RESTRICTED WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/ACC/SPEC/CHN/1/Rev.3
11 September 2000
(00-3500)
Working Party on the
Accession of ChinaOriginal:  English/
anglais/
inglés
DRAFT REPORT OF THE WORKING PARTY ON THE
ACCESSION OF CHINA TO THE WTO1
Revision
Following the Chairman's remarks at the conclusion of the Eleventh Meeting of the Working
Party on 27 July 2000, this further revision of the Draft Report of the Working Party on the Accession
of China to the WTO is being circulated on the Chairman's own responsibility.  This revision attempts
to take into account developments during the Eleventh Meeting and is submitted to the Working Party
for the purpose of facilitating further discussions.
Groupe de travail del'accession de la Chine
PROJET DE RAPPORT DU GROUPE DE TRAVAIL DE
L'ACCESSION DE LA CHINE À L'OMC
1
Révision
Suite aux remarques formulées par le Président à l'issue de la onzième réunion du Groupe de
travail le 27 juillet 2000, cette nouvelle révision du projet de rapport du Groupe de travail del'accession de la Chine à l'OMC est distribuée sous la responsabilité du Président.  Cette révision vise
à tenir compte des faits nouveaux intervenus au cours de la onzième réunion du Groupe de travail et
est soumise au Groupe pour faciliter la suite des débats.
Grupo de Trabajo sobre laAdhesión de China
PROYECTO DE INFORME DEL GRUPO DE TRABAJO
SOBRE LA ADHESIÓN DE CHINA A LA OMC
1
Revisión
Como consecuencia de las observaciones formuladas por el Presidente al concluir la
undécima reunión del Grupo de Trabajo del 27 de julio de 2000, se distribuye esta nueva revisión delproyecto de informe del Grupo de Trabajo s obre la Adhesión de China a la OMC bajo la
responsabilidad del Presidente.  La presente revisión tiene por objeto tener en cuenta los nuevos
acontecimientos que se han producido durante la undécima reunión y se somete al Grupo de Trabajo
con el fin de facilitar la continuación de los debates.
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/ACC/SPEC/CHN/1/Rev.3
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TABLE OF CONTENTS
I. INTRO DUCTION ................................................................................................................. ...1
1. DOCUMENTATION  PROVIDED .........................................................................................1
2. INTRODUCTORY STATEMEN TS.......................................................................................1
II. ECONOMIC POLICIES..........................................................................................................31. Non-discrimination (including national treatment)...............................................................3
2. Monetary and Fiscal Policy................................................................................................... ...6
3. Foreign Exchange and Payments ............................................................................................7
4. Balance-of-Payments Measures.............................................................................................10
5. Investment Regime ............................................................................................................ .....11
6. State-Owned and State-Invested Enterprises.......................................................................11
7. Pricing Policie s ............................................................................................................. ...........13
8. Competitio n Policy........................................................................................................... .......15
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES....................................15
1. Power of Executive, Legislative and Judicial Branches of Government............................15
2. Authority of Sub-Central Governments ...............................................................................16
3. Uniform Administration of the Trade Regime.....................................................................174. Judicial Review .............................................................................................................. .........18
IV. POLICIES AFFECTING TRADE IN GOODS ...................................................................19
A. T
RADING RIGHTS .....................................................................................................................19
1. Designated Trading........................................................................................................... ......20
B. IMPORT REGULATION ......................................................................................................22
1. Ordinary Customs Duties...................................................................................................... .22
2. Other Duties and Charges..................................................................................................... .23
3. Rules of  Orig in .............................................................................................................. ..........23
4. Fees and Charges for Services Rendered..............................................................................24
5. Application of Internal Taxes to Imports .............................................................................256. Tariff Exemptions............................................................................................................ .......25
7. Tariff Rate  Quotas ........................................................................................................... .......27
8. Quantitative Import Restrictions, including Prohibitions and Quotas..............................29
9. Import Licensing............................................................................................................. ........32
10. Customs Valuation........................................................................................................... .......34
11. Other Customs Formalities................................................................................................... .35
12. Preshipment Inspec tion...................................................................................................... ....35
13. Anti-Dumping, Countervailing Duties..................................................................................36
14. Safeguards .................................................................................................................. .............39
C. EXPORT REGULATIONS ...................................................................................................39WT/ACC/SPEC/CHN/1/Rev.3
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1. Customs Tariffs, Fees and Charges for Services Rendered, Application of
Internal Taxes to Exports...................................................................................................... .39
2. Export Licensing............................................................................................................. ........39
3. Export Restrictions .......................................................................................................... .......40
4. Export Subsidies ............................................................................................................. ........41
D. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS .........................41
1. Taxes and Charges Levied on Imports and Exports ...........................................................41
2. Industrial Policy, including Subsidies...................................................................................42
3. Technical Barriers to Trade.................................................................................................. .45
4. Sanitary and Phytosanitary Measures..................................................................................50
5. Trade-Related Investment Measures ....................................................................................50
6. State Trading Entities....................................................................................................... ......51
7. Special Economic Areas ....................................................................................................... ..54
8. Government Procurement......................................................................................................5 5
9. Transit...................................................................................................................... ................56
10. Agricultural  Poli cies ....................................................................................................... ........56
11. Trade in Ci vil Ai rcraft ..................................................................................................... ......57
12. Textiles .................................................................................................................... .................58
13. Measures Maintained  Against China....................................................................................59
14. Transitional Safeguards ..................................................................................................... ....59
15. Transitional Review Mechanism ...........................................................................................60
V. TRADE-RELATED INTELLECTUAL  PROPERTY REGIME.......................................61
VI. POLICIES AFFECTING TRADE IN SE RVICES..............................................................62
1. Licensing.................................................................................................................... ..............62
2. Choice of Partner ............................................................................................................ ........67
3. Modification of the Equity Interest.......................................................................................67
4. Prior Experience Requirement for Establishment in Insurance Sector ............................675. Inspection  Services.......................................................................................................... ........67
6. Market Research.............................................................................................................. .......68
7. Legal Services............................................................................................................... ...........68
8. Schedule of Specific Commitments .......................................................................................68
VII. OTHER ISSUES ............................................................................................................... ......68
1. Notifica tions................................................................................................................ .............68
2. Trade Agreements............................................................................................................. ......68
3. Transparency ................................................................................................................. .........69
VIII. CONCLUSIONS ............................................................................................................... ......72WT/ACC/SPEC/CHN/1/Rev.3
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I. INTRODUCTION
1. At its meeting on 4 March 1987, the Council established a Working Party to examine the
request of the Government of the People's Republic of China ("China") (L/6017, submitted on10 July 1986) for resumption of its status as a GATT contracting party, and to submit to the Councilrecommendations which may include a Draft Protocol on the Status of China.  In a communication
dated 7 December 1995, the Government of China applied for accession to the AgreementEstablishing the World Trade Organization ("WTO Agreement") pursuant to Article XII of the WTOAgreement.  Following China's application and pursuant to the decision of the General Council on31 January 1995, the existing Working Party on China's Status as a GATT 1947 Contracting Partywas transformed into a WTO Accession Working Party, effective from 7 December 1995.  The terms
of reference and the membership of the Working Party are reproduced in document
WT/ACC/CHN/2/Rev.8.
2. The Working Party on China's Status as a Contracting Party met on 20 occasions between
1987 and 1995 under the Chairmanship of H.E. Mr. Pierre-Louis Girard (Switzerland).  The WorkingParty on China's Accession to the WTO Agreement met on _________________ and_________________ under the same Chairman.
1. DOCUMENTATION PROVIDED
3. The Working Party had before it, to serve as a basis for its discussion, a Memorandum on
China's Foreign Trade Regime (L/6125) and questions posed by members of the Working Party on theforeign trade regime of China, together with replies of the Chinese authorities thereto.  In addition, theGovernment of China made available to the Working Party a substantial amount of documentation,which is listed in document WT/ACC/CHN/23.
2. INTRODUCTORY STATEMENTS
4. In statements to the GATT 1947 Working Party and subsequently to the Working Party on
China's Accession to the WTO, the representative of China stated that China's consistent efforts toresume its status as a contracting party to GATT and accession to the WTO were in line with itsobjective of economic reform to establish a socialist market economy as well as its basic nationalpolicy of opening to the outside world.  China believed that its WTO accession would increase itseconomic growth and enhance its economic and trade relations with WTO Members.
5. Members of the Working Party welcomed China's accession to the WTO and considered that
its accession would contribute to a strengthening of the multilateral trading system, enhancing theWT/ACC/SPEC/CHN/1/Rev.3
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universality of the WTO, bringing mutual benefits to China and to the other Members of the WTO,
and ensuring the steady development of the world economy.
6. The representative of China said that China had a territory of 9.6 million square kilometres
and, at the end of 1998 a population of 1.25 billion.  Since 1979, China had been progressively
reforming its economic system, with the objective of  establishing and improving the socialist market
economy.  The reform package introduced in 1994, covering the banking, finance, taxation,investment, foreign exchange ("forex") and foreign trade sectors, had brought about majorbreakthroughs in China's socialist market economy.  State-owned enterprises had been reformed by aclear definition of property rights and responsibilities, a separation of government from enterprise,and scientific management.  A modern enterprise system had been created for the state-owned sector,and the latter was gradually getting on the track of growth through independent operation, responsiblefor its own profits and losses.  A nation-wide unified and open market system had been developed.An improved macroeconomic regulatory system used indirect means and market forces to play a
central role in economic management and the allocation of resources.  A new tax and financial system
was functioning effectively.  Financial policy had been separated from commercial operations of the
central bank, which now focussed on financial regulation and supervision.  The exchange rate of theChinese currency Renminbi (also "RMB") had been unified and remained stable.  The Renminbi hadbeen made convertible on current account.  Further liberalization of pricing policy had resulted in themajority of consumer and producer products being subject to market prices.  The market now played amuch more significant role in boosting supply and meeting demand.
7. The representative of China further noted that as a result, in 1999, the Gross Domestic
Product (GDP) of China totaled RMB 8.2054 trillion yuan (approximately US$ 990 billion).  In 1998,
the net per capita income for rural residents was RMB 2,160 yuan (approximately US$ 260), and theper capita dispensable income for urban dwellers was RMB 5,425 yuan (approximately US$ 655).  Inrecent years, foreign trade had grown substantially.  In 1999, total imports and exports of goodsreached US$ 360.65 billion, of which exports stood at US$ 194.93 billion, and imports, US$ 165.72billion. Exports from China in 1998 accounted for 3.4% of the world's total.
8. The representative of China stated that although important achievements had been made in its
economic development, China was still a developing country and therefore should have the right toenjoy all the special and preferential treatment accorded to developing country Members pursuant to
the WTO Agreement.
9. In response, some members of the Working Party indicated that because of the significant
size, rapid growth and transitional nature of the Chinese economy, a pragmatic approach should beWT/ACC/SPEC/CHN/1/Rev.3
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taken in determining China's need for recourse to transitional periods and other special provisions in
the WTO agreements available to developing country WTO Members.  Each agreement and China'ssituation should be carefully considered and specifically addressed.
10. Many members of the Working Party expressed their interest in carrying out bilateral market
access negotiations with China with respect to industrial and agricultural products, and initial
commitments in services.  The representative of China stated that China was keen to undertake suchnegotiations with interested Working Party members.
11. Some members of the Working Party stated that in addition to undertaking market access
negotiations in goods and services, close attention should also be paid to China's multilateralcommitments, in particular China's future obligations under the Multilateral Agreements on Trade inGoods and the General Agreement on Trade in Services ("GATS").  This was of vital importance toensure that China would be able to take full benefit of WTO membership as quickly as possible, aswell as to ensure that the value of any market access conditions undertaken were not adversely
affected by inconsistent measures such as some types of non-tariff measures.  The representative of
China stated that the achievement of balance between rights and obligations was the basic principle inits negotiation of WTO accession.
12. Some members of the Working Party expressed concern over discrepancies in statistical
information supplied by the Government of China on trade volume/value.  Members and Chinapursued this issue separately in an Informal Group of Experts on Export Statistics.  The Group ofExperts submitted its report to the Chairman of the Working Party on 30 June 1994.
13. The Working Party reviewed the foreign trade regime of China.  The discussions and
commitments resulting therefrom are contained in paragraphs … below and in the Draft Protocol of
Accession ("Draft Protocol") and in China's Schedules annexed to the Protocol.
II. ECONOMIC POLICIES
1. Non-discrimination (including national treatment)
14. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals and enterprises (whether wholly or partly foreignfunded).  Those members stated that China should enter a commitment to accord non-discriminatorytreatment to all foreign individuals and enterprises and foreign-funded enterprises in respect of theprocurement of inputs and goods and services necessary for production of goods and the conditionsunder which their goods were produced, marketed or sold, in the domestic market and for export.  Inaddition, those members said that China should also enter a commitment to guarantee non-WT/ACC/SPEC/CHN/1/Rev.3
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discriminatory treatment in respect of the prices and availability of goods and services supplied by
national and sub-national authorities and public or state enterprises, in areas including transportation,energy, basic telecommunications, other utilities and factors of production.
15. Some members of the Working Party also raised concerns over China's practice of
conditioning or imposing restrictions upon participation in the Chinese economy based upon the
nationality of the entity concerned.  Those members in particular raised concerns over such practicesin relation to the pricing and procurement of goods and services, and the distribution of import andexport licences.  Members of the Working Party requested that China enter into a commitment not tocondition such practices on the nationality of the entity concerned.
16. In response, the representative of China emphasized the importance of the commitments that
the government was undertaking on non-discrimination.  The representative of China noted, however,that any commitment to provide non-discriminatory treatment to Chinese enterprises, includingforeign-funded enterprises, and foreign enterprises a nd individuals in China, would be subject to other
provisions of the Draft Protocol and, in partic ular, would not prejudice China's rights under the
GATS, China's Schedule of Specific Commitments or commitments undertaken in relation to trade-related investment measures.
17. The representative of China further confirmed that China would provide the same treatment to
Chinese enterprises, including foreign-funded enterprises, and foreign enterprises and individuals inChina.  China would eliminate dual pricing practices  as well as differences in treatment accorded to
goods produced for sale in China in comparison to those produced for export.  The Working Partytook note of these commitments.
18. The representative of China confirmed that, consistent with China's rights and obligations
under the WTO Agreement and the Draft Protocol, China would provide non-discriminatory treatmentto other WTO Members, in particular with respec t to any benefit accorded to Members of the WTO
that were separate customs territories.  The Working Party took note of this commitment.
19. Members of the Working Party expressed concern about certain provisions of Chinese laws,
regulations, administrative notices and other requirements which could, directly or indirectly, result inless favourable treatment of imported products in contravention of Article III of the GeneralAgreement on Tariffs and Trade ("GATT 1994").  Such requirements included product registrationand certification, internal taxation, price and profit controls and all distinct forms of licensing for
imports, and distribution or sale of imported goods.  Even where such requirements existed in relation
to domestically produced goods, Members re-iterated that any de facto  or de jure less favourableWT/ACC/SPEC/CHN/1/Rev.3
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treatment of imported goods had to be eliminated in order to ensure full conf ormity with the principle
of national treatment.
20. Some members of the Working Party drew China's attention to the variety of types of
requirements which could contravene GATT Article III. Specific reference was made to the
procedures, charges and conditions for granting of business licences, whether to import, distribute, re-
sell or retail goods of non-Chinese origin.  Reference was also made to taxes and fiscal provisionswhose impact depended, directly or indirectly, upon the Chinese or non-Chinese origin of the goodsimported or traded.  Those members drew the attention of China to its obligation to ensure thatproduct testing and certification requirements, including procedures for in situ  inspections, posed no
greater burden – whether financial or practical - on goods of non-Chinese origin than on domestic
goods.  Those members underlined that technical assessment procedures and standards, includingsafety and other compliance requirements, had to respect the terms of the WTO Agreement onTechnical Barriers to Trade ("TBT Agreement") as well as GATT Article III.
21. The representative of China confirmed that the full respect of all laws, regulations and
administrative requirements with the principle of non-discrimination between domestically producedand imported products would be ensured and enforced by the date of China's accession to the WTO.The representative of China declared that, by accession, China would repeal and cease to apply allsuch existing laws, regulations and other measures whose effect was inconsistent with WTO rules onnational treatment.  This commitment was made in relation to final or interim laws, administrative
measures, rules and notices, or any other form of stipulation or guideline. The Working Party tooknote of these commitments.
22. In particular, the representative of China confirmed that measures would be taken at national
and subnational level, including repeal or modification of legislation, to provide full GATT nationaltreatment in respect of laws, regulations and other measures applying to internal sale, offering for
sale, purchase, transportation, distribution or use of the following:
- After sales service (repair, maintenance and assistance), including any conditions applying to
its provision, such as the MOFTEC 3rd Decree of 6 September 1993, imposing mandatory
licensing procedures for the supply of after-sales service on various imported products;
- Pharmaceutical products, including regulations, notices and measures which subjected
imported pharmaceuticals to distinct procedures and formulas for pricing and classification,
or which set limits on profit margins attainable and imports, or which created any other
conditions regarding price or local content which could result in less favourable treatment ofimported products;WT/ACC/SPEC/CHN/1/Rev.3
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- Cigarettes, including unification of the licensing requirements so that a single licence
authorized the sale of all cigarettes, irrespective of their country of origin, and elimination of
any other restrictions regarding points of sale for imported products, such as could beimposed by the China National Tobacco Corporation ("CNTC"). It was understood that in the
case of cigarettes, China could avail itself of a transitional period of two years to fully unify
the licensing requirements.  Immediately upon accession, and during the two year transitionalperiod, the number of retail outlets selling imported cigarettes would be substantiallyincreased throughout the territory of China;
- Spirits, including requirements applied under China's "Administrative Measures on Imported
Spirits in the Domestic Market", and other provisions which imposed distinct criteria and
licensing for the distribution and sale of different categories of spirits, including unification ofthe licensing requirements so that a single licence authorized the sale of all spirits irrespectiveof their country of origin;
- Chemicals, including registration procedures applicable to imported products, such as those
applied under China's "Environmental Control Regulations for Initial Imports of Chemical
Products and Imports and Export s of Toxic Chemical Products";
- Boilers and pressure vessels, including certification and inspection procedures which had to
be no less favourable than those applied to goods of Chinese origin, and fees applied by the
relevant agencies or administrative bodies, which had to be equitable in relation to thosechargeable for like products of domestic origin.
The representative of China stated that in the cases of pharmaceuticals, spirits and chemicals cited
above China would reserve the right to use a transitional period of one year from the date of accession
in order to amend or repeal the relevant legislation.  The Working Party took note of thesecommitments.
2. Monetary and Fiscal Policy
23. The representative of China stated that through the reform and opening up in the last two
decades, China had established a fiscal management system which was compatible with the principlesof a market economy.  With respect to fiscal revenue, a taxation system with a value-added tax as the
main element had been established since the taxation reform in 1994. With respect to fiscal
expenditure, over recent years the government had, in line with the public fiscal requirement generallyexercised by market economies, strengthened its adjustment of the structure of expenditure and givenpriority to public needs so as to ensure the normal operations of the government.WT/ACC/SPEC/CHN/1/Rev.3
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24. The representative of China further stated that in recent years, while pursuing proactive fiscal
policy, China had implemented proper monetary policy and had taken a series of adjusting and reformmeasures which included lowering the interest rate for loans from financial institutions, improving thesystem of required deposit reserves and lowering the ratio of required reserves, positively increasing
the input of base money and encouraging the commercial banks to expand their credit.
