2.  Regulations for the Implementation of the
Copyright Law of the People's Republic of ChinaTo be revised upon accession
3.  Regulations for the Protection of Computer
SoftwareTo be revised upon accession
4.  Trademark Law of the People's Republic of
ChinaTo be revised upon accession
5.  Detailed Rules for the Implementation of the
Trademark Law of the People's Republic of ChinaTo be revised upon accession
6.  Regulations of the People's Republic of China
on the Protection of New Varieties of PlantsEffective as of 1 October 1997WT/ACC/SPEC/CHN/1/Rev.7
Page 80
7.  Law of the people's Republic of China Against
Unfair CompetitionEffective as of 1 December 1993
8.  Regulations on the Implementation of the
Integrated Circuit Layout DesignTo be effective as of 10 October 2001
Part II  Department Rules
Department Rules Date of Implementation
1.  Interim Rules on the Administration of Patents
in Agriculture, Animal Husbandry and FisheriesTo be abolished upon accession
2.  Notice on the Interim Regulation on the
Protection of Copyright of Books and MagazinesTo be abolished upon accession
3.  Notice on the Issuance of the "Detailed Rules
of Interim Regulations on the Protection ofCopyright of Books and Magazines", "PublicationIntention Contracts" and  "Publication Contracts"To be abolished upon accession
4.  Interpretation of Article 15(4) of the "Interim
Regulation on the Protection Copyright of Books
and Magazines"To be abolished upon accession
2. Responsible agencies for policy formulation and implementation
264. The representative of China said that, at present, different agencies were responsible for IPR
policy formulation and implementation.  The State Intellectual Property Office (SIPO) wasresponsible for patent approval; the Trademarks Office under the State Administration for Industryand Commerce (SAIC) was responsible for trademarks registration; the Copyright Office wasresponsible for copyright policy making; SAIC was responsible for anti-unfair competition, including
the protection of trade secrets; the State Drug Administration (SDA) was responsible for
administrative protection of pharmaceuticals; the General Customs Administration was responsiblefor border measures;  the Ministry of Agriculture and the State Administration of Forestry wereresponsible for protection of plant varieties;  the Ministry of Information Industry was responsible forthe protection of layout designs of integrated circuits;  and the State General Administration of theWT/ACC/SPEC/CHN/1/Rev.7
Page 81
81People's Republic of China for Quality Supervision and Inspection and Quarantine and SAIC were
responsible for combating counterfeiting activities.  Other agencies like the agency for press andpublications, the people's courts and police were also involved in the protection of IPR in China.
3. Participation in international intellectual property agreements
265. The representative of China said that China became a member of the World Intellectual
Property Organization in 1980. In 1985, China became a member of the Paris Convention for theProtection of Industrial Property. China was one of the first countries that signed the Treaty onIntellectual Property in Respect of Integrated Circuits, the negotiation of which was concluded in1989. In 1989, China became a member of the Madrid Agreement Concerning the InternationalRegistration of Marks and in 1992, China became a member of the Berne Convention for theProtection of Literary and Artistic Works.  In 1993, China became a member of the Convention forthe Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms.
In 1994, China became a member of  the Patent Cooperation Treaty and a member of the Nice
Agreement Concerning the International Classification of Goods and Services for the Purposes of the
Registration of Marks.  In 1995, China became a member of the Budapest Treaty on the InternationalRecognition of the Deposit of Microorganisms for the Purposes of Patent Procedure and applied formembership in the Protocols of the Madrid Agreement Concerning the International Registration ofMarks. In 1996, China became a member of the Locarno Agreement on Establishing an InternationalClassification for Industrial Designs; and in 1997, China became a member of the StrasbourgAgreement Concerning the International Patent Cl assification.  Besides the above efforts, China
participated in the TRIPS negotiations during the Uruguay Round and initialled the Final Act.
4. Application of national and MFN treatment to foreign nationals
266. Some members of the Working Party expressed concern that certain provisions of China's
copyright and trademark laws, as well as China's Rules on Banning the Infringement of BusinessSecrets (23 November 1995) did not provide national treatment to foreign right-holders.  The Ruleson Banning Infringements of Business Secrets, for example, defined the "owner" of a trade secret as a"citizen, corporation, and other organization" and did not explicitly provide protection for foreignindividuals or organizations.  Some members of  the Working Party further stated that national
treatment should be fully applied, so that copyright enforcement action by local copyright bureauxinvolving foreign right-holders, would no longer require clearance by the National Copyright
Administration in Beijing.WT/ACC/SPEC/CHN/1/Rev.7
Page 82
267. The representative of China responded that China's IPR laws provided that any foreigner
would be treated in accordance with any agreemen t concluded between the foreign country and China,
or in accordance with any international treaty to which both countries were party, or on the basis ofthe principle of reciprocity.  The representative of China further confirmed that China would modify
relevant laws, regulations and other measures so as to ensure national and MFN treatment to foreign
right-holders regarding all intellectual property ri ghts across the board in compliance with the TRIPS
Agreement.  This would include adjustments of th e clearance requirement mentioned in the previous
paragraph to ensure national treatment.  The Working Party took note of these commitments.
B. SUBSTANTIVE
 STANDARDS OF PROTECTION, INCLUDING PROCEDURES FOR 
THE ACQUISITION AND MAINTENANCE OF INTELLECTUAL PROPERTY RIGHTS
1. Copyright protection
268. The representative of China said that the Copyright Law, which was promulgated in 1990,
established the basic copyright protection system in China together with the Implementing Rules ofthe Copyright Law (30 May 1991), the Provisions on the Implementation of the InternationalCopyright Treaty (25 September 1992) and other related laws and regulations.  In principle, thissystem was in compliance with the international IPR treaties and practices.  For the protection of
copyright and neighbouring rights, not only civil and criminal liabilities but also administrative
liabilities, were provided for in this system.  He nce the infringing activities could be curbed in a
timely and effective manner and the legitimate rights of the right-holders could be protected.
269. Some members of the Working Party expressed concerns about the consistency of China's
current law on the protection of copyright and related rights with the TRIPS Agreement.  In particular,members noted the need to clarify the rights of performers and producers to bring them into
conformity with the requirements of Article 14 of the TRIPS Agreement.  In addition, improvementswere needed with respect to enforcement of copyright to provide expressly for provisional measuresto preserve evidence, including documentary evidence and for remedies sufficient to deter further
infringements.
270. The representative of China responded that, realizing that there were some existing
differences between China's copyright laws and the TRIPS Agreement, the amendment to theCopyright Law had been accelerated.  The proposed amendments would clarify the payment system
by broadcasting organizations which use the re cording products and also include the following
provisions: rental rights in respect of computer programs and movies, mechanical performance rights,rights of communication to the public and related protection measures, protection of databasecompilation, provisional measures, increasing the legitimate compensation amount and strengtheningWT/ACC/SPEC/CHN/1/Rev.7
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83the measures against infringing activities.  Chin a's copyright regime including the Implementing
Rules of the Copyright Law and the Provisions on the Implementation of the International Copyright
Treaty would be amended so as to ensure full consistency with China's obligations under the TRIPSAgreement.  The Working Party took note of these commitments.
