WORLD TRADE  
ORGANIZATION  G/C/W/499 
11 November 2004 
 
 (04-4803) 
Council for Trade in Goods Original:   English 
 
 
 
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE 
PROTOCOL ON THE ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA1 
 
Questions from the UNITED STATES to CHINA  
 
 
 The following communication, dated 10 November 2004, is being circulated at the request of 
the Delegation of the United States. 
 
_______________ 
 
 
 The United States wishes to pose the followi ng questions to China at the 25 November 2004 
meeting of the Council for Trade in Goods for the purposes of the transitional review mandated by 
China's Protocol of Accession.  Many of these qu estions relate to matters that were not fully 
addressed by China during the transitional reviews he ld before the committees that report to the 
Council for Trade in Goods. 
 
Export Restrictions 
 
1. The United States and other Members raised concerns regarding China's export quota on 
coke, a key steel input, as well as other goods during th e transitional review held by the Committee on 
Market Access.  
 
(a) China appears to believe that the expo rt quota on coke falls under the exception 
regarding the conservation of exhaustible na tural resources, set forth in Article XX of 
the General Agreement on Tariffs and Tr ade 1994.  However, that exception only 
allows measures that were made effectiv e in conjunction with restrictions on 
domestic production or consumption, and provided that they are not applied in a 
manner that would constitute a means of arbitrary or unjustifiable discrimination 
between countries where the same conditions prevail or a disguised restriction on 
trade.  Please identify all of the relevant  domestic restrictions imposed by China. 
  (b) Please explain how these restrictions, in China's view, satisfy the requirements of 
GATT Article XX in light of the fact that only a small percentage of domestic coke 
production has been permitted for export. 
 
(c) Does China have any plans to impose any ne w or additional domestic restrictions?  If 
so, please explain them. 
 
(d) Does China have any timetable for eliminating the export quota on coke? 
 
 
                                                     
 
1 WT/L/432. G/C/W/499 
Page 2  
 
Tariff Rate Quotas on Fertilizers 
 
2. In the TRQ headnotes on fertilizer and wool t ops (found in Part III, Section A, of China's 
Goods Schedule), paragraph 6B, China committed that  applications for reallocation of uncontracted-
for TRQ quantities shall be accepted from 1-15 Sept ember, that specific conditions for applying for 
reallocated TRQ quantities will be published in the official journal one month in advance of the 
application period, and that new allocations will be assigned by 1 October.  Please provide the 
following information, in accordance with paragraph IV.1(a) of Annex 1A to China's Protocol of 
Accession, for 2003 and 2004 for each fertilizer TRQ:   
 
(a) amount of unused TRQ returned prior to reallocation;  
 
(b) number of applications for reallocated TRQ received;  
 
(c)  number of applications for reallocated TRQ denied; and  
 
(d)  amount of TRQ reallocated. 
 
Value-Added Tax Applied to Diammonium Phosphate  
 
3. The United States raised concerns during th e transitional review before the Committee on 
Market Access regarding the Circular about VAT Exemption Policy for Certain Farming Materials 
(No. 113/2001), which exempts all phosphate fer tilizers except diammonium phosphate (DAP) from 
China's value-added tax.  This measure discourages use of DAP, for which China committed to permit 
access under its TRQ commitments, in favor of other phosphate fertilizer products that are not 
imported.  Please provide the following data, whic h China indicated during the transitional review 
before the Committee on Market Access, it was attempting to gather:  
(a) China's annual consumption of DAP since 2001, including the amounts sourced 
domestically versus imports; and 
 
(b) China's annual consumption of m onoammonium phosphate (MAP) since 2001, 
including the amounts sourced domestically versus imports. 
 SPS Measures    
4. China is obligated under the WTO SPS Ag reement to base its SPS measures on sound science 
and risk assessments.  If it follows existing sta ndards of the three WTO-recognized international 
standard-setting bodies (Codex Alim entarius (Codex), the International Plant Protection Convention 
(IPPC) and the World Organization for Animal Health  (OIE)), it is automatically assumed to be in 
compliance with this requirement; otherwise, risk assessments should be completed and made 
available.  However, in dozens of notified and unnot ified regulations, standards more restrictive than 
those of Codex, IPPC and OIE have been adopt ed without providing access to risk assessments 
identifying the necessity for such restrictive measures.  We recognize that China is not a member of 
international standard-setting or ganizations like the OIE and IPPC.  Nevertheless, the WTO SPS 
Agreement obligates Members to base their measur es on relevant international standards.  If a 
Member introduces a measure that provides a higher level of protection than that achieved by the international standard, it must present a scientific justification or a risk assessment to support its 
measure.  What steps is China taking to make these scientific justifications and risk assessments 
available to interested parties or to bring these m easures into line with the standards of OIE, IPPC, 
and Codex Alimentarius? 
 