25. In respect of future fiscal policy, the Government of China would further improve its taxation
system and would continue to improve the efficiency of fiscal expenditure through implementingreform measures such as sectoral budget, centralized payment by the national treasury and zero basebudget, as well as improving management of fiscal expenditure. With respect to future monetarypolicy, the central bank would continue to pursue a prudent policy, maintain the stability of RMB,promote interest rate liberalization and establish a modern commercial banking system.
3. Foreign Exchange and Payments
26. Some members of the Working Party raised concerns about China's use of forex controls to
regulate the level and composition of trade in goods and services.  In response, the representative ofChina stated that its system of forex was undergoing rapid change.  Significant moves had been takento reform, rationalize and liberalize the forex market.  The practice of multiple exchange rates in swapcentres had been abolished.  China had already unified its forex market and removed many of therestrictions on the use of forex.  Some members of the Working Party stated that China shouldundertake appropriate commitments on its reform of forex.
27. In response, the representative of China stated that China was a member of the International
Monetary Fund ("IMF").  The purpose of China's forex reform was to gradually reduce administrativeintervention and increase the role of market forces.  From 1979, a forex retention system was appliedin China, although forex swap was gradually developing.  In early 1994, official RMB exchange rateswere unified with the market rates. The banking exchange system was adopted and a nationwideunified inter-bank forex market was established, with conditional convertibility of the Renminbi oncurrent accounts.  Since 1996, foreign investment ente rprises ("FIEs") were also permitted into the
banking exchange system, and the remaining exchange restrictions on current accounts wereeliminated. On 1 December 1996, China had formally accepted the obligations of Article VIII,
Sections 2, 3, and 4 of the IMF's Articles of Agreement, removing exchange restrictions on current
account transactions.  Accordingly, since then the Renminbi had been fully convertible on currentaccounts.
28. The representative of China stated that the State Administration of Foreign Exchange
("SAFE") was under the auspices of the People's Bank of China ("PBC"), and was the administrativeWT/ACC/SPEC/CHN/1/Rev.3
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organ empowered to regulate forex.  Its main functions were to monitor and advise on balance-of-
payments and forex matters.  SAFE was also requir ed to draft appropriate regulations and monitor
compliance.  He further noted that domestic and foreign banks, and financial institutions could engagein forex business, with the approval of the PBC.
29. In response to requests from members of the Working Party for further information, the
representative of China added that for forex payments under current accounts, domestic entities(including FIEs) could purchase forex at market exchange rates from designated banks or debit theirforex accounts directly upon presentation of valid documents.  For payments such as pre-payment,commission, etc., exceeding the proportion or limit, the entities could also purchase forex from thebanks upon meeting the bona fide  test administered by SAFE.  Forex for personal use by individuals
could be purchased directly from the banks upon presentation of valid documents (within a specifiedlimit).  For amounts exceeding the limit, individuals able to prove their need for additional forex
could purchase it from the banks.  He also noted that current account forex receipts owned by
domestic entities had to be repatriated into China, some of which could be retained and some sold to
the designated banks at market rates.  A verification system for forex payment (imports) and forexreceipt (exports) had also been adopted.
30. Concerning the exchange rate regime in particular, the representative of China noted that
since the unification of exchange rates on 1 January 1994, China had adopted a single and managedfloating exchange rate regime based on supply and demand.  PBC published the reference rates ofRMB against the US dollar, the HK dollar and Japanese yen based on the weighted average prices offorex transactions at the interbank forex market during the previous day's trading. The buying and
selling rates of RMB against the US dollar on the inter-bank forex market could fluctuate within 0.3%
of the reference rate. For the HK dollar and Japanese yen, the permitted range was 1%.   Designatedforex banks could deal with their clients at an agreed rate.  Under such contracts the exchange rate ofthe US dollar was required to be within 0.15% of the reference rate, whereas for the HK dollar andJapanese yen, the permitted range was 1%.  The exchange rates for other foreign currencies werebased on the rates of RMB against the US dollar and cross-exchange rates of other foreign currencyon the international market. The permitted margin  between the buying and selling rate could not
exceed 0.5%.
31. The representative of China further noted that since 1 January 1994, designated forex banks
had become major participants in forex transactions.  On 1 April 1994, a Chinese Foreign Exchange
Trading System was set up in Shanghai and branches were opened in dozens of cities.  The ShanghaiForeign Exchange Trading System had adopted a system of membership, respective quotation,concentrated trading and forex market settlement.  Designated forex banks dealt on the inter-bankWT/ACC/SPEC/CHN/1/Rev.3
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market according to the turnover position limit on ba nking exchange stipulated by SAFE and covered
the position on the market. Depending on its macro-economic objectives, the PBC could intervene inthe forex open market in order to regulate market supply and demand, and maintain the stability of theRMB exchange rate.
32. The representative of China noted that since 1 July 1996, forex dealing of the FIEs was
carried out through the banking exchange system.  He further noted that to encourage foreign directinvestment, China had granted national treatment to FIEs in exchange administration.  Accordingly,
FIEs were allowed to open and hold forex settlement accounts to retain receipts under currentaccounts, up to a maximum amount stipulated by SAFE.  Receipts in excess of the maximum amountwere required to be sold to designated forex bank s.  No restrictions were maintained on the payment
and transfer of current transactions by FIEs, a nd FIEs could purchase forex from designated forex
banks or debit their forex accounts for any payment under current transactions, upon the presentationof valid documents to the designated forex banks or SAFE for the bona fide test.  FIEs could also
open forex accounts to hold foreign-invested capital, and they could sell from these accounts upon the
approval of SAFE.  FIEs  could also borrow forex directly from domestic and overseas banks, but
were required to register with SAFE afterwards, and obtain approval by SAFE for debt repayment and
services.  FIEs could make payments from their forex accounts or in forex purchased from designatedforex banks after liquidation, upon approval by SAFE according to law.
33. The representative of China further noted that the laws and regulations mentioned above
were:  Law of the People's Republic of China on Chinese-Foreign Equity Joint Venture;  Law of thePeople's Republic of China on Chinese-Foreign Contractual Joint Venture;  Regulations on the
Exchange System of the People's Republic of China; and Regulations on the Sale and Purchase of and
Payment in Foreign Exchange.
34. The representative of China stated that significant steps had been taken to reform, rationalize
and liberalize its forex market.  In particular, China had unified its forex market and achieved currentaccount convertibility.  In the light of these advances, China would provide complete information onits exchange controls in the context of the transi tional review mechanism and such other information
as was deemed necessary in the context of the transitional review mechanism.  The Working Partytook note of this commitment.
35. The representative of China stated that China would implement its obligations with respect to
forex matters in accordance with the provisions of the WTO Agreement and related declarations and
decisions that concerned the IMF.  In particular, China confirmed that it would not subject individualrequests for forex for the making of payments and transfers  for current international transactions,WT/ACC/SPEC/CHN/1/Rev.3
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including the issuance of credit or credit guarantees for current international transactions (e.g., letters
of credit; direct loans; guarantees of loans by financial institutions or other entities; or insurance offinancing by financial institutions or other entities), to any form of approval or restriction (including arequirement for the presentation of an invoice), in a manner inconsistent with its obligations under the
Articles of Agreement of the IMF.  The Working Party took note of this commitment.
4. Balance-of-Payments Measures
36. Some members of the Working Party stated that China should apply balance-of-payments
("BOPs") measures only under the circumstances provided for in the WTO Agreement and not as ajustification for imposition of restrictions on imports for other protectionist purposes.  Those membersstated that measures taken for BOPs reasons should have the least trade disruptive effect possible and
should be limited to temporary import surcharges, import deposit requirements or other equivalent
price-based trade measures, and those measures should not be used to provide import protection forspecific sectors, industries or products.
37. Those members further stated that any such measures should be notified pursuant to the
Understanding on the Balance-of-Payments Provis ions of the GATT 1994 ("BOPs Understanding")
and to the General Council not later than the im position of the measures, together with a time
schedule for their elimination and a programme of external and domestic policy measures to be usedto restore BOPs equilibrium.  Those members also stated that following deposit of such a notification,the Committee on Balance-of-Payments Restrictions ("BOPs Committee") should meet to examine
the notification.  It was noted that paragraph 4 of the BOPs Understanding would be available to
China in the case of "essential products".  Some members stated that the BOPs Committee shouldreview the operation of any BOPs measures taken by China on an annual basis, if so requested byChina or a WTO Member.
38. Some other members considered that, in respect of measures taken for BOP purposes, China
should enjoy the same rights as those accorded to other developing country WTO Members, asprovided in GATT Article XVIII:B and the BOPs Understanding.
39. In response, the representative of China stated that China considered that it should have the
right to make full use of WTO BOPs provisions to protect, if necessary, its BOPs situation.  The
representative of China confirmed that China would fully comply with the provisions of the GATT
1994 and the BOPs Understanding.  Further to su ch compliance, China would give preference to
application of price-based measures as set forth in the BOPs Understanding.  If China resorted tomeasures that were not price-based, it would transform such measures into price-based measures assoon as possible.  Any measures taken would not exceed what was necessary to address the BOPsWT/ACC/SPEC/CHN/1/Rev.3
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situation and would be maintained only so long as considered necessary by the BOPs Committee.
China confirmed that measures taken for BOPs reasons would only be applied to control the generallevel of imports and not to protect specific sectors, industries, or products.  The Working Party tooknote of these commitments.
5. Investment Regime
40. The representative of China stated that since the inception of the reform and opening up
policy in the late 1970's, China had carried out a series of reforms of its investment regime. Thehighly centralized investment administration under the planned economy had been progressivelytransformed into a new pattern of diversification of investors, multi-channelling of capital sources anddiversification of investment modalities. The gove rnment encouraged foreign investment into the
Chinese market and had uninterruptedly opened and expanded the scope for investment. At the same
time, the Government of China also encouraged the development of the non-state-operated economyand was speeding up the opening of areas for non-st ate investment. With China's programme in the
establishment of its market economy, the construction projects of various enterprises utilizing freecapital and financed by the credit of the enterprise would be fully subject to the decision-making ofthe enterprise concerned and at their own risk. The commercial banks' credit activities to all kinds ofinvestors would be based on their own evaluation and decision-making, and would be at their own
risk.  The business activities of intermediate invest ment agencies would be fully subject to the market
and would provide service at the instruction of the investors. These agencies would break up their
administrative relations with government agencies and the service activities financed by the
government would also be subject to the terms and conditions agreed in the contracts concerned.
6. State-Owned and State-Invested Enterprises
41. The representative of China stated that the state-owned enterprises of China basically
operated in accordance with rules of market economy.  The government would no longer directlyadminister the human, finance and material resources, and operational activities such as production,
supply and marketing.  The prices of commodities produced by state-owned enterprises were decided
by the market and resources in operational areas were fundamentally allocated by the market.  Thestate-owned banks had been commercialized and the central revenue would no longer be used toinvest in these enterprises.  China was furthering its reform of state-owned enterprises andestablishing a modern enterprise system.
42. In light of the role that state-owned and state-invested enterprises played in China's economy,
some members of the Working Party expressed concer ns about the continuing governmental influence
and guidance of the decisions and activities of such enterprises relating to the purchase and sale ofWT/ACC/SPEC/CHN/1/Rev.3
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goods and services. Such purchases and sales should be based solely on commercial considerations,
without any governmental influence or application of discriminatory measures.  In addition, those
members indicated the need for China to clarify its understanding of the types of activities that wouldnot come within the scope of Article III:8(a) of GATT 1994.  For example, any measure relating to
state-owned and state-invested enterprises importing materials and machinery used in the assembly of
goods, which were then exported or otherwise made available for commercial sale or use or for non-governmental purposes, would not be considered to be a measure relating to government procurement.
43. The representative of China emphasized the evolving nature of China's economy and the
significant role of FIEs and the private sector in the economy.  Given the increasing need anddesirability of competing with private enterprises in the market, decisions by state-owned and state-
invested enterprises had to be based on commercial considerations as provided in the WTOAgreement.
44. The representative of China further confirmed that China would ensure that all state-owned
and state-invested enterprises would make purchases and sales based solely on commercial
considerations, e.g. price, quality, marketability and availability, and that the enterprises of otherWTO Members would have an adequate opportunity to compete for sales to and purchases from theseenterprises on non-discriminatory terms and conditions.  In addition, the Government of China wouldnot influence, directly or indirectly, commercial decisions on the part of state-owned or state-investedenterprises, including the quantity, value or country of origin of any goods purchased or sold, exceptin a manner consistent with the WTO Agreement.  The Working Party took note of thesecommitments.
45. The representative of China confirmed that, without prejudice to China's rights in future
negotiations in the Government Procurement Agreement, all laws, regulations and measures relatingto the procurement by state-owned and state-invested enterprises of goods and services forcommercial sale, production of goods or supply of services for commercial sale, or for non-governmental purposes would not be considered to be laws, regulations and measures relating togovernment procurement. Thus, such purchases or sales would be subject to the provisions ofArticles II, XVI and XVII of the GATS and Arti cle III of the GATT 1994.  The Working Party took
note of this commitment.
46. Certain members of the Working Party expressed concern about laws, regulations and
measures in China affecting the transfer of technol ogy, in particular in the context of investment
decisions.  Moreover, these members expressed concern about measures conditioning the receipt ofbenefits, including investment approvals, upon t echnology transfer.  In their view, the terms andWT/ACC/SPEC/CHN/1/Rev.3
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conditions of technology transfer, particularly in the context of an investment, should be agreed
between the parties to the investment without gove rnment interference.  The government should not,
for example, condition investment approval upon technology transfer.
47. The representative of China confirmed that China would only impose, apply or enforce laws,
regulations or measures relating to the transfer of technology, production processes, or other
proprietary knowledge to an individual or enterprise in its territory that were not inconsistent with theWTO Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") andthe Agreement on Trade-Related Investment Measures ("TRIMs Agreement").  China confirmed thatthe terms and conditions of technology transfer, production processes or other proprietary knowledge,particularly in the context of an investment, would be agreed between the parties to the investment.The Working Party took note of these commitments.
7. Pricing Policies
48. Some members of the Working Party noted that China had made extensive use of price
controls, for example in the agricultural sector.  Those members requested that China undertakespecific commitments concerning its system of state pricing.  In particular, those members stated thatChina should allow prices for traded goods and services in every sector to be determined by marketforces, and multi-tier pricing practices for such goods and services should be eliminated.  Thosemembers noted, however, that the goods and services listed in Annex 4 to the Draft Protocol wereexpected to remain subject to price controls, co nsistent with the WTO Agreement, in particular
Article III of the GATT 1994 and Annex 2, paragraphs 3 and 4, of the Agreement on Agriculture.
Those members noted that except in exceptional circumstances, and subject to notification to theWTO Secretariat, price controls should not be extended to goods or services beyond those listed inAnnex 4, and China should make its best efforts to reduce and eliminate those controls.  They alsoasked that China publish in the appropriate official journal the list of goods and services subject tostate pricing and changes thereto.
49. China confirmed that it would publish in the official journal the list of goods and services
subject to state pricing and changes thereto, together with price-setting mechanisms and policies.  TheWorking Party took note of these commitments.
50. Members expressed the view that price controls and state pricing in China also encompassed
"guidance pricing" and  regulation of the range of profits that enterprises could enjoy.  Such policiesand practices would also be subject to China's commitments.  In their view, price controls should beadopted only in extraordinary circumstances and should be removed as soon as the circumstancesjustifying their adoption were addressed.WT/ACC/SPEC/CHN/1/Rev.3
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51. The representative of China said that China currently applied a mechanism of market-based
pricing under macro-economic adjustment.  He noted that national treatment was applied in the areasof government pricing for all imported goods.  There were presently three types of prices:government price, government guidance price and ma rket-regulated price.  The government price was
set by price administration authorities and could not be changed without the approval of these
authorities. Products and services subject to government pricing were those having a direct bearing onthe national economy and the basic needs of the people's livelihood, including those products thatwere scarce in China.
52. He added that the government guidance price mechanism was a more flexible form of pricing.
The price administration authorities stipulated either a basic price or floating ranges. The floatingrange of guidance pricing was generally 5% to 15%.  Enterprises could, within the limits of theguidance and taking into account the market situation, make their own decisions on prices.  Withmarket-regulated prices, enterprises were free to set prices in accordance with supply and demand to
the extent permitted by generally applicable laws, regulations and policies concerning prices.
53. The representative of China stated that in formulating government prices and government
guidance prices, the following criteria were taken into account:  normal production costs, supply anddemand situation, relevant government policies and prices of related products. When fixing prices ofconsumer goods, consideration was given to the limits of consumers' purchasing power.  He notedthat due to the continued reform of China's price system, the share of government prices had droppedsubstantially and that of market-regulated prices had increased;  of social retailing products, the shareof government prices was about 4%, that of govern ment guidance prices 1.2%, and that of market-
regulated prices 94.7%.  For agricultural products, the share of government prices was 9.1%,
government guidance prices 7.1%, and market-regulated 83.3%.  For production inputs, the share ofgovernment prices was 9.6%, that of government guidance prices 4.4%, and market-regulated prices86%.  The share of directly government-controlled prices had been much reduced.  The Governmentof China considered that China's price system was becoming increasingly rationalized, creating arelatively fair marketplace for all enterprises to compete on an equal footing.
54. The representative of China recalled that Annex 4 of the Draft Protocol contained a
comprehensive listing of all products and services presently subject to government guidance pricingand government pricing.
55. The representative of China confirmed that the official journal providing price information
was the Pricing Monthly of the People's Republic of China, published in Beijing.  It was a monthly
magazine listing all products and services priced by the State.  He further stated that China wouldWT/ACC/SPEC/CHN/1/Rev.3
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continue to further its price reform, adjusting the catalogue subject to state pricing and further
liberalize its pricing policies.
56. The representative of China further confirmed that price controls would not be used for
purposes of affording protection to domestic industries  or services providers.  The Working Party took
note of this commitment.
57. In addition, the representative of China confirmed that China would apply its current price
controls and any other price controls from the entry into force of the Draft Protocol in a WTO-consistent fashion, and would take account of the interests of exporting WTO Members as providedfor in Article III:9 of the GATT 1994.  The Working Party took note of these commitments.
8. Competition Policy
58. The representative of China noted that the Government of China encouraged fair competition
and was against acts of unfair competition of all kinds. The Law of the People's Republic of China onCombating Unfair Competition, promulgated on 2 September 1992 and implemented on1 December 1992, was the basic law to maintain the order of competition in the market. In addition,the Price Law, the Law on Tendering and Bidding, the Criminal Law and other relevant laws alsocontained provisions on anti-monopoly and unfair co mpetition. China was now formulating the Law
on Anti-Monopoly.
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
1. Power of Executive, Legislative and Judicial Branches of Government
59. The representative of China informed members of the Working Party that in accordance with
the Constitution and the Law on Legislation of the People's Republic of China, the National People'sCongress was the highest organ of state power.  Its permanent body was its Standing Committee.  The
National People's Congress and its Standing Committee exercised the legislative power of the State.