2. Trademarks, including service marks
271. The representative of China stated that the Trademark Law, its implementing rules and other
relevant laws, administrative regulations and department rules constituted the existing trademark legalsystem in China.  The objective of these laws was to provide protection to right-holders in line withthe international conventions and prevailing practices regarding intellectual property rights, whichwas embodied both in the regulations on the substance and procedures for trademark registration andin the protection of trademark exclusive right.  In order to protect the trademark owner's exclusiverights, China's Trademark Law contained not only civil and criminal liabilities but also provided foradministrative punishment of trademark infringers.  This "double-track system" for the protection of
exclusive rights in trademarks could prevent trademark infringements in a timely and effective
manner and protect the legitimate rights and interests of these exclusive rights.  In recent years,China's judicial and administrative bodies had stepped up their efforts to protect trademark exclusiverights within their respective authority.  They had settled a large number of cases that were influential,domestically and abroad, which provided adequate protection to the legitimate rights and interests ofboth Chinese and foreign holders of exclusive rights in trademarks, and received a positive responsefrom domestic and foreign right-holders.
272. Some members of the Working Party reiterated their concerns about whether certain
provisions of China's trademark law provided national treatment to foreign owners of trademarks.
They noted that China's law required foreign owners of trademarks to use designated trademarkagents, while Chinese nationals were permitted to file directly with China's Trademark Office.Members also noted that China's trademark law did not consider certain signs as eligible forprotection as required under the TRIPS Agreement.  These included names, letters, numerals andcolours capable of distinguishing goods and services.  In addition, if registrability of a trademarkdepends on use, China's trademark law should provide that a non-distinctive mark could qualify forregistration when it has acquired distinctiveness based on use.  Members also noted that it was notclear under China's law that actual use of a mark was not required before a party could file to register
a mark.WT/ACC/SPEC/CHN/1/Rev.7
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273. Some members of the Working Party also raised concerns about the protection of well-known
trademarks in China, in particular those not registered in China.  China's laws and regulations did notspecifically state the criteria for determining whether a mark was well-known and therefore memberscould not determine if it conformed to the requirements of Article 16 of the TRIPS Agreement.
Moreover, while China had provided protection to "well-known trademarks" owned by nationals, such
protection had, as yet, not been granted to the well-known trademarks of foreigners.  Members alsonoted that certain provisions of China's trademark law needed to be extended to unregistered well-known trademarks.
274. The representative of China stated that with the development of China's market economy and
the further implementation of the TRIPS Agreement,  China's legislative and law enforcement bodies
had also realized that the existing trademark law fe ll somewhat short of fulfilling the requirements of
the TRIPS Agreement and the Paris Convention in a few aspects and were therefore preparing toamend the existing trademark law to fully meet the requirements of the TRIPS Agreement.
Modifications would mainly be made to the followin g aspects: to include the trademark registration of
three-dimensional symbols, combinations of colours, alphabets and figures; to add the content ofcollective trademark and certification trademark (including geographical indications); to introduceofficial symbol protection; to protect well-known trad emarks; to include priority rights; to modify the
existing trademark right confirmation system and offer interested parties the opportunity for judicialreview concerning the confirmation of trademark rights;  to crack down on all serious infringements;and to improve the system for providing damages for trademark infringement.  The Working Partytook note of these commitments.
3. Geographical indications, including appellations of origin
275. The representative of China said that the relevant rules of the SAIC and the State General
Administration of the People's Republic of China for Quality Supervision and Inspection andQuarantine partly provided protection for geographical indications, including appellations of origin,and that the amendments to the trademark law w ould have a specific provision on the protection of
geographical indications.
276. The members of the Working Party took note of the progress achieved on providing
protection for geographical indications and reiterated the importance of China's legislation complyingwith the obligations under the TRIPS Agreement (Articles 22, 23 and 24).  The representative of
China shared this assessment and reiterated China's in tention to fully comply with relevant articles in
the TRIPS Agreement on geographical indications. The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.7
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854. Industrial designs
277. Some members of the Working Party noted that the industrial design provisions of China's
patent law appeared to implement substantial port ions of the TRIPS Agreement requirements relating
to industrial designs.  One notable exception was the area of textile designs.  These members noted
that designs of WTO Members could be protected under China's Provisions on the Implementation of
the International Copyright Treaty as works of applied art.  Members urged China to incorporate thisprotection into its law and to provide such protection to domestic textile designs.
5. Patents
278. The representative of China said that in preparation for its accession to the WTO, China
revised its patent law in 1992 for the first time.  China had taken measures to enhance consistencywith the TRIPS Agreement in terms of major provisi ons and protection standards.  In order to increase
the awareness of the general public on IPR protection, and patent protection in particular, to beconsistent with the TRIPS Agreement, and to build up a sound social environment for the promotion
and commercialization of inventions, the National People's Congress approved the second revision of
the Patent Law on 25 August 2000.  The revised patent law, which would take effect on 1 July 2001,included the following elements: (1) patent owners would have the right to prevent others fromoffering for sale the patented product without thei r consent (Article 11);  (2) for utility model and
design applications or patents, the final decision on re-examination and invalidation would be madeby the people's courts other than for inventions th at were patented prior to the amendment (Articles 41
and 46);  (3) patent owners could, before instituting legal proceedings, request the people's court totake provisional measures such as to order the suspension of infringing acts and to provide property
preservation (Article 61); and (4) conditions for granting a compulsory licence would be further
clarified and made consistent with the TRIPS Agreement.
279. The representative of China further stated that since its establishment, SIPO had paid great
attention to strengthening its contacts and coordination with relevant departments and ministries in thefield of IPR law enforcement, especially in the areas of settling inter-agency problems and resolvingkey cases.  At the same time, SIPO had taken appropriate measures to improve the performance oflocal patent authorities in law enforcement.  For example, in June 1999, SIPO convened a nationwideworking conference, which was attended by representatives from local patent administrativeauthorities.  The participants summarized their law enforcement practices over the previous two years
and also exchanged information on their experiences in their local legislative work with a view toWT/ACC/SPEC/CHN/1/Rev.7
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intensifying patent protection.  The conference also called for the introduction of important patent
cases reporting and recording system.
280. The representative of China stated that so far as the range of patent protection and protection
for new plant varieties were concerned, China had already met the requirements of Article 27 of the
TRIPS Agreement.  When amending the Patent Law in 1992, China modified Article 25 therein with
reference to the relevant stipulations in the fi nal text of the TRIPS Agreement and expanded the
coverage of patent protection to food, beverages, flavourings, pharmaceuticals and materials obtainedby chemical methods.  The scope of patent exclusions would be limited to "scientific discoveries,rules and methods of intellectual activities, diagnostic and therapeutic methods for the treatment ofdiseases, animals and plant varieties, as well as materials obtained by the change of nucleus".
