WORLD TRADE  
ORGANIZATION  G/AG/W/64 
31 August 2004 
 (04-3596) 
Committee on Agriculture Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM 
 
Questions to China from the United States in the c ontext of the Transitional Review Mechanism under 
Paragraph 18 of the Protocol of Accessi on of the People's Republic of China  
 
  The following communication, dated 27 Augus t 2004, has been received from the Delegation 
of the United States, with the request that it be  circulated to Members, for the purposes of the 
Transitional Review to take place at th e Committee's meeting on 23 September 2004. 
 
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  The following questions relate to matters c overed by both Article 4 of the Agreement on 
Agriculture and various articles of the Agreem ent on Import Licensing Procedures.  While the 
United States is submitting these questions in conn ection with the transitional review before the 
Committee on Agriculture scheduled for 23 Sept ember 2004, it may address these matters further 
during the transitional review before th e Committee on Import Licensing scheduled for 
30 September 2004. 
 
Administration of Agricultural Tariff-Rate Quotas  
1. In paragraph 116 of its Working Party Report, China committed that it would ensure that 
tariff-rate quotas (TRQs) were administered on a transparent, predictable, uniform, fair and non-discriminatory basis using clearly specified  time-frames, administrative procedures and 
requirements that would provide effective impor t opportunities; that would reflect consumer 
preferences and end-user demand; and that would not inhibit the filling of each TRQ.  In paragraph 6 
of the TRQ headnote in its Goods Schedule (Part I,  Section I-B), China also committed to equitably 
distribute allocations within each portion of the TR Q to ensure complete TRQ utilization, and to 
establish a TRQ system that is responsive to mark et conditions and minimally  burdensome to trade. 
2. At the November 2003 meeting of the Committee on Agriculture and again during bilateral 
discussions with the United States in April 2004, Ch ina agreed to provide certain information on 
quota holders and allocations and reallocations for commodities subject to TRQs, for those quota 
holders that have expressed their consent to the Chinese government for release of this information, 
upon written request.  After subsequently submitting a written request to China regarding all TRQ 
commodities, the United States receiv ed an initial list of quota holders for wheat and cotton, but no 
information on the amounts allocated or reallocate d.  The United States has not received any 
information with regard to the other TRQ commodities. 
 (a) Please provide the following informati on for each of the commodities subject to 
TRQs:  (i) the volume of TRQ request ed, both for initial allocation and for 
reallocation;  (ii) the volume of TRQ requests denied;  (iii) fill rates to date;  (iv) the 
amount of any goods entered at the out-of-quota rate;  and (v) time taken to grant 
TRQ allocations and reallocations. G/AG/W/64 
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 (b) For each of the commodities subject to TRQs , please provide a list of enterprises that 
applied for TRQ allocation.  
  (c) For each of the commodities subject to TR Qs, please provide a list of the enterprises 
that have received allocations, the nature of each enterprise (e.g. state-owned 
enterprise, foreign-invested enterprise, etc. ), and whether the enterprise has received 
quota reserved for importation through state trading enterprises or enterprises other than state trading. 
 
3. Please confirm that:  (a) the application pe riod for 2005 quota allocations will be between 
15 and 30 October 2004;  (b) specific requirements ha ve been published in the International Business 
Daily and the China Economic Herald as well as th e websites of the Ministry of Commerce and the 
State Development and Reform Commission one mont h in advance of the application period;  and 
(c) all 2005 TRQ quantities will be allocated by 1 January 2005, in accordance with China's WTO 
commitments and Decree No. 4, the Interim Rules and Regulations for Agricultural Imports Tariff 
Rate Quota , issued 27 September 2003.  
4. Can China verify that cotton that is im ported into bonded warehouses, bonded areas and 
export processing zones does not count towards its global cotton TRQ allocation?  Because of the 
limited transparency in China's operation of its  TRQ system, the United States has had difficulty 
verifying that these products are not counted in China's TRQ totals. 
5. The United States appreciates that, in response to Members' concerns and in light of its WTO 
obligations, China revised its TRQ regulations in 2003 to eliminat e the sub-quota for processing trade 
(i.e. imports that must be processed and re-exporte d).  However, the United States is still concerned 
that China's regulations provide for the applica tion of out-of-quota tariff rates if a TRQ product 
imported under a processing trade channel is sold in  China rather than processed and re-exported.  
Can China confirm that although it never requires that quota holders bring product in as processing 
trade as a condition of any TRQ import certificates, quota holders have the option of choosing the 
processing trade channel as opposed to the general tr ade channel and China counts the product as in-
quota imports in either case?  If so, please explain how product entering China as processing trade under China's TRQ system can be consistent with  China's tariff binding and national treatment 
obligations when product entering China as processi ng trade is subject to out-of-quota tariffs and 
other penalties if it enters the customs territory of China.   
AQSIQ Licensing for Inspection of Imports 
 
