RESTRICTEDWORLD TRADE
ORGANIZATIONG/LIC/M/18
29 October 2003
(03-5749)
Committee on Import Licensing
MINUTES OF THE MEETING HELD ON 2 OCTOBER 2003
Chairperson: Miss Philippa Davies (Jamaica)
The Committee on Import Licensing held its eighteenth meeting on 2 October 2003.  The
agenda proposed for the meeting, contained in WTO/AIR/2171/Rev.1, was adopted as follows.
Before adopting the agenda proposed for the meeting, it was agreed to add to agenda item 1 on
Members' compliance with notification obligations the replies received from Venezuela to the written
questions from the United States, circulated in  document G/LIC/Q/VEN/4, wh ich had been left out by
error.  
Table of contents
1. Members' compliance with notification obligations – Developments since the last
meeting........................................................................................................................ ...............2
2. Notifica tions................................................................................................................ ...............6
(i) Notifications under Articles 1.4(a) and/or 8.2(b) of the Agreement (publications and
legislation) ................................................................................................................... ...............6
(ii) Notifications under Article 7.3 of the Agreement (replies to the Questionnaire on
Import Licensing Procedures) ................................................................................................... .8
(iii) Notifications under Article 5 of the Agreement (new import licensing procedures,
changes to existing licensing procedur es and reverse no tificati ons)..........................................9
3. Transitional review under Section 18 of the Protocol of Accession of the People's
Republic of  China .............................................................................................................. .....10
4. Report (2003) to the Council for Trade in Goods ................................................................19
5. Other business............................................................................................................... ..........20
(i) Sugar import quota of Chile ................................................................................................. ....20
(ii) Date of the next meeting ................................................................................................... ........20G/LIC/M/18
Page 2
1. Members' compliance with notification obligations – Developments since the last
meeting
1.1 The Chairperson informed the Committee that since the last meeting, 30 notifications had
been received from 22 Members under various provisions of the Agreement on Import Licensing
Procedures.  However, as of the date of the meeting, out of a total Membership of 146, there remained
26 Members1 who had not submitted any notification since joining the WTO;  only 109 Members
(counting each of the EC member States individually) had submitted notifications of laws and
regulations (under Articles 1.4(a) and/or 8.2(b));  only a cumulative total of 107 Members had
submitted replies to the Questionnaire2 (under Article 7.3) since the entry into force of the WTO
Agreement.  For Article 7.3 notifications, the annual deadline of 30 September was not often
respected by many Members;  for example, Article 7.3 notifications had been received from only 56Members in 2002 (EC member States counted separately), and from 37 up to the date of this meeting
this year.  Only 43 Members had notified new licensing procedures or changes in existing procedures
(under Paragraphs 1-4 of Article 5);  of this, two Members
3 had notified changes to import licensing
procedures without submitting the initial notifications of legislation or replies to the Questionnaire.
While Article 5.5 of the Agreement allowed Members to submit counter-notifications, where aMember considered that another Member had not notified the institution of a licensing procedure or
changes in the procedures, up to the date of this meeting no such counter-notifications had been
received.  The compliance with the notification obligations under this Agreement remained low and
no Member had requested any technical assistance to fulfill these obligations either.
1.2 The Chairperson said that the Secretariat had reminded several delegations, informally, of
their pending notifications.  In addition to this, at the end of each year, the Central Registry of
Notifications sent to each Member a list of notifications that should be made under all WTO
Agreements in the following year;  this was followed up with periodic reminders (twice a year) from
the CRN to those Members who had not submitted the required notifications during the year.
1.3 The Chairperson said that the Secretariat had also reminded delegations concerned
4 of
questions posed to them by other Members regarding their licensing systems or notifications (which
had been circulated in document series G/LIC/Q/-).  Since the last meeting, written replies to  these
questions had been provided by Indonesia and Venezuela to the United States, while the United States
had submitted questions in writing to China.5  Delegations that were in a position to provide replies to
the questions were requested to do so at this meeting, keeping in mind that under the proceduresadopted in the Committee they were required to provide replies, in writing, to those delegations that
had posed questions, with copies to the Secretariat (G/LIC/4).
1.4 The representative of the United States said that he appreciated the submissions from all
Members, especially from the Dominican Republic, Mongolia, Paraguay, Sri Lanka and Togo that had
notified for the first time. Notifying an import licensing system or lack of one was central to the
transparency obligations of this Agreement.  He also appreciated the responses received from
Venezuela to their written questions.  Such notifications and responses were essential elements of
WTO Members' obligations and tangible evidence of the respect that they owed each other as
                                                     
1 Angola, Belize, Botswana, Central African Rep., Congo, Congo, Dem. Rep., Djibouti, Egypt, El
Salvador, Guinea, Guinea Bissau, Israel, Kuwait, Lesotho, Macedonia, Mauritania, Mozambique, Myanmar,
Papua New Guinea, Rwanda, St. Vincent & the Grenadines, Sierra Leone, Solomon Islands, Suriname, Tanzania
and Thailand.
2 The Questionnaire is annexed to document G/LIC/3.
3 Mexico and Papua New Guinea.
4 Antigua and Barbuda, Bahrain, Chad, China, European Communities, Ghana, Indonesia, Oman,
Turkey and the United Arab Emirates.
5 Circulated in G/LIC/Q/IDN/2, G/LIC/Q/VEN/4 and G/LIC/Q/CHN/8, respectively.G/LIC/M/18
Page 3
Members, to be both transparent in the admini stration of their trade regimes and responsive to
legitimate requests for information about access to each other's markets.  He regretted that only 70 per
cent of Members had met the initial notification requirements of the Agreement and believed that a
more concerted effort was needed by all Committee Members in this regard.  He suggested that the
Chairperson communicate with all Committee Members, noting any identifiable deficiencies, andasking them to review the status of their notifications with the Committee and, as necessary, to bring
it into line with the notification requirements of Articles 1, 5, 7 and 8.  The United States thanked the
Chairperson and the Secretariat for their continuing encouragement of compliance by sending
reminders to Members on notifications and reminding those delegations who had received questions
posed by other Members to submit their replies.  He hoped that the Chairperson and the Secretariat,
with input from Members, would continue to examine how a useful offer of technical assistance could
be made to those Members who believed that they did not have the capacity to fulfill theseobligations.  He noted that thus far no Members had requested such assistance.
1.5 The representative of China, referring to the questions posed by the United States
(G/LIC/Q/CHN/8), wished to provide some clarifications as follows:  The list in the
G/LIC/N/1/CHN/1 was comprehensive and contained all items for which China currently maintainedimport licensing requirements.  China permitted import of all goods, except those items which were
limited or prohibited by laws or regulations.  Some imported goods were subject to automatic
licensing administration for statistical purposes.  China had already provided the revised information
this year.  All information had been included in the submissions.  No administrative fees would be
charged.  China was upgrading the list of entities responsible for the authorization or approval ofimport and would notify them to the WTO as soon as possible.  No preferential criteria were
employed and no export performance requirements a ssociated with the issuance of an import licence.
China had clearly stated that a licence could not be bought, sold or transferred.  Any buying, selling
and transferring import licences between non-affiliated entities was prohibited by their laws and
regulations and corresponding punitive measures were stipulated.  China also checked and supervisedthe import licences issued through communi cating with customs and other approaches.
1.6 Concerning import licensing procedures for telecommunication products, as had been
provided for in the Tendering and Bidding Law of China, projects such as large-scale infrastructure
facilities and public utilities as well as those bearing on social interests and public security or
involving state financing must go through the tendering process.  Given that the majority of
telecommunication products fell within the above description, importers were required to go throughan international open tendering process stipulated by the state in procuring such products.
Telecommunication products were subject to automatic import licensing.  After international
tendering, importers should proceed with the import procedures in accordance with the Regulations
on Automatic Import Administration of Machinery and Electronic Products.  China had notified the
WTO of all information concerning automatic import licensing.