281. He further stated that Article 5 of China's Patent Law stipulated that inventions that violate
laws of China or social morality or prejudice public interest would not be entitled to patent right.While literally there was a difference between Article 5 of China's Patent Law and the TRIPS
Agreement, in practice, during the review of patent applications, the interpretation of "violating laws
of China" had been restricted to "if laws of China prohibit the sale of a certain patented product, orprohibit the sale of products manufactured by a patented method, the granting of patent right cannotbe denied to this product invention or this invention of product manufacturing method by relying onArticle 5 of the Patent Law".  Hence, in essence, he concluded that there was no difference betweenArticle 5 of the Patent Law as applied and the TRIPS Agreement.  Nonetheless, China would amendthe Implementing Rules of the Patent Law to ensure that this provision would be implemented in fullcompliance with Article 27.2 of the TRIPS Agreement, which stipulated that: "Members may exclude
from patentability inventions, the prevention within their territory of the commercial exploitation of
which is necessary to protect ordre public  or morality, including to protect human, animal or plant life
or health or to avoid serious prejudice to the environment, provided that such exclusion is not mademerely because the exploitation is prohibited by their law".  The Working Party took note of thiscommitment.
282. Regarding Article 28 of the TRIPS Agreement (rights conferred), the representative of China
stated that China's patent law had fully complied with the requirements of the TRIPS Agreement for
the following reasons.  First, in the 1992 amendment to the Patent Law, Article 11 was modified asfollows: "any entity or individual is, without prior licensing from the patentee, prohibited from
making, using or selling patented products or patented processes, or using or selling products directly
obtained by the patented processes for the purpose of production and operation".  It was alsoprohibited for any entity or individual to import patented products or products directly obtained bypatented processes for the purpose of production and operation.  This modification expanded theWT/ACC/SPEC/CHN/1/Rev.7
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87scope of patentees' right, namely the new content of  "the right to prohibit import" and "the effect of
patented processes is extended to products directly obtained by patented processes".  Second, in 2000,when the second amendment was made to the Patent  Law, Article 11 was once again modified. A new
stipulation was introduced granting patentees the right to prohibit others from offering for sale the
patented products or products directly obtained by patented processes without the consent of
patentees.  Therefore, so far as "the right of patentees" is concerned, China's Patent Law had fullyaccommodated the requirements of the TRIPS Agreement.
283. Further to the 1992 amendment, China's Patent Law provided for compulsory licences based
on reasonable terms, for public interest and for dependent patents.  With regard to the conditions ofcompulsory licences for dependent patents, the Patent  Law provided that the latter invention should be
technically more advanced than the earlier one.  The TRIPS Agreement provides that "the invention
claimed in the second patent shall involve an important technical advance of considerable economicsignificance in relation to the invention claimed in the first patent" (Article 31(l)(i)).  Since the
provisions of the TRIPS Agreement were more transparent and easier to operate, the relevant
expressions contained in the TRIPS Agreement were adopted in the new revision.  In addition, thefollowing restrictive conditions for granting compul sory licences contained in the Implementing Rules
of the Patent Law of 1992 had been moved into the Patent Law in order to make it more authoritative:the decision of SIPO on the granting of a compulsory licence for exploitation would be limited interms of its scope and duration; when the circumstances which led to such compulsory licence ceasedto exist and were unlikely to recur, SIPO, upon the request of the patentee, could terminate thecompulsory licence after examination;  were inco rporated into the Law (former Article 68 of the
Implementing Rules of the Patent Law of 1992 had now been moved into Article 51 of the revised
Patent Law).
284. The representative of China stated that following the 1992 amendment, the regulations on
compulsory licensing in China's Patent Law and its implementing rules, as a whole, had fulfilled therequirements of the TRIPS Agreement.  However, some wording and expressions in the Chineseregulations were still not identical to the TR IPS Agreement and these regulations still needed
improvement in respect of the administrative legal proceedings concerning compulsory licensing.Therefore, in the second amendment to the Patent Law in 2000, the corresponding amendments andmodifications to the stipulations on compulsory licensing were mainly made in the following two
points: (1) Article 53 of the Patent Law was modifi ed from "a patented invention or utility model is
technically more advanced than the inventions or utility models which have obtained patent rightearlier" into "a later invention or utility model is an important technical progress with strikingWT/ACC/SPEC/CHN/1/Rev.7
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economic significance as compared to the earlier invention or utility model"; and (2) having been
subject to appropriate adjustments, the regulations  on the time, scope and termination of compulsory
licensing enforcement in Article 68 of the Implementing Rules of the Patent Law of 1992 wereintegrated into Article 52 of the amended Patent Law.  Following the above-mentioned amendments,
China's Patent Law had regulations on compulsory licensing with clearer structure and improved
content.  In the representative of China's view, these regulations were fully consistent with the TRIPSAgreement.  He also added that up to now China had not issued any compulsory licences for patentenforcement.
285. Some members of the Working Parity noted the improvements in the provisions regarding
compulsory licensing for patents that the representative of China cited.  Some members however,requested clarification of the subject matter that would be subject to compulsory licensing under the
Patent Law.
286. In response, the representative of China agreed that still not all the requirements of Article 31
of the TRIPS Agreement had been incorporated into Chinese law, and that Implementing Rules of the
Patent Law would therefore be modified so as to ensure that: (1) use without authorization of the rightholder would only be permitted if, prior to such use, the proposed user had made efforts to obtainauthorization from the right-holder on reasonable commercial terms and conditions (Article 31(b)),(2) the right-holder would be paid adequate remuneration in the circumstances of each case, takinginto account the economic value of the authorization (Article 31(h)); (3) any such use would beauthorized predominantly for the supply of the domestic market (Article 31(f)); and (4) in the case ofsemi-conductor technology, the scope and duration of such use would only be for public non-
commercial use or to remedy a practice determined after judicial or administrative process to be anti-
competitive (Article 31(c)). The Working Party took note of these commitments.
287. Regarding Article 32 of the TRIPS Agreement (revocation/forfeiture), the representative of
China stated that in light of Articles 41 and 46 of the amended Patent Law, patent applicants orpatentees of inventions, as well as applicable utility models and designs, could institute legalproceedings in the people's court if they were not satisfied with the review or nullity decisions madeby the Patent Review Board.  This modification enabled China's Patent Law to be fully consistent
with TRIPS regarding administrative decisions which were subject to judicial review.
288. On the duration of patent right protection, the representative of China stated that as early as
1992 when China made an initial amendment to the Patent Law, Article 45 (later converted into
Article 42 after the second amendment) was modified as: "the duration of inventions patent right is 20years and the duration of patent right for applicable utility model and designs is 10 years, counted asWT/ACC/SPEC/CHN/1/Rev.7
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89of the date of application".  Therefore, China's Patent Law had for a long time accorded with
Articles 26 and 33 of the TRIPS Agreement concerning the duration of patent rights.