They had the power to formulate the Cons titution and laws.  The State Council, i.e., the Central
People's Government of China, was the executive body  of the highest organ of state power. The State
Council, in accordance with the Constitution and relevant laws, was entrusted with the power to
formulate administrative regulations.  The ministries and commissions of the State Council couldissue departmental rules within the jurisdiction of their respective departments and in accordance withthe laws and administrative regulations.  The provincial people's congresses and their standingcommittees could adopt local regulations.  The prov incial governments had the power to make local
government rules.  The National People's Congress and its Standing Committee had the power to
annul the administrative regulations that contradicted the Constitution and laws as well as the localWT/ACC/SPEC/CHN/1/Rev.3
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regulations that contradicted the Constitution, laws and administrative regulations.  The State Council
had the power to annul departmental rules and local government rules that were inconsistent with theConstitution, laws or administrative regulations.  The Government of China believed that thesefeatures of the Chinese legal system would ensure an effective and uniform implementation of the
obligations after China's accession.
60. The representative of China stated that China had been consistently performing its
international treaty obligations in good faith.  According to the Constitution and the Law on the
Procedures of Conclusion of Treaties, the WTO Agreement fell within the category of "importantinternational agreements" subject to the ratification by the Standing Committee of the NationalPeople's Congress. China would ensure that its laws and regulations pertaining to or affecting tradewere in conformity with the WTO Agreement and with its commitments so as to fully perform its
international obligations. For this purpose, China had commenced a plan to systematically revise itsrelevant domestic laws. Therefore, the WTO Agreement would be implemented in an effective and
uniform way after China's accession.
61. In response to questions from some Members, the representative of China stated that pursuant
to Article 142 of the General Principles of Civil Law, if any international treaty concluded or acceded
to by China contained provisions differing from those in China's civil laws, the provisions of the
international treaty would apply, unless the provisions were ones on which China had announcedreservations. for ratification.  Upon ratification by the National People's Congress, the WTOAgreement would have the status of domestic law.
2. Authority of Sub-Central Governments
62. Several members of the Working Party raised concerns about the continued presence of
multiple and overlapping trade instruments used by different levels of government within China.Those members considered that this situation resulted  in a lessening of the security and predictability
of access to the Chinese market.  In addition, some members expressed concerns about the limited
control exercised by the central government over trade measures introduced at the sub-national level.
63. Some members of the Working Party raised concerns in relation to the uniformity of
administration of the foreign trade and economic regi me within China.  In particular, those members
raised concerns about measures taken by sub-national authorities.  In response, the representative ofChina emphasized that the central government had full constitutional authority to ensure compliancewith WTO obligations by both national and sub-national governmental authorities in China.  Somemembers requested that an appropriate commitment be undertaken in this regard by China.WT/ACC/SPEC/CHN/1/Rev.3
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64. In response to questions from members of the Working Party, the representative of China
confirmed that all fiscal, financial and budgetary activities performed by sub-central governmentswould be in compliance with Article III of the GATT 1994.  The Working Party took note of thiscommitment.
65. Some members of the Working Party raised concerns about the limited ability of China's
central government to be sufficiently informed about non-uniform practices and to take necessaryenforcement actions.  Those members stated that China should establish a mechanism by which anyconcerned person could bring to the attention of the central government cases of non-uniformapplication of the trade regime.
3. Uniform Administration of the Trade Regime
66. Members of the Working Party stated that it should be made clear that China would apply the
requirements of the WTO Agreement and its other accession commitments throughout China's entirecustoms territory, including border trade regions, minority autonomous areas, Special EconomicZones ("SEZs"), open coastal cities, economic and technical development zones and other specialeconomic areas.
67. Members of the Working Party also stated that Ch ina should ensure that the provisions of the
WTO Agreement and any additional obligations created by the Draft Protocol were applied uniformlythroughout its entire customs territory, including at the sub-national level.  Members of the WorkingParty also noted that China should administer in a uniform, impartial and reasonable manner all its
laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the
control of forex. In this connection, members of the Working Party requested that China establish amechanism under which individuals and enterprises could bring to the attention of the nationalauthorities cases of non-uniform application of the trade regime.  Members of the Working Party alsonoted that China's laws, regulations and other measures of government entities at the sub-nationallevel would be required to conform to the obligations undertaken in the Draft Protocol and theWTO Agreement.
68. The representative of China confirmed that sub-central entities had no autonomous authority
over issues of subsidies, taxation, trade policy or any other measures covered by WTO provisions.  He
also confirmed that the provisions of the WTO Agreement, including the Draft Protocol, would be
applied uniformly throughout its customs territory, including in SEZs and other areas where specialregimes for tariffs, taxes and regulations were established.  The Working Party took note of thesecommitments.WT/ACC/SPEC/CHN/1/Rev.3
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69. The representative of China further confirmed that the mechanism established pursuant to
Section 2(A) of the Draft Protocol would be operative upon entry into force of the Draft Protocol.  Allindividuals and entities could bring to the attention of central government authorities cases ofnon-uniform application of China's trade regime, including its commitments under the WTO
Agreement and the Draft Protocol. When China's authorities were informed of such cases, relevant
government authorities would act promptly to remedy the situation without requiring affected partiesto petition through the courts, taking into consideration the need to provide a meaningful remedy.The individual or entity making the notification would be informed promptly in writing of any
decision and action taken.  The Working Party took note of these commitments.
4. Judicial Review
70. Some members of the Working Party stated that China should designate independent
tribunals, contact points, and procedures for the prompt review of all administrative actions relating tothe implementation of laws, regulations, judicial decisions and administrative rulings of generalapplication referred to in Article X:1 of the GATT 1994, including administrative actions relating toimport or export licences, non-tariff measures and any other measures within the scope of the WTOAgreement.  Those members stated that notwithstanding Article X:3(c) of the GATT 1994, thetribunals should be independent of the agencies entrusted with administrative enforcement ofprovisions contained in the WTO Agreement.
71. Those members also stated that the administrative actions subject to review should include
measures relating to the availability and distribution of import and export licences, permits or quotas;
application of measures for safeguard or BOPs purpos es or to protect against unfair trade;  and any
other measures within the scope of the WTO Agreement, in particular any actions required to bereviewed under the relevant provisions of the TRIPS Agreement and the GATS.  Such reviewprocedures should include the opportunity for appeal , without penalty, by individuals or enterprises
affected by any administrative action subject to review.  If an initial right of appeal were to anadministrative body, there should be an opportunity for a further appeal to a judicial body.  Anydecision by any appellate body and the reasons therefore would be communicated in writing to theappellant, together with notification of any right to further appeal.
72. Some members of the Working Party expressed concern that China needed to improve its
institutions and procedures for the prompt review of disputes over trade-related matters in China, inparticular with respect to the independence of the administrative and judicial authorities responsiblefor reviewing measures.  These members also sought to ensure that all measures related to the WTO,including forex measures, would be subject to review under Chinese domestic procedures;  inparticular they sought a commitment to cover measures related to services trade and intellectualWT/ACC/SPEC/CHN/1/Rev.3
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property. These members sought explicit confirmation that certain types of measures, such as
decisions relating to statutory inspection and chemical registration, would be subject to judicialreview.
73. The representative of China expressed concern over the expectation of a few members for
China to assume higher obligations than those required by the WTO covered agreements with regard
to judicial review, obligations which no Member in the WTO had ever been required to undertake.The representative of China took the position that such requirements for China would surelyundermine the fundamental principle of non-discrimination of the organization.
74.  The representative of China confirmed that it would revise its relevant laws and regulations
so that its relevant domestic laws and regulations would be consistent with the requirements of allWTO covered agreements on procedures for judicial review of specific administrative actions.  In thisrespect, China would assume its obligations relating to judicial review only to the extent required by
the relevant WTO agreements.  The Working Party took note of this commitment.
75. In response to questions from members, the representative of China confirmed that
administrative actions relating to any measure within the scope of the WTO, including decisionsrelating to national treatment, conformity assessments, grant or denial of a licence to provide a serviceand other matters, would be subject to the pr ocedures established for prompt review under
Section 2(D) of the Draft Protocol, and information on such procedures would be available throughthe enquiry point that China would establish upon accession.  The Working Party took note of thesecommitments.
76. The representative of China confirmed that measures subject to review would include
measures affecting in any way the regulation, control, supply or promotion of transportation and
transportation-related services, insurance and insurance-related services, banking and other financialservices, telecommunications services, distribution services, entertainment services, informationprocessing services, construction and maintenance services, professional services, and retail salesservices.  China undertook to ensure that all such measures would be subject to review.  The WorkingParty took note of this commitment.
IV. POLICIES AFFECTING TRADE IN GOODS
A. T
RADING RIGHTS
77. Members of the Working Party noted that China was in the process of liberalizing the
availability of the right to import and export goods from China, but that such rights were nowrestricted to enterprises in China.  Objective criteria  for the grant of trading rights needed to be agreedWT/ACC/SPEC/CHN/1/Rev.3
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and applied to facilitate implementation of the national treatment provisions in Section 5 of the Draft
Protocol.  Certain members emphasized that upo n accession China would need to apply the same
criteria to foreign enterprises and individuals that  it applied to Chinese enterprises in authorizing
foreign enterprises and individuals to import and export goods, rather than approving the grant of such
rights on a case-by-case basis.  This would ensure that the process of progressive liberalization would
proceed more rapidly and uniformly.
78. Those members noted China's commitment to accord foreign enterprises and individuals,
including those not invested or registered in Chin a, national treatment with respect to obtaining the
right to trade.  Moreover, goods imported or exported by foreign enterprises and individuals should beaccorded national treatment under Article III of GATT 1994, especially paragraph 4 thereof, inrespect of internal sale, offering for sale, purchase, transportation, distribution or use, including theirdirect access to end-users. In respect of goods that would remain subject to designated trading listed in
Annex 2b of the Draft Protocol, China should phase out limitations on the grant of trading rights
pursuant to the schedule in that Annex.  They also stated that China should complete all necessary
legislative procedures to implement these commitments during this transition period.
79. The representative of China stated that the end-users mentioned above referred to the Chinese
enterprises without right to import and/or export. At present, these enterprises imported products fortheir own use through enterprises with the right to import and export.  Three years after China'saccession to the WTO, the right to trade would be liberalized, as a result of which all enterprises inChina would have the right to trade.  Therefore, the end-users at that time would be legal persons ofenterprises which used imported products.  The Working Party took note of these commitments.
1. Designated Trading
80. The representative of China stated that China would adjust and expand its list of enterprises
under its designated trading regime annually during the transition period, leading up to fullimplementation of the commitment contained in Annex 2b. The criteria for enterprise underdesignated trading regime included registered capital, import and export volume and the importvolume of products subject to designated trading in the previous year, bank credit rating and profitsand losses.
81. Members of the Working Party requested that China provide detailed information regarding
the process for enterprises and individuals to qualify to import and export goods.  The need forspecific, objective and automatic criteria for the prompt grant of rights was emphasized.  Existingenterprises should be able to engage in importation and exportation without need to amend their scopeof business or obtain a new business licence, since the approval process could itself delay and form aWT/ACC/SPEC/CHN/1/Rev.3
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barrier to obtaining these important rights.  Members of the Working Party sought assurances that
China's requirements for various licences, such as import business licences, would not adverselyaffect the realization of the right to trade.  Nor should enterprises be required to establish in aparticular form or create separate entities to engage in importing or exporting.
82. The representative of China confirmed that during the three years of transition, China would
progressively liberalize the scope and availability of trading rights in China.  Upon accession, Chinawould eliminate export performance and trade and foreign exchange balancing requirements ascriteria for obtaining or maintaining the right to import and export.  The representative of China alsoconfirmed that any enterprise in China was free to apply for the trading rights and would be grantedsuch rights in accordance with criteria set out in the Foreign Trade Law. The enterprises with trading
rights in China would be permitted to import and export all goods, except for those goods listed inAnnex 2a and Annex 2b of the Draft Protocol.  Th e Working Party took note of these commitments.
83. The representative of China further confirme d that China would grant to any enterprise
possessing the right to trade any product pursuant to Section 5 of the Draft Protocol, the right to
import goods in Annex 2a that were subject to a tariff rate quota ("TRQ") or to an agreed volume ofimports by non-state trading enterprises, except for the quantity of such goods specifically reservedfor importation by state trading enterprises.  Any firm possessing the right to trade pursuant to Section5 of the Draft Protocol would also have the right to import that portion of a TRQ reallocated to non-state trading enterprises pursuant to the agreed rules on TRQ administration.  The representative ofChina also confirmed that for goods in Annex 2a su bject to a TRQ, any enterprise granted the right to
trade, pursuant to Section 5 of the Draft Protocol , would be permitted to import such goods at the out-
of-quota tariff rate.  The Working Party took note of these commitments.
84. Members of the Working Party noted China's commitment that it would phase out the
limitation on the grant of trading rights for goods specified in Annex 2b within three years of entryinto force of its Draft Protocol.  In responding to questions raised by WTO members, therepresentative of China said that China would progressively liberalize the right to trade in such goodsby increasing the number of designated entities permitted to import goods in each of the three years ofthe transition period specified in Annex 2b.  The representative of China added that China wouldextend the right to register as designated importi ng and exporting enterprises for the goods in Annex
2b in each of the first, second and third years after entry into force of its Draft Protocol, to enterprises
that used such goods in the production of finished goods and enterprises that distributed such goods in
China.  At the end of three years, all enterprise s in China and all foreign enterprises and individuals
would be permitted to import and export such goods  throughout the customs territory of China. The
Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
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B. IMPORT REGULATION
1. Ordinary Customs Duties
85. Members of the Working Party welcomed China's decision to bind tariffs for all products in
its schedule on market access for goods.  This action would increase the certainty and predictability ofthis aspect of China's trade regime.  Members also noted the substantial unilateral tariff reductionsmade in many sectors by China in recent years.
86. The representative of China provided members of the Working Party with a copy of the
Customs Import Tariff of the People's Republic of China and related laws and regulations.  He noted
that the Customs Tariff of China was a charge imposed on imported goods. The purpose of levyingtariffs was twofold:  (a) to regulate imports so as to promote and support domestic production;  and(b) to serve as an important source of revenue for the treasury of the central government.  China's
tariff policy was to promote economic reform and opening of the economy.  The basic principles forestablishing duty rates were as follows.  Duty-free or low duty rates were applied to imported goodswhich were needed for the national economy and the people's livelihood but which were not producedsufficiently domestically.  Import duty rates on raw materials were generally lower than those onsemi-manufactured or manufactured products.  For parts or components of machinery, equipment and
instruments which were not produced domestically, or at a sufficiently high standard, the import duty
was lower than the duty on finished products.  Higher duty rates were applied to products which wereproduced domestically or which were considered non-essential for the national economy and thepeople's livelihood.   A higher duty was applied to imported products, the equivalent of which wereproduced domestically and the local manufacturer of which needed protection.
87. The representative of China said that China had adopted the Harmonized Commodity
Description and Coding System (HS) as from 1 January 1992 and joined the International Conventionon the Harmonized Commodity Description and Coding System in the same year.  There were21 sections, 97 chapters and 7062 tariff headings in the Customs Import and Export Tariff of the
People's Republic of China.  Tariff rates were fixed by the State Council. Partial adjustment to the
duty rates was subject to deliberation and final decision by the State Council Tariff Commission.  Thesimple average of China's import duties in 2000 was 16.4%.  Among the 7062 tariff headings, tariffrates for 525 headings were below 5%, 1488 were between 5% (inclusive) and 10% (exclusive), 2022between 10% (inclusive) and 15% (inclusive) and 3027 were above 15%.  Information on tariff ratesfor specific products and import statistical data fo r recent years had been provided to the Working
Party.WT/ACC/SPEC/CHN/1/Rev.3
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88. He also noted that currently there were two columns of import duty rates: general rates and
preferential rates.  The preferential rates applied to imports originating in countries and regions withwhich China had concluded reciprocal tariff agreements, whereas the general rates applied to importsfrom other sources.  The representative of China clarified that the term "HS 2000" was China's own
nomenclature for applied rates, referring to China's specific 8-digit classification in 2000 but based on
the 4-digit HS'96 classification.
89. The representative of China confirmed that upon accession China would participate in the
Information Technology Agreement ("ITA") and would eliminate tariffs on all informationtechnology products as set out in China's schedule.  Furthermore, upon accession, China wouldeliminate all other duties and charges for ITA products.  The Working Party took note of thesecommitments.
90. Certain members of the Working Party expressed particular concerns about tariff treatment in
the auto sector.  In response to questions about the tariff treatment for kits for motor vehicles, China
confirmed that it had no tariff lines for completely knocked-down kits for motor vehicles or semi-
knocked down kits for motor vehicles.  If China cr eated such tariff lines, the tariff rates would be no
more than 10%.  The Working Party took note of this commitment.
91. China undertook bilateral market access negotiations on goods with members of the Working
Party.  The results of those negotiations were contained in the Schedule of Concessions andCommitments on Goods and formed Annex 10 to the Draft Protocol.
2. Other Duties and Charges
92. The representative of China confirmed that China had agreed to bind at zero other duties and
charges in its Schedule of Concessions and Commitments, pursuant to Article II:1(b) of the GATT1994.  The Working Party took note of that commitment.
3. Rules of Origin
93. Some members of the Working Party requested information about the adoption and
application of rules of origin in China, whether in the context of free trade agreements or otherwise,
and also requested China to confirm that its rules of origin for both preferential and non-preferentialtrade complied fully with the WTO Agreement on Rules of Origin.
94. The representative of China noted that the criteria for making the determination of substantial
transformation was:  (a) change in tariff classification of a four-digit tariff line in the Customs ImportWT/ACC/SPEC/CHN/1/Rev.3
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and Export Tariff of the People's Republic of China ("Customs Tariff");  or (b) the value-added
component was 30% or more in the total value of a new product.
95. He further noted that under current arrangements, when an imported product was processed
and manufactured in several countries, the country of origin of the product was determined to be the
last country in which the product underwent substantial transformation.  Substantial transformation
was understood to mean processing which resulted in a change of the four-digit level tariffclassification or an added value (including all co st-related expenditures) exceeding 30% of the total
value.  These rules of origin were applicable to a ll imported products.  The rules of origin applied for
statistical purposes were the same.  However, for statistical purposes, the General CustomsAdministration ("Customs") also recorded count ries of consumption and trading countries.
96. The representative of China stated that China's rules of origin for import and export were non-
preferential rules of origin.  Upon its accession to the WTO, China would implement the Agreementon Rules of Origin.  Once the international harmoni zation of non-preferential rules of origin was
concluded, China would fully adopt the internationally harmonized non-preferential rules of origin.
The Working Party took note of these commitments.
97. The representative of China further stated that China would not use the rules of origin as an
instrument to pursue trade objectives directly or indirectly.  The Working Party took note of thiscommitment.
98. The representative of China confirmed that fr om the date of accession, China's preferential
and non-preferential rules of origin would comply fully with the Agreement on Rules of Origin, andthat a mechanism that met the requirements of Article 2(h) and Annex II, paragraph 3(d) of the
Agreement, which required provision upon request of an assessment of the origin of the import and
outlined the terms under which it would be provided, would be established in China's legal frameworkprior to accession.  The Working Party took note of these commitments.
4. Fees and Charges for Services Rendered
99. Some members of the Working Party expressed concern over an apparent lack of uniformity
of customs fees and charges administered by national and sub-national authorities.  These membersnoted that as a condition of accession China should undertake a commitment to ensure conformity of
such fees and charges with Article VIII of the GATT 1994.  The representative of China confirmed
that China would comply with Article VIII of GATT 1994 in this regard.  The Working Party tooknote of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
Page 25
5. Application of Internal Taxes to Imports
100. Some members of the Working Party expressed concern that some internal taxes applied to
imports, including a value-added tax ("VAT") were not administered in conformity with therequirements of the GATT 1994, particularly Article III.  Those members of the Working Party notedthat China appeared to permit the application of discriminatory internal taxes and charges to importedgoods and services, including taxes and charges applied by sub-national authorities.  Those membersrequested that China undertake a commitment to ensure  that all such internal taxes and charges would
be in conformity with the requirements of the GATT 1994.