1.7 Concerning Tariff Rate Quota (TRQ) administration, according to China’s policies on
processing trade, imports under processing trade were bonded.  These bonded materials, components
and products thereof were not permitted for domestic sale and had to be re-exported.  If an enterprise
wanted to sell imported materials and components or products thereof, it should conduct the importunder general trade and pay tariffs, rather than under processing trade with the preferences of bonded
import.  Thus, the conduct of enterprises engaged in the business of processing trade selling imported
bonded materials and components or products thereof on the domestic market without permission
constituted tariff evasion, and had to be punished.  Otherwise it would be unfair for imports that were
made under the general trade channel.  With rega rd to the issue of transparency in the TRQ
administration, China had been handling the enquiries in accordance with the commitments ever since
its WTO accession.G/LIC/M/18
Page 4
1.8 With regard to the issue of commercial viability in TRQ allocation, starting from 2004, China
would increase the average amount of quota allocated to each enterprise appropriately, based on the
total number of applicants.  Among them, the newly increased quota amount for 2004 would be
mainly allocated to users who had the smalle st amounts of quotas in 2003, thereby raising the
benchmark of the minimum quota amount.
1.9 As regarded the concerns highlighted by the Un ited States in three specific areas, i.e. TRQs
for processing trade, lack of transparency, and allocation for some TRQ goods that had not been in
commercially meaningful quantities, China had already provided a reply during the transitional
review conducted by the Committee on Agriculture on 25 September 2003.
1.10 Concerning additional questions from the United States, China stated that, given that the list
of enterprises granted TRQ allocations and the amount of quota granted to these enterprises pertained
to confidential business information, in allocating TRQs  in the future, the relevant authorities in China
were planning to consult the enterprises which applied for quotas on whether or not they would
consent to provide the relevant information to the enquirers.  The information and the allocated
amount of those enterprises which had given their consent would be provided in accordance with therequirements of the enquirers.
1.11 China confirmed that its TRQ administration agencies would allocate TRQs in strict
compliance with the relevant WTO commitments.  Applications by enterprises would be handled
from 15 to 30 October 2003.  Specific information such as the total quota amount and criteria forapplication would be published in the official j ournals one month ahead of the application period.
The TRQs would be allocated to end-users before 1 January 2004.
1.12 The TRQ administration agencies in China adopted a consistent approach in TRQ allocation
for all agricultural products (including cotton).  In TRQ allocation, the relevant enterprises were notrequired to submit import contracts.  Her authorities had never been informed of such situations as
had been raised by the United States.
1.13 The representative of the United States thanked China for the information they had supplied
at this meeting.  The US considered this to be  an attempt to respond to the questions that his
delegation had put forward.  Making some general comments in this respect, he said that he had
supplied these questions to the Committee prior to the May 2003 meeting and that, as the Chairpersonhad pointed out, one of the procedural requirements of the Committee was that answers should be
submitted in writing, in order for Members to anal yse them closely.  With respect to notification
issues, his delegation had sought clarifications on some of the answers that had been provided in
previous meetings and he expected that that would continue to be the case.  It was therefore important
that this cooperative spirit on both sides be mainta ined as this process of  questions and answers
should be dealt with as smoothly as possible.
1.14 He wished to inform the Committee, for transparency purposes, the background to the issue
with respect to the TRQs.  The United States had met bilaterally with China on several occasions to
discuss a number of difficult issues surrounding the administration of TRQs, particularly in the area ofagriculture.  In late July 2003, China had taken steps to address these issues when it circulated draft
Interim Rules on Agricultural Tariff Rate Quota Administration for comment.  The United States was
pleased with several improvements made by the draf t Rules.  For example, the draft Rules eliminated
the separate TRQ for the processing trade, meaning import of goods that must be processed and
re-exported.  At the same time, the concerns and questions the United States had on the draft Ruleswere presented to China in the form of written comments in August 2003.  In the questions that were
submitted in connection with the meeting of the Committee on Agriculture on 25 September 2003, his
authorities had highlighted three specific areas of concern in the draft Rules.G/LIC/M/18
Page 5
• First, even though China had eliminated the separate TRQ for the processing trade, the United
States was concerned that the draft Rules still provided for restrictions relating to the processingtrade and, in particular, for application of out-of-quota tariff rates and other penalties when a
processing trade enterprise sold agricultural goods imported pursuant to a TRQ allocation on the
domestic market without prior approval.  Based on their understanding of the draft Rules, these
restrictions appeared to conflict with China's tariff bindings, national treatment obligations andother WTO obligations.  The United States had therefore sought assurances from China that,
when the draft Rules were finalized, they would not restrict the end-use of goods imported under
the TRQ, or provide for application of out-of-quota tariff rates if any of the imported goods were
not processed and re-exported.
• Second, the United States had expressed their concerns about the continued lack of transparency
in China's TRQ administration.  For example, in its accession agreement, China had committed toprovide information on the entities that receiv ed TRQ allocations.  This type of information
obviously was necessary to facilitate the importation of goods subject to TRQs.  The UnitedStates had therefore sought to find out what steps China had taken to ensure that information on
the entities that received TRQ allocations was available.
• Third, the United States had been working with China to resolve their concern that allocations for
some TRQ goods had not been made in commercially viable quantities.
1.15 The United States noted that China had recently published its draft Rules in final form.  His
authorities were currently in the process of review ing those final Rules to determine if their concerns
had been addressed.  His delegation was not addressing the issue of the Rules themselves directly
before this Committee.  These questions had been raised in the Committee on Agriculture.
1.16 The questions from the United States focussed on clarifying certain matters regarding China's
operation of the TRQ system mainly in the following three areas:  the United States sought (i)
information on TRQ certificate holders, and the volume each one held for 2003;  (ii) information on
China's plans for its 2004 TRQ allocations;  and (iii) finally an explanation from China regarding
reports that the United States had received indicating that China would not allocate TRQs unless the
underlying contract contained a clause specifying that any dispute would be arbitrated in China,before the China International Economic and Trade Arbitration Commission, and that Chinese law be
chosen as the governing law for any such dispute.  He understood that information had been provided
to the Secretariat in these areas and looked forward to the circulation of this information.
1.17 The representative of China said that as the written questions from the United States had been
received only a few days before this meeting, his authorities were still in the process of preparing
responses and that, in compliance with the proced ures of the Committee, the information would be
provided as soon as possible.
1.18 The representative of Indonesia, referring to the replies provided by his authorities in
G/LIC/Q/IDN/2 to the questions from the United States, said that he had already provided a brief
explanation regarding this issue during the last m eeting and that it was, therefore, not necessary to
provide additional information for the time being.  However, the document did not contain
information with respect to the list of companies that had been granted licences since the introduction
of the import policy, which would be provided soon.6
1.19 The representative of the United States thanked the delegation of Indonesia for its response
(G/LIC/Q/IDN/2).  However, the United States remained concerned that Decree No. 732/2002
pertaining to the import licensing for textiles was restricting and distorting trade contrary to the
Agreement on Import Licensing Procedures.  His authorities were particularly concerned with
                                                     
6 Subsequently circulated in G/LIC/Q/IDN/2/Add.1.G/LIC/M/18
Page 6
Indonesia's decision to grant licences only to textile producers with a local production capacity, and to
bar the transfer of imported textiles to other private parties.  It appeared to his authorities that this
system was inherently trade-distortive, and his authorities requested Indonesia to explain to the
Committee how this system was consistent with the Agreement.  Indonesia had stated that the Decree
aimed only at providing administrative import procedures with the purpose of preventinganti-competitive behaviour and smuggling.  His authorities were reviewing the copy of the Decree
that had been provided to them by the Secretariat.  The United States requested, however, that
Indonesia explain to the Committee how the restrictions contained in the Decree further the goals of
preventing anti-competitive behaviour and smuggling.
1.20 The representative of Indonesia requested the United States to provide the question in writing
in order that they could provide a more detailed and precise reply.1.21 The representative of the United States said that for transparency purposes the best way to do
this would be to provide the questions to the Secretariat for circulation as a document.7
1.22 The representative of Turkey said that responses to the questions contained in
G/LIC/Q/TUR/1, posed by the United States in Ma y 2002, had been received from his authorities and
would be submitted within a week.8
1.23 The representative of the United States said that although he had comments to make under the
next agenda item, with respect to the questions that  the United States had previously posed to Turkey
(G/LIC/Q/TUR/1), he woul d not do so prior to the circulation of the above responses.  He also said
that his authorities were in the process of reviewing the replies provided by Venezuela in
G/LIC/Q/VEN/4 and, if necessary , would revert to this issue through the Secretariat.