6. The United States remains concerned about the quarantine import inspection permit 
procedures provided for in State General Administ ration of Quality Supervision and Inspection and 
Quarantine (AQSIQ) Ordinance 7, Administrative Measures for the Entry-Exit Inspection and 
Quarantine for Grains and Feed Stuff  (effective March 1, 2002), as well as AQSIQ Decree No. 25, 
Administrative Measures for Entry Animal and Plant Quarantine  (effective 1 September 2002).  
Specifically, pursuant to Ordinance 7, AQSIQ requires that importers obtain an import inspection permit prior to signing an import contract for grain or  feed.  Port quarantine authorities may return or 
destroy any cargoes without a prior import inspection permit.  This import inspection permit is in 
addition to other import licenses, including a TRQ import certificate (in the case of TRQ commodities 
like wheat) and a safety certificate (in the case of certain commodities), and it does not replace inspection at the port.  Similar procedures apply under Decree No. 25, pursuant to which importers are 
required to obtain a quarantine permit for a wide rang e of animal and plant products before an import 
contract can be signed.  The United States continu es to receive reports from traders regarding both the 
burdensome nature of the procedures and selectiv e enforcement by AQSIQ under Ordinance 7 and 
Decree No. 25.  G/AG/W/64 
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(a) Please clarify who is eligible to apply for an import inspection permit under 
Ordinance 7.  What standards does AQS IQ employ in accepting or rejecting 
applications? 
 
(b) Please clarify who is eligible to appl y for a quarantine permit under Decree No. 25. 
What standards does AQSIQ employ in accepting or rejecting applications? 
 
(c) Under Article 6 of Ordinance 7, in applying for an import inspection permit, the 
owner of the goods to be imported, or its  agent, must provide information that 
includes details about plant location, stor age capacity, transportation, processing and 
whether prior shipments have been fu lly utilized.  Please explain why this 
information is necessary. 
 
(d) Please explain why AQSIQ  requires an in spection of the facilities of an enterprise 
that processes agricultural commodities, sin ce the State Administration of Industry 
and Commerce also requires an inspecti on of those same facilities.  Will one 
inspection satisfy both requirements?  
 
(e) Please explain why an importer must re-apply for a new import inspection permit 
(rather than have the term of the original  one extended) if it has not entered into a 
commercial contact and imported the commodities covered by the import inspection 
permit by the expiry date. 
 
(f) Please explain why an importer must specify the commodity weight, country of origin 
and port of entry before it has even entered into an import contract.  Please also 
explain why an importer must reapply for a license if the commodity weight changes 
by more than 10 per cent or if the country of origin or the port of entry changes. 
 7. On 16 June 2004, AQSIQ issued Decree No. 73, Items on Handling the Review and Approval 
for Entry Animal and Plant Quarantine  (effective 1 July 2004).  This decree adds provisions that may 
create unfavorable commercial terms for imports.  While it is unclear how this new decree will be 
implemented and enforced, the vague wording of the decree leaves open the possibility for future 
enforcement actions and places liability on the foreign exporter. 
 
 (a) Decree No. 73, in paragraph 4, requires importers to incorporate the inspection and 
quarantine requirements specified in the quara ntine permit into contracts and stipulate 
that the goods should comply with relevant  Chinese laws and food safety regulations.  
This requirement appears to be unn ecessary, because China's inspection and 
quarantine requirements are fully enforceable  by Chinese authorities.  Please explain 
the necessity of requiring inspection and quara ntine requirements to be incorporated 
into commercial contracts.   
 
(b) The requirement of paragraph 4 of D ecree No. 73 appears to oblige the seller of 
imported goods to bear the full commercial risk of non-compliance with China's inspection and quarantine requirements.  Customarily in international sales contracts for bulk commodities, parties generally agree that upon inspection of goods by the exporting country and issuance of a certificate of approval by the exporting country, 
risk pertaining to the quality of goods p asses to the buyers.  Please explain the basis 
for changing existing commercial practice.   
 G/AG/W/64 
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 (c) Decree No. 73, paragraph 6, requires the na me of the exporter and the supplier to be 
indicated in the application form for the entry animal and plant quarantine permit 
when applying for soybean imports.  It is often difficult to identify the name of the supplier (or the origin of the commodity) at the time an importer applies for the 
inspection permit.  Often, the supplier is  changed after the quarantine permit is 
issued.  While the United States understands the need to provide the name of the 
exporter in a transaction, please explain why Ch ina needs the name of  the supplier to 
be indicated in the application form for the quarantine permit for soybeans. 
 
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