101. In response, the representative of China noted that there were three major types of taxes
levied on products and services:  (a) VAT levied on goods and services for processing, maintenance
and assembling;  (b) the Consumption Tax on some se lected consumer products;  and (c) the Business
Tax on providing services, transferring intangible assets and selling real estate.   Both the VAT andthe Consumption Tax were applicable to entities importing goods. VAT and the Consumption Tax onimported goods were collected by Customs at the poin t of entry.  He noted that VAT was  reimbursed
once goods were exported.  Exported goods were exempted from the Consumption Tax.
102. He further noted that the State Council determined all policies concerning the levying of VAT
and the Consumption Tax, adjustment of tax types and tax rates (tax value), as well as the taxexemption of VAT, the Consumption Tax and the Business Tax.  The laws and regulations wereinterpreted and implemented by the Ministry of Finance and the State Administration of Taxation.
VAT and the Consumption Tax were levied and administered by the State competent departments of
taxation, while the Business Tax was collected and administered by the local competent departmentsof taxation.
6. Tariff Exemptions
103. The representative of China stated that the tariff exemption policy of China was developed
and implemented in accordance with the Customs Law of the People's Republic of China and the
Regulations of the People's Republic of China on Import and Export Duties. The coverage of specific
tariff reduction or exemption was provided for by the State Council. All the statutory tariff reductionsand exemptions were applied on an MFN basis.
104. The representative of China noted that in accordance with international practices and
provisions of China's Customs Law, import duty reductions or exemptions were available for thefollowing goods:WT/ACC/SPEC/CHN/1/Rev.3
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(a) A consignment of goods, on which customs duties were estimated below
RMB 10 yuan;
(b) advertising articles and samples, which were of no commercial value;(c) goods and materials, which were rendered gratis by international organizations or
foreign governments;
(d) fuels, stores, beverages and provisions for use en route loaded by any means of
transport, which were in transit across the border;
(e) exported goods being replaced;(f) goods damaged prior to Customs release;(g) goods covered by international treaties providing for tariff reductions and exemptions
which China had entered into or acceded to;
(h) goods temporarily imported;(i) goods imported under the processing programme;
(j) goods imported at zero cost for offset purpose;
(k) domestic- or foreign-funded projects encouraged by China;(l) articles for scientific research, education and the disabled.
He noted that goods so imported were required to be put under Customs supervision and control. The
Customs duty was required to be recovered if such goods were sold, transferred or used for otherpurposes during the time period of supervision and control.
105. Some members of the Working Party expressed concerns over the broad availability and
application of tariff reductions and exemptions for a wide variety of enterprises and other entities,
including state trading enterprises, state-owned enterprises, foreign-invested enterprises and not-for-
profit entities.  Similar concerns also existed for exemptions from application of other duties, taxesand charges.  These members noted the detrimental effect such reductions or exemptions could haveon revenues and predictability and certainty in application of tariff and other trade measures.WT/ACC/SPEC/CHN/1/Rev.3
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106. The representative of China confirmed that upon entry into force of the Draft Protocol, China
would adopt and apply reductions and exemptions so as to ensure MFN and national treatment for
imported goods.  The Working Party took note of this commitment.
7. Tariff Rate Quotas
107. Some members of the Working Party expressed concern over the lack of transparency,
uniformity and security of China's administration of its TRQ regime.  Those members suggested thatChina enter a commitment in relation to those matters.  The representative of China confirmed thatadministration of TRQs would be consistent with  the Agreement on Import Licensing Procedures.
The Working Party took note of this commitment.
108. Some members of the Working Party raised concerns regarding the current operation of
China's TRQ system for bulk agricultural commoditie s and the practices of state trading enterprises in
relation to importing such products.  These concerns included the current lack of transparentregulations for administering TRQs; failure to establish and publish annual TRQ quantities; trade-restrictive and non-competitive practices of state trading enterprises; and general uncertainty,inconsistency and discrimination in trade of bulk commodities.  Those members requested that Chinareduce tariffs and regulate access for bulk commodities by using TRQs with low in-quota duties.
109. The representative of China confirmed that China would adopt TRQs for certain goods and
would ensure that these TRQs were administered on a transparent, predictable, and non-discriminatory basis using clearly specified time frames, administrative procedures and requirements
that would provide effective import opportunities and promote filling each TRQ, including the grant
of trading rights and import licences to non-state trading entities to import quota allocations permittedto be imported by such entities. China confirmed that for the goods listed in Annex 2 of the DraftProtocol that were subject to a TRQ, China would apply the provisions of its market access schedule
relating to TRQ administration and related comm itments in the Draft Protocol, including those
relating to the right to trade.  The Working Party took note of these commitments.
110. Members of the Working Party expressed concern that scheduled TRQs should be
administered simply, effectively, transparently and in a non-trade restrictive manner.  Therepresentative of China agreed that China would administer the TRQs fully in accordance with WTO
rules and principles and that the administration would be in accord with the provisions set out in the
Schedule of Concessions and Commitments on Goods.  The Working Party took note of thiscommitment.WT/ACC/SPEC/CHN/1/Rev.3
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111. The representative of China noted that in 1996, for the first time, China published a list of
import products subject to tariff quota administration, together with their eligible tariff rates in and outquota.  The allocation was based on historical performance and state trading administration.However, the administration on imports within the tariff quota was identical to that for pure quota
products.  In addition, China had also tried several ways of administration, including import at applied
tariff rates, first come first served, and first come first served at the point of entry, on certain productsand bonded import which was strictly monitored by Customs.  In comparison with WTO rules andregulations, current administrative measures lacked transparency and the time-frame and quantity ofallocation varied from year to year.  Besides, the information was released only in internal documents,with no prior notice.
112. The representative of China further noted that market-oriented reform to agricultural
production and trade conformed to China's construction of a socialist market economy.  In the pastseveral years, China had made great progress in freeing agricultural products from state pricing and
trading, in guiding farmers to adjust the structure of agricultural production based on the demand of
the market.  In connection with that reform process, in the bilateral negotiations with agriculturalexporting countries, China committed that as soon as it became a Member of the WTO, it wouldeliminate TRQ administration of a certain number of TRQ products and implement single tariffadministration on those products, including barley, so ybean, rape-seed, peanut oil, sunflower seed oil,
corn oil, etc.  In addition to that effort, China would apply tariffication on products including sugar,
cotton and three types of fertilizers, which were currently subject to import quantitative restrictions,and list them under products subject to TRQ administration.  When China acceded to the WTO, China
would further shorten the list to 13 categories and 42 tariff lines.  Ten categories were agricultural
products including 39 tariff lines, namely wheat, corn, rice, soybean oil, rape-seed oil, palm oil, sugar,wool, wool tops and cotton.  In addition, three catego ries (three tariff lines), namely urea, DAP and
NPK fertilizer, would be put under TRQ administration.  The Working Party took note of thiscommitment.
113. The representative of China stated that as a Member of the WTO China would strictly comply
with relevant rules and regulations of the WTO.  In line with that commitment, China was preparing
for significant reform to the current TRQ administra tion, in a bid to have it conform to the relevant
requirements of the WTO:
(a) implement in-quota and out-quota rates to TRQ products, as specified in the
Schedule;WT/ACC/SPEC/CHN/1/Rev.3
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(b) identify and publish in advance the initial tariff quota quantity and annual increase
within the implementation period, namely the minimum market access opportunity ofthe TRQ products in every year within the implementation period;
(c) stipulate and publish TRQ administration and establish a TRQ administration system
which was open, fair, transparent and non-discriminative;
(d) publish in advance specific qualifications for applicants and specific administration
for every TRQ product, and designate a fixed "enquiry point" to provide consultationand increase transparency;
(e) set a fixed time-frame for TRQ application, allocation and reallocation;
(f) limit imports share of the state trading en terprises and provide a gradually increasing
opportunity to participate in trading the TRQ products for non-state tradingenterprises including private enterprises, shareholding enterprises and foreign-fundedenterprises, national treatment would be endowed to every non-state trading
enterprise with trading rights;
(g) establish and optimize feedback and supervision mechanism toward quota holders,
and promote rational and full utilization of TRQ;  and
(h) set up a fixed "enquiry point", as an obligation by Article 13.3 of the GATT 1994 and
other relevant provisions, for exporting countries and suppliers of TRQ products, soas to provide consultation and information on TRQ administration, allocation andimplementation.
Moreover, the Government of China was trying to further simplify the administrative regime and
procedures of TRQ administration, in a bid to facilitate users, enhance efficiency and adapt to theabove-mentioned reform.
8. Quantitative Import Restrictions, including Prohibitions and Quotas
114. In response to requests for information from members of the Working Party, the
representative of China noted that China prohibited or restricted the importation of certaincommodities, including various types of weapons, ammunition and explosives, narcotic drugs,poisons, obscene materials, and foodstuffs, medicines, animals and plants.WT/ACC/SPEC/CHN/1/Rev.3
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115. Some members of the Working Party noted that there were a large number of overlapping
non-tariff measures in existence in China, both at the national and sub-national levels, which appearedto have a trade restrictive or trade distorting effect.  Those members requested that China undertake acommitment to eliminate and not to introduce, re-introduce or apply non-tariff measures other than
those specifically identified and subject to phase d elimination in Annex 3 to the Draft Protocol.
116. Some members of the Working Party also raised concerns that many non-tariff measures were
imposed by sub-national authorities in China on a non-transparent, discretionary and discriminatorybasis.  Those members of the Working Party asked that China undertake a commitment to ensure thatnon-tariff measures would only be imposed by the central government or by sub-national authoritieswith clear authorization from the central governme nt.  Actions lacking authorization from the national
authorities should not be implemented or enforced.
117. Some members of the Working Party noted that China had provided a list of non-tariff
measures in respect of which China was prepared to commence phased elimination, contained in
Annex 3 of the Draft Protocol.  Those members stated that China should eliminate the measures listed
in accordance with the schedule provided in Annex 3, during the periods specified in Annex 3.  Thosemembers also noted that the protection afforded by the measures listed in Annex 3 should not beincreased or expanded in size, scope, or duration, nor any new measures be applied, unless inconformity with the provisions of the WTO Agreement.
118. Those members of the Working Party also stated that in implementing the provisions of
Articles III and XI of the GATT 1994 and the Agreement on Agriculture, China should eliminate andnot introduce any new nor re-introduce any old non-tari ff measures that could not be justified under
the provisions of the WTO Agreement.  Those members also stated that all non-tariff measures
administered by China, whether or not referred to in Annex 3 of the Draft Protocol, which wereapplied after China's accession to the WTO, should be allocated and otherwise administered in strictconformity with the provisions of the WTO Agreement, including Article XIII of the GATT 1994 andthe Agreement on Import Licensing Procedures, including notification requirements.
119. The representative of China stated that duri ng the phasing-out period, China would administer
relevant quotas, licences and tendering requiremen ts in accordance with the current administrative
regulations which had been notified to the Secretariat.  China had also modified Annex 3 on the basisof the comments raised by certain members of the Working Party.  Annex 3 contained all the products
subject to quotas, licences and tendering requirements in China.
120. Some members of the Working Party requested  information on how China would implement
the quota and licensing requirements for products listed in Annex 3, in particular the procedures andWT/ACC/SPEC/CHN/1/Rev.3
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criteria for grant of quota allocations and licensing during the phase-out period for these restrictions.
Members expressed concern about complex and burdensome requirements for obtaining a licence orquota allocation which often required approvals from various authorities within an organization aswell as approval from both the sub-central and central level.  Those members sought a transparent,
streamlined system that would issue quota allocations and licences through a simple, consolidated
approval process that would ensure full use of the quota and its equitable distribution among
importers.  Those members also requested information on how China would establish the value ofimports for those products whose quota was established in terms of value of imports.
121. The representative of China confirmed that the products currently covered under the HS
categories listed in Annex 3 were the only products that would continue to be subject to quotas during
the agreed phase-out periods and that additional products would not be added to these HS categories.Further, the representative of China stated that fo r products listed in Annex 3 as being subject to quota
and licensing requirements, any entity possessing the right to trade, including enterprises in the sector
importing the products or importing inputs for production purposes, would be eligible for a quota
allocation and licence to import  products listed in Annex 3.  China's system for quota allocation andlicensing would ensure that those entities with  quota allocations would also receive any necessary
import licence.  This system would conform to WTO rules, including the WTO Agreement on ImportLicensing Procedures, and would be transparent, timely, responsive to market conditions and wouldminimize the burden on trade.  All applications for an import licence and allocation of quota were tobe submitted to the organization authorized to gran t such allocations and licences. Applicants would
be required to approach only one organization at one level (central or sub-central) to obtain both an
allocation and licence.  In exceptional cases, an applicant might be required to approach up to three
organizations for approval of an allocation and licence.  The relevant organization, amount of quota,including the growth in quota provided for in A nnex 3, and procedures for application for a quota
allocation and licence, including the beginning and end date of the application period and any otherrelevant procedures or criteria, would be published in the official journal referred to in paragraph2(C)(2) of the Draft Protocol no later than 30 days prior to the beginning of the application period.Such application period would be from 1-30 June.  Quotas and licences would be allocated toapplicants no later than 30 days after closure of the application period.  Members of the WorkingParty took note of these commitments.
122. The representative of China stated that China would grant quota allocations on a first-come-
first served basis, valid for importations on a calendar year basis.   If after the specified applicationperiod additional quota remained,  the relevant organization would receive and process requests forquota allocations and licences until the full amount of the quota had been allocated.  Such allocationswould be made within 10 days after receipt of a request.  If requests for a quota allocation received atWT/ACC/SPEC/CHN/1/Rev.3
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the same time exceeded the quota level, the relevant organization would ensure that quota was
allocated in an equitable manner that promoted utilization of the allocation, including granting aproportionate share of individual requests and giving priority consideration to unfilled requests in thecontext of reallocated quota.  In all cases, allocations would be established for commercially viable
quantities and provision would be made for partial shipments against a single allocation. Inquiries
regarding quota allocation and grant of a licence could be made to the relevant organization, withwritten responses provided within 10 working days.  The Working Party took note of thesecommitments.
123. The representative of China confirmed that all commercial terms of trade, including product
specifications, product mix, pricing, and packaging, would be at the sole discretion of the quotaholder.  Allocations would be valid for any article or mixture of articles subject to the same quota asspecified in Annex 3 of the Draft Protocol.  Allocations would be valid for a period of 12 monthsfrom the opening of the quota import period.  However, if the holder of a quota allocation had not
contracted for import of the total quantity allocated to it within 6 months after the opening of the
import period, the holder was to immediately return the unused portion of the allocation to therelevant authority which would reallocate the quota i mmediately, if unfilled requests were pending, or
otherwise within 10 days after receipt of a request for an allocation.  The relevant organization wouldpublish notice of the availability of additional allocations on a monthly basis. This reallocation wouldbe valid for the duration of the original term.  For quota quantities specified in terms of value, Chinawould determine the value of any shipment based on the FAS ship value listed on the bill of lading.The Working Party took note of these commitments.
9. Import Licensing
124. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of imports would be upda ted and republished in the official journal, the
MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of thiscommitment.
125. In response to requests for additional information about its system of import licensing, the
representative of China said that the import licensing system was administered without discrimination
among countries or regions.  In 1984, the State Coun cil had promulgated the "Interim Regulations on
Licensing System for Import Commodities", and MOFTEC and Customs had issued "Detailed Rulesfor the Implementation of the Interim Regulations on Licensing System for Import Commodities".The Interim Regulations were uniformly implemented throughout China. The import licensing systemensured that limited forex resources were used for imports most needed by national economicdevelopment and that necessary assistance could be provided to the domestic industries.  In 1999, ofWT/ACC/SPEC/CHN/1/Rev.3
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the total import value of US$ 165.7 billion, imports subject to licensing represented 8.45%, covering
US$ 14 billion.  MOFTEC determined which products should be subject to import licensing accordingto the relevant provisions of the "Foreign Trade Law".
126. The representative of China further stated that in 1993, China had applied import restrictions
to 53 product categories.  By 1999, the number had been reduced to 35.  Products covered were (1)
Processed oil; (2) Wool;  (3) Polyester fibre;  (4) Acrylic fibres;  (5) Polyester fillet;  (6) Natural
rubber;  (7) Vehicles tyres;  (8) Sodium cyanide;  (9) Sugar;  (10) Fertilizer;  (11) Tobacco and itsproducts;  (12) Acetate tow;  (13) Cotton;  (14) Motor vehicles and their key parts;  (15) Motorcyclesand their engines and chassises; (16) Colour television sets and TV kinescope;  (17) Radios, taperecorders and their main parts;  (18) Refrigerators and their compressor;  (19) Washing machines;(20) Recording equipment and its key parts;  (21) Cameras and their bodies (without lenses);  (22)Watches;  (23) Air conditioners and their compressor;  (24) Audio and video tape duplicationequipment;  (25) Crane lorries and their chassises;  (26) Electronic microscopes;  (27) Open-end
spinning machines;  (28) Electronic colour scanners ;  (29) Grain;  (30) Vegetable oil;  (31) Wine;
(32) Colour sensitive material;  (33) Chemical under supervision and control that were used forchemical weapon;  (34) Chemicals used to produce narcotics;  and (35) Laser disc productionfacilities.  He also noted that in 1999, there were 13 commodity categories which were imported bythe foreign trade companies designated by MOFTEC. These categories were as follows:  (1)Processed oil;  (2) Fertilizer; (3) Tobacco; (4) Vegetable oil; (5) Grain; (6) Natural rubber; (7) Wool;(8) Acrylic fibers; (9) Sugar; (10) Cotton; (11) Crude oil; (12) Steel; and (13) Plywood.
127. Concerning the granting and administration of import licences, the representative of China
said that the examination and approval of the lice nce took two to three working days.  Applications
for import licences could be submitted to the Qu ota and Licence Administrative Bureau of MOFTEC,
or Special Commissioner Offices in 16 provin ces, or Commissions of Foreign Economic Relations
and Trade of various provinces, autonomous regions, and municipalities directly under the centralgovernment and those with independent budgetary st atus. Licensing agencies authorized by MOFTEC
could issue import licences on the basis of import documents submitted by the applicants,  approvedby the competent departments. A licence could not be bought, sold or transferred, and was valid forone year.  Import licences could be extended once for up to three months.
128. Some member of the Working Party expressed concern that China's Provisional Procedures
for the Administration of Automatic Registration for the Import of Special Commodities
(13 August 1994), in particular the criteria for approval of registration, would act as a restraint onimports.  The representative of China emphasized that the purpose of the registration system was onlyto gather statistical information.  He confirmed that China would bring its automatic licensing systemWT/ACC/SPEC/CHN/1/Rev.3
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into conformity with Article 2 of the Agreement on Import Licensing Procedures upon entry into
force of the Draft Protocol.  The Working Party took note of this commitment.