1.24 The Committee took note of the statements made.
2. Notifications
(i) Notifications under Articles 1.4(a) and/or 8.2(b) of the Agreement (publications and
legislation)
2.1 The Chairperson recalled that Articles 1.4(a) and 8.2(b), and procedures agreed to by the
Committee, required all Members to publish their laws, regulations and administrative procedures,
and submit copies of any relevant publications or laws and regulations upon becoming a Member of
the WTO.  Any subsequent changes to these laws and regulations were also required to be notified.
She informed the Committee that as of the date of this meeting, only a total of 109 Members
(counting each of the EC member States individually) had submitted legislative notifications.  Thisincluded a notification received from Armenia that week, and a second notification received from
China
9 the day before the meeting,  that were not yet issued.  Noting that 37 Members had not yet
submitted legislative notifications, she urged all Members which had not yet provided any
information on their laws and regulations relevant to import licensing procedures to submit their
notifications without further delay.  She noted that even those Members which did not apply importlicensing procedures or had no laws or regulations relevant to the Agreement were required to notify
the Committee of this fact in order for it to obtain a complete overview of the licensing regimes of all
Members.
                                                     
7 The questions posed by the United States to Indones ia at this meeting were circulated in document
G/LIC/Q/IDN/3.
8 Subsequently circulated in G/LIC/Q/TUR/2.
9 Subsequently circulated in G/LIC/N/1/CHN/3.G/LIC/M/18
Page 7
2.2 The Chairperson said that there were notifications from ten Members before the Committee
for review, received from China (G/LIC/N/1/CHN/2), Croatia (G/LIC/N/1/HRV/2), India
(G/LIC/N/1/IND/6), Jord an (G/LIC/N/1/JOR/2/Add.1), Kenya (G/LIC/N/1/K EN/1), Macao China
(G/LIC/N/1/MAC/1/Adds.2 & 3), Paraguay (G/LIC/N/1/PRY/1), Sri Lanka (G/LIC/N/1/LKA/1),Togo (G/LIC/N/1/TGO/1) and Turkey (G/LIC/N/1/T UR/4).  The notifications from China and Turkey
had been received only recently, and that of Croatia had not yet been issued in all three working
languages.  These notifications would be available for review by the Committee at the next meeting.
Copies of laws and regulations submitted under these provisions were available for consultation in the
Secretariat.
2.3 The representative of the United States said that they did not have specific comments to make
with respect to the notifications made by Turkey a nd China, but they reserved their right to further
comment on all the notifications under this agenda item as some of these had been received only
recently.
2.4 The representative of the European Communities reserved the right to intervene at the next
meeting regarding the notification that had been submitted by China.2.5 The representative of Jordan informed the Committee that the copy of the Law submitted to
the Committee (Law No. (18) of 2003 amending Imports and Exports Law No. (21) notified to the
Committee in G/LIC/N/1/JOR/2) was a temporary law due to the fact that it had to be presented to theParliament at its session on 1 December 2003.  The main purpose of the amendment was to facilitate
the exportation part in such a way as to help in establishing the statistical administration system of the
relevant Ministry.  In addition, Article 3 of the Law provided for an exclusion from the requirement of
obtaining an Exporter Card for fruit and vegetable exporters unless the Council of Ministers decided
otherwise.
2.6 The representative of the United States wished to raise the following issues with respect to
licensing procedures maintained by several other Members.
• With respect to Mexico, he recalled that during the September 2002 meeting of the Committee the
representative of Mexico had stated that Mexico was working to make its notifications as soon as
possible.  The United States looked forward to these submissions.
• With respect to Costa Rica, his delegation had expressed its concerns at the meetings in
September 2002 and May 2003 that Costa Rica sometimes delayed the issuance of permits for
rice beyond the Costa Rican Government's rule that required a ten-day turnaround.  This in some
cases caused sales to unravel as market conditions changed during the long periods of delay.
• At the meeting in May 2003, the United States had noted that a similar situation existed with
respect to exports requiring licences in the Dominican Republic.
• With respect to the European Communities, the Unit ed States was still awaiting a response to the
questions it had raised in the past with respect to import licensing measures for organic fruits and
vegetables.
• Finally, United States had serious concerns about Brazil's import licensing procedures for soda
ash and lithium carbonate.10
As concerned soda ash, on 28 February 2003 Brazil had published Ministry of Justice Regulation 169,
pertaining to import licensing for chemical products.  It was the understanding of the United States
that under the new regulation, importation of certain chemical products, including disodium carbonate(soda ash), was subject to preliminary authorization by the Federal Police Department, as well as
                                                     
10 Circulated in G/LIC/Q/BRA/1.G/LIC/M/18
Page 8
mandatory administrative processing by the Overseas Trade Department (SISCOMEX).  The United
States noted that this new regulation had not been notified to the Committee on Import Licensing, as
required by the Agreement.  In addition, the United States was concerned that the import licensing
procedure was trade-distortive, and requested that Brazil clarify the total period of time allowed to the
Federal Police Department and SISCOMEX for processing applications under the new procedure.The United States also noted that under Article 1, paragraph 6 of the Agreement "[a]pplicants shall
have to approach only one administrative body in connection with an application", and requested that
Brazil explain why it was strictly indispensable to approach more than one administrative body when
importing chemicals listed in Regulation 169.
As regarded lithium carbonate, the United States was concerned over reports from industry that the
import licensing requirements intended to regulate goods related to the production of nuclear energy
and other nuclear applications, in particular lithium carbonate, established by Law No. 6189
(12/16/74) and Decrees 2464 (8/31/88) and 7781 (6/27/89), were restricting and distorting trade
contrary to the Agreement.  Industry had reported that lithium carbonate, in particular, was a raw
material used in aluminium smelting, the production of glass and ceramics, and pharmaceutical
products, but had no nuclear application.  It was the understanding of the United States that under theterms of these Decrees, Brazil's National Nuclear Energy Commission (CNEN) was responsible for
approving the import licences for lithium compounds, and industry had reported that the last time an
import licence had been granted was in 2001.  The United States therefore requested that Brazil
explain to the Committee how the restrictions contained in the Decree furthered the goals of
regulating goods of importance to the production of nuclear energy and other nuclear applications,and why lithium carbonate was included in the coverage.  The United States was also concerned about
the procedures for acquiring an import licence for lithium compounds.  Therefore, the United States
requested additional information and explanation from Brazil on the operation of this licensing
system, and all relevant information concerning the following:  (i) the basis for granting licences;
(ii) administration of the restrictions;  (iii) the import licences granted over a recent period;  (iv) thedistribution of such licences among supplying countries;  (v) where practicable, import statistics (i.e.
value and/or volume) with respect to the products subject to import licensing;  and (vi) the
time-period allowed for processing applications.
The United States requested that Brazil submit its notifications, as required under Article 5 of the
Agreement, for chemical products and goods related to nuclear applications, and update its annual
notification of replies to the Questionnaire to cover these products.  The United States looked forwardto Brazil's explanations and responses to the United States and to the Committee.
2.7 The representative of the European Communities,  in response to the United States, said that
she had taken note of the request made at the previous meeting by the United States for clarification
of measures for organic fruits and vegetables in the EC.  She referred in this regard to the writtenreplies provided by the European Communities contained in document G/LIC/Q/EEC/2, which
explained why the EC had notified these measures under the Agreement on Technical Barriers to
Trade rather than under the Agreement on Import Licensing Procedures.
2.8 The Committee took note of the notifications and the statements made.
(ii) Notifications under Article 7.3 of the Agreem ent (replies to the Questionnaire on Import
Licensing Procedures)
2.9 The Chairperson said that there were notifications from 12 Members listed in the airgram,
received from Brazil (G/LIC/N/3/BRA/3), Croatia ((G/LIC/N/3/HRV/2), the Dominican Republic
(G/LIC/N/3/DOM/1),  Hong Kong China (G/L IC/N/3/HKG/7), Indonesia (G/LIC/N/3/IDN/2), Japan
(G/LIC/N/3/JPN/3), Keny a (G/LIC/N/3/KEN/2/Add.1), Mongolia  (G/LIC/N/3/MNG/1), PhilippinesG/LIC/M/18
Page 9
(G/LIC/N/3/PHL /4/Add.1), Sri Lanka (G/LIC /N/3/LKA/1), To go (G/LIC/N/3/TGO/1) and Turkey
(G/LIC/N/3/TUR/5).
