. /.  WORLD TRADE  
ORGANIZATION  WT/DS309/1 
G/L/675 
S/L/160 23 March 2004 
 
 
(04-1280) 
 Original:   English 
  
 
CHINA – VALUE-ADDED TAX ON  INTEGRATED CIRCUITS 
 
Request for Consultations by the United States
 
  
 The following communication, dated 18 Marc h 2004, from the delegation of the United States 
to the delegation of China and to the Chairman of  the Dispute Settlement Body, is circulated in 
accordance with Article 4.4 of the DSU.  
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  My authorities have instructed me to request  consultations with the Government of the 
People's Republic of China ("China") pursuant to Articles 1 and 4 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes  ("DSU"), Article XXII:1 of the General Agreement 
on Tariffs and Trade 1994  ("GATT 1994"), and Article XXII:1 of the General Agreement on Trade in 
Services ("GATS") regarding China's value-added tax (" VAT") on integrated circuits ("ICs"). 
  China provides for a 17 per cent VAT on ICs.  However, we understand that enterprises in 
China are entitled to a partial refund of the VAT on IC s that they have produced, resulting in a lower 
VAT rate on their products.  China therefore appear s to be subjecting impor ted ICs to higher taxes 
than applied to domestic ICs and to be accord ing less favourable treatment to imported ICs. 
  In addition, we understand that China allows for a partial refund of VAT for 
domestically-designed ICs that, because of technol ogical limitations, are manufactured outside of 
China.  China thus appears to be providing fo r more favourable treatment of imports from one 
Member than another, and discriminating agains t services and service suppliers of other Members. 
  We understand that China implements its pr eferential tax for domestically-produced or 
designed ICs through the following measures:    • Document 18 (24 June 2000), Notice of the State Council Regarding Issuance of Certain 
Policies Concerning the Development of th e Software Industry and Integrated Circuit 
Industry ;  
 • Document 25 (22 September 2000), Notice of the Ministry of Finance, State Administration of 
Taxation, and General Administration of Cust oms on Relevant Tax Policy Issues Concerning 
Encouraging the Development of the Software Industry and the Integrated Circuit Industry ;  
 • Document 86 (7 March 2002), Notice of the Ministry of Information Industry Regarding 
Issuance of Regulations on Certification of  Integrated Circuit Design Enterprises and 
Products ;  
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G/L/675 S/L/160 
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  • Document 70 (10 October 2002), Notice of the Ministry of Finance, State Administration of 
Taxation Regarding Furthering Tax Policies to  Encourage the Development of the Software 
Industry and Integrated Circuit Industry ;  
 
• Document 140 (25 October 2002), Notice of the Ministry of Finance, State Administration of 
Taxation Regarding Tax Policies for Imports of  Integrated Circuit Products Domestically 
Designed and Fabricated Abroad ; and 
 
• Document 1384 (23 December 2003), Notice of the State Administration of Taxation 
Regarding Issuance of the Catalogue of Inte grated Circuit Products Enjoying Preferential 
Tax (First Batch) ; 
 as well as any amendments, related meas ures, or other implementing measures. 
 
 The United States therefore believes that these me asures are inconsistent with the obligations 
of China under Articles I and III of the GATT 1994 , the Protocol on the Accession of the People's 
Republic of China (WT/L/432), and Article XVII of the GATS.   We look forward to receiving your reply to this request and to fixing a mutually acceptable 
date for consultation. 
  
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