129. Some members of the Working Party noted that enterprises and individuals seeking to import
products subject to tariff quota administration requirements had to go through extensive procedures to
receive a quota allocation and that the quota certificate would indicate whether the subject good was
to be imported through a state trading enterprise or a non-state trading enterprise and would be validfor a certain period of time.  Moreover, the entity importing the good would need trading rights.  Inthe light of these multiple requirements, a quota allocation certificate should satisfy any importlicensing requirement that might apply.
130. The representative of China confirmed that China would not require a separate import licence
approval for goods subject to a TRQ allocation re quirement but would provide any necessary import
licence in the procedure that granted a quota allocation.  If quota were reallocated pursuant to China'sTRQ administration commitments, the provisions rela ting to licensing of such reallocated quantities
would apply.  The Working Party took note of this commitment.
10. Customs Valuation
131. Some members expressed concern regarding the methods used by China to determine duty-
paying value of goods, in particular regarding the practice of using minimum or reference prices forcertain goods, which would be inconsistent with the Agreement on Implementation of Article VII ofthe GATT 1994 ("Customs Valuation Agreement").  Other WTO-consistent means were available to
Members doubting the veracity of declared transaction values.
132. In response, the representative of China stated that from the date of accession, China would
cease to use minimum or reference prices as a means to determine customs value.  The Working Partytook note of this commitment.
133. The representative of China considered that there would not be situations where the "normal
transaction value" could not be "ascertained" since the Customs Valuation Agreement providedseveral methods for valuation.
134. The representative of China recalled that the overwhelming majority of China's customs
duties were ad valorem  duties.  The customs or duty-paying value of imported goods was assessed
according to the c.i.f. price based on the normal transaction value.  If the transaction value of imported
goods could not be determined, the duty-paying value was determined based on the transaction valueor the computed value of identical or similar goods.  He also noted that the Customs Law provided forappeal procedures. In the event of a dispute over  calculation of duty paid or payable with theWT/ACC/SPEC/CHN/1/Rev.3
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Customs, the dissatisfied importer could apply to Customs for a reconsideration of the case. If the
appeal was rejected the importer could sue at the People's Court.
135.  The representative of China confirmed that, from the entry into force of the Draft Protocol,
China would apply fully the WTO provisions concerning customs valuation.  In this context, the
representative of China stated that China had no intention to resort to Article 20.3 of the Customs
Valuation Agreement.  In addition, China would ap ply the provisions on the Treatment of Interest
Charges in Customs Value of Imported Goods and for the Valuation of Carrier Media BearingSoftware for Data Processing Equipment. In accordance with these latter provisions, only the cost ofthe carrier medium itself would be accounted for in the customs value.   The Working Party took noteof these commitments.
11. Other Customs Formalities
136. The representative of China said that Chin a joined the International Convention on the
Simplification and Harmonisation of Customs Syst em in 1988 and on 15 June 2000 signed the
Protocol on the Amendment of the International Convention on the Simplification and Harmonisationof Customs System.  The Customs authorities of China had only adopted such customs formalities asdeclaration, examination, levying of duties and release which were consistent with internationalpractices.
12. Preshipment Inspection
137. The representative of China stated that, currently, there were trade and commerce inspection
agencies (including joint-venture agencies) engaged in preshipment inspection.  China committeditself to comply with the Agreement on Preshipmen t Inspection, and would regulate the existing trade
and commerce inspection agencies and permit the qualified agencies to be engaged in preshipmentinspection in line with the government mandate or the terms and conditions of commercial contracts.
138. Some members of the Working Party requested information on whether China used the
services of a private preshipment inspection entity.  The representative of China confirmed that China
would ensure that any laws and regulations relating to preshipment inspection by private entities
currently or in the future would be consistent with relevant WTO agreements, in particular, theAgreements on Preshipment Inspection and Customs Valuation.  Moreover, any fees charged inconnection with such preshipment inspection would be commensurate with the service provided, inconformity with Article VIII:1 of the GATT 1994.  The Working Party took note of thesecommitments.WT/ACC/SPEC/CHN/1/Rev.3
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13. Anti-Dumping, Countervailing Duties
139. The representative of China said that China had promulgated regulations on anti-dumping and
countervailing duties in 1997.  He further noted that China had submitted an Action Plan setting outhow it intended to revise its laws and regulations to bring them into conformity with the Agreement
on Implementation of Article VI of GATT 1994 ("Anti-Dumping Agreement").
140. Some Members of the Working Party raised concerns that the current investigations by the
Chinese authority would be judged to be inconsis tent with the Anti-Dumping Agreement if China
were a Member of the WTO today. In certain cases, the basis for calculating dumping margins for apreliminary affirmative determination was not disc losed to interested parties. Furthermore, the
determination of injury and causation did not appear to have been made on an objective examination
of sufficient evidence. In the views of these Members, bringing the Chinese anti-dumping rules into
compliance with the WTO Agreement on its face was not sufficient. WTO-consistency had to besecured substantively as well. The representative of China stated that China intended to comply fullywith the letter and spirit of the Anti-Dumping Agreement.  
141. The representative of China confirmed that, notwithstanding Article 18.3 of the
Anti-Dumping Agreement,
(a) China would apply the provisions of the Anti-Dumping Agreement to:
(1) proceedings under Article 9.3, including the calculation of margins of
dumping, in connection with anti-dumping measures adopted before the entry into
force of the Draft Protocol ("existing measures") pursuant to requests made on or
after the entry into force of the Draft Protocol;
(2) reviews of existing measures initiated under Articles 9.5, 11.2, and 11.3
pursuant to requests made on or after the entry into force of the Draft Protocol.  Anyreview of an existing measure under Article 11.3 would be initiated no later than fiveyears from the date of its imposition.
(b) China would also provide the type of judicial review described in Article 13 of the
Anti-Dumping Agreement with regard to proceedings under Article 9.3 and reviewsunder Articles 9.5, 11.2, and 11.3.
The Working Party took note of these commitments.
142. Several members of the Working Party noted that China was continuing the process of
transition towards a full market economy.  Those members noted that under those circumstances, inWT/ACC/SPEC/CHN/1/Rev.3
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the case of imports of Chinese origin into a WTO Member, special difficulties could exist in
determining cost and price comparability in th e context of anti-dumping investigations and
countervailing duty investigations. Those members stated that in such cases, the importing WTOMember might find it necessary to take into account the possibility that a strict comparison with
domestic costs and prices in China might not always be appropriate.
143. The representative of China expressed concern with regard to past measures taken by certain
WTO Members who had treated China as a non-market economy and imposed anti-dumping duties onChinese companies without identifying or publishing the criteria used, without giving Chinesecompanies sufficient opportunity to present evidence and defend their interests in a fair manner, andwithout explaining the rationale underlying their de terminations, including with respect to the method
of price comparison in the determinations.  The representative of China thereupon stated the followingpositions with regard to the implementation of paragraph (1)(b) of Article 20 of the Draft Protocol("Price Comparability in determining Dumping and Subsidization"):
(a) When determining price comparability in a particular case in a manner not based on a
strict comparison with domestic prices or costs in China, the importing WTOMember should ensure that it has established and published rules in advance on (1)the criteria that it used for determining whether market economy conditions prevail inthe industry producing the like product and (2) the methodology that it used indetermining the price comparability.  The importing WTO Member should select theprices or costs of the like product produced in an economy comparable to that ofChina.  The process of investigation should be transparent and sufficient
opportunities should be given to all interested parties, including Chinese producers or
exporters, to make comments or counter-proposals;
(b) The importing WTO Member should give notice of the information which it required
and provide Chinese producers and exporters ample opportunity to present evidencein writing in a particular case;
(c) The importing WTO Member should provide Chinese producers and exporters a full
opportunity for the defence of their interests in a particular case;
(d) The importing WTO Member should provide a sufficiently detailed reasoning of its
determinations in a particular case;  andWT/ACC/SPEC/CHN/1/Rev.3
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(e) The Anti-Dumping and SCM Agreements should fully apply in proceedings
involving imports of Chinese origin except as otherwise provided in the DraftProtocol.  The provisions of the Dispute Settlement Understanding should apply toconsultations and the settlement of disputes arising under Article 20 of the Draft
Protocol.
144. The representative of China noted that pursuant to the provisions of "Regulation on
Anti-dumping and Anti-subsidy of the People's Re public of China", there were four Chinese
government bodies responsible for anti-dumping and countervailing duty investigations. Theiridentities and responsibilities were as follows:
A. Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
Receiving anti-dumping and countervailing petitions; Conducting investigation on
dumping and dumping margin and issuing relevant preliminary determinationdecisions and notices;  Negotiating with foreign interested parties on "PriceUndertaking" if necessary;  Providing proposal on imposition of definitive anti-dumping or countervailing duties or propo sals on duty refund, etc.  There was an
Anti-dumping Division established under th e Department of Treaties and Law of
MOFTEC, with responsibility to handle anti-dumping and countervailing
investigations on alleged imports.
B. State Economics and Trade Commission (SETC)
Responsible for the investigation of injury caused to the domestic industry by the
dumped or subsidized imports, the extent of such injury and making injury findings.
There was a non-permanent decision and policy-making body in SETC, named the
Injury Investigation and Determination Committee ("IIDC"), which was composed ofsix commissioners from the relevant departments of SETC. There was a permanentexecutive office in charge of the investigation of injury to the industry and submittingits findings to the IIDC for approval.
C. General Customs Administration (Customs)
Coordinating anti-dumping investigati ons with MOFTEC;  Enforcing anti-dumping
measures such as collecting cash deposits, dumping or countervailing duties andmonitoring its implementation.WT/ACC/SPEC/CHN/1/Rev.3
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D. Tariff Commission of State Council(TCSC)
Making final decisions on whether or not to levy the anti-dumping or countervailing
duties and refund duties based on the suggestions by MOFTEC with regard toimposing anti-dumping or countervailing duties and reimbursing excess amount ofduties, respectively.
14. Safeguards
145. The representative of China stated that upon accession, China would implement its
Regulation on Safeguard by which the future safeguard measures would be regulated.  The draftingwork of this regulation was still under way.  The contents of this new regulation would be fullyconsistent with the Agreement on Safeguards.  He noted that, at present, China was in the process ofdrafting safeguard legislation in accordance with Article 29 of the Foreign Trade Law and theAgreement on Safeguards.
C. EXPORT REGULATIONS
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of Internal Taxes
to Exports
146. Some members of the Working Party raised concerns over taxes and charges applied
exclusively to exports.  In their view, such taxes and charges should be eliminated unless applied inconformity with GATT Article VIII or listed in Annex 6 to the Draft Protocol.
147. The representative of China noted that the majority of products were free of export duty,
although 36 items, including tungsten ore, Ferrosil icon and some aluminum products, were subject to
export duties.  He noted that the duty-paying value of exported goods was the F.O.B. price of thegoods.
2. Export Licensing
148. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of expor ts would be updated and republished in the official journal, the
MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of thiscommitment.
149. The representative of China said that China applied its export licence system to certain
agricultural products, resource products and ch emicals. China's export licencing system was
administered in accordance with the "Interim Procedures for the Export Licencing System". In 1992,
there were 143 categories of products subject to export licencing which accounted for 48.3% of theWT/ACC/SPEC/CHN/1/Rev.3
Page 40
total value of the China's exports, but by 1999, the total number of products subject to export
licensing had been reduced to 58 categories and 73 items with an export value of US$ 18.5 billion,taking up only 9.5% of total exports. Export licence s for these products were issued according to the
stipulated commodity scope respectively by the Administrative Bureau of Quota and Licence
(ABQL), the Special Commissioner Offices (SCO) lo cated in 16 provinces and the Commissions of
Foreign Economic Relations and Trade (COFTEC) of various provinces, autonomous regions,municipalities directly under the central government and those with independent budgetary status.The main criteria used in determining whether a product was subject to export licensing, as set downin the Foreign Trade Law, were:  (1) maintenance of national security or public interests;(2) protection against shortage of supply in the domestic market or exhaustion of natural resources;(3) limited market capacity of importing countries or regions;  or (4) obligations stipulated ininternational treaties.  Export licensing was also used for statistical purposes.
150. He further noted that an application for an export licence had to be submitted to the licence
issuing institutions authorized by MOFTEC, together with documents approving the export by the
competent departments, and other relevant materials (such as the Export Qualification Certificate forthe enterprises, export contract and so on). The procedures were the same for all export destinations.A decision on the request for an export licence normally took three working days. Licences were validfor six months and could be extended once.  FIEs engaged in exporting products not produced bythem were required to obtain export licences if the products to be exported were subject to thelicensing requirement.  If the products were not subject to licensing, customs clearance would begiven after examination by Customs on the basis of export contracts and other relevant documents.
151. Some members of the Working Party expressed concern that China's export licensing rules
had been used to restrict exports in a manner inconsistent with WTO requirements.  They noted thatArticle XI of the GATT 1994 applied to both import and export restrictions and the same need forcertainty, predictability, transparency and minimizing the burden on trade applied with respect to thegranting of export licences as pertained to import licences.
152. The representative of China stated that upon accession, China would apply the same
procedures to the granting of export licences as it applied to automatic and non-automatic importlicences, depending on the WTO justification for such export licence.  The Working Party took noteof this commitment.
3. Export Restrictions
153. The representative of China said that China prohibited export of narcotic drugs, poisons,
materials containing State secrets, precious and rare animals and plants.WT/ACC/SPEC/CHN/1/Rev.3
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154. Some members of the Working Party expressed concern about China's restrictions on exports
of silk.  Certain other members expressed concern about export restrictions on other goods, inparticular raw materials or intermediate products that could be subject to further processing, such astungsten ore concentrates, rare earths and other metals.  Members urged China to ensure that any such
restrictions that were imposed or maintained co mplied with the terms of the WTO Agreement and the
Draft Protocol.  Some members also noted that the requirements and procedures for obtaining importlicences and export licences often were not transparent, and, when known, proved overly burdensome.Often, it took a long time to obtain all of the required approvals.  The representative of Chinaconfirmed that upon entry into force of the Draft Protocol, restrictions on exports would be eliminatedunless they could be justified under the WTO Agr eement or the Draft Protocol.  The Working Party
took note of this commitment.
4. Export Subsidies
155. Some members of the Working Party noted that China had provided a list of prohibited
subsidies falling within the scope of Article 3 of the SCM Agreement and a timetable for theirelimination, in Annex 5b of the Draft Protocol.  Those members considered this list to be incomplete.
156. The representative of China confirmed that it would eliminate all export subsidies by the time
of accession, and not re-introduce any export subsidie s, including fiscal or other financial measures
referred to in Article 1 of the SCM Agreement which were contingent upon export performance.  Tothis end, China would, by accession, cease to maintain all pre-existing export subsidy programmes
and, upon accession, make no further payments or disbursements, nor forego revenue or confer any
other benefit, under such programmes.  This commitment covered subsidies granted at all levels ofgovernment, including tax exemptions, reductions, deferrals or forgiveness to enterprises, which werecontingent, in law or in fact, upon an obligation to export.  The Working Party took note of thiscommitment.
157. On the same basis, the representative of China confirmed that China would eliminate, upon
accession, all subsidies contingent upon the use of domestic over imported goods.  The Working Partytook note of this commitment.
D. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS
1. Taxes and Charges Levied on Imports and Exports
158. Some members of the Working Party expressed particular concern about the application of
the VAT and additional charges levied by sub-central governments on imports.  In some cases,
producers of domestic goods either did not pay the VAT or failed to pass the charge along toWT/ACC/SPEC/CHN/1/Rev.3
Page 42
customers.  The loss of revenue from this failure to pass along the VAT often put such firms into an
unprofitable position and loans or other measures would then be provided to address the situation.Non-discriminatory application of the VAT and other internal taxes was deemed essential.  Moreover,central-government discipline over the practices of sub-central authorities to ensure their conformity
with the provisions of the Draft Protocol and the WTO Agreement was essential.
159. The representative of China confirmed that from the entry into force of the Draft Protocol,
China would ensure that its laws and regulations relating to all fees, charges or taxes levied onimports and exports would be in full conformity with its WTO obligations, including Articles I, III:2and 4, and XI:1 of the GATT 1994, and that it would also implement such laws and regulations in full
conformity with these obligations.  The Working Party took note of this commitment.
2. Industrial Policy, including Subsidies
160. Some members of the Working Party noted that the situation of differential treatment of
minority autonomous regions and other areas of economic poverty within China was uncertain andcould raise problems in relation to the requirements of the SCM Agreement.  In response, therepresentative of China stated that, under the Constitution, the central government provided assistanceto those disadvantaged areas.
161. Some members of the Working Party expressed concern about certain of the provisions of
Article 27 of the SCM Agreement which could be interpreted as making special or differential rulesavailable to China.  In particular, these members stated that it would be inappropriate for China to
benefit from treatment such as modified injury st andards in dispute settlement proceedings involving
subsidies pursuant to paragraphs 8 and 9 of Article 27, higher de minimis  and negligibility thresholds
in countervailing duty investigations pursuant to paragraphs 10, 11 and 12 of Article 27, or theinactionability of certain types of pre-privatization subsidies pursuant to paragraph 13 of Article 27.The representative of China stated that the injury standards applicable in dispute settlementproceedings involving actionable Chinese subsidies were set forth in Articles 5 and 6 and thereforeArticles 27.8 and 27.9 had no relevance and would not be invoked by China.  The representative ofChina also stated that the de minimis  and negligibility standards applicable to China were set forth in
Articles 11.9 and 15.3 and therefore China would have no reason to invoke Article 27.10, 27.11 or
27.12.  The representative of China further stated that Article 27.13 had no applicability in China's
case because China did not undertake privatization as contemplated under Article 27.13 and therefore
China would not make use of this provision.  The Working Part took note of these commitments.
162. Some members of the Working Party raised concerns about the provisions of Article 29 of the
SCM Agreement, which created special rules for certain economies undergoing transformation.  TheWT/ACC/SPEC/CHN/1/Rev.3
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representative of China stated that these provisions did not apply to China's economy.  He confirmed
that China therefore would not make use of these provisions.  The Working Party took note of thiscommitment.
163. Some members of the Working Party were concerned that the scope of subsidization in China
should be adequately defined.  In this regard, it was concluded that all activities of state-owned
enterprises (including banks) which involved a financial contribution (e.g. provision of goods andservices, purchases of goods, forgiveness of debt, provision of loans and/or guarantees) would fallwithin the scope of Article 1.1(a) of the SCM Agreement, since such enterprises were part of orcontrolled by the government.  The representative of China confirmed this conclusion.  The WorkingParty took note of this commitment.
164. Some members of the Working Party raised concerns over the notification which China had
provided in Annex 5 to the Draft Protocol. regarding its subsidy regime, which was last modified on[31 May 2000].  Those members in particular raised concerns over China's failure to provide a
comprehensive list of the subsidies that it granted or maintained, as sought in paragraph 1 of
Article 11 of the Draft Protocol.  Those members also  considered that Annex 5 in some places did not
contain the information required by Article 25  of the SCM Agreement and Document G/SCM/6.
While those members understood many of the difficulties that China had encountered in attempting toprovide the Working Party with a full notification, they noted the importance of China's notification
of subsidies.
165. Some members of the Working Party explained that it was difficult to identify all of the
subsidies that China had not notified in Annex 5, particularly because of transparency problems.