2.10 Of the submissions received recently by the Secretariat, those from Brazil, Hong Kong China
and Turkey , had been issued for the time being only in English while those from Japan  and the
Philippines had not yet been issued.  In addition, the submission from Croatia was not yet issued in
Spanish.  The Committee could therefore review these notifications only at the next meeting.  The
Committee would also have on the agenda for the next meeting the notifications submitted by China
and the European  Communities since the airgram convening this meeting had been issued.11
2.11 The representative of Australia thanked Members for their comprehensive responses to the
Questionnaire on Import Licensing Procedures.  He said that his authorities were concerned that some
Members might be using non-automatic licensing procedures to apply measures that either did not
have a valid purpose under the WTO or were not the least trade-restrictive available to achieve a valid
purpose.  They were also concerned about the potential for unwarranted trade restriction arising from
procedural aspects of such licences.  They were particularly concerned that such measures might have
a trade-chilling effect.  By way of example, he referred to the response to the Questionnaire submittedby Indonesia in document G/LI C/N/3/IDN/2 which indicated that non-automatic licensing
requirements were applied to a number of commodities, including textiles, sugar, iron and steel.  The
stated purposes of such licensing however included:  safeguarding public health, safeguarding
security, ensuring public safety, protecting public morals, protecting the environment and fulfilling
obligations under international agreements.  These were all worthy objectives.  However, he wasunable to see how measures applied to textiles, sugar, iron or steel could reasonably further objectives
such as these.  Accordingly it was unclear that th ere was any need for non-automatic licensing.  It was
essential that any non-automatic licensing procedures also complied with the provisions of
paragraph 2 of Article 3 of the Agreement, i.e. that they should not have any trade-restrictive or
distortive effects on imports in addition to those imposed by the restriction;  should correspond inscope and duration to the measures they were used to implement;  and should be no more
administratively burdensome than absolutely necessary to administer the measure.  To fully clarify the
issues that Indonesia had placed before them, Australia needed to better understand these restrictions.
Accordingly, he requested that Indonesia provide fu rther information on these restrictions including,
in relation to each product, the purpose, scope and duration of the measures concerned, the
administering authority and their legislative basis.  He also asked whether these restrictions had been
previously notified to the Committee.
2.12 The representative of Indonesia said that he had not heard all the questions raised by Australia
and requested the questions to be provided in writing, if possible.2.13 Pending the questions to be provided in writing, the representative of Australia repeated them
for the benefit of the Indonesian delegate.12
2.14 The representative of Indonesia said that he had no comment at this time.
2.15 The Committee took note of the notifications and the statements made.
(iii)  Notifications under Article 5 of the Agreemen t (new import licensing procedures, changes to
existing licensing procedures and reverse notifications)
2.16 The Chairperson recalled that under paragraphs 1-4 of Article 5, Members which instituted
licensing procedures or changes in these procedures were required to notify the Committee of such
                                                     
11 Subsequently circulated in G/LIC/N/3/EEC/6 and G/LIC/N/3/EEC/6/Add.1 and G/LIC/N/3/CHN/2.
12 Subsequently circulated in G/LIC/Q/IDN/4.G/LIC/M/18
Page 10
within 60 days of publication of these procedures.  Paragraph 2 of Article 5 listed the information that
should be included in such notifications.  Members also had to submit copies of publications in which
the information required in Article 1.4 would be published.
2.17 Furthermore, under paragraph 5 of Article 5, any interested Member which considered that
another Member had not notified the institution of a licensing procedure or changes therein, in
accordance with paragraphs 1-3 of Article 5, could bring the matter to the attention of that other
Member, and if a notification was not made promptly thereafter the Member could itself notify the
licensing procedure or changes therein, including all relevant and available information.  The
Chairperson informed the Committee that the Secretariat had not received any notification under this
provision since the entry into force of the WTO Agreement.
2.18 The Chairperson said that three notifications had been submitted under Article 5.1-5.4 since
the last meeting:  by India (G/LIC/N/2/IND/6), Jamaica (G/LIC/N/2/JAM/1) and Venezuela
(G/LIC/N/2/VEN/5).  The notification from Jamaica,  which had not yet been circulated in all three
languages, would be on the agenda for the next meeting.
2.19 The Committee took note of the notifications.
3. Transitional review under Section 18 of the Protocol of Accession of the People's
Republic of China
3.1 The Chairperson recalled that the first transi tional review of the implementation by China of
the WTO Agreement and of the related provisions of  the Protocol, under paragraph 1 of Section 18 of
the Protocol of Accession of Ch ina (WT/L/432), had been carried out in 2002 by the subsidiary bodies
of the WTO, including the Committee on Import Licensing, which had a mandate covering China's
commitments under the WTO Agreement or China's Protocol of Accession.  The report of thisCommittee to the Council for Trade in Goods on th at review had been circulated in document
G/LIC/10.  The Committee would conduct the second transitional review at the present meeting.
3.2 The Chairperson further recalled that under the Protocol of Accession China was required to
provide relevant information, including information specified in Annex 1A, to each subsidiary body,
in advance of this review.  Each subsidiary body was required to report the results of such review
promptly to the relevant Council;  in the case of this Committee, to the Council for Trade in Goods,which should in turn report promptly to the Genera l Council.  According to paragraph 4 of Section 18
of the Protocol, the transitional review would take place after accession, in each year, for eight years,
followed by a final review in the tenth year or at an earlier date decided by the General Council.
Under paragraph 3(a), Section IV of Annex 1A , China was required to notify the Committee on
Import Licensing of "implementation of the pr ovisions of the Agreement on Import Licensing
Procedures and the WTO Agreement applying the measures set out in Section 8 of the Protocol
including provision of the time taken to grant an import licence".  Paragraph 1 of Section 8 of the
Protocol set out the measures which China was to undertake to facilitate compliance with the WTO
Agreement and provisions of the Agreement on Import Licensing Procedures.  China was also
required, inter alia , to submit the notification of its import licensing procedures to the Committee, and
to report annually to the Committee on its automatic import licensing procedures, explaining the
circumstances which gave rise to these requiremen ts and justifying the need for their continuation.
This report should also provide the information listed in Article 3 of the Licensing Agreement.
3.3 In addition, Section VII(a) of Annex 1A of the Protocol referred to responses to specific
questions in the context of the transitional review mechanism, which should be notified to the relevant
subsidiary body.G/LIC/M/18
Page 11
3.4 The Chairperson informed the Committee that a communication received from China on
23 September 2003, containing information required by paragraph 3(a), Section IV of Annex 1A of
the Protocol to carry out the transitional review , had been circulated in document G/LIC/W/20 but
was available only in English for the time being.
3.5 The Chairperson further informed the Committ ee that, pending the information required from
China to carry out the review, four Members had submitted questions and/or comments to China as
follows:  communications dated 14 August 2003 from the European Communities (G/LIC/Q/CHN/5),
1 September 2003 from Japan (G/LIC/Q/CHN/6) , 19 September 2003 from Chinese Taipei
(G/LIC/Q/CHN/7), and 8 May and 25 September 2003 from the United States (G/LIC/Q/CHN/4 and
G/LIC/Q/CHN/9).
3.6 Since China's communication circulated in G/LIC/W/20, the Committee had received
additional information from China which was relevant to the transitional review.  This included
regulations and rules submitted under Article 8.2(b) of the Agreement, one week prior to this meeting,
which had been circulated as do cument G/LIC/N/1/CHN/ 2.  China had also submitted a notification
of replies to the Questionnaire under Article 7.3 and a second notification under Articles 1.4(a) and8.2(b) the day before this meeting, which had not yet been circulated as Committee documents
13.  The
Chairperson thanked the Chinese delegation, on behalf of the Committee, for the information
provided.