5. China's SPS requirements for a number of commodities, such as G/SPS/N/CHN/52, hygienic standards for grain, and the unnotified AQSIQ Decree 73, which modifies the requirements for  G/C/W/499 
 Page 3 
 
 
applicants of quarantine inspection permits, mix product quality requirements with SPS measures.  
These two measures in particular introduce water, h eat, and foreign material requirements that have 
no bearing on the safety of the product and whic h a foreign supplying government should not be 
expected to guarantee.   Quality issues are primar ily matters for resolution between buyer and seller 
on commercial sales.  Please indicate when China will rescind these requirements, not only for the 
two identified regulations, but  also as general practice. 
 
6. China's fresh and frozen poultry regulation (GB16869-2002), notified on 9 August 2002 as 
G/TBT/N/CHN/6, establishes a zero tolerance limit fo r the presence of Salmonella bacteria in raw, 
uncooked products.  The regulation was published wit hout any accompanying public health risk data 
to support the establishment of such a restrictive me asure.  Current science indicates that the complete 
elimination of enteropathogenic bacteria on raw meat and poultry products is unachievable without 
first subjecting such products to a process of irradiation.  
(a) When will China provide the risk  data to support the standard? 
 
(b) What evidence can China provide to doc ument that, in accordance with its WTO/SPS 
obligations, the same standard is bei ng applied to domestic as well as imported 
poultry products? 
 Control, inspection and approval procedures  
7. The United States remains concerned about  the quarantine import inspection permit 
procedures provided for in General Administra tion for Quality Supervision, Inspection and 
Quarantine's (AQSIQ) Ordinance 7,  Administrative Measures for th e Entry-Exit Inspection and 
Quarantine for Grains and Feed Stuff (effective 1 March 2002), and AQSIQ Decree 25, 
Administrative Measures for Entry Animal and Plant Quarantine (effective 1 September 2002).  
Specifically, pursuant to Ordinance 7, AQSIQ requires that importers obtain an import inspection 
permit prior to signing an import contract for grain or  feed.  Port quarantine authorities may return or 
destroy any cargoes without a prior import inspection permit.  This import inspection permit is in addition to other import licences, including a tariff-rate quota (TRQ) import certificate (in the case of 
TRQ commodities like wheat) and a safety certificate (in the case of certain commodities), and it does 
not replace inspection at the port.  Similar proced ures apply under Decree 25, pursuant to which 
importers are required to obtain a quarantine permit for a wide range  of animal and plant products 
before an import contract can be signed.  The Unite d States continues to receive reports from traders 
regarding both the burdensome nature of the pr ocedures and selective enforcement by AQSIQ under 
Ordinance 7 and Decree 25. 
 
(a) Please clarify who is eligible to apply for an import inspection permit under 
Ordinance 7.  What standards does AQS IQ employ in accepting or rejecting 
applications? 
 
(b) Please clarify who is eligible to apply fo r a quarantine permit under Decree 25.  What 
standards does AQSIQ employ in accepting or rejecting applications? 
 
(c) Under Article 6 of Ordinance 7, in applying for an import inspection permit, the 
owner of the goods to be imported, or its  agent, must provide information that 
includes details about plant location, stor age capacity, transportation, processing and 
whether prior shipments have been fu lly utilized.  Please explain why this 
information is necessary. 
 
(d) Please explain why AQSIQ requires an insp ection of the facilities of an enterprise 
that processes agricultural commodities, sin ce the State Administration of Industry G/C/W/499 
Page 4  
 
and Commerce also requires an inspecti on of those same facilities.  Will one 
inspection satisfy both requirements?  
 
(e) Please explain why an importer must re-apply for a new import inspection permit 
(rather than have the term of the original  one extended) if it has not entered into a 
commercial contact and imported the commodities covered by the import inspection 
permit by the expiry date. 
 
(f) Please explain why an importer must specify the commodity weight, country of origin 
and port of entry before it has even entered into an import contract.  Please also explain why an importer must reapply for a licence if the commodity weight changes 
by more than ten per cent or if the country of origin or the port of entry changes. 
 8. AQSIQ Decree 73, Items on Handling the Review and Approval for Entry Animal and Plant 
Quarantine , which became effective 1 July 2004, adds  provisions that may create unfavorable 
commercial terms for imports.  While it is uncl ear how this new Decree will be implemented and 
enforced, the vague wording of th e Decree leaves open the possibility for future enforcement actions 
and places liability on the foreign exporter. 
 