Nevertheless, those members highlighted certain especially significant types of subsidies that had not
been reported in Annex 5.  Those members of the Working Party first identified state support throughthe banking system, which took the form of policy loans, the automatic roll-over of state-ownedenterprises' unpaid principal and interest, forgiven  or non-performing loans, and the selective use of
below-market interest rates.  They indicated that  these subsides were provided by government-owned
banks, such as the Peoples Bank of China, and they distinguished these subsidies from the onesnotified in Annex 5 as being provided by recently created policy banks.  They also noted that some ofthese subsidies were only available to exporting firms.  The representative of China acknowledged theexistence of these types of measures, but indicated that China was attempting to reduce state-owned
enterprises' reliance on these types of measures and, further, to confine them to the policy banks
identified in Annex 5.WT/ACC/SPEC/CHN/1/Rev.3
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166. Some members of the Working Party also stated that, in their view, China provided
significant subsidies in the form of tax deferrals and tax forgiveness, tax exemptions, tax credits andpreferential tax rates, with state-owned enterprises again being the predominant recipient of this typeof support.  They noted that most of these subsidies had not been included in Annex 5.  The
representative of China acknowledged the existence of these types of  measures.  He explained that, as
part of its effort to reform state-owned enterprises and make them more market-oriented, China wasattempting to reduce substantially the availability of these types of measures.
167. Some members of the Working Party emphasized that Annex 5 contained only one subsidy
programme provided by sub-central governments in China.  They also noted that this subsidyprogramme was several times the magnitude of a similar subsidy programme maintained by thecentral government.  While recognizing the special difficulties that China, like many members of theWorking Party themselves, had encountered in atte mpting to notify sub-central subsidies, those
members nevertheless expressed concern that subsid ization by provincial and municipal governments
in China was quite significant and could result in adverse effects on WTO Members.  They also
expressed concern that these sub-central governments continued to provide subsidies contingent uponexport performance and subsidies contingent upon the use of domestic goods over imported goods;these practices were recognized as especially distortive of trade and were prohibited in Article 3 of theSCM Agreement.  The representative of China acknowledged that China had not been able to reportall sub-central subsidies but indicated that China would comply with its obligations under the DraftProtocol and the SCM Agreement.
168. Some members of the Working Party also raised concern regarding the subsidies that China
provided in connection with SEZs and other special economic areas.  Many of these subsidies were
reported in Annex 5, but not as prohibited export subsidies.  Those members considered many of the
subsidies provided in connection with SEZs and other special economic areas to be prohibited exportsubsidies because they were contingent, at least in part, upon export performance.  Those membersalso stated that the existing practice of granting preferential treatment to imported products and tojoint-venture production enterprises in China's special economic areas conditional upon export or re-export of products manufactured or subject to additional processing in such areas met the definition ofprohibited subsidies pursuant to Article 3 of the SCM Agreement.  Those members requested thatChina eliminate all of these subsidies upon accession.  In response, the representative of China stated
that China would review the operation of the prog rammes providing subsidies in SEZs and other
special economic areas.  He stated that China, upon accession, would either eliminate any subsidiesthat it found to be contingent upon export performance or amend them to be consistent with the SCMAgreement.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
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169. Some members of the Working Party stated their belief that China had granted, on a
discretionary basis, ad hoc  investment subsidies, which included free or preferential provision of
goods and services.  Those members stated that such subsidies, whether granted at national or sub-national level, should have been notified. The representative of China acknowledged the existence of
these types of measures.  He explained that China was attempting to reduce substantially the
availability of these types of subsidies as part of its reform effort.
170. Some members of the Working Party stated that there was also no mention of subsidies to
compensate for currency changes.  The representative of China acknowledged the existence of thistype of measure.
171. Some members of the Working Party requested information from China regarding an
unreported subsidy programme known as the Steel Import Substitution Programme, which appearedto provide export subsidies.  These members stated that they had been informed that this programme
was begun in 1997 and provided large tax rebates to the big four steel groups in China in connection
with sales of domestic inputs to producers of finished products for use in their exported products.
These members requested an explanation with regard to the general operation of this programme, thespecific products covered by it, and the amount of the rebates granted in relation to the amount of thevalue added tax, both under the terms of the relevant law and in practice.  In response, therepresentative of China explained [...].
172. Some members of the Working Party also requested information from China regarding the
"China High-Tech Product Export Catalogue", which was jointly published by the Ministry of Science
and Technology, MOFTEC, the Ministry of Fina nce and Customs.  These members understood that
this Catalogue addressed preferential central government export policies for the telecommunications,
computer software, aviation and aerospace, lasers, pharmaceuticals, medical equipment, newmaterials and energy industries.  These members requested an explanation regarding the nature of theexport policies addressed by this Catalogue.  In response, the representative of China explained [...].
3. Technical Barriers to Trade
173. In response to requests for information from members of the Working Party, the
representative of China confirmed that, further to China's application of the provisions of the GATT
1994 and the TBT Agreement, internal mechanisms existed in China (e.g. policy guidelines,
inter-agency committees) to inform and consult with, on an ongoing basis, government agencies andministries (at national and sub-national levels), and private sector interests, on the rights andobligations under the GATT 1994 and the TBT Agreement.  The Working Party took note of thiscommitment.WT/ACC/SPEC/CHN/1/Rev.3
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174. Concerning questions from members of the Working Party on the opportunity for public
consultation and comment on proposed standards and technical regulations, the representative ofChina noted that China had already established such a mechanism.  Currently, China provided a45-day period to allow for comments on proposed standards, technical regulations, and conformity
assessment procedures.  If within that 45-day period a request for extension of the time-limit was
received from a WTO Member, the period was extended to 60 days.  In addition, provision was alsomade for a further extension of the time-limit beyond 60 days if requested by another Party to theTBT Agreement.  The Working Party took note of these commitments.
175. Members of the Working Party noted that a compilation of technical regulations and relevant
standards in force in China, was provided in A nnex 7 to the Draft Protocol.  Members agreed that
Annex 7 did not prejudge the legal status, nature or effects of notified standards and technicalregulations under the WTO Agreement.
176. Some members of the Working Party stated that pursuant to the requirements of the TBT
Agreement, China's standards, technical regulation s and conformity assessment procedures should be
based, to the maximum extent possible, on relevant international standards, where they existed, exceptwhere use of different standards, technical regulations and conformity assessment procedures could bejustified to the TBT Committee, pursuant to Article 2.4 of the TBT Agreement, as necessary to fulfillegitimate objectives as defined in Article 2.2 of the TBT Agreement.  Those members also stated thatany such standards, technical regulations and conformity assessment procedures should beadministered so as not to create unnecessary barriers to trade.
177. Those members of the Working Party also stated that government inspection agencies should
not apply compulsory standards to imported products which related solely to fulfilling unspecified
criteria of quality, quantity or weight, nor require statutory inspection of products solely because ofthe volume of such imports.  Those members stated that China should publish complete commodityinspection criteria, whether formal or informal, in its official journal.  In this connection, thosemembers noted that pursuant to Article 15.2 of the TBT Agreement, China should provide anotification Statement on Implementation and Administration of the Agreement consistent with therelevant Decisions adopted by the Committee on Technical Barriers to Trade of the Tokyo RoundAgreement on Technical Barriers to Trade (TBT/16/Rev.7).
178. Some members of the Working Party stated that government-mandated inspection agencies
should not inspect imported products to assess compliance with the terms of commercial contracts.
Those members noted that China could inspect imported products or require conformity assessmentwhen third-party testing or certification was not able to fulfil the legitimate objectives listed in theWT/ACC/SPEC/CHN/1/Rev.3
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TBT Agreement.  They noted that once Mutual Recognition Agreements were concluded between
China and a particular  WTO Member, China should not require inspection nor retesting in respect ofany product exported from that Member which had been tested or certified to meet relevantinternational standards by a widely recognized conformity assessment body.  Concerning foreign and
joint-venture commodity inspection agencies, member s of the Working Party noted that China should
not maintain requirements which had the effect of acting as barriers to their operation, unlessotherwise specified in China's Schedule of Specific Commitments.
179. Some members of the Working Party expressed their concern about China's practice of
applying conformity assessment procedures to imported products and not accepting the results ofconformity assessment by bodies in other WTO Members.  The representative of China respondedthat products certified by bodies recognized by China would require no additional conformityassessment procedures in China, except for random sampling of said products.  The Working Partytook note of this commitment.
180. The representative of China stated that except those statutory inspections listed in Annexes 7a
and 7b of the Draft Protocol, the Government of China, in accordance with legitimate objectivesstipulated in the TBT Agreement for the protection of human, animal and plant health, nationalsecurity, environmental protection, prevention of deceptive practices and guaranteeing quality ofexported goods, carried out administration in terms of technical regulations, standards and conformityassessment, to a series of subjects such as medicine (including pesticides, veterinary medicine andorganic medicine), airplanes, vessels and seaworthy installations, nuclear safety facilities, measuringinstruments, pressuring vessels, pressuring tunnels and special equipment, fire extinguishing
equipment, safety of telecoms, wireless equipment and networks, mining safety facilities and
dangerous chemicals.
181. The representative of China stated that pursuant to the provisions of the TBT Agreement,
China applied compulsory inspection and quarantine to commodities as well as to animals, plants and
their processed products as required in the interests of national security, life and health of humanbeings, animals and plants, environmental protection, as well as prevention of deceptive activities.  Healso noted that most of China's standards were equa l or equivalent to the international standards, and
that China implemented the same standards, technical regulations and accreditation procedures ofinspection and quarantine to both imported and domestic goods. There was no discrimination against
the imported goods, animals and plants and their processed products.
182. The representative of China said that China had set up a TBT notification authority and two
enquiry points which had been notified to the TBT Committee.  Laws, regulations, rules, standardsWT/ACC/SPEC/CHN/1/Rev.3
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and procedures on entry-exit inspection and quarantine had been published in publications such as the
MOFTEC Gazette.  Information could also be gathered from the TBT notification authority,MOFTEC or China's TBT enquiry points.
183. Some members of the Working Party expressed concerns about the complexity and lack of
consistency of China's standards and inspection regime.  In addition, members of the Working Party
noted that imported and domestic products were not inspected by the same governmental entities andthat this situation could result in less favourable treatment for imports.  Some members also criticized
mandatory government inspection requirements for compliance with terms of commercial contracts.
In response to those concerns, the representative of China stated that China intended to comply fullywith its WTO obligations concerning its standards, technical regulations and inspection regime.
184.  The representative of China also indicated that China would ensure the transparency of its
standard and certification systems by publishing all relevant laws and regulations, including theregulations concerning domestic products, which were not currently published.  Members of the
Working Party took note of this commitment.
185. Some members of the Working Party raised specific concerns regarding the standards and
certification systems in China, including such matters as (a) registration of initial imports of chemicalproducts, (b) procedures for the Chinese Commodity Inspection Bureau ("CCIB") safety mark and the"Great Wall" mark, (c) standards and certification for automobiles, and (d) the safety and qualitylicence system for boilers and pressure vessels. In response to those concerns, the representative ofChina stated that China intended to implement the following measures. These measures would beimplemented prior to China's accession to the WTO, unless otherwise indicated.
(a) Registration of Initial Imports of Chemical Products
- Enact and implement, within one year after its accession to the WTO, a new
law and relevant regulations regarding assessment and control of chemicalsfor the protection of the environment, in which complete national treatmentand full consistency with international practices would be ensured.
- Ensure that chemicals listed in the "inventory chemicals" annexed to the
above new law and its regulations would be exempted from a registrationobligation and that a unified assessment procedure would be established fordomestic and imported products under the new law and its regulations.WT/ACC/SPEC/CHN/1/Rev.3
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(b) CCIB Safety Mark and the "Great Wall" Mark
- Promulgate implementation regulations on the harmonization of the CCIB
safety mark and the "Great Wall" mark , by introducing into these regulations
the principle of "a single application, a single inspection and a single fee
payment" for obtaining both marks at the same time. This principle would be
applied before the promulgation of the regulations.
- Accept testing reports for products subject to the CB Scheme to which China
was a party, and simplify the procedures for obtaining the CCIB safety markand/or the "Great Wall" mark.
- Shorten the time period needed for importers to obtain both marks regarding
the same products, to around three months in principle.
(c) Standards and Certification for Automobiles
- Unify its laws, regulations and standards applied to domestic and imported
automobiles.
- Formulate, publish and implement laws and regulations, standards and
implementation regulations to establish a transparent system under which allthe laws and regulations would be applied so as to accord imported productstreatment no less favourable than that accorded to like products of nationalorigin.
(d) Safety and Quality Licence System for Boilers and Pressure Vessels
- Accord imported products treatment no less favourable than that accorded to
products of national origin, including fees imposed for conformity
assessment and the effective period of factory certification.
- Adopt international standards to the greatest extent possible, and exempt
imported products from inspection where like domestic products are notsubject to such inspection.
- Simplify the inspection methods and procedures for factories and products
certified by inspection agencies having bilateral mutual recognitionarrangements.WT/ACC/SPEC/CHN/1/Rev.3
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4. Sanitary and Phytosanitary Measures
186. Members of the Working Party noted that China's notification of laws, regulations and other
measures relating to sanitary and phytosanitary ("SPS") measures, referred to in the Draft Protocol,was provided in document WT/ACC/CHN/33.  Members of the Working Party agreed that thisnotification did not prejudge the legal status, nature or effects of the notified laws, regulations andother measures under the WTO Agreement.
187. Members expressed the view that China should apply the Agreement on Sanitary and
Phytosanitary Measures ("SPS Agreement") from the date of China's accession and should ensure theconformity with the SPS Agreement of all of its laws, regulations and practices relating to SPSmeasures.  In response, the representative of Ch ina confirmed that China would fully apply the SPS
Agreement from the date of accession and would ensure the conformity with the SPS Agreement of
all of its laws, regulations and practices relating to SPS measures.  The Working Party took note ofthese commitments.
188. The representative of China stated that pursuant to the provisions of the SPS Agreement,
China applied compulsory inspection and quarantine as required in the interests of national security,life and health of human beings, animals and plants, environmental protection, as well as theprevention of deceptive practices.  He also noted that most of China's standards were equivalent to theinternational standards, and that China implemented the same standards, technical regulations andaccreditation procedures for inspection and quarantine to both imported and domestic goods. There
was no discrimination against imported goods, animals and plants or their processed products.
189. The representative of China said that China had set up an SPS notification authority and an
SPS enquiry point of inspection and quarantine which had been notified to the WTO'sSPS Committee.  Laws, regulations, rules, standards and procedures on entry-exit inspection andquarantine had been published in publications such  as the MOFTEC Gazette.  Information could also
be gathered from the SPS notification authority or from China's SPS enquiry point.
5. Trade-Related Investment Measures
190. The representative of China confirmed that upon accession, as set forth in the Draft Protocol,
China would comply fully with the TRIMs Agreemen t, without recourse to Article 5 thereof, and
would eliminate foreign-exchange balancing a nd trade balancing requirements, local content
requirements and export performance requirements. Chinese authorities would not enforce the termsof contracts containing such requirements.  The allocation, permission or rights for importation andinvestment would not be conditional upon performance requirements set by national or sub-nationalauthorities, or subject to secondary conditions covering, for example, the conduct of research, theWT/ACC/SPEC/CHN/1/Rev.3
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provision of offsets or other forms of industrial compensation including specified types or volumes of
business opportunities, the use of local inputs or the transfer of technology.  Permission to invest,import licences, quotas and tariff rate quotas would be granted without regard to the existence ofcompeting Chinese domestic suppliers.  The Working Party took note of this commitment.
191. In the context of discussions on the government's Industrial Policy for the Automotive Sector,
the representative of China confirmed that this pol icy would be amended to ensure compatibility with
WTO rules and principles.
192. The representative of China added that amendments would be made to ensure that all
measures applicable to motor vehicle producers restricting the categories, types or models of vehiclepermitted for production, would gradually be lifted.  Such measures would be completely removedtwo years after accession, thus ensuring that moto r vehicle producers would be free to choose the
categories, types and models they produced.  However, it was understood that category authorizationsby the government could continue to distinguish between trucks and buses, light commercial vehicles,
and passenger cars (including multi-purpose vehicles and sport utility vehicles).
193. The representative of China confirmed that Chin a also agreed to raise the limit within which
investments in motor vehicle manufacturing could be  approved at provincial government level only,
from the current level of US$ 30 million, to US$ 60 million one year after accession, US$ 90 milliontwo years after accession, and US$ 150 million four years after accession.
194. With respect to the manufacture of motor vehi cle engines, the representative of China also
confirmed that China agreed to remove the 50% foreign equity limit for joint-ventures uponaccession.
6. State Trading Entities
195. Some members of the Working Party expressed concern that the activities of China's state
trading enterprises were not sufficiently transparent and were not in accordance with WTOobligations.  The representative of China indicated, however, that China's state trading enterprises hadfull management autonomy and responsibility for their own profits and losses and that China hadundertaken broad and significant commitments to improve the transparency of state tradingenterprises' operation and the measures relating to such operation.
196. The same members of the Working Party also stated that China should ensure that the import
purchasing practices and procedures of state trading enterprises were fully transparent, and incompliance with the requirements of the WTO Agreement.  They considered that China should alsorefrain from taking any measure to influence or direct state trading enterprises as to the quantity,WT/ACC/SPEC/CHN/1/Rev.3
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value, or country of origin of goods purchased or sold, except in accordance with the requirements of
the WTO Agreement.  Those members also stated that in light of the GATT 1994 and theUnderstanding on the Interpretation of Article XVII of the GATT 1994, China should notifyinformation on state trading, including, in the case of state trading of exported goods, domestic
procurement prices, contract terms for delivery and financing terms and conditions.
197. In response, the representative of China stated that its state trading enterprises had full
management autonomy and responsibility for their own profits and losses.  However, some membersof the Working Party again stated that China should undertake a commitment to ensure that all statetrading enterprises complied with the requirements  of the WTO Agreement.  The representative of
China noted that a list of products subject to state trading had been provided in Annex 2a of the DraftProtocol.  He also stated that the notification of information on state trading enterprises would beprovided in conformity with the relevant WT O agreement and interpretations. Meanwhile, such
notification should be without prejudice to the comm ercial interests of the state trading enterprises.
198. Members of the Working Party took note of the specific arrangements that would apply for
fertilizers and crude and processed oil.  A key feature of those arrangements related to the annualallocation of import quantities.  The differences in the regimes that would apply to those productswere noted, in particular in regard to the obligation on state enterprises trading in fertilizers to carryover to the next year any unused import quantities.
199. Some members of the Working Party requested assurances that, for oil products, quantities
reserved for non-state traders would be allocated in such a manner that they would be fully utilized.
In this respect, the representative of China confirmed that imports allocated to non-state traders of
crude and processed oil, as specified in Annex 2a of the Draft Protocol, would be carried over to the
next year if they were not fully utilized.  In addition, the representative of China agreed that Chinawould publish, on a quarterly basis, the requests for imports that had been made by non-state traders,as well as the licences granted, and would supply information relevant to such traders upon request.The Working Party took note of these commitments.
200. Some members of the Working Party noted that prior to accession, enterprises in China were
permitted to import goods for production purposes, including those goods included in Annex 2a.  Therepresentative of China confirmed that, notwithstanding section 5, paragraph 1, of the Draft Protocol,non-state trading enterprises, including private traders, would still be permitted to import for
production purposes goods which continued to be subj ect to state trading under the Draft Protocol and
the WTO Agreement, and that such enterprises would have direct access to end-users of these goods,including processors.  The Working Party took note of these commitments.WT/ACC/SPEC/CHN/1/Rev.3
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201. Some members of the Working Party expressed concerns about supplies of raw materials in
the textiles sector, and particularly in regard to supplies of silk, in the light of China's position as themajor world supplier of silk, currently subject to state trading rights concerning exports.