3.7 The Chairperson suggested that the review be conducted  in two parts:  first, under
Section IV.3(a) of Annex 1A, and thereafter under Section VII(a) of Annex 1A.
3.8 Taking the floor under Section IV.3(a) of Annex 1A, the representative of China  informed the
Committee of the implementation of China’s commitments regarding the WTO Agreement on Import
Licensing Procedures and China’s commitments upon accession to the WTO since the last transitionalreview by this Committee in 2002.  She said that the Chinese Government had, upon accession to the
WTO, abided by its commitments in an effort to establish and maintain a uniform, transparent, fair
and non-discriminatory environment for market access.  At present, the import regulatory measures in
China took the following forms:  import quota, specific tendering, import licensing, automatic import
licensing, tariff rate quota and import prohibition.  Since the transitional review of 2002, the
regulatory structure had generally remained unchanged with a view to ensuring the stability and
predictability of China's trading system.  Meanwhil e, in order to maintain the transparency in the
implementation of import regulations and rules, a period for comment was provided to solicit opinions
from various parties before the enforcement of regulations and measures;  before implementation, the
regulations had been published in the China Foreign Trade and Economic Cooperation Gazette,
International Business Daily and the official websites of various ministries and commissions under the
State Council.  During this one-year period, the Chinese authorities had amended and published aseries of measures, which, among others, included:  (i) Catalogue of Commodities Under Automatic
Import Licensing Administration for 2003;  (ii)  Catalogue of Commodities Under Import Licence
Administration for 2003 ; (iii) Implementing Rules on the Allocation of  Tariff Rate Quotas for Import
of Major Agricultural Products in 2003;  (iv) Implementing Rules on the Administration of Import
Tariff Rate Quotas for Wool and Wool Tops in 2003;  (v) Implementing Rules on the Allocation of
Import Quotas for Natural Rubbers in 2003;  (vi)  Total Volume, Allocation Criteria and Application
Procedures of Import Quotas for Processed Oil in 2003;  (vii) Total Volume, Allocation Criteria and
Application Procedures of Import Quotas for Automobile Tyres in 2003;  (viii) Tentative Methods for
Administration of Importation of Crude Oil, Processed Oil and Fertilizer by State Trading
Enterprises;  and (ix) Announcement on  the Criteria, Materials and Procedures for the Application
for the Record of Qualification as Non-State Trad ing Enterprises Importing Crude Oil, Processed Oil
and Fertilizers.   At the same time, China had also published the catalogues of commodities under
                                                     
13 Subsequently circulated in document G/LIC/N/3/CHN/2 and G/LIC/N/1/CHN/3.G/LIC/M/18
Page 12
import ban and restriction and the methods for the administration of import licensing for some
commodities.  Such measures had been implemented in a manner compliant with the requirements of
the WTO.
3.9 Furthermore, on 1 January 2003, the Chinese Government had removed quotas and import
licensing measures on two products (auto hoists and motorcycles) under 18 tariff lines, two years in
advance of the requirements of the Protocol;  currently there were four commodities  subject to quota
and licensing administrations in total, i.e. processed oil, natural rubber, auto tyres and auto products.
China had also lifted nine products under 19 tariff lines (eight-digits, HS 2002) out of the specific
tendering scheme ahead of schedule, which represented more than 45 per cent of all the products
under special tendering administration.
3.10 China had notified the above-mentioned policies and measures on import licensing to this
Committee, including the responses to the Questionnaire as required by the Article 7.3 of the
Agreement on Import Licensing Procedures14.
3.11 A special note needed to be made to the reform on the governmental agencies with economic
jurisdictions, as the result of which the duties of certain authorities had been adjusted, such as:
(i)  The former State Development and Planning Commission (SDPC) was reinstituted as the State
Development and Reform Commission (SDRC).  The import tariff rate quotas for major agricultural
products were now being administered by the SDRC  and the Ministry of Commerce (MOC), of which
the SDRC and MOC were jointly responsible for gr ain (rice, maize and wheat) and cotton, and the
MOC solely responsible for other agricultural products.  Import tariff rate quota for fertilizers which
had been administered by the former State Ec onomic and Trade Commission (SETC), was now within
the jurisdiction of the MOC.
(ii)  Import Quotas:  the MOC was in charge of th e administration of all products subject to import
quotas.
(iii)  Specific tendering:  the MOC was responsible for the administration of import licensing of
specific mechanical and electrical products.
(iv)  Automatic import licensing:  major industrial products and some electrical and mechanical
products subject to automatic import licensing, were now under the administration of MOC.
In order to ensure effective communication between China and other Members, the Chinese
authorities had provided the Committee with a great amount of information prior to this meeting,
hoping it would help Members better understand China’s fulfilment of its commitments.
3.12 As concerned the questions China had received from some Members, she wished to provide
the following responses:
(a)  Questions concerning trading rights:  According to China’s commitments upon accession, China
would  eliminate the system of examination and approval of trading rights within three years from
accession.  At that time, China would permit all domestic and foreign enterprises and individuals,
including sole proprietorships of other WTO Members, to export and import all goods (with theexception of products listed in Annex 2A of the Protocol reserved for importation and exportation by
state trading enterprises) throughout the customs territory of China.  Trading right in this context only
referred to the right for importation and exportation, not including the right of distribution in China.
The liberalization of distribution rights would be executed in accordance with the Schedule of
Specific Commitments on Services.  Currently, enterprises in China with foreign investment had theright to import equipment, technology, raw material and other goods for self-use, and export their
products, while for the importation of goods and technology other than the above-listed, enterprises
                                                     
14 Circulated in G/LIC/N/1/CHN/2, G/LIC/N/1/CHN/3 and G/LIC/N/3/CHN/2.G/LIC/M/18
Page 13
should change the scope of their business as required by relevant legislation.  The Foreign Trade Law
of the People’s Republic of China  was being revised to reflect that specific requirement.  In
January 2003, the former Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
promulgated the Interim Rules for Establishing Sino-Foreign Trade Joint Ventures , endowing legally
incorporated Sino-foreign joint ventures with the right of import and export for the goods, technologyand services within the approved scope, and the right to conduct domestic wholesale of the goods
imported by the joint ventures themselves.  With distribution also included, the scope of the rights
granted by the Interim Rules went beyond what China had committed to in the Protocol.  In that spirit,
the Interim Rules had prescribed some requirements on experiences and registered capital for both
Chinese and foreign parties of the joint venture.  In addition, "Sino-foreign joint venture" referred to
in the Interim Rules included joint ventures solely engaged in import and export business and
wholesale of imported products, as well as other types of enterprises which applied for the operationof such businesses and satisfied the requirements of the Interim Rules.
(b)  Questions concerning import TRQs for fertiliz ers:  In strict accordance with their commitments
upon accession and the Regulations on the Administration of Import and Export of Goods of the
People’s Republic of China , his authorities had promptly published the total volume and allocation
criteria of 2003 import TRQs for fertilizers, distributed 2003 fertilizer TRQs in full quantity, and
allocated TRQs for state trading and non-state trading enterprises directly to importers in line with
specified proportions.  The allocation process had been administered in a fair and transparent manner.
Enterprises went about the importation of fertilizers according to the market situation, either for
themselves or as an agent, and their business ac tivities were free from any government interference.
With regard to the alleged problem of licence trade, i.e. selling quota for profit, such practice was
against the Chinese law and subject to severe punishment.  China hoped that Members would provide
relevant information and evidence on this illegal trade.  His authorities would deal with the offenders
according to the law and slashing their quotas for the next year.
(c)  The question on the administration of automobile import quotas:  According to the statistics of the
Chinese Customs, import of automobiles had maintained a robust growth in 2002 and 2003.  In 2002,
China had imported automobiles to the value of US$ 7.86 billion, 42.5 per cent higher than 2001.
From January to July 2003, China had imported automobiles to the value of US$ 8.19 billion,
109.2 per cent higher than in the same period of the previous year, which set a new record of growth.
Among automobile imports by China, imports from Japan represented more than 60 per cent in terms
of value.