289. Regarding Article 34 of the TRIPS Agreement (process patents: burden of proof), the
representative of China stated that China's Patent Law was modified in 1992 and 2000, and was now
in full conformity with the TRIPS Agreement.  The amended paragraph 2 of Article 57 reads: "when
any infringement dispute relates to a process patent for the manufacture of a new product, any entityor individual manufacturing the identical product shall furnish proof to the effect that a differentprocess is used in the manufacture of its or his product".
6. Plant variety protection
290. The representative of China confirmed that China was a party to the 1978 text of the UPOV
Convention on the Protection of Plant Varieties.  In March 1997, the State Council formulated andpromulgated the Regulation on the Protection of New Plant Varieties, thus offering protection for newplant varieties in a  sui generis form consistent with the requirements of the TRIPS Agreement. A unit
or an individual that had accomplished the breeding enjoyed an exclusive right in their right-granted
variety. No unit or individual could, without permissi on from the owner of the variety rights (referred
to as "the variety rights owner"), produce or market for commercial purposes the propagation materialof the rights-granted variety, or repeatedly use for commercial purposes the propagation material ofthe rights-granted variety in the production of the propagation material of another variety. Theconditions of non-voluntary licensing were set out in the regulation. The period of protection ofvariety rights, from the date of grant of the rights, would be 20 years for vines, forest trees, fruit treesand ornamental trees and 15 years for other plants.
7. Layout designs of integrated circuits
291. The representative of China said that China was one of the first countries to sign the Treaty on
Intellectual Property in Respect of Integrated Circuits in 1989.  The specific Regulation on theProtection of Layout Designs of Integrated Ci rcuits, which would implement China's obligations
under Section 6 of the TRIPS Agreement, was issued in April 2001 and would be effective on1 October 2001.
292. The representative of China stated that China was strengthening the protection of the layout
designs to support the rapid development of the integrated circuit industry. The regulations providedprotection to layout-designs, according to which the following acts if performed without authorization
of the right holder were unlawful: importing, selling or otherwise distributing for commercialWT/ACC/SPEC/CHN/1/Rev.7
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purposes a protected layout-design, an integrated circuit in which a protected layout-design was
incorporated, or an article incorporating such an in tegrated circuit only in so far as it continued to
contain an unlawfully reproduced layout-desig n. The exception clause and non-voluntary licensing
clause were in conformity with Article 37 of TRIPS. The term of protection was 10 years counted
from the date of filing an application for registration or from the first commercial exploitation
wherever in the world it occurred. In addition, the protection to the layout-design of integrated circuitswas in accordance with Article 2 through 7 (other than paragraph 3 of Article 6), Article 12 andparagraph 3 of Article 16 of the Treaty on Intellect ual Property in Respect of Integrated Circuits.
8. Requirements on undisclosed information, including trade secrets and test data
293. Some members of the Working Party expressed concern about China's protection against
unfair commercial use and disclosure of undisclosed test and other data submitted to authorities inChina to obtain marketing approval for pharmaceutica ls and agricultural chemicals.  They noted that
China's laws appeared to prohibit the release of information by government officials but did not
include provisions regarding the prevention of unfair commercial use, as required under Article 39.3
of the TRIPS Agreement.  Some members requested that China specifically provide in its law and
regulations that it would protect against unfair commercial use of undisclosed test or other datasubmitted in support of applications for marketing approval of pharmaceutical or of agriculturalchemical products which utilize new chemical entiti es, by providing that no person other than the
person that submitted such data may, without the permission of the person initially submitting thedata, rely on such data in support of an application for product approval for a period of at least sixyears from the date on which marketing approval to the person that submitted the data had been
granted.
294. The representative of China said that Article 10 of the Anti-unfair Competition Law provided
that a business operator must not infringe upon trade secrets.  Under the same Article, obtaining, usingor disclosing another's trade secrets by a third part y who clearly knew or ought to have known that the
case fell under the unlawful acts listed in the preceding paragraph was deemed infringement upontrade secrets.  Trade secrets referred to any technology information or business operation informationwhich was unknown to the public, could bring about economic benefits to the obligee, had practicalutility and about which the obligee had adopted secret-keeping measures.  He also stated thatArticle 219 of the Criminal Law had similar definitions on trade secrets.
295. The representative of China further confirmed that China would, in compliance with
Article 39.3 of the TRIPS Agreement, provide effective protection against unfair commercial use ofundisclosed test or other data submitted to authorities in China as required in support of applicationsWT/ACC/SPEC/CHN/1/Rev.7
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91for marketing approval of pharmaceutical or of agricultural chemical products which utilized new
chemical entities, except where the disclosure of such data was necessary to protect the public, orwhere steps were taken to ensure that the data are protected against unfair commercial use.  Thisprotection would include introduction and enactment of laws and regulations to make sure that no
person, other than the person who submitted such data, could, without the permission of the person
who submitted the data, rely on such data in support of an application for product approval for aperiod of at least six years from the date on which China granted marketing approval to the personsubmitting the data.  During this period, any second applicant for market authorization would only begranted market authorization if he submits his own data.   This protection of data would be availableto all pharmaceutical and agricultural products which utilize new chemical entities, irrespective ofwhether they were patent-protected or not.  The Working Party took note of these commitments.
C. MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROPERTY RIGHTS
296. The representative of China said that there were provisions relating to compulsory licences in
the Patent Law to prevent abuse of patent right.  He also stated that the Trademark Law provided thatthe trademark registrant may, by concluding a trademark licensing contract, authorize another personto use its registered trademark.  The licensor would supervise the quality of the goods on which thelicensee used the licensor's registered trademark and the licensee would guarantee the quality of thegoods on which the registered trademark was to be used.
297. Some members of the Working Party expressed some concerns as to the compatibility of
China's rules on control of anti-competitive licensing practices or conditions with the corresponding
obligations under Article 40 of the TRIPS Agreement.  The representative of China stated in responsethat China's legislation would comply with these obligations, notably as to the request forconsultations with other Members.  He stated that these rules would apply across the board to allintellectual property rights. The Working Party took note of this commitment.
D. ENFORCEMENT
1. General
298. Some members of the Working Party expressed concern that there was a continued need for
additional enforcement efforts by the Government of China.  They also said that China shouldstrengthen the legislative framework for the enforcem ent of intellectual property rights for all right-
holders.  The representative of China stated that where an infringement of intellectual property rightswas found in China, the person concerned could bring a lawsuit to a court.  Since 1992, special IPRWT/ACC/SPEC/CHN/1/Rev.7
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courts have been set up in major cities such as Beijing and Shanghai on the basis of their specialized
collegial panels.  According to China's legislation, individuals and enterprises would be heldresponsible for all their IPR infringing activities and su bject to civil and/or criminal liabilities.  Where
any person violated the IPR of another person and the circumstances were serious, the person directly
responsible would be prosecuted for his criminal liability by applying relevant provisions of the
Criminal Law.  If found guilty, the person directly responsible could be sentenced to a fixed-termimprisonment of no more than seven years or be subject to detention or a fine.