202. In this regard, the representative of China confirmed that China would progressively abolish
the system of state trading in respect of silk by measures increasing and extending trading rights, with
the result that China would remove completely the silk products set out in numbers 10 and 11 ofAnnex 2a-2 to the Draft Protocol (list of products subject to state trading on exports) and grant theright to trade in such products to all individuals and enterprises no later than 1 January 2005.  Pendingthe implementation of this right, China undertook not  to introduce any changes of a more restrictive
nature to the existing structures in place for the supply of silk.  The representative of China furtherconfirmed that access to supplies of raw materials in the textiles sector would remain at conditions noless favorable than for domestic users, and gave his assurance that access to supplies of raw materialsas enjoyed under existing arrangements would not be adversely affected following China's accession
to the WTO.  The Working Party took note of these commitments.
203. The representative of China also confirmed that China would eliminate state trading of
cottonseed oil, sunflower seed oil, and corn oil by 1 January 2006.  The Working Party took note ofthese commitments.
204. Members of the Working Party noted that domestic prices for most agricultural commodities
in China were higher than world prices, and this differential allowed China's state trading enterprisesto import at low prices and then mark up the price when selling the product to wholesalers andend-users. Some members expressed concern that th is practice could become more widespread when
access opportunities were created under TRQs.  Those members were particularly concerned that
mark-ups could be used to reduce the competitiveness of imported products and limit the range ofqualities and grades available to end-users in China.  The representative of China stated that currentlystate trading enterprises did not mark up imported products; instead, they only charged a nominaltransaction fee.  Consequently, China claimed that its practice was consistent with WTO obligations,did not result in any trade-distorting effect, and that under China's law limits existed on the fees thatcould be charged by state trading enterprises.
205. The representative of China stated that China would ensure that no price increase in respect to
imports, in particular by state trading enterprises, would result in protection that was not justified
under WTO rules.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
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7. Special Economic Areas
206. Members of the Working Party noted that there was insufficient information available
concerning special economic areas, in particular their names, geographic boundaries, and relevantlaws, regulations and other measures relating thereto.  In response, the representative of China statedthat since 1979 China had established a number of zones and areas where more open policies wereapplied.  They included five SEZs, 14 coastal open cities, six open cities along the Yangtze River,21 provincial capital cities and 13 inland boundary cities.  Those areas enjoyed greater flexibility inutilizing foreign capital, introducing foreign technology and conducting economic cooperationoverseas.  At present, foreign investors were entitled to certain preferential treatment.
207. The representative of China further stated that FIEs located in SEZs or the Economic and
Technical Development Zones of open coastal cities were entitled to a corporate income tax rate of
15% (the normal income tax was 33%).  Profits remitted abroad by foreign investors were exemptedfrom income tax.  The preferential income tax rate of 15% was applicable to technology-intensive orknowledge-intensive items or projects with foreign investment of over US$30 million, as well asenterprises that operated in the fields of energy, transport and port construction.
208. The representative of China noted that throughout  the customs territory of China, a socialist
market economy system was applied.  In 1999, the foreign trade volume of SEZs accounted for nearlyone fifth of the nation's total.  The national laws and regulations on taxation were applicable to SEZsin a uniform manner.
209. In response to further requests for information, the representative of China indicated that there
was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs hadbeen eliminated. With the development of China's economic reform and opening up, China wouldimplement its tariff policy uniformly throughout its customs territory. Members of the Working Partyexpressed concern that imported products introduced from these special economic areas into otherparts of China's customs territory should be subject to the same treatment in the application of alltaxes, import restrictions and customs duties and other charges as that normally applied to importsinto the other parts of China's customs territory. The representative of China stated that China wouldundertake to ensure such non-discriminatory treatment.  The Working Party took note of this
commitment.
210. Some members of the Working Party also raised  concerns about the differential treatment
within areas of minority autonomous regions and other areas of economic poverty.  In response, therepresentative of China stated that China had a clear commitment to uniform administration of thetrade regime within each such area and was also determined to prevent smuggling.WT/ACC/SPEC/CHN/1/Rev.3
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211. Some members of the Working Party requested that China take steps to ensure that all
products imported into the other parts of the customs territory of China from special economic areaswould be subject to the same normal customs duties and charges as any other product imported intothe customs territory of China.  In particular, those members requested that China undertake a
commitment to apply all taxes, charges and measures affecting imports, including import restrictions
and customs and tariff charges, that were normally applied to imports into the other parts of China'scustoms territory to all imported products, including physically incorporated components, importedinto China's customs territory from the special economic areas.
212. The representative of China confirmed that China would strengthen the uniform enforcement
of taxes, tariffs and non-tariff measures on trade between its special economic areas and the otherparts of China's customs territory.  China further confirmed that statistics on trade between China'sspecial economic areas and the other parts of its customs territory would be maintained and improved,and would be notified to the WTO on a regular basis.  The Working Party took note of these
commitments.
213. Some members of the Working Party requested that China notify the WTO Secretariat of all
the relevant laws, regulations and other measures relating to its special economic areas.  They askedthat the notification list and identify all those special economic areas.  Those members also requestedthat China notify the WTO Secretariat promptly, but in any case within 60 days, of any additions ormodifications to its special economic areas, including notification of the laws, regulations and othermeasures relating thereto.
214. The representative of China confirmed that China would provide information in its
notifications describing how the special trade, tariff, and tax regulations applied were limited to the
designated special economic areas, including in formation concerning their enforcement.  The
Working Party took note of this commitment.
215. Some members of the Working Party also requested that any preferential arrangements
provided for enterprises located within the special economic areas should be applied on the basis ofnon-discrimination.
8. Government Procurement
216. The representative of China stated that in order to promote China's government procurement,
the Ministry of Finance promulgated the Interim Regulations on Government Procurement inApril 1998.  The Interim Regulations were stipulated in line with the spirit of the WTO Agreement onGovernment Procurement ("GPA") and on the basis of the relevant provisions of the United NationsWT/ACC/SPEC/CHN/1/Rev.3
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Model Law on Procurement of Goods, Construction and Services while making reference to the laws
and regulations of some WTO Members on government procurement. The policy and procedureregarding government procurement provided for ther ein were consistent with international practice.
China stuck to the fundamental principles of being open, fair, equitable, efficient and in the public
interest when carrying out government procurem ent.  At present, China was formulating the
Government Procurement Law.
217. Some members of the Working Party stated that China should become a Signatory to the GPA
and that prior to its accession to the GPA, China should conduct all government procurement, withinthe meaning of the Draft Protocol, in a transparent and non-discriminatory manner.  Those membersnoted that China's public entities engaged exclusively in commercial activities would not beconducting government procurement and thus laws, regulations and other measures regulating theseentities' procurement practices would be fully subject to WTO requirements.
218. The representative of China said that until such time as China became a signatory to the GPA,
all government entities at the central and sub-central level would conduct their procurement in a
transparent manner and provide all foreign suppliers with equal opportunity to participate in thatprocurement pursuant to the principle of MFN trea tment.  Such procurements would be subject only
to laws, regulations, judicial decisions, administrative rulings of general application, and procedures(including standard contract clauses) which had been published and made available to the public.
9. Transit
219. The representative of China stated that the current regulation of transit in China, the
Regulations of the Customs of the People's Republic of China on the Supervision and Administrationof Transit Goods, was consistent with Article V of the GATT 1994.
10. Agricultural Policies
220. Members of the Working Party noted that China's commitments on agricultural tariffs, on
domestic support and on export subsidies for agricultural products were contained in the Schedule of
Concessions and Commitments on Goods annexed to the Draft Protocol.  They further noted that
China had bound its agricultural export subsidies at zero.
221. In response to requests for information, the representative of China stated that since  China
was a country with a vast agricultural base, as well as a vast population, agricultural security, andfood security in particular, was an issue of supreme importance. China would base its policies ondomestic agricultural supply, especially on balanced supply and demand of grains.  Meanwhile, Chinawould actively seek international resources as a necessary supplement.WT/ACC/SPEC/CHN/1/Rev.3
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222. Some members of the Working Party requested further information concerning administrative
guidance provided at the national and sub-national level which could have the effect of influencingthe quantity and composition of agricultural imports.  Those members requested that China undertakean appropriate commitment to eliminate these practices.
223. China confirmed that, in the agricultural sector, it would not maintain, resort or revert to
guidance plans or administrative guidance at the national or sub-national level that regulated thequantity of imports, import controls, import substitution practices, or other non-tariff trade measuresmaintained through state trading enterprises at the national or sub-national level.  The Working Party
took note of this commitment.
224. Some members of the Working Party requested additional information about the use of fiscal
transfers and other forms of domestic subsidies to government-owned and government-controlledentities in the agricultural sector.  Those members stated that China's notifications under theAgreement on Agriculture and other WTO Agreements and related commitments for subsidies should
include reference to such measures.  Those members also stated that the information notified should
also detail export subsidies within the meaning of  Article 9 of the Agreement on Agriculture.  In
response, the representative of China confirmed that China did not intend to resort to agriculturalexport subsidies in the future and that this fact was set out clearly in China's Schedule of Concessionsand Commitments on Goods wherein China had bound its agricultural export subsidies at zero.  TheWorking Party took note of this commitment.
225. Some members of the Working Party stated that China should undertake a commitment not to
invoke the provisions in Articles 6:2, 6:4(b), 6: 5, 9:4, 12:2, 15 or 16, or Annex 5, Section B of the
Agreement on Agriculture.
226. The representative of China confirmed that China would fully implement the Agreement on
Agriculture from the date of entry into force of the Draft Protocol.  The Working Party took note of
this commitment.
11. Trade in Civil Aircraft
227. In response to questions from members of the Working Party, the representative of China
indicated that China was not in a position to co mmit to joining the Agreement on Trade in Civil
Aircraft at the present stage.
228. The representative of China confirmed that China would not impose any provisions of offsets
or other forms of industrial compensation when purchasing civil aircraft, including specified types orvolumes of business opportunities.  Members of the Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
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12. Textiles
229. Some members of the Working Party proposed and the representative of China accepted that
the quantitative restrictions maintained by WTO Members on imports of textiles and apparel productsoriginating in China that were in force on the date prior to the date of the accession of China to the
WTO should be notified to the Textiles Monitoring  Body (TMB) as being the base levels for the
purpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC").
For such Members, the phrase "day prior to the date of entry into force of the WTO Agreement,"contained in Article 2.1 of the ATC should be deemed to refer to the day prior to the date of accessionof China to the WTO.  To these base levels, the increase in growth rates provided for in Articles 2.13and 2.14 of the ATC should be applied, as appropriate,  from the date of accession of China to the
WTO.  The Working Party took note of these commitments.
[It is proposed to move the following paragraph to the Draft Protocol.]230. China agreed that the following provisions would apply to trade in textiles and clothing
products until 31 December 2008 and be part of the terms and conditions for China's accession to theWTO:
(a) In the event that a WTO Member believed that imports of Chinese origin of textiles
and apparel products covered by the ATC as of the date the WTO Agreement enteredinto force, were, due to market disruption, threatening to impede the orderlydevelopment of trade in these products, such Member could request consultations
with China with a view to easing or avoi ding such market disruption.  The Member
requesting consultations would provide China, at the time of the request, with adetailed factual statement of reasons and justifications for its request for consultationswith current data which, in the view of the requesting Member, showed:  (1) theexistence or threat of market disruption;  and (2) the role of products of Chineseorigin in that disruption;
(b) Consultations would be held within 30 days of receipt of the request.  Every effort
would be made to reach agreement on a mutually satisfactory solution within 90 daysof the receipt of such request, unless extended by mutual agreement;
(c) Upon receipt of the request for consultations, China agreed to hold its shipments to
the requesting Member of textile or textile products in the category or categoriessubject to these consultations to a level no greater than 7.5 per cent (6 per cent forwool product categories) above the amount entered during the first 12 months of theWT/ACC/SPEC/CHN/1/Rev.3
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most recent 14 months preceding the month in which the request for consultations
was made;
(d) If no mutually satisfactory solution were reached during the 90-day consultation
period, consultations would continue and the Member requesting consultations could
continue the limits under subparagraph (c) for textiles or textile products in the
category or categories subject to these consultations;
(e) The term of any restraint limit established under subparagraph (d) would be effective
for the period beginning on the date of the request for consultations and ending on31 December of the year in which consultations were requested, or where three orfewer months remained in the year at the time of the request for consultations, for theperiod ending 12 months after the request for consultations;
(f) No action taken under this provision would remain in effect beyond one year, without
reapplication, unless otherwise agreed between the Member concerned and China.
The Working Party took note of these commitments.
13. Measures Maintained Against China
231. The representative of China stated that WTO Members should eliminate all discriminatory
non-tariff measures maintained against Chinese exports from the date of China's accession to theWTO.  In response, some members of the Working Party stated that, in their view, such measures didnot need to be phased out until such time as China's foreign trade regime fully conformed to WTO
obligations.
232. In light of the above, it was agreed that any prohibitions, quantitative restrictions or other
measures maintained against imports from China in a manner inconsistent with the WTO Agreementwould be listed in Annex 8 to the Draft Protocol.  It was further agreed that all such measures would
be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables asspecified in said annex.
14. Transitional Safeguards
233. Some members of the Working Party stated that there was a need, during a transitional period,
for a special safeguard mechanism to guard against imports from China in such increased quantities orunder such conditions as to cause or threaten injury to domestic producers of like or directlycompetitive products.WT/ACC/SPEC/CHN/1/Rev.3
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234. The representative of China stated that China opposed the creation of such a discriminatory
safeguards provision and considered that the safeguards provisions of the GATT provided sufficientprotection to the domestic industries of WTO Members.  Some members of the Working Partyconsidered that the provision of a transitional safeguard would have to be carefully circumscribed to
prevent abuse in its invocation.
235. The representative of China expressed the following position concerning the implementation
of the Product-Specific Safeguard provided in Section 19 of the Draft Protocol:
(a) The Safeguard Agreement should apply in proceedings involving imports of Chinese
origin except as otherwise provided in the Draft Protocol.
(b) The Dispute Settlement Understanding should apply to consultations and the
settlement of disputes arising under Section 19 of the Draft Protocol.
(c) "Diversions of trade" mentioned in pa ragraph 8 of the Product-Specific Safeguard
Section of the Draft Protocol, existed only when there was clear evidence to show:(a) that imports of a product, like or directly competitive with a product produced bythe domestic industry, were increasing significantly and absolutely as a result of theimposition of the Product-Specific Safeguard measure by other WTO Membersagainst imports from China;  and (b) such increased imports were a significant causeof material injury to the domestic industry.  The affected WTO Member shouldconsider objective factors including the volume of imports, the effect of imports on
prices for the like or directly competitive products and the effect of such imports on
the domestic industry producing like or directly competitive products and any suchother factors.
(d) If a measure taken as a result of diversions of trade remains in effect more than
90 days, China would have the right to suspend the application of substantiallyequivalent concessions or obligations und er the GATT 1994 to the Member applying
the measure.
15. Transitional Review Mechanism
236. Members of the Working Party stated that following China's accession to the WTO it would
be necessary to establish a transitional review mechanism constituted by a working party to monitorChina's compliance with its Draft Protocol and the WTO Agreement within the overall framework ofWT/ACC/SPEC/CHN/1/Rev.3
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China's progress in the reform of its economic and foreign trade regimes.  Some members considered
that the review should be held every two years (o r more frequently upon request of China or another
WTO Member), and that a major review should be held, e.g., every six years.  That working partywould have regard to the outline contained in Annex 9 to the Draft Protocol and could make
recommendations, as appropriate, to China or to the other WTO Members concerned.  Those
members stated that that working party should also decide whether and to what extent the transitionalprovisions provided in paragraphs … of this Dr aft Report should no longer apply.  Those members
noted that once the transitional provisions ceased to apply, the Transitional Review Mechanism wouldbe extinguished.
237. The representative of China stated that his government did not in principle oppose such a
review mechanism but considered that the review could be carried out as part of the regular TradePolicy Review to which China would be subject.   In response, some members of the Working Party
stated that they considered that the WTO Agreement's Trade Policy Review Mechanism was not well
adapted to the type of specific review of compliance with conditions of accession that they considered
to be necessary.  Some members stated that the Trade Policy Review of China in the WTO shouldoccur as regularly scheduled, notwithstanding the possible creation of a special transitional reviewmechanism for China.
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME
238. Members of the Working Party expressed concern that certain elements of China's laws were
not yet fully compatible with the provisions of th e TRIPS Agreement.  This related, in particular, to
provisions in the fields of copyright and neighbouring rights, trademarks, patents, geographicalindications and layout-designs of integrated circu its, and to the enforcement of intellectual property
rights.  Members also expressed concern that there was a continued need for additional enforcementefforts by the Government of China.
239. Some members of the Working Party stated that China should amend the following laws: the
Copyright Law to provide for a rental right for computer programmes and phonograms; theTrademark Law to provide for protection of trade-names, famous marks and marks consisting ofcolours, letters or numerals; the Patent Law to allow compulsory licensing only within the limits
prescribed in the TRIPS Agreement, and the Crimin al Code to provide remedies which constitute a
deterrent to further infringements.  In addition, China should provide for the protection ofgeographical indications and layout-designs of integrated circuits to implement the respectiveprovisions of the TRIPS Agreement.  China should also strengthen the legislative framework for the
enforcement of intellectual property rights for all right-holders. In particular, national treatmentshould be fully applied, so that copyright enforcement action by local copyright bureaux involvingWT/ACC/SPEC/CHN/1/Rev.3
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foreign right-holders, would no longer require clearance by the National Copyright Administration in
Beijing. Other procedural rights should be strengthened as well, so that right-holders could obtaininformation on government enforcement activities and that investigations could be conducted withinreasonable time-limits supported, where necessary, by significant fines that constitute an effective
deterrent to further infringements.  In addition, China should ensure the vigorous application by
Chinese authorities of the enforcement legislation in order to considerably reduce the existing highlevels of piracy and counterfeiting.  Action should include the closure of manufacturing facilities aswell as markets and retail shops that had been the object of administrative convictions for infringingactivities.
240. The representative of China confirmed that upon accession China would fully apply the
provisions of the TRIPS Agreement and did not intend to have recourse to the provisions of Article 65of that Agreement.  The Working Party took note of this commitment.
VI. POLICIES AFFECTING TRADE IN SERVICES
241. Some members of the Working Party expressed concerns regarding the issue of transparency
in China's services regime, in particular in respect of obtaining, extending and renewing licences andother approvals required to provide services in China's market.  These members welcomed the broadranging and comprehensive commitments that China was undertaking  to increase transparency and toprovide information to governments and service providers on any matter relating to the GATSincluding China's Schedule of Specific Commitments.   Those members also expressed the view that
upon its accession, China should publish a list of authorities responsible for authorizing, approving or
regulating those service sectors in which China ma de specific commitments as well as the specific
procedures and conditions for obtaining, extending, renewing, denying or terminating licences orapprovals.  These members also stated the need to ensure the independence and impartiality ofregulatory authorities from the enterprises and individuals that they regulated.
242. The representative of China stated that China would publish promptly and, except in
emergency situations, at the latest by their entry into force, all relevant measures of generalapplication which pertained to or affected the supply of services and make relevant informationpublicly available.  The Working Party took note of this commitment.
