WORLD TRADE
ORGANIZATIONG/C/W/435
19 November 2002
(02-6423)
Council for Trade in Goods Original:  English
TRANSITIONAL REVIEW MECHANISM
PURSUANT TO PARAGRAPH 18 OF THE PROTOCOL ON THE ACCESSION
OF THE PEOPLE'S REPUBLIC OF CHINA
Questions from the UNITED STATES to CHINA concerning trade in goods
The following communication, dated 26 August 2002, has been received from the Permanent
Mission of the United States.
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Attached are the questions that the Government of the United States wishes to pose to China
at the 22 November CTG meeting for the purposes of the Transitional Review mandated by China's
Protocol of Accession.
State Trading Enterprises
1. The Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs
and Trade 1994 (Understanding) requires WTO Members to submit a notification regarding state
trading enterprises to the Council for Trade in Goods, for review by the Working Party on State
Trading Enterprises. The Understanding defines state trading enterprises for this purpose as:
Governmental and non-governmental enterprises, including marketing boards, which have
been granted exclusive or special rights or privileges, including statutory or constitutional
powers, in the exercise of which they influence through their purchases or sales the level ordirection of imports or exports.
The Understanding also explains that a Member's notification shall be made in accordance
with the questionnaire on state trading, as adopted on 24 May 1960 and revised in 1998. In
accordance with that questionnaire, the notification should include all state trading enterprises (that
fall within the definition above) and the products within their control (listed by HS tariff code);
statistics, by quantity and value, on imports, exports and national production of the products notified;the purpose of each notified state trading enterprise and the legal authority which grants exclusive or
special rights to that enterprise; a detailed description of the functioning of each notified state trading
enterprise, including in particular whether that enterprise is primarily involved in importing or
exporting, whether private traders are allowed to import or export and on what conditions, and
whether there is free competition between private traders and that enterprise; all exclusive or specialrights or privileges granted to each notified state trading enterprise, including any support or
assistance provided by the government; and an explanation of how any mark-up on imported products
is determined. In addition, China agreed in its Protocol of Accession (in Section 6.2 of Part I) to
provide full information on the pricing mechanisms of its state trading enterprises for exported goods.
China's notification under the Understanding and the Protocol of Accession was due upon accession.G/C/W/435
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(a) Please indicate when this notification will be supplied.
(b) Please list all laws, regulations and other measures (at both the central level and the
sub-national level) that China has issued since its accession dealing with state trading enterprises, andindicate which of these measures were taken to comply with the Understanding or the commitments in
China's accession agreement.
(c) Please indicate what steps China has taken to ensure that all laws, regulations and other
measures related to state trading enterprises have been published and are readily available, as required
by Section 2(C)2 of Part I of  China's Protocol of Accession.
Export Restrictions
2. Since 1994, China has subjected acid grade fluorspar to two types of export restrictions.
China imposes a quota on fluorspar exports, and it also requires fluorspar exporters to pay
export license fees, which reportedly range from 85 percent to more than 150 per cent of the cost of
fluorspar.  China has not eliminated these export re strictions since acceding to the WTO, despite the
fact that WTO rules establish a general prohibition against export restrictions, with only limited
exceptions.  The United States understands China's position to be that the export restrictions on
fluorspar, a raw material used in the production of hydrofluoric acid and fluorocarbons, fall under theexception regarding the conservation of exhaustible natural resources, set forth in Article XX of the
General Agreement on Tariffs and Trade 1994 (GATT 1994).  However, that exception only allows
measures such as export restrictions if they were made effective in conjunction with restrictions on
domestic production or consumption.
(a) Please indicate whether the two types of export restrictions on fluorspar were made effective
in conjunction with a measure imposing restrictions on domestic production or consumption of
fluorspar, as envisioned by Article XX of GATT 1994.  If so, please identify the measure imposing
the restrictions on domestic production or consumption, and indicate when it became effective.
(b) Does China charge domestic fluorspar producers any fees similar to the export licence fees
imposed on exporters of fluorspar?  If so, please describe those fees.