299. Some members of the Working Party further urged China to ensure the vigorous application
by Chinese authorities of the enforcement legislation in order to considerably reduce the existing highlevels of copyright piracy and trademark counterfeiting.  Action should include the closure ofmanufacturing facilities as well as markets and retail shops that had been the object of administrativeconvictions for infringing activities.  The representative of China stated that the measures for crackingdown on intellectual property piracy were always severe in China.  In judicial aspects, courts at all
levels were continuously paying attention to the trial of IPR cases.  As for administration aspects, the
administrative authorities at all levels were putting emphasis on strengthening anti-piracy work.  Inaddition, the administrative authorities were also enhancing the legal publication and education of thegeneral public in a bid to ensure that the legal environment of China would be able to meet therequirements for enforcing the TRIPS Agreement.  The Working Party took note of thesecommitments .
2. Civil judicial procedures and remedies
300. Some members of the Working Party expressed concern about certain practices relating to the
filing of civil judicial actions that made it difficult for intellectual property right-holders to pursue
their rights in China's courts.  China's system of basing filing fees on the amount of damagesrequested makes large-scale infringement actions unnecessarily costly.  Members also expressedconcern  regarding the calculation of damages based on the infringer's profits.  This, combined withChina's rules on establishing the level of profits which require evidence of actual sale and whichdisregard inventory and past activity, often resulted in damage amounts inadequate to compensate forthe injury that the right-holder has suffered.
301. The representative of China stated that Article 118 of the General Principles of the Civil Law
provided that if the rights of authorship (copyrights), patent rights, rights of exclusive use of
trademarks, rights of discovery, rights of invention or rights for scientific and technological research
achievements of citizens or juridical persons were infringed upon by such means as plagiarism,alteration or imitation, they had the right to demand that the infringement be stopped, its ill effects beWT/ACC/SPEC/CHN/1/Rev.7
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93eliminated and the damages be compensated for.  He further stated that the Trademark Law, the
Patent Law and the Copyright Law had similar provisions.
302. The representative of China further confirmed that, Articles 42 and 43 of the TRIPS
Agreement would be effectively implemented under the judicial rules of civil procedure.  The
Working Party took note of this commitment.
303. The representative of China confirmed that the relevant implementing rules would be
amended to ensure full compliance with Articles 45 and 46 of the TRIPS Agreement, to the effect thatdamages paid by the infringer to the right-holder would be adequate to compensate for the injury
suffered because of an infringement of that person 's intellectual property right by an infringer who
knowingly, or with reasonable gr ounds to know, engaged in infringing activity.  The Working Party
took note of this commitment.
3. Provisional measures
304. Members of the Working Party noted that the TRIPS Agreement required that judicial
authorities have the authority to order prompt and effective provisional measures to (1) prevent an
infringement of intellectual property from occurring, in particular to prevent the distribution or sale ofinfringing goods, and (2) to preserve the evidence of alleged infringement.
305. The representative of China stated that in China's Civil Procedure Law there were provisions
on property preservation, but as yet no explicit stipulations had been provided to authorize thepeople's court to take measures for the prevention of infringements prior to formal institution of alawsuit by a party involved.  In order to enhance the deterrent power of law against infringements andto guarantee that the legitimate rights and interests of patentees would not suffer from irreparable
harm as well as to comply with the TRIPS Agreement, China, when amending the Patent Law for the
second time in 2000, introduced Article 61 to regulate provisional measures, which provided asfollows: "where a patentee or any interested party who can provide any reasonable evidence that hisright is being infringed or that such infringement is imminent, and any delay in stopping the acts islikely to cause irreparable harm to his or its legitimate rights and interests, he or it may, beforeinstituting legal proceedings, request the people's court to order the suspension of related acts and toprovide property preservation".
306. Some Members of the working party expressed concern that Article 61 of the Patent Law did
not fully incorporate all requirements of Article 44 of the TRIPS Agreement, and that it was stillWT/ACC/SPEC/CHN/1/Rev.7
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unclear whether holders of intellectual property rights other than patents could rely on a similar
procedure.
307. The representative of China stated that Article 61 of the Patent Law would be implemented in
a way fully consistent with Article 50.1-4 of the TRIPS Agreement.  He also stated that "reasonable
evidence" in Article 61 of the Patent Law would be, through implementing rules, clarified to mean
"any reasonably available evidence in order to sati sfy with sufficient degree of certainty that the
applicant is the right-holder and that the applicant's right is being infringed or that such infringement
is imminent, and to order the applicant to provide a security or equivalent assurance sufficient toprotect the defendant and to prevent abuse". The Working Party took note of this commitment.
4. Administrative procedures and remedies
308. Members of the Working Party noted that most IPR enforcement in China was done through
administrative actions.  In this connection, some members expressed concern about the inadequatelevels of administrative sanctions in China which, when coupled with the high threshold for initiating
criminal prosecutions, made IPR enforcement in China difficult.  Administrative sanctions generally
amounted to small fines and the loss of infringing inventory.  Members also stressed the need for
administrative authorities to refer more cases, including those involving repeat offenders and willfulpiracy and counterfeiting, to the appropriate authorities for initiation of criminal actions.
309. The representative of China said that the Trademark Law provided that in the event of any
infringement of the right to the exclusive use of a registered trademark, the infringed right holdercould request the administrative department for industry and commerce at or above the county levelfor disposition.  The relevant administrative de partment for industry and commerce had the power to
order the infringer to stop the infringing act immedi ately and to compensate the infringed right holder
for its or his losses.  SAIC and its local agencies above the county level could also impose a fine uponthe infringer.  The Patent Law provided that the patentee and interested party could request theadministrative authority for patent affairs to handle the infringing act.  The administrative authoritycould order the infringer to stop the infringing act immediately and mediate on damages at the requestof the parties concerned.  The Copyright Law provided that the copyright administration departmentcould subject anyone who committed acts of infringement to such administrative penalties asconfiscation of unlawful income from the act or imposition of a fine.
310. The representative of China stated that most IPR enforcement actions in China resulted in
administrative measures to address the infringement.  He noted ongoing efforts to strengthen the
sanctions that were available to administrative authorities and the increased attention given toenforcement of IPRs.  The representative of China confirmed that the government would continue toWT/ACC/SPEC/CHN/1/Rev.7
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95enhance its enforcement efforts, including through the application of more effective administrative
sanctions.  Relevant agencies, including the St ate Administration for Industry and Commerce, the
State General Administration of the People's Republic of China for Quality Supervision andInspection and Quarantine and the Copyright Office, now had the authority to confiscate equipment
used for making counterfeit and pirated products and other evidence of infringement.  These relevant
agencies would be encouraged to exercise their authority to seize and preserve evidence ofinfringement such as inventory and documents.  Administrative authorities would have the authorityto impose sufficient sanctions to prevent or deter further infringement and would be encouraged toexercise that authority.  Appropriate cases, including those involving repeat offenders and willfulpiracy and counterfeiting, would be referred to relevant authorities for prosecution under the criminal
law provisions.  The Working Party took note of these commitments.