1. Licensing
243. Some members of the Working Party noted that the procedures and conditions for obtaining,
extending or renewing licences or approvals for providing services had to be consistent with theprovisions of the WTO Agreement, including the Draft Protocol and China's Schedule of SpecificCommitments.  Any licensing or approval process should not itself act as a barrier to market accessWT/ACC/SPEC/CHN/1/Rev.3
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and should not be more trade restrictive than necessary.  Specific time frames for decision, the
opportunity to cure deficiencies in an applicat ion and to submit additional information, and the
prompt provision in writing of reasons for denial of an application, should be provided for in the
procedures. Fees charged for processing of applications should be commensurate with the
administrative cost of processing the application.   Conditions for filing an application and the time
taken to approve applications were not to have the effect of quantitative limitations on servicesuppliers or denial of national treatment.  Those members expressed particular concern regarding thepractice of inviting only certain service providers to apply for licences or approvals and the practice ofautomatically terminating the effectiveness of an application if the approving authority did not act
within a set period of time.  Moreover, automatically terminating the effectiveness of pendingapplications after a certain period of time without providing reasons had the effect of denying alicence with no effective right of appeal as required under the Draft Protocol.  Applicants needed to beinformed of the reasons for denial of a licence and su ch reasons needed to be consistent with China's
WTO commitments.
244. The representative of China confirmed that, in the application of its commitments under the
WTO Agreement, the Draft Protocol and its Schedule of Specific Commitments, China would, uponaccession, ensure that its licensing and approval procedures for foreign service suppliers to provideservices in China would be consistent with Article VI of GATS.  For authorization required for thesupply of a service on which a specific commitment had been made in China's Schedule of SpecificCommitments, the competent authorities of China would, within a reasonable period of time after thesubmission of an application considered complete under domestic laws and regulations, inform the
applicant of the decision concerning the application.  For the services included in China's Schedule of
Specific Commitments, the decisions and procedures used by regulators would be impartial withrespect to all market participants unless otherwise specified in the Schedule.  Where China requiredan examination to licence professionals, such examinations would be scheduled at reasonable
intervals.  The Working Party took note of these commitments.
245. The representative of China also confirmed that established foreign service suppliers would
be able to agree with their joint-venture partners on the modification of their equity interest andimplement this.  He further confirmed that such an agreement would be approved if consistent withthe relevant equity commitments in China's GATS Schedule.  The Working Party took note of these
commitments.
246. The representative of China submitted an action plan for implementing China's services and
related commitments, circulated to the Working Party in [WT/ACC/CHN/X].  The action planoutlined the steps that China was taking to ensure full implementation of its services commitments, inWT/ACC/SPEC/CHN/1/Rev.3
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particular, focusing on revisions in its laws, regulations and other measures relating to licensing of
enterprises to provide services to comply with its obligations.  The representative of China confirmed
that China would inform WTO Members regarding its revision of relevant laws, regulations and othermeasures to comply with China's obligations.   The Working Party took note of this commitment.
247. Members of the Working Party welcomed China's commitments in the area of distribution,
noting that implementation of its commitments in th is area would modernize China's infrastructure for
supplying this essential service.  Moreover, China's commitments were subject to a progressive phase-in of rights which would require changes in China's laws and regulations concerning distributionactivities generally.  New regulations on sales away from a fixed location, for example, werespecifically referenced in China's Schedule of Specific Commitments.  Some members noted that theWorld Code of Conduct provided a strong ethical basis for regulating sales away from a fixedlocation.  Members also sought confirmation that the supply of franchising services was differentfrom the establishment of a "chain store" since franchises with numerous establishments could be
envisioned in a country of the size and population of China.
248. The representative of China confirmed that  China would consult with WTO Members and
develop regulations, consistent with the commitments in its services schedule, on direct salesactivities.  The Working Party took note of this commitment.
249. The representative of China clarified that franchising services could be supplied in the form
of chain stores and that therefore the limitations on certain chain stores would apply to enterprisesestablished and operating under franchising agreements.
250. In response to questions from members of the Working Party regarding certain terms in
China's Schedule of Specific Commitments, the representative of China confirmed the following:
(a) A "master policy" was a policy that provided blanket coverage for the same legal
person's property and liabilities located in different places.  A master policy could only beissued by the business department of an insurer's head office or that of its authorizedprovince-level branch offices.  Other branches were not allowed to issue master policies.
I. Master policy business with the state key construction projects as its subject-
matter insured.
If investors on the state key construction projects (i.e., projects that were so
listed and annually announced by the State Development and Planning
Commission) met either of the following requirements, they could purchase aWT/ACC/SPEC/CHN/1/Rev.3
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master policy from insurers that were located in the same place as the
investors' legal persons were located.
(1) The investment on the subject-matter insured were all from China
(including the reinvestment from the foreign-invested enterprises in China)
and the sum of investment of the investor accounted for over 15% of the total
investment.
(2) The investment was partially from abroad, and partially from China
(including the reinvestment from the foreign-invested enterprises in China)
and the sum of investment of the Chinese investor accounted for over 15% ofthe total domestic investment.
For those projects that drew all investment from abroad, every insurer could provide
coverage in the form of a master policy.
II. A Master policy covering different subject-matters insured of the same legal
person.
For those subject-matters insured located in different places and owned by
the same legal person (excluding financial, railway, and post andtelecommunications industries and enterprises), a master policy could beissued on the basis of either of the following conditions.
(1) For the sake of payment of the premium tax, insurance companies
incorporated where the legal person or accounting unit of the insuranceapplicant was located, were allowed to issue a master policy.
(2) If over 50% of the insurance amount of the subject-matter insured
was from a larger or medium sized city, then insurers in that city wereallowed to issue a master policy, no matter whether the insurance applicant'slegal person or accounting unit was located in the city.
(b) The subject-matter insured of Large Commercial Risk was limited to large-scale
commercial enterprise or large-scale construction project.
I. For an insurance risk written on any large-scale commercial enterprise, the
following conditions had to be met:
(i) the fixed asset of the enterprise exceeded 200 million RMB;  andWT/ACC/SPEC/CHN/1/Rev.3
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(ii) in one single insurance contract, either the sum-insured exceeded 500
million RMB or the total annual premium income exceeded one millionRMB.
II. For an insurance risk written on any large-scale construction project, the
following conditions had to be met:
(i) the project had to be approved by relevant state departments;(ii) the total amount of investment exceeded 200 million RMB;  and(iii) in one single insurance contract, the sum insured exceeded
500 million RMB and the total annual premium income exceeded one millionRMB.
III. The calculation basis for the above-mentioned sum insured and premium
income did not include motor insurance,  credit insurance, employer liability
insurance, statutory insurance, policy insurance and other insurance business
stipulated by CIRC.
(c) Motor insurance, credit insurance, employer liability insurance, statutory insurance
and other insurance business excluded by the CIRC could not be underwritten or co-insuredby insurers located other than where the subject-insured was located, or covered under amaster policy.
(d) Statutory insurance products in China's Schedule of Specific Commitments were
limited to the following specific categories, and no additional products or categories would be
added: Mandatory third-party liability of auto insurance, driver and operator liability for buses
and other commercial vehicles (by railway, road and ships); and the 20% compulsory
reinsurance of all lines of the primary risks for non-life, personal accident and healthinsurance business with an appointed Chinese reinsurance company.
(e) The term "foreign insurers" included services providers that provided reinsurance
services or services auxiliary to insurance only.
(f) China could make changes to the definitions of the above-defined "Master Policy"
and "Large Commercial Risk", and the new de finitions would be implemented on a national
treatment basis.WT/ACC/SPEC/CHN/1/Rev.3
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251. Members of the Working Party welcomed China' s commitment to permit internal branching
for all insurance firms consistent with the phase-out of geographic restrictions.  Some members notedthat China had certain qualifications in addition to prudential measures that foreign insurers had tomeet to apply for a licence to provide services in China.  Those qualifications related to a minimum
period of establishment in a WTO Member, total assets and maintenance of a representative office in
China.  These qualifications did not apply to thos e established foreign insurance companies in China
seeking to practice internal branching.
2. Choice of Partner
252. Some members expressed concern regarding the existing practice of imposing conditions on
the Chinese companies that were allowed to partner with foreign service suppliers. These members
indicated that this could amount to de facto  quotas, as the number of potential partners meeting those
conditions might be limited. The representative of China confirmed that a foreign service supplierwould be able to partner with a Chinese entity of its choice as long as the Chinese partner was legallyestablished in China and met the criteria set out in relevant Chinese laws and regulations.  TheWorking Party took note of this commitment.
3. Modification of the Equity Interest
253. With respect to its Schedule of Specific Commitments, the representative of China confirmed
that established foreign service suppliers would be able to agree with their joint-venture partners onthe modification of their equity interest and implement such modification. The representative of Chinaconfirmed that such an agreement would be approved if consistent with the relevant equitycommitments in China's Schedule of Specific Commitments. The Working Party took note of thiscommitment.
4. Prior Experience Requirement for Establishment in Insurance Sector
254. In response to questions from members, the representative of China confirmed that, the
merging, division, restructuring or other change of legal form of an insurance company would notimpact the prior experience requirements included in China's Schedule of Specific Commitments, aslong as the insurance activities were maintained in the new entity.  The Working Party took note ofthis commitment.
5. Inspection Services
255. In response to questions from members of the Working Party, the representative of China
confirmed that China would not maintain requirements which had the effect of acting as barriers toWT/ACC/SPEC/CHN/1/Rev.3
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the operation of foreign and joint-venture commodity inspection agencies. The Working Party took
note of this commitment.
6. Market Research
256. Some members of the Working Party expressed concern regarding market research activities.
In response to questions from members in this respect, the representative of China confirmed that,upon accession to the WTO, China would remove the prior approval requirement for market researchservices, defined as investigation services designed to secure information on the prospects andperformance of an organization's products in the market, including market analysis (of the size andother characteristics of a market) and analysis of consumer attitudes and preferences. Market researchfirms registered in China, which were engaged in such services, would only be required to file the
survey plan and the questionnaire form on record in the statistical agencies of government at or above
the provincial level.  The Working Party took note of these commitments.
7. Legal Services
257. In response to questions from members of the Working Party, the representative of China
clarified that "Chinese national registered lawyers", as indicated in China's Schedule of SpecificCommitments, were those Chinese nationals who had obtained a lawyer's certificate and a practising
permit and had registered in a Chinese law firm for practising.
8. Schedule of Specific Commitments
258. China's Schedule of Specific Commitments was annexed to the Draft Protocol reproduced in
the Appendix to this Draft Report.  This Schedule of Specific Commitments contained the marketaccess commitments of China in respect of services.
VII. OTHER ISSUES
1. Notifications
259. Members of the Working Party requested that China provide to the WTO Secretariat the
notifications described in paragraphs … of this Draft Report.
2. Trade Agreements
260. Some members of the Working Party raised specific concerns in relation to some of China's
special trade arrangements, including barter trade arrangements, with third countries and separatecustoms territories.  Those members requested that China enter a commitment to eliminate such
arrangements or bring them into conformity with WTO obligations by no later than the date of its
accession to the WTO Agreement.WT/ACC/SPEC/CHN/1/Rev.3
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3. Transparency
261. Some members of the Working Party requested that China undertake to ensure that upon
request, and prior to implementation or enforcement, all laws, regulations and other measurespertaining to or affecting trade in goods, services, TRIPS or the control of forex would be publishedand made available to WTO Members.
262. Those members of the Working Party also requested that China designate an official journal
in which all laws, regulations and other measures pertaining to or affecting matters covered by theWTO Agreement would be published and that those laws regulations and other measures should onlybecome effective following a period within which interested parties could submit comments to the
designated authorities.  They asked that China publish that journal on a regular basis and make copies
of all issues of this journal readily available to individuals and enterprises.
263. Members of the Working Party also requested that China set up an enquiry point where
information relating to all laws, regulations and other measures pertaining to or affecting trade ingoods, services, TRIPS or the control of forex could be obtained.  Those members stated that repliesto such enquiries should generally be provided within 30 days of a request, and should in no case takelonger than 45 days, and if so delayed a statement indicating the reasons therefore should be providedin writing to the interested party.  Members noted that replies to enquiries would need to be completeand represent the authoritative view of the Government of China.
264. The representative of China stated that China would, according to the requirements of all
WTO covered agreements, make available to WTO Members, upon request, relevant laws, regulations
and other measures when such measures were implemented or enforced.  He further stated that Chinawould establish or designate an enquiry point wh ere, upon request of other WTO Members, laws,
regulations and other measures pertaining to or affecting the subject-matters of the WTO Agreementcould be obtained and replies to relevant inquiries from other WTO Members be provided within areasonable period of time.  The Working Party took note of these commitments.
265. Members of the Working Party further requested that China provide the WTO Secretariat
with statistical data and information describing China's economy and trading system, as specified inAnnex 1 of the Draft Protocol, every two years, and 30 calendar days prior to a meeting of the
Working Party on Trade with China that would be established by the Draft Protocol.
266. Some members of the Working Party expressed concern about the lack of transparency
regarding the laws, regulations and other measures that applied to matters covered in the WTOAgreement and the Draft Protocol.  In particular, some members noted the difficulty in finding andWT/ACC/SPEC/CHN/1/Rev.3
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obtaining copies of regulations and other measures undertaken by various ministries as well as those
taken by provincial and local authorities.  Transparency of regulations and other measures,particularly of sub-central authorities, was essential since these authorities often provided the detailson how the more general laws, regulations and other measures of the central government would be
implemented and often differed among various jurisdictions. Those members emphasized the need to
receive such information in a timely fashion so that governments and traders could be prepared tocomply with such provisions and could exercise  their rights in respect of implementation and
enforcement of such measures.  Those members noted the development of the Internet and othermeans to ensure that information from all government bodies at all levels could be assembled in oneplace and made readily available.  The creation and maintenance of a single, authoritative journal andenquiry point would greatly facilitate dissemination of information and help promote compliance.
267. Members of the Working Party also emphasized the importance of a meaningful opportunity
to provide comments prior to final implementation of laws, regulations and other measures.  Such an
opportunity could enhance understanding of the provision and permit China to take such comments
into account before implementing a measure.
268. In response, the representative of China noted that the Government of China regularly issued
publications providing information on China's foreign trade system, such as the: "Almanac of Foreign
Economic Relations and Trade" and "The Bulletin of MOFTEC" published by MOFTEC; "StatisticalYearbook of China", published by the State Statistical Bureau; "China's Customs Statistics(Quarterly)", edited and published by the Customs.  China's laws and administrative rules andregulations of the State Council relating to foreign trade were all published, as were regulations issued
by Ministries and Commissions.  Such laws and regulations were available in the "Bulletin of the
State Council", the "Collection of the Laws and Regulations of the People's Republic of China" andthe "MOFTEC Gazette".  The administrative regulations  and directives relating to foreign trade were
also published on MOFTEC's official websit e (http://www.moftec.gov.cn) and periodicals.
269. He further noted that there were no forex restrictions affecting import or export. Information
on forex measures was published by the SAFE and was available on SAFE's website(http://www.safe.gov.cn) and via the news media.
270. Concerning administration of imports and exports, the representative of China noted that
MOFTEC, together with the relevant department s, decided the items and specific quantities of
products subject to import and export licensing and made timely adjustments according to the need of
the current situation.  Such information would be published in the "International Business" newspaperand the "MOFTEC Gazette".WT/ACC/SPEC/CHN/1/Rev.3
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271. He also noted that information on China's customs laws and regulations, import and export
duty rates, and customs procedures were published in the "State Council Bulletin" and in the pressmedia, and were available upon request. The procedures  concerning application of duty rates, customs
value and duty determination, drawback and duty recovery, as well as the procedures concerning duty
exemptions and reduction, were also published.  Customs also published monthly customs statistics,
calculated according to country of origin and final destination, on the basis of eight-digit HS levels.
272. The representative of China noted that any bilateral trade agreements concluded between
China and its trading partners, and protocols on the exchange of goods negotiated under them werepublished in "The Treaty Series of the PRC".  He also noted that the "Directory of China's Foreign
Economic Relations and Trade Enterprises" and "China's Foreign Trade Corporations andOrganizations" were two publications which identified foreign trade corporations and otherenterprises in China engaged in foreign trade.
273. The representative of China confirmed that China would make available to WTO Members
translations into one or more of the official languages of the WTO all laws, regulations and other
measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex, and to themaximum extent possible would make these laws, regulations and other measures available [__]calendar days before they were implemented or enforced.  The Working Party took note of thesecommitments.
274. The representative of China confirmed that publication of all laws, regulations and other
measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex wouldinclude the effective date of these measures.  Where appropriate, it would also include the products
and services affected by a particular measure, identified by appropriate tariff line and CPC
classification.  The Working Party took note of these commitments.
275. The representative of China confirmed that China would publish in the official journal, by
appropriate classification and by service where relevant, a list of all organizations, including thoseorganizations delegated such authority from the national authorities, that were responsible forauthorizing, approving or regulating services activities whether through grant of licence or otherapproval.  Procedures and the conditions for obtaining such licences or approval would also bepublished.  The Working Party took note of these commitments.
276. The representative of China confirmed that none of the information required by the
WTO Agreement or the Draft Protocol to be disclosed would be withheld as confidential information.
The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.3
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277. The representative of China confirmed that China would establish or designate an enquiry
point where all information relating to the laws, regulations and other measures pertaining to oraffecting trade in goods, services, TRIPS or the control of forex, as well as the published texts, couldbe obtained.  This information would include the names of national or sub-national authorities
(including contact points) responsible for implementing a particular measure.  The Working Party
took note of these commitments.
278. The representative of China stated that the full listing of official journals was as follows:
Gazette of the Standing Committee of the National People's Congress of the People's Republic ofChina;  Gazette of the State Council of the People's Republic of China;  Collection of the Laws of thePeople's Republic of China;  Collection of the Laws and Regulations of the People's Republic ofChina;  Gazette of MOFTEC of the People's Republic of China;  Proclamation of the People's Bank ofthe People's Republic of China;  Proclamation of the Ministry of Finance of the People's Republic ofChina.
VIII.  CONCLUSIONS
279. The Working Party took note of the explanations and statements of China concerning its
foreign trade regime, as reflected in this Draft Report.  The Working Party took note of thecommitments given by China in relation to certain specific matters which are reproduced inparagraphs […] of this Draft Report and noted that  these commitments are incorporated in paragraph
1.2 of the Draft Protocol.
280. Having carried out the examination of the foreign trade regime of China and in the light of the
explanations, commitments and concessions made by China, the Working Party reached theconclusion that China should be invited to accede to the Marrakesh Agreement Establishing the WTOunder the provisions of Article XII.  For this purpose, the Working Party prepared the Draft Decisionand Draft Protocol reproduced in the Appendix to this Draft Report, and took note of China'sSchedule of Concessions and Commitments on Goods [(document WT/ACC/SPEC/CHN…)] and
China's Schedule of Specific Commitments on Services [(document WT/ACC/SPEC/CHN…)] thatwere annexed to the Draft Protocol.  It was proposed that these texts be adopted by the GeneralCouncil when it adopted the Draft Report.  When the Draft Decision was adopted, the Draft Protocol
would be open for acceptance by China which would become a WTO Member 30 days after it
accepted the said Draft Protocol.  The Working Party agreed, therefore, that it had completed its workconcerning the negotiations for the accession of China to the WTO Agreement.
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