3.13 It should be noted that the volume of import quotas were not necessarily equal to actual
import volume, and the fill rate of quotas depended on actual demand for imported automobiles on the
Chinese market.  Over recent years, automobiles produced by Chinese enterprises (including joint
ventures) had satisfied the needs of Chinese consumers with enhanced quality, diversified models andlower prices.  Therefore, although the need for automobiles on the Chinese market had considerably
increased, the need for imported high-price automobiles was still limited.  In particular, given the fast
growth in production of automobiles below 2000 cc and their relative low prices compared with
imported cars of the same class, Chinese importers had voluntarily increased the proportion of
automobiles above 2000 cc in their applications for import quotas, so as to avoid competition withChinese auto manufacturers.
3.14 Paragraph 130 of the Working Party Report (WT/MIN(01)/3) stated that in allocating quotas
for imported products for wholesale or retail distribution, China would consider historical
performance, experience and ability in servicing, as well as the qualifications of importers required bythe Agreement on Import Licensing Procedures.  The allocation criteria for quotas of automobiles
imported for sale were as follows:  first, verify  the importer’s qualification to conduct automobile
trade in China;  second, check the operational ability of the importer (i.e. the venue for sale and
maintenance);  and third, examine the business performances of the importer.  The ChineseG/LIC/M/18
Page 14
Government would not allocate quotas for sale to importers without sale qualification and operational
ability.  Importers with prominent operational ability and historical performance would receive more
quotas.  Importers might decide the composition of products for their quotas at their own discretion,
i.e. they could themselves determine the type, spec ification and model of automobiles of their choice.
The Chinese Government would grant import quotas in light of their selections.
3.15 With regard to punitive measures against importers failing to return unused quotas,
Regulations on Import and Export of Goods of People’s Republic of China  specified that in the event
that an importer did not use all quotas in its possession for the year, he should return remaining quotas
to the administrative authority for import quotas before 1 September of the current year;  if he failed
to do so and failed to use the remaining quotas by  the end of that year, the quota authority would
reduce his quotas for the next year accordingly.  Considering that import quotas of 2002 could beextended to 31 March 2003, there were no quotas returned in 2002.  If a quota holder failed to use all
quotas in his possession by the end of 2003 and failed to return the unfilled quotas within the
specified time limit, the Chinese authorities would reduce his quotas for the next year.
(d)  Question on the import inspection permit issued by the State General Administration of Quality
Supervision and Inspection and Quarantine Procedur es (AQSIQ):  The procedures concerning import
inspection permits were established on the basis of the Law of the People’s Republic of China on the
Entry and Exit of Animal and Plant Quarantine, adopted on 1 April 1992, and its Implementing
Regulation adopted on 1 January 1997 (which had been notified to the WTO in documents
G/SPS/N/CHN/P/4 and G/SPS/N/CHN/P/5, respectively).  The said procedures were not newlydeveloped, and applied equally to all countries exporting animals and plants as well as their products
to China, not aimed at a certain country.  China wanted to make it clear that the import permit regime
concerned SPS measures and was not related to import licensing procedures applied to control the
quantity in trade.  The import permit procedures were neutral in application and administered in a fair
and equitable manner in conformity with Article 1.3 of the Agreement on Import LicensingProcedures.  This regime was also set up in line with Article 2.2 of the Agreement and did not have
trade-restricting effects.
3.16 Finally, she wished to inform the Committee th at the delegation from China for this review
was composed of representatives from relevant ministries in order to give a better coverage for the
concerns Members might have with regard to the import licensing regime of China.
3.17 The Chairperson asked whether a copy of the above statement by China could be provided to
the Secretariat and whether the statement also included replies to the specific questions posed to
China by several Members.
3.18 The representative of China said that a copy of the statement would be given after the meeting
for circulation to Members.3.19 A second representative of China said that, in his view, according to Section 18 of  the
Protocol of Accession under which the transitional review was conducted, China had no obligation to
answer all the specific questions.  He actually w ondered if this question and answer process had to be
a part of this transitional exercise at all and, th erefore, wished that this transitional review be
conducted strictly in accordance with Section 18 of the Protocol rather than, as some Members
requested, in a way that went beyond Section 18.  He hoped that the Chairperson as well as Members
would abide by this understanding.
3.20 The Chairperson invited comments from delegations on the relevant parts of the above
statement by China in respect of Section IV.3(a) of Annex 1A.G/LIC/M/18
Page 15
3.21 The representative of the European Communities thanked China particularly for having come
to Geneva during this time of their national holiday and given a long presentation on the present
situation.  She wished to inform China that, fo llowing the notifications the Committee had received
from China under Articles 8.2(b) and 7.3, the European Communities might have additional questions
to China, in addition to the questions that had been circulated in G/LIC/Q/CHN/5.
3.22 The Chairperson, moving on to the discussion under Section VII(a) of Annex 1A  of the
Protocol of Accession, reminded Members that spec ific questions to China under this provision had
been posed by Chinese Taipei, the European Communities, Japan and the United States in the context
of the transitional review which had been ci rculated in documents G/LIC/Q/CHN/5 (European
Communities), G/LIC/Q/CHN/6 (Japan), G/LIC/Q/CHN/7 (Chinese Taipei), and G/LIC/Q/CHN/4
and G/LIC/Q/CHN/9 (United States).
3.23 The representative of the United States thanked China for the responses provided at this
meeting.  He said that he did not entirely understand from the last intervention made by the delegate
of China what China's responsibilities were.  He wished to clarify this point first before raising further
specific issues with respect to the questions that his authorities had posed to China as part of thistransitional review.  He recalled that in the past there had been controversy over whether written
responses to questions posed were required under Section VII(a) of Annex 1A;  this was something
that the United States was not raising at this point.  However, if he understood what the representative
of China said, it was that China did not have a responsibility to provide oral statements as part of the
transitional review to the questions that had been posed.  He wished to have clarification on this.
3.24 The representative of China said that he disagreed with the United States that this was China's
transitional review.  This was not true.  The tran sitional review had to be conducted in accordance
with Section 18 of the Protocol of Accession of Ch ina, under which China also had the right to raise
questions concerning the fulfilment by other Members' of their obligations as part of the terms andconditions of China's accession.  Therefore, it should not be called China's transitional review.  It was
simply a transitional review under Section 18.  Second ly, with regard to whether he meant that China
had an obligation to provide oral statements, China's practice this morning had made that very clear.
China had already provided oral statements and therefore he had never indicated that China had no
obligation to take part in this exercise, but he did question in what way, in what manner, and under
which specific regiment China was going to take part in this exercise.  He believed that China would
do it according to China's understanding of Section 18 of the Protocol of Accession of China.  Of
course, if Section 18 clearly specified that questions and answers had to be an integral part of this
exercise, then China would do it, but since Section 18 did not specifically say that, China then had no
obligation to take part in this so-called questions and answers part of the exercise.  That was his
understanding and he hoped that he had now made his position clear.
3.25 The representative of the United States said that this was disturbing for him, because, at least
in his recollection, this was the first time that this issue had arisen.  As he had  said before, there had
been a controversy in the past about written responses but he  did not recall there being a controversy
with respect to providing oral responses;  in fact, he thought that in 2002 China had done a very good
job of trying to respond to all of the questions that were put to it as part of the transitional review.  Itwas clear that Section 18 of China's Protocol said that questions might be posed to China.  It did not
specifically say that China had to answer those questions, but there simply could be no other
interpretation of the clear intention of Section 18.  What sort of exercise would Members be engaged
in if questions were allowed to be posed,  but China was free to simply ignore them?  He noted that
China had agreed to circulate in writing its statement made this morning.  He also noted that fourMembers had submitted a fairly substantial body of questions to China in the documents that had been
circulated.  Having listened to the responses that were made at this meeting by China, he knew that
China had responded to at least some of those questions, but his impression was that the answers
given were not comprehensive, and that there were aspects still unanswered.  He wished to state thatG/LIC/M/18
Page 16
he did not want to make this a contentious exercise, but he felt that, under Section 18 of the Protocol,
Members had a right to receive responses to the questions that Section 18 said they could pose.