5. Special border measures
311. The representative of China said that on 5 July 1995 the State Council of the People's
Republic of China had issued special legislation in respect of border measures for enforcement of
intellectual property rights – the Regulations of the People's Republic of China Governing CustomsProtection of Intellectual Property Rights – which came into effect on 1 October of the same year.According to this legislation, China's Customs offices must take measures to intercept importation orexportation of goods that were proved to be infringing the rights of trademarks, patents or copyrightslegally protected in China.  China's Customs offices were granted authority to investigate anysuspected shipment and confiscate the goods in case infringement was proved.
312. Some members of the Working Party expressed concerns as to the compatibility of existing
border measures with obligations under Articles 51 to 60 of the TRIPS Agreement; particularly the
provisions on suspension of release into free circulation by custom authorities (Article 51), rules onevidence for initiating this procedure (Article 52), requirements on the security needed to protect the
defendant (Article 53), rules on notice of the suspen sion (Article 54) and its duration (Article 55),
rules on indemnification of the importer in case of wrongful detention (Article 56) and opportunity forthe right-holder to have the goods detained inspec ted (Article 57). Moreover some expressed their
concern as to compatibility of rules on actions ex -officio by competent authorities and the conditions
attached (Article 58), as well as to the remedies provided against infringing goods (Article 59) and the
quantities subject to the  de minimis rules (Article 60).
313. In response, the representative of China stated that China would provide holders of
intellectual property rights with procedures related to border measures that comply fully with theWT/ACC/SPEC/CHN/1/Rev.7
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relevant provisions of the TRIPS Agreement (Articles 51 to 60). The Working Party took note of this
commitment.
6. Criminal procedures
314. The representative of China stated that Articles 213 to 220 of the Criminal Law (Crimes of
Infringing on Intellectual Property Rights) provided that whoever seriously infringes the right-holders'
rights of registered trademarks, patents, copyrights or trade secrets would be sentenced to fixed-termimprisonment and would also be fined.
315. Some members of the Working Party expressed concerns that criminal procedures could not
be used effectively to address piracy and counterfeiting.  In particular, the monetary thresholds forbringing a criminal action, as currently applied, were very high and seldom met.  Those thresholdsshould be lowered so as to permit effective action that would deter future piracy and counterfeiting.In response, the representative of China stated that  China's administrative authority would recommend
that the judicial authority make necessary adjustment s to lower the thresholds so as to address these
concerns.  The Working Party took note of this commitment.
316. Noting the advanced state of protection for in tellectual property rights in China, the
representative of China confirmed that upon accession China would fully apply the provisions of theTRIPS Agreement.  The Working Party took note of this commitment.
VI. POLICIES AFFECTING TRADE IN SERVICES
1. Licensing
317. Some members of the Working Party welcomed the broad-ranging and comprehensive
commitments that China was undertaking to increa se transparency and to provide information to
governments and service providers on any matter relating to the GATS including China's Schedule ofSpecific Commitments.  These members nonetheless expressed concerns regarding the lack oftransparency in China's current services regime, in particular with respect to obtaining, extending,renewing, denying and terminating licences and other approvals required to provide services inChina's market and appeals of such actions (hereafter referred to as "China's licensing procedures andconditions"). To be consistent with the provisions of the WTO Agreement, including the DraftProtocol and China's Schedule of Specific Commitments, members of the Working Party noted that
China's licensing procedures and conditions should not in themselves act as a barrier to market access
and should not be more trade restrictive than necessary. Those members also expressed the view thatupon its accession, China should publish (1) a list of authorities responsible for authorizing, approvingWT/ACC/SPEC/CHN/1/Rev.7
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97or regulating those service sectors in which China made specific commitments and (2) China's
licensing procedures and conditions.
318. The representative of China confirmed that paragraph [344]  regarding publication of a list of
all organizations that were responsible for authorizing, approving or regulating service activities for
each service sector, including those organizations delegated such authority from the central
government authorities, would apply. The representative of China also confirmed that China wouldpublish in the official journal all of China's licensing procedures and conditions upon accession.  TheWorking Party took note of these commitments.
319. The representative of China also confirmed that upon accession China would ensure that
China's licensing procedures and conditions would not act as barriers to market access and would notbe more trade restrictive than necessary.  In accordance with China's commitments under the WTOAgreement, the Draft Protocol and its Schedule of Specific Commitments, the representative of Chinaconfirmed that for those services included in China's Schedule of Specific Commitments, China
would ensure that:
(a) China's licensing procedures and conditions were published prior to becoming effective;(b) In that publication, China would specify reasonabl e time frames for review and decision by all
relevant authorities in China's licensing procedures and conditions;
(c) Applicants would be able to request licensing without individual invitation;(d) Any fees charged, which were not deemed to include fees determined through auction or a
tendering process, would be commensurate with the administrative cost of processing anapplication.
(e) The competent authorities of China would, after receipt of an application, inform the applicant
whether the application was considered complete under China's domestic laws and regulationsand in the case of incomplete applications, identify the additional information that was
required to complete the application and provide the opportunity to cure deficiencies;
(f) Decisions would be taken promptly on all applications;(g) If an application was terminated or denied, the applicant would be informed in writing and
without delay the reasons for such action. The applicant would have the possibility ofWT/ACC/SPEC/CHN/1/Rev.7
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resubmitting, at its discretion, a new application that addressed the reasons for termination or
denial;
(h) If an application was approved, the applicant would be informed in writing and without delay.
The licence or approval would enable the applicant to start the commercial operations upon
registration of the company's name with SAIC for fiscal and other similar administrative
purposes.  This registration would be completed within 2 months of the submission of acomplete file, as required by public SAIC regulations, and in accordance with China'sSchedule of Specific Commitments;
(i) Where China required an examination to licence professionals, such examinations would be
scheduled at reasonable intervals.
The Working Party took note of these commitments.320. Some members of the Working Party also expressed concern about maintaining the
independence of regulators from those they regulated. The representative of China confirmed that for
the services included in China's Schedule of Specific Commitments, relevant regulatory authorities
would be separate from, and not accountable to, any service suppliers they regulated, except forcourier and railway transportation services.  For these excepted sectors, China would comply withother relevant provisions of the WTO Agreement and the Draft Protocol. The Working Party tooknote of these commitments.
321. The representative of China stated that China would consult with WTO Members and develop
regulations, consistent with China's Schedule of Specific Commitments and its obligations underGATS, on sales away from a fixed location.  The Working Party took note of this commitment.
322. Some members of the Working Party noted that the World Code of Conduct provided a strong
ethical basis for regulating sales away from a fixed location.
323. In response to questions from members of the Working Party regarding certain terms in
China's Schedule of Specific Commitments, the representative of China confirmed the following:   
(a) A "master policy" was a policy that provided blanket coverage for the same legal person's
property and liabilities located in different places.  A master policy could only be issued bythe business department of an insurer's head office or that of its authorized province-levelbranch offices.  Other branches were not allowed to issue master policies.WT/ACC/SPEC/CHN/1/Rev.7
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99I. Master policy business with the state key construction projects as its subject-matter
insured.
