RESTRICTEDWORLD TRADE
ORGANIZATIONG/STR/W/35
27 July 1998
(98-2973)
Working Party on
State Trading Enterprises
DRAFT ILLUSTRATIVE LIST
OF RELATIONSHIPS BETWEEN GOVERNMENTS AND STATE TRADING
ENTERPRISES AND THE KINDS OF ACTIVITIES ENGAGED IN
BY THESE ENTERPRISES
I. INTRODUCTORY COMMENTS
1. Pursuant to paragraph 5 of the Understanding on the Interpretation of Article XVII of the
General Agreement on Tariffs and Trade 1994 ("the Understanding"), this Illustrative List shows the
kinds of relationships which exist between governments and state trading enterprises and the kinds of
activities which such enterprises engage in, which may be relevant for the purposes of Article XVII.
It is based on the Article XVII notifications made since 1980.
2. The List does not represent a definition of what constitutes a state trading enterprise or an
attempt to further refine or interpret the defin ition of "state trading enterprise" as provided in
Article XVII of GATT 1994 and its Interpretative Notes or the working definition contained in the
Understanding1.  It is based on relationships and activities already notified, and is intended to guide
Members in determining whether an enterprise wi thin their jurisdictions falls within the agreed
definitions and whether therefore it should be notified to the WTO under Article XVII.  As such, itprovides a checklist of possible relationships with government and possible activities with respect to
state trading enterprises.  It may also contribute to a clearer understanding of the disciplines in
Article XVII.
3. While the List is as comprehensive as possible, it is not exhaustive.  There may be other
relationships or activities that may be relevant for the purposes of Article XVII.  Conversely, none of
the elements listed necessarily identifies a state trading enterprise, as certain of the
relationships/activities listed could involve, or be engaged in by, entities which do not meet thecriteria set out in the agreed definitions of "state trading enterprise".
4. It remains the prerogative and responsibility of each Member to determine whether an
enterprise under its jurisdiction falls within the agreed WTO definitions and thus should be notified
under Article XVII.  Equally, any Member which has reason to believe that another Member has not
adequately met its notification obligation has the right to proceed as provided for in paragraph 4 of theUnderstanding.
II. USER'S GUIDE TO THE ILLUSTRATIVE LIST
5. It is recalled that three fundamental elements are identified in the working definition of "state
trading enterprise" contained in paragraph 1 of the Understanding:
(i) a governmental or non-governmental entity, including marketing boards;
(ii) the granting to the enterprise of exclus ive or special rights or privileges;  and
                                                     
11  See attached Annex for the full text of GATT Article XVII paragraphs 1(a) and (b), the Interpretative
Notes to Article XVII, and the working definition in paragraph 1 of the WTO Understanding on Article XVII.G/STR/W/35
Page 2
(iii) a resulting influence, through the enterprise's purchases or sales, on the level or
direction of imports or exports.
6. Thus, a notifiable state trading enterprise has a relationship to the government through the
latter's granting of a right or privilege and conducts an activity which influences the level or directionof imports or exports.  It is suggested that by looking at the type of relationship the entity has with the
government as a result of the latter's granting of an exclusive or special right or privilege, at the type
of activity the enterprise engages in and through which it influences the level or direction of imports
or exports, and finally by examining the interaction between the two, the Member may be better able
to determine whether the enterprise should be notified.  The lists in Sections III and IV which follow
are included for this purpose.  It should be noted that the activities of a state trading enterprise may
not be limited to those derived from the rights/privileges granted to it and may include other activities.
7. This preliminary guidance as to the basic elem ents of a state trading enterprise should help
Members' consideration of the two sections which follow.
III. RELATIONSHIPS WITH GOVERNMENT
8. The following types of relationships between enterprises and governments should be
considered as possible indications of the existence of a state trading enterprise.  As mentioned in thesection on "Introductory Comments", no one relationship described necessarily identifies an enterprise
as falling within the agreed WTO definitions of "state trading enterprise".
The enterprise
2 which is granted exclusive or special rights or privileges in the
exercise of which it influences through its purchases or sales the level or direction of
imports or exports is
(a) a branch of government or a government-owned (or partially owned)
enterprise;  or
(b) entirely separate from government (i.e. neither a branch of government nor
fully or partially owned by the government), whether established to carry outgovernment-mandated policies or programs subject to legislated controls, or
whether established for commercial purposes; this includes entities which are
established and maintained under legislation and financed and controlled by
the producers of the product over which they have marketing authority.
In addition , the enterprise purchases or sells a given product or group of products,
either directly or indirectly through third parties under contract or transfer of right;
and one or more of the following applies:
(i) the enterprise is specially authorized or mandated by the government to do
one or more of the following:
- control and/or conduct import or export operations;
- distribute imports;- control domestic production, processing or distribution.
                                                     