3.26 He wished to move on to some specific elaborations of some of the questions that his
delegation had posed to China as part of this agenda item.  The first set of questions from the UnitedStates to China addressed the licensing provisions provided for in AQSIQ Ordinance 7, which dealt
with inspection permits, and AQSIQ Decree 25, which dealt with quarantine permits.  Through its
implementation of these measures, AQSIQ had taken over effective control of imports of any
agricultural products that required an import inspection permit, including livestock, poultry, grains,
oilseeds, planting seeds, horticultural products, and hides and skins.  The United States was concerned
that AQSIQ was using the procedures provided for by these measures to control the pace and quantity
of agricultural imports, including non-TRQ commodities like soybeans and meat and poultryproducts.  The United States was also concerned about reports from traders regarding both the
burdensome nature of the procedures and selective enforcement by AQSIQ.  His authorities had raised
these concerns with China bilaterally on several occasions.  The United States had also raised some of
their concerns previously in this Committee.  They would also like to ask an additional question that
had not been included in the material that they had provided up to this point, which focused on importrequirements for GMO products, as announced by the Ministry of Agriculture in a letter released on
16 July 2003, which appeared to be inconsistent with AQSIQ import requirements.  To obtain an
interim safety certificate for a GMO product, it was ne cessary to show an existing contract between a
supplier and an importer.  Meanwhile, an import inspection permit had to be obtained before entering
into a contract, but to obtain that permit it was necessary to have an Interim Safety Certificate whichpresupposed the existence of a contract.  His authorities were seeking guidance as to how suppliers
and importers should handle these conflicting requirements.
3.27 The representative of the European Communities thanked China once again for their long
presentation that morning which partially responded to some of their concerns and some of their
questions.  She also thanked China for agreeing to make their intervention available to the Committee
in writing.  This intervention would be studied closely by her authorities.  The questions from the EC
had two main aspects, trading rights and tariff rate quota allocation, and she noted the responses
provided by the Chinese delegation at this meeting.  Regarding trading rights, the EC's main concerns
were with regard to the time frame, scope, prescription of trading rights and the provisional nature of
the rules adopted.  Regarding the allocation of tariff rate quotas, she had taken note of the requests by
Members for additional information from China regarding the allocation of TRQs for importers andthe setting up of a licensing market.  She thought that at this stage, before her authorities had studied
the interventions China had made at this meeting, it was pointless repeating the questions which were
to be found in docu ment G/LI C/Q/CHN/5.
3.28 The representative of Japan thanked the delegation of China for the information provided at
the beginning of this session on the implementation of China's commitments in the area of import
licensing.  He also hoped that this session would be constructive and said that he would like to have
quick responses from China to Japan's questions and concerns raised in  document G/LIC/Q/CHN/6.
In that respect he referred to Section VII(a) of Annex 1A of the Protocol which specifically referred to
"responses to specific questions in the context of th e transitional review mechanism received from the
General Council or a subsidiary body"  and wondered how this provision should be interpreted in the
context of China's comments.  While he thanked China for briefly informing the Committee at this
meeting of the implementation of auto quotas, he still believed that some of the questions Japan had
raised had not been responded to.  Japan welcomed the progress that China had made in implementing
its commitments on import licensing since the first transitional review in 2002, and appreciated theefforts by China in developing the necessary fr amework and smoothly implementing the phasing in of
its commitments.  He recalled that Japan had submitted their comments and questions well in advance
of this review in order to make the discussions in the review as meaningful as possible.  While he had
expected China to provide them with responses an d relevant information prior to this meeting, heG/LIC/M/18
Page 17
thanked China for the explanation given and still hoped that the Chinese delegation would respond at
this meeting to the remaining questions and concerns that they had raised.  Japan, like the European
Communities, was interested in the issue of China's implementation of import quotas of automobiles.
• First, actual automobile imports from 20 April 2002 to March 2003, i.e. the period subject to
the quota for the first year, were worth US$ 3.85 billion, and this number was significantly
lower than the import quota of US$ 7.94 billion.  Japan wished to know why this large
discrepancy between the figures had occurred.  He noticed that China had given them some
statistical data, but Japan had provided specific numbers based on the customs tariff
classification, which were attached to the questions submitted in G/LIC/Q/CHN/6.  Japan
therefore wished to know, based on their submission, what difference China found compared
with the statistical data attached to Japan's questions.  Furthermore, imports in the second
quota for 2002 were US$ 1.2 billion as shown in the annex.  Multiplying this figure four-foldamounted to only US$ 4.84 billion, which again resulted in a significant disparity from the
nominal quota for 2003 of US$ 9.125 billion.  Japan was concerned about the implementation
of the quota as had been agreed and wished to know what measures the Chinese Government
planned to take to improve implementation for the current year.
• Secondly, Annex 3 to China's Protocol of Access ion stated that 44 items were subject to the
import quota for 2003 under complete vehicles and only one item, namely bodies, under auto
parts.  It was important to have a common understanding of what should be counted as items
subject to import quotas in order to appropriately assess the situation concerning
implementation of quotas.  This would clarify the issue of the difference between the data
given by Japan and that presented by China.  Japan therefore requested China to confirm that
there were no other items subject to import quotas for 2003.
• Thirdly, Japan considered it important to ensure transparency in the implementation of
quotas.  Several paragraphs in the Protocol  of Accession and the Agreement on Import
Licensing Procedures referred to such a principle.  However Japan was still concerned with
the lack of transparency in China's implementation of the import quota allocation in other
sectors;  his delegation had found, especially during this meeting, that there was a wide
disparity between China's statistical data and Japan's numbers.  He therefore requested thatChina present the actual quotas for 2003, by item and by country of origin.
• Fourthly, paragraph 130(c) of the Report of the Working Party on the Accession of China
(WT/MIN(01)/3) provided that quota-holders that did not import their full allocation would
receive a proportionate reduction in their quota allocation in the subsequent year unless the
quantity was returned for reallocation by 1 September.  As he had explained, Japan believed
that actual imports in 2002 were much lower than the import quota, and thus there would be anumber of quota-holders subject to such proportional reduction in quota allocation in 2003.
Japan wished to know the number of quota-holders to whom China had applied this
proportional reduction at the time of allocating the quotas for 2003 and the reduction in quota
in total.
• Finally, Japan had information that China controlled the number of import licences to be
granted by category, particularly those granted for cars of 2000 cc or less displacement in the
sedan category "small", which indicated that import licences were not granted impartially and
allocation did not reflect market demand.  China had explained the market situation of less
demand for smaller cars, but Japan wished to know if such information about the method for
granting licences was true, and requested confirmation of the non-existence of such practices
by the Chinese Government.  He hoped to receive satisfactory replies to these questions at
this meeting, in order to make this transitional review as meaningful as possible.
3.29 The representative of Chinese Taipei said that they too appreciated the informative
presentation made by the Chinese delegation at this meeting.  Noting that China had madeG/LIC/M/18
Page 18
considerable efforts over the past year in fulfilling their accession commitments, his delegation had no
further questions to pose to China.
3.30 The representative of China, responding to the follow-up questions, said that concerning
inspection permits, all applications would be accepted and approved within nine to 30 days by
AQSIQ, as long as they were in conformity with the provisions of the quarantine law and its
implementation rules as well as AQSIQ Decree N o. 25.  This ensured that China's import permit
regime was fair and just.  The import permit procedures related to entry of animal and plant
quarantine did not come under automatic registration procedures, given the differences in the
epidemic situation of the source nations and the relevant preventive and treatment measures, as well
as the risk and management thereof concerning disease introduction.  However, importers qualified to
apply for import permits could submit applications to AQSIQ on an equitable basis.  Concerning thequestions on import requirements for GMO products , the Ministry of Agriculture of China had
decided to extend Circular No. 222 to 20 April 2004, wherein contents concerning application
requirements and approval procedures for GM products remained unchanged.  The Ministry of
Agriculture had entertained the idea of indicating on an Interim Safety Certificate the names of
importers whose applications were submitted after 20 September.  However, when they found thatsuch a measure, were it to be implemented, would contradict that adopted by AQSIQ, they had not in
fact carried out this idea.  Therefore to reply to the question, China had not promulgated such a policy
as had been mentioned in the questions presented, namely a policy which required the provision of the
importer's name upon application of the Interim Certificate for GMO products;  therefore the alleged
contradiction contained in the questions had not actually taken place.