If investors on the state key construction projects (i.e., projects that were so listed and
annually announced by the State Development and Planning Commission) met either
of the following requirements, they could purchase a master policy from insurers that
were located in the same place as the investors' legal persons were located.
1. The investment on the subject-matter insured were all from China (including
the reinvestment from the foreign-invested enterprises in China) and the sum ofinvestment of the investor accounted for over 15 per cent of the total investment.
2. The investment was partially from abroad, and partially from China
(including the reinvestment from the foreig n-invested enterprises in China) and the
sum of investment of the Chinese investor accounted for over 15 per cent of the totaldomestic investment.
For those projects that drew all investment from abroad, every insurer could provide
coverage in the form of a master policy.
II. A Master policy covering different subject-matters insured of the same legal person.
For those subject-matters insured located in different places and owned by the same
legal person (excluding financial, railway, and post and telecommunicationsindustries and enterprises), a master policy could be issued on the basis of either ofthe following conditions.
1. For the sake of payment of the premium tax, insurance companies
incorporated where the legal person or accounting unit of the insurance applicant was
located, were allowed to issue a master policy.
2. If over 50 per cent of the insurance amount of the subject-matter insured was
from a larger or medium sized city, then insurers in that city were allowed to issue amaster policy, no matter whether the insurance applicant's legal person or accountingunit was located in the city.
(b) Large scale commercial risk meant an insurance risk written on any large scale commercial
enterprise if, upon accession, the aggregate annual premium exceeded 800 thousand RMB andWT/ACC/SPEC/CHN/1/Rev.7
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the investment was more than 200 million RMB;  one year after accession, if the aggregate
annual premium exceeded 600 thousand RMB and the investment was more than 180 millionRMB; two years after accession, if the aggregate annual premium exceeded 400 thousandRMB and the investment was more than 150 million RMB.
(c) Statutory insurance in China's Schedule of Specific Commitments were limited to the
following specific categories, and no additional lines or products would be added:  third partyauto liability insurance, and driver and ope rator liability for buses and other commercial
vehicles.
(d) The representative of China confirmed that any changes to the definition of master policy and
large scale commercial risk would be consistent with China's Specific Schedule ofCommitments and obligations under GATS so as to progressively liberalize access to thisservices sector.
The Working Party took note of these commitments.
324. Members of the Working Party welcomed China' s commitment to permit internal branching
for insurance firms consistent with the phase-out of geographic restrictions.  Some members notedthat China had scheduled certain qualifications as limitations under GATS Articles XVI and XVII thatforeign insurers had to meet to apply for a licence to provide services in China.  These qualificationsrelated to a minimum period of establishment in a WTO member, total assets and maintenance of arepresentative office in China.  These qualificatio ns should not apply to those foreign insurance
companies established in China seeking authorisation to establish a branch or sub-branch.   Therepresentative of China confirmed that the qualifications for foreign insurers applying for a licence to
enter China's market would not apply to foreign insurers already established in China that were
seeking authorization to establish branches or sub-branches. [He also confirmed that a branch and a
sub-branch was an extension of the parent enterprise and not a separate legal entity and that Chinawould permit internal branching accordingly on that basis. ]  The Working Party took note of these
commitments.
2. Choice of Partner
325. Some members of the Working Party expressed concern regarding the existing practice of
imposing conditions on the Chinese companies that were allowed to partner with foreign service
suppliers.  These members indicated that this could amount to de facto  quotas, as the number of
potential partners meeting those conditions might be limited.  The representative of China confirmedthat a foreign service supplier would be able to partner with any Chinese entity of its choice, includingWT/ACC/SPEC/CHN/1/Rev.7
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101outside the sector of operation of the joint venture, as long as the Chinese partner was legally
established in China.  The joint venture as such should meet the prudential and specific sectoralrequirements, on the same basis as those for domestic enterprises and which must be publiclyavailable.  The Working Party took note of these commitments.
3. Modification of the Equity Interest
326. The representative of China confirmed that the Chinese and foreign  partners in an established
joint venture would be able to discuss the modification of their respective equity participation levelsin the joint venture and implement such modification if agreement was reached by both sides and alsoapproved by the authorities.  The representative of China confirmed that such an agreement would beapproved if consistent with the relevant equity commitments in China's Schedule of Specific
Commitments.  The Working Party took note of this commitment.
4. Prior Experience Requirement for Establishment in Insurance Sector
327. The representative of China confirmed that the merging, division, restructuring or other
change of legal form of an insurance company w ould not impact the prior experience requirements
included in China's Schedule of Specific Commitments if the new entity continues to supply insuranceservices.  The Working Party took note of this commitment .
5. Inspection Services
328. In response to questions from members of the Working Party, the representative of China
confirmed that China would not maintain requirements which had the effect of acting as barriers tothe operation of foreign and joint-venture commodity inspection agencies, unless otherwise specifiedin China's Schedule of Specific Commitments.  The Working Party took note of this commitment.
6. Market Research
329. Some members of the Working Party expressed concern regarding market research activities.
In response to questions from members in this respect, the representative of China confirmed that,upon accession to the WTO, China would remove the prior approval requirement for market researchservices, defined as investigation services designed to secure information on the prospects andperformance of an organization's products in the market, including market analysis (of the size andother characteristics of a market) and analysis of consumer attitudes and preferences.  Market researchfirms registered in China, which were engaged in such services, would only be required to file the
survey plan and the questionnaire form on record in the statistical agencies of government at or above
the provincial level.  The Working Party took note of these commitments.   WT/ACC/SPEC/CHN/1/Rev.7
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7. Legal Services
330. In response to questions from members of the Working Party, the representative of China
clarified that "Chinese national registered lawyers", as indicated in China's Schedule of SpecificCommitments, were those Chinese nationals who had obtained a lawyer's certificate and were holdinga Chinese practising permit and were registered to practice in a Chinese law firm.
8. Minority Shareholder Rights
331. With respect to its Schedule of Specific Commitments, China confirmed that, while it had
limited its market access commitments in some sectors to permit foreigners to hold only a minority
equity interest, a minority shareholder could enforce under China’s laws, regulations and measures,rights in the investment.   Moreover, WTO Members would have recourse to WTO dispute settlementto ensure implementation of all commitments in China’s GATS schedule.  The Working Party took
note of these commitments.
9. Schedule of Specific Commitments
332. China's Schedule of Specific Commitments was annexed to the Draft Protocol reproduced in
the Appendix to this Draft Report.  This Schedule of Specific Commitments contained the market-
access commitments of China in respect of Services.
VII. OTHER ISSUES
1. Notifications
333. Members of the Working Party requested that China provide to the WTO Secretariat the
notifications described in paragraphs … of this Draft Report.
2. Special Trade Arrangements
334. Some members of the Working Party raised specific concerns in relation to some of China's
special trade arrangements, including barter trade arrangements, with third countries and separate
customs territories, which those members considered not to be in conformity with WTO requirements.