3. In paragraph 165 of the Working Party Report accompanying China's Protocol of Accession,
China confirmed that, upon accession, it would notify remaining non-automatie restrictions on
exports. Please indicate when this notification will be supplied.
Border Trade
4. China continues to provide preferential treatment to imports from border areas, in the form
of reduced import duties and/or value-added taxes (VAT).  For example, China's WTO Notification
and Enquiry Center, in response to an enquiry about China's border trade policy, confirmed that Chinacontinues to apply a 50 per cent lower import duty rate to imports of boric acid from Russia.
(a) Please identify the conditions that must be satisfied in order for trade to be considered "border
trade" that is eligible for import duty and/or VAT reductions, and identify the amounts of those
reductions.
(b) Are all imports from within a border area subject to preferential treatment, or is there a list of
specific products that receive this treatment? If there is a list, please identify the products on the list.G/C/W/435
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(c) Boric acid is manufactured in Russia several hundred kilometers away from Russia's border
with China, outside the definition of a border area, as set forth in the State Council notice on border
trade, issued on 3 January 1996.  Please explain how the application of a 50 per cent lower import
duty rate for Russian boric acid is in compliance with China's border trade policy, given that the
location of the mining of boric acid in Russia is outside the border trade area.
(d) In its Protocol of Accession, China agreed that "[t]he provisions of the WTO Agreement and
this Protocol shall apply to the entire customs territory of China, including border trade regions and
minority autonomous areas, Special Economic Zones, open coastal cities, economic and technical
development zones and other areas where special regimes for tariffs, taxes and regulations are
established . . . . China shall apply and administer in a uniform, impartial and reasonable manner all
its laws, regulations and other measures of the central government as well as local regulations, rulesand other measures issued or applied at the sub-national level . . . ." Protocol of Accession, Section
2(A) (emphasis added).  China also took on the obligation to provide most-favoured nation treatment
under Article I of GATT 1994.  In addition, China specifically stated that it would eliminate
preferential import duty and VAT treatment in border areas by the end of 2000.  See Protocol of
Accession, Annex 5A, Part XIV. Please describe China's plans for eliminating its preferential bordertrade policy.  If China does not intend to eliminate this policy immediately, please explain how this
policy, including its application to trade in boric acid, is consistent with China's WTO commitments.
National Treatment
5. Please identify all laws, regulations and other measures that China has repealed or modified
because they were inconsistent with the WTO's natio nal treatment principle, as required by Part II.1
of Annex lA to China's Protocol of Accession.
6. Please describe the steps taken by China to repeal or modify laws, regulations and other
measures in order to provide national treatment in respect of after sales service and boiler and
pressure vessels.
Foreign Trade Barriers Regulation
7. The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) recently issued the
Provisional Rules on Investigation of Foreign Trade Barriers, effective 17 November 2002.
MOFTEC did not provide any opportunity for publ ic comment on these rules, contrary to the
commitment in Section 2(C)2 of Part I of China's Pr otocol of Accession.  The United States seeks the
following clarifications about these rules:
(a) Article 12 indicates that interested parties will have the opportunity to comment if MOFTEC
decides to accept a petition for investigation of trade barriers.  How much time will interested parties
have to provide their comments?  Will interest ed parties have the opportunity to review a
non-confidential version of the petition?  Will there be a public hearing?
(b) Under Article 16, what type of information will MOFTEC provide in its announcement of a
self-initiated case?
(c) Under Article 18, will MOFTEC take steps to ensure that the expert panelists do not have an
interest in the outcome of the investigation?  Will the names of the expert panelists be made public?
Will the panel's findings be made public?
(d) If MOFTEC finds that material submitted during an investigation is not confidential under
Article 20, will it provide the submitting interested  party the opportunity to withdraw the material?G/C/W/435
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(e) Article 32 states that the power to interpre t the rules shall remain with MOFTEC.  Please
confirm that MOFTEC's interpretation is subject to judicial review.
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