3.31 Responding to the questions posed by Japan, he said that in the statement presented by the
Chinese delegation at the beginning of this discussion, China had already answered the majority of the
questions posed by Japan, including, for instance, the penalties for those unreturned quota-holders.
He wished to offer a brief explanation of the disparity between the statistics in order to have a correctunderstanding of the disparity between the actual and the committed volume of quota.  In accordance
with Table One and Table Two of Annex 3 of China's Protocol of Accession, there were 65 HS codes
covered in the sector of automobiles and their key parts which were subject to quota administration.
Based on these 65 HS codes, China had committed US$ 6 billion worth of quota for automobiles and
their key parts and had made a commitment to increase this by 15 per cent annually during the
transition period.  In 2003, the total amount of US$ 9.125 billion should also be based on these 65 HS
codes.  According to the timetable on the elimination of non-tariff measures committed by China, inthe years 2001, 2002 and 2003 China had consecutively eliminated its quota administrative measures
on some automobiles and key parts, but these parts of the products which had been imported should
also be included in the import statistics for 2003, or else it would be unfair to China.  As concerned
the substantial disparity alleged by Japan concerning the committed volume and the actual volume of
imports, he offered the following explanation:  in the statistics provided by Japan, the period coveredextended from April 2002 to March 2003.  He wished to emphasise that the committed volume was
not the actual volume of imports, because the actual amount of imports would depend solely on the
market for automobiles in the Chinese market.  Secondly, as his delegation had elaborated earlier in
this discussion, according to China's understanding, the automobiles and key parts covered by the
quota administration should be 65 HS codes instead of 45.  Thirdly, concerning the period covered bythese statistics, the first quarter of 2002 also used quotas allocated for the whole year, because in order
to meet the requirements of Chinese domestic manufacturers and some importers, before April 2002
the Chinese Government had already arranged for the import quotas for 2002, or else all the domestic
automobile manufacturers in China would have to stop their production.  Therefore the period covered
by the statistics should extend from January 2002 to March 2003.  Fourthly, China had noted that inJapan's statistics, auto knock-down kits, or CKD and SKD, which were imported for assembly in
China, were not included, because in the past two years in the initial period of production of new car
models by Chinese domestic manufacturers, they had to import a considerable amount of knock-down
kits for assembly production;  for the import of these parts they had to be granted certain quotas;G/LIC/M/18
Page 19
however, as regarded customs statistics, because these parts arrived at the customs in the form of
component parts,  they had not been incorporated in the statistics for complete automobiles.  The final
aspect could be attributed to the restrictions placed by certain suppliers in Japan.  According to their
information, some manufacturers and suppliers in Japan had placed restrictions on the number of
Chinese importers, mainly limiting the number of Chinese importers who could sign contracts withsuppliers in Japan.  According to their understanding from these importers, Japanese suppliers had
also placed restrictions on the amount of automobiles to be exported to China on a monthly basis.
There was also another aspect, i.e. the alleged control by the Chinese Government of granting import
licences for automobiles below 2000 cc displacement.  He said that according to China's WTO
commitments importers had the discretion to choose the types, specifications and models of some
automobiles to be imported, and the relevant authorities in China, by deriving from their needs and
choices, issued the relevant licences.  In fact, gi ven the quick growth of the production of automobiles
below 2000 cc and the relative low prices compared with imported cars, Chinese importers had
voluntarily increased the proportion of automobiles above 2000 cc in their applications for import
quotas, so as to avoid competition with Chinese auto manufacturers.
3.32 In conclusion, the representative of China stated that, according to his understanding of
Section 18 of the Protocol, China had no legal obligation to provide written answers to questions
posed.  The information that China had submitted in written form prior to this meeting and the oral
answers provided during the course of the meeting were sufficient for a meaningful review.  China
believed that providing written answers to Members' questions went beyond the provisions of Section
18 and would be overly burdensome for China.  However, for the purpose of transparency and tofacilitate the delegates who reported to capital, he would submit his statement to the Committee.
3.33 The representative of Japan thanked the delegation of China for the important explanation that
was given on the import quota of automobiles.  He was pleased to hear that China did not control the
number of import licences to be granted by category, and hoped that the concerns prevailing withinthe Japanese auto industry would disappear quickly.  As regarded the other issue, he said that he was
not at this moment satisfied with the explanation by China.  He would convey it to his capital for
further consideration, and would take up these issues bilaterally as necessary.
3.34 The Committee took note of the comments and questions to China circulated in G/LIC/Q/-
series, the notifications from China and the statements made.
3.35 The Chairperson suggested that a factual report on China's transitional review be submitted to
the CTG for consideration at its meeting on 24 November 2003.  This factual report would refer to the
relevant paragraphs of the minutes of this meeting as well as the oral and written comments and
questions submitted to China, and the informati on and notifications received from China.  The
relevant paragraphs of the minutes which reflected the discussion would be annexed to this report.
3.36 The Committee so agreed.  The report to the CTG on the second transitional review was
circulated in document G/LIC/11.
4. Report (2003) to the Council for Trade in Goods
4.1 The Chairperson said that the Committee was required to submit annually a report on its
activities to the Council for Trade in Goods.  A draft report to the CTG, covering the activities of the
Committee in 2003, had been circulated in document G/LIC/W/19 for the Committee's consideration.
The information covered in the draft report, including its Annex, would be updated to reflect thenotifications received up to the present meeting as well as the discussion at this meeting.  The latest
notifications submitted by Armenia, Brazil, China, the European Communities, Hong Kong China,
Jamaica, Japan, Macao China, Philippines and Turkey, as well as any notifications that were received
up to the date of issuing the final version of the report, would be reflected in the relevant paragraphsG/LIC/M/18
Page 20
and in the Annex.
4.2 There were no comments on the draft report.  The Committee agreed to adopt the report
subject to the updating which was required to take account of the Committee's work at this meeting
and the new notifications received up to its date of issue.
4.3 The report as revised and adopted was circulated as document G/L/652.
5. Other business
(i) Sugar import quota of Chile
5.1 The representative of Colombia said that her delegation wished to pose some questions to
Chile concerning sugar.  According to information received from Colombian sugar exporters, the
Chilean Government seemed to have adopted recently a law by which it added to the WTO sugar
quota (of 60,000 tonnes per year) a quota of 15,000 tonnes annually.  Apparently this law also created
a quota of 30,000 tonnes per year for mixtures and assigned the entirety of this quota under industrialproducts.  Her authorities understood that a regulation was drawn up according to which these quotas
would be administered.  Colombia wished to know  as to when Chile planned to notify this new
regime to the Committee on Import Licensing so as to comply with multilateral obligations in this
respect.  The information from the Chilean Government would be of great use in improving
transparency and predictability of access of the principal exporting product of Colombia to Chile.
5.2 The representative of Chile said that the law which Colombia had referred to was Law
No. 19897 published in the Official Gazette of Chile on 25 September 2003.  This Law modified in
various aspects the price band system which Chile applied to imports of wheat and sugar.  The
purpose of this Law was to ensure that the Chilean price band system was fully in line with recentrecommendations of the Dispute Settlement Body.  As a result, Chile considered it expeditious to
notify this Law first of all to the Dispute Settlement Body, which, in fact, was done at the DSB
meeting this morning.  Law 19897 changed various procedures and among many other aspects this
also modified the tariff quota which Chile maintained for imports of sugar, which was established in
2001 as a result of a negotiation under Article XXVIII of GATT 1994.  However, the National
Customs Service of Chile had not yet stipulated the administrative standards of this quota, i.e. those
established under Law 19897.  He understood that these standards were being prepared, therefore hewas not yet ready to give a specific reply to Colombia at this meeting.  The question from Colombia
would be transmitted to his capital and he hoped that he would be able to reply to Colombia as soon
as possible and certainly before the next session of this Committee.
5.3 The Committee took note of the statements made.
(ii) Date of the next meeting
5.4 The Committee took note that the next meeting would take place on 5 May 2004, on the
understanding that additional meetings would be convened if necessary15.
__________
                                                     
15 The Secretariat had tentatively reserved 30 September 2004 for the autumn meeting of the
Committee.