In response, the representative of China noted that China would undertake a commitment in the DraftProtocol to eliminate or bring into conformity  with WTO requirements, all such special trade
arrangements that were not in conformity with those requirements, by no later than the date of entryinto force of the Draft Protocol.WT/ACC/SPEC/CHN/1/Rev.7
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1033. Transparency
335. Some members of the Working Party expressed concern about the lack of transparency
regarding the laws, regulations and other measures that applied to matters covered in the WTOAgreement and the Draft Protocol.  In particular, some members noted the difficulty in finding and
obtaining copies of regulations and other measures undertaken by various ministries as well as those
taken by provincial and local authorities.  Transparency of regulations and other measures,particularly of sub-central authorities, was essential since these authorities often provided the detailson how the more general laws, regulations and other measures of the central government would beimplemented and often differed among various jurisdictions. Those members emphasized the need toreceive such information in a timely fashion so that governments and traders could be prepared tocomply with such provisions and could exercise  their rights in respect of implementation and
enforcement of such measures.   The same members emphasized the importance of such pre-publication to enhancing secure, predictable trading relations.  Those members noted the development
of the Internet and other means to ensure that in formation from all government bodies at all levels
could be assembled in one place and made readily available.  The creation and maintenance of asingle, authoritative journal and enquiry point would greatly facilitate dissemination of informationand help promote compliance.
336. In response, the representative of China noted that the Government of China regularly issued
publications providing information on China's foreign trade system, such as the: "Almanac of Foreign
Economic Relations and Trade" and "The Bulletin of MOFTEC" published by MOFTEC; "StatisticalYearbook of China", published by the State Statistical Bureau; "China's Customs Statistics
(Quarterly)", edited and published by the Customs.  China's laws and regulations of the State Council
relating to foreign trade were all published, as were rules issued by departments.  Such laws,regulations and rules were available in the "Gazette  of the State Council", the "Collection of the Laws
and Regulations of the People's Republic of China" and the "MOFTEC Gazette".  The administrativeregulations and directives relating to foreign trade were also published on MOFTEC's official website
(http://www.moftec.gov.cn) and in periodicals.
337. He further noted that there were no forex restrictions affecting import or export.  Information
on forex measures was published by the SAFE and was available on SAFE's website(http://www.safe.gov.cn) and via the news media.WT/ACC/SPEC/CHN/1/Rev.7
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338. The representative of China noted that information concerning the administration of imports
and exports would be published in the "International Business" newspaper and the "MOFTECGazette".
339. He also noted that information on China's customs laws and regulations, import and export
duty rates, and customs procedures was published in the "Gazette of the State Council" and in the
press media, and was available upon request.  The procedures concerning application of duty rates,customs value and duty determination, drawback and duty recovery, as well as the proceduresconcerning duty exemptions and reduction, were also published.  Customs also published monthly
customs statistics, calculated according to country of origin and final destination, on the basis ofeight-digit HS levels.
340. The representative of China noted that any bilateral trade agreements concluded between
China and its trading partners, and protocols on the exchange of goods negotiated under them werepublished in "The Treaty Series of the PRC".  He also noted that the "Directory of China's Foreign
Economic Relations and Trade Enterprises" and "China's Foreign Trade Corporations and
Organizations" were two publications which identified foreign trade corporations and otherenterprises in China engaged in foreign trade.
341. The representative of China stated that the full listing of official journals was as follows:
Gazette of the Standing Committee of the National People's Congress of the People's Republic ofChina; Gazette of the State Council of the People's Republic of China; Collection of the Laws of thePeople's Republic of China; Collection of the Laws and Regulations of the People's Republic ofChina; Gazette of MOFTEC of the People's Republic of China; Proclamation of the People's Bank of
the People's Republic of China;  and Proclamation of the Ministry of Finance of the People's Republic
of China.
342. The representative of China confirmed that publication of all laws, regulations and other
measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex wouldinclude the effective date of these measures.  It would also include the products and services affectedby a particular measure, identified by appropriate tariff line and CPC classification.  The WorkingParty took note of these commitments.
343. The representative of China confirmed that China would publish in the official journal, by
appropriate classification and by service where relevant, a list of all organizations, including those
organizations delegated such authority from the national authorities, that were responsible for
authorizing, approving or regulating services activities whether through grant of licence or otherWT/ACC/SPEC/CHN/1/Rev.7
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105approval.  Procedures and the conditions for obtaining such licences or approval would also be
published.  The Working Party took note of these commitments.
344. The representative of China confirmed that none of the information required by the
WTO Agreement or the Draft Protocol to be disclosed would be withheld as confidential information
except for those reasons identified in Section 2(C) of the Draft Protocol or unless it would
demonstrably prejudice the legitimate commercial interests of particular enterprises, public or private.The Working Party took note of this commitment.
345. The representative of China confirmed that China would make available to WTO Members
translations into one or more of the official languages of the WTO all laws, regulations and othermeasures pertaining to or affecting trade in goods, services, TRIPS or the control of forex, and to themaximum extent possible would make these laws, regulations and other measures before they wereimplemented or enforced, but in no case later than 90 days after they were implemented or enforced.The Working Party took note of these commitments.
346. Members of the Working Party also requested that China set up an enquiry point where
information relating to all laws, regulations, judicial decisions and administrative rulings of generalapplication and other measures pertaining to or affecting trade in goods, services, TRIPS or thecontrol of forex could be obtained.
347. The representative of China confirmed that China would establish or designate one or more
enquiry points where all information relating to the laws, regulations and other measures pertaining toor affecting trade in goods, services, TRIPS or the control of forex, as well as the published texts,could be obtained and would notify the WTO of any enquiry point and its responsibility.  The
information would include the names of national or sub-national authorities (including contact points)
responsible for implementing a particular measure.  The Working Party took note of thesecommitments.
VIII.  CONCLUSIONS
348. The Working Party took note of the explanations and statements of China concerning its
foreign trade regime, as reflected in this Draft Report.  The Working Party took note of thecommitments given by China in relation to certain specific matters which are reproduced inparagraphs […] of this Draft Report and noted that these commitments are incorporated inparagraph 1.2 of the Draft Protocol.WT/ACC/SPEC/CHN/1/Rev.7
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349. Having carried out the examination of the foreign trade regime of China and in the light of the
explanations, commitments and concessions made by China, the Working Party reached theconclusion that China should be invited to accede to the Marrakesh Agreement Establishing the WTOunder the provisions of Article XII.  For this purpose, the Working Party prepared the Draft Decision
and Draft Protocol reproduced in the Appendix to this Draft Report, and took note of China's
Schedule of Concessions and Commitments on Goods [(document WT/ACC/SPEC/CHN…)] and
China's Schedule of Specific Commitments on Services [(document WT/ACC/SPEC/CHN…)] thatwere annexed to the Draft Protocol.  It was proposed that these texts be adopted by the GeneralCouncil when it adopted the Draft Report.  When the Draft Decision was adopted, the Draft Protocolwould be open for acceptance by China which would become a WTO Member 30 days after itaccepted the said Draft Protocol.  The Working Party agreed, therefore, that it had completed its workconcerning the negotiations for the accession of China to the WTO Agreement.
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