(a) Decree 73, in paragraph 4, requires im porters to incorporate the inspection and 
quarantine requirements specified in the quarantine permit into contracts and to 
stipulate that the goods should comply with relevant Chinese laws and food safety regulations.  This requirement appears to  be unnecessary, becau se China's inspection 
and quarantine requirements are fully enfo rceable by Chinese authorities.  Please 
explain the necessity of requiring inspec tion and quarantine requirements to be 
incorporated into commercial contracts. 
 
(b) The requirement of paragraph 4 of Decree 73 appears to oblige the seller of imported 
goods to bear the full commercial risk of non-compliance with China's inspection and 
quarantine requirements.  Customarily in international sales contracts for bulk commodities, parties generally agree that  upon inspection of goods by the exporting 
country and issuance of a certificate of approval by the exporting country, risk 
pertaining to the quality of goods passes to the buyers.  Please explain the basis for changing existing commercial practice. 
 
(c) Decree 73, paragraph 6, requires the name  of the exporter and the supplier to be 
indicated in the application form for th e entry animal and plant quarantine permit 
when applying for agricultural product imports.  It is often difficult to identify the 
name of the supplier (or the origin of the commodity) at the time an importer applies 
for the inspection permit.  Often, the supplie r is changed after the quarantine permit is 
issued.  While the United States understands the need to provide the name of the 
exporter in a transaction, please explain why Ch ina needs the name of  the supplier to 
be indicated in the application form for the quarantine permit for soybeans. 
 
9. On 30 August 2004, China issued a measure exempting certain animal and plant products 
from entry quarantine review and approval, e ffective 1 September 2004.  The measure, AQSIQ 
Announcement 111, appears to exempt certain animal and plant products from the requirement to obtain a quarantine import inspection permit in a dvance of entry and prior to signing an import 
contract.  The United States welcomes China's m odification of its quarantine permit policies in 
Announcement 111 which removed some products fro m the list of products requiring quarantine 
permits, as traders have expressed continued con cern regarding the burdensome nature of the 
quarantine permit procedures.  
  G/C/W/499 
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(a) Announcement 111 lists the generic names of  certain products in the animal products 
and plant products categories that ar e exempted from the quarantine permit 
requirement, but does not provide sufficient detail for the trader or a description of 
these products based on Harmonized Schedule (HS) Number.  Please provide a 
description of exempted products by HS Number. 
 
(b) Announcement 111 indicates that China's decision to exempt certain products is 
based on risk assessments.  Please provide  those risk assessments, along with any 
other analysis or criteria used as a basis for the exemptions. 
 
(c) Were risk assessments performed on other products, i.e., products that are still on the 
list of products requiring quarantine perm its?  If so, please provide those risk 
assessments, along with any other analysis or criteria used. 
 Border Trade  
10. Through Bulletin No. 27 and Bulletin No. 39, issued by the General Administration of 
Customs on 1 May 2003 and 11 June 2003, respectiv ely, China took boric acid and 19 other products 
off the list of imports from border areas that can be nefit from preferential treatment in the form of 
reduced import duties and/or VAT.  At last year's transitional review, China acknowledged that it 
continues to provide preferential treatment to impor ts of other products from border areas and stated 
that it had published lists of these products in several batches.   
(a) Please identify the products that continue to receive preferential border area 
treatment.  For each product, please explain whether it benefits from reduced import 
duties, reduced VAT or both. 
 
(b) Please explain how this preferential tr eatment is consistent with China's WTO 
commitments, as set forth in Part XIV of A nnex 5A to China's Protocol of Accession 
(where China stated that it would eliminate preferential import duties for border trade) and paragraph 2(A) of China's Protocol of Accession (where China extended 
its obligations under the WTO Agreement a nd the commitments that it made in its 
Protocol of Accession to border trade regi ons as part of its commitment to apply 
uniformly its trade regime). 
 
Transparency 
 
11. The Chinese Government utilizes numerous offici al journals to invite comments on the drafts 
of prospective WTO-related laws , regulations and other measures and to announce the issuance of 
final ones.  Has China considered  consolidating these publications into a single publication?  If so, 
when might China do so? 
 
Government Procurement 
 12. Nearly three years ago, in paragraph 341 of the Working Party Report
2 accompanying its 
Protocol of Accession, China committed to initia te negotiations for China's accession to the WTO's 
Government Procurement Agreement (GPA) "as soon  as possible."  We understand that, in late 2003, 
China set up a working group to study the possibili ty of initiating GPA negotiations.  What is the 
status of the working group's work?  Has Ch ina decided on any timetable for initiating GPA 
negotiations? 
__________ 
                                                      
2 WT/ACC/CHN/49.