2 Not included are entities, or government Ministries, that have only regulatory authority in areas relevant to
international trade ..G/STR/W/35
Page 3
(ii) all or part of the enterprise's activities are supported by government in one or
more of the following ways, and the support afforded is specific or more
favourable to the enterprise and not generally available to other entities, or is
not warranted by purely commercial considerations:
- budget allocations;
- interest rate/tax concessions;
- guarantees (e.g. for loans or against business failure);
- revenue from the collection of tariffs;- preferential access to foreign exchange;- any off-budget support or assistance.
IV. ACTIVITIES
3 ENGAGED IN BY STATE TRADING ENTERPRISES
9. The following activities are of the kind which might be engaged in by a state trading
enterprise. An enterprise might engage in one or more of these activities, which can be directly related
to importation, exportation or the trade régime, which can be related to domestic production, or whichcan be related to trade in a subsidiary way.  As mentioned in the section on "Introductory Comments",
no one activity or combination of activities necessarily identifies an enterprise as falling within the
agreed WTO definitions of "state trading enterprise".
(a) Controls or conducts imports or exports;
(b) Administers multilaterally or bilaterally agreed quotas, tariff quotas or other
restraint arrangements, or other import or export regulations;
(c) Issues licenses/permits for importation or exportation;
(d) Determines domestic sales prices of imports.
(e) Enforces the statutory requirements of an agricultural marketing scheme
and/or stabilization arrangement;
The following activities were included in some notifications:
(i) Authorizes or manages domestic production and/or processing of domestic
production;
(ii) Determines the purchase price and/or sales price of domestic production;
(iii) Manages domestic distribution of domestic production and/or imports;
(iv) Undertakes purchases and sales of domestic production based on pre-
determined floor and ceiling prices (intervention purchases/sales);
(v) Issues credit guarantees for producers, processors, exporters or importers;
(vi) Engages in export- and support-related activities such as storage, shipping,
processing, packaging and insurance;
                                                     
3 The list refers to activities of a state trading enterprise for a given product or group of products.G/STR/W/35
Page 4
(vii) Controls or conducts marketing or distribution of processed products through
subsidiaries or joint ventures in import markets;
(viii) Exercises quality control functions for imports or domestic production,
including for export;
(ix) Engages in promotional activities for exports and/or domestic consumption;(x) Procures and maintains emergency stocks of certain strategic and/or
agricultural goods;
(xi) Negotiates or administers long-term bilateral contracts (including
government-to-government) for exports and/or imports;
(xii) Undertakes purchases or sales necessary to fulfil contractual obligations
entered into by the government.G/STR/W/35
Page 5
ANNEX
Article XVII:1(a) of GATT 1994 reads as follows:  "Each contracting party undertakes that if
it establishes or maintains a State enterprise, wherever located, or grants to any enterprise, formally or
in effect, exclusive or special privileges, such ente rprise shall, in its purchases or sales involving
either imports or exports, act in a manner consistent with the general principles of non-discriminatorytreatment prescribed in this Agreement for govern mental measures affecting imports or exports by
private traders."
Article XVII:1(b) of GATT 1994 reads as follows:  "The provisions of sub-paragraph ( a) of
this paragraph shall be understood to require that such enterprises shall, having due regard to the other
provisions of this Agreement, make any such purchas es or sales solely in accordance with commercial
considerations, including price, quality, availability, marketability, transportation and other conditionsof purchase or sale, and shall afford the enterprises of the other contracting parties adequate
opportunity, in accordance with customary business practice, to compete for participation in such
purchases or sales."
The Interpretative Notes to Article XVII read as follows:"Paragraph 1 :  The operations of Marketing Boards, which are established by contracting
parties and are engaged in purchasing or selling, are subject to the provisions of sub-paragraphs ( a)
and ( b).  The activities of Marketing Boards which are established by contracting parties and which do
not purchase or sell but lay down regulations covering private trade are governed by the relevantArticles of this Agreement.  The charging by a state enterprise of different prices for its sales of a
product in different markets is not precluded by the provisions of this Article, provided that such
different prices are charged for commercial reason s, to meet conditions of supply and demand in
export markets.
"Paragraph 1(a) :  Governmental measures imposed to insure standards of quality and
efficiency in the operation of external trade, or privileges granted for the exploitation of national
natural resources but which do not empower the government to exercise control over the trading
activities of the enterprise in question, do not constitute "exclusive or special privileges".
"Paragraph 1(b) :  A country receiving a "tied loan" is free to take this loan into account as a
"commercial consideration" when purchasing requirements abroad.
"Paragraph 2 :  The term "goods" is limited to products as understood in commercial practice,
and is not intended to include the purchase or sale of services.
"Paragraph 3 :  Negotiations which contracting parties agree to conduct under this paragraph
may be directed towards the reduction of duties and other charges on imports and exports or towards
the conclusion of any other mutually satisfactory arrangement consistent with the provisions of this
Agreement. (See paragraph 4 of Article II and the note to that paragraph.)
"Paragraph 4(b) :  The term "import mark-up" in this paragraph shall represent the margin by
which the price charged by the import monopoly for the imported product (exclusive of internal taxes
within the purview of Article III, transportation, distribution, and other expenses incident to the
purchase, sale or further processing, and a reasonable margin of profit) exceeds the landed cost."
Paragraph 1 of the Understanding reads as follows:"Governmental and non-governmental enterprises, including marketing boards, which have
been granted exclusive or special rights or privile ges, including statutory or constitutional powers, in
the exercise of which they influence through their purchases or sales the level or direction of imports
or exports."
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