WORLD TRADE
ORGANIZATIONG/AG/W/51
10 September 2002
(02-4734)
Committee on Agriculture Original:  English
CHINA'S TRANSITIONAL REVIEW MECHANISM
Questions to China from the United States in the context of the Transitional Review Mechanism
pursuant to Section 18 of the Protocol of Accession of the People's Republic of China
The following communication, dated 28 August 2002, has been received from the Permanent
Mission of the United States, with the request that it be circulated to Members, for the purposes of the
Transitional Review to take place at the Committee's meeting on 26 September 2002.
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Questions related to the administration of agricultural tariff-rate quotas
1. The regulations regarding administration of tariff-rate quota (TRQ) for agricultural
commodities were released in draft form for public comment in November 2001, and final regulations
were published in January 2002.  Allocation of the TRQs was delayed until May 2002.  This has
caused significant disruption and uncertainty to the trade.
(a) Please provide details on the procedure and timetable for reallocation of 2002 TRQ
that has not been contracted for.
(b) Please confirm that all 2003 TRQ quantities will be allocated by 1 January 2003, that
the application period will be open from 15-30 October 2002, and that specific
conditions have been published in the official journal one month in advance of the
application period, in accordance with the TRQ headnote in China's Goods Schedule(Part I-Section I-B of Schedule CLII  - People's Republic of China).
2. In the Committee on Agriculture meeting in June , China provided the following information:
(1) the amount of TRQ allocated for wheat, corn, rice, soybean oil, and cotton for 2002;  (2) the
distribution of allocations for trade through State trading entities and non-State trading entities;  and
(3) the amounts reserved for "processing" for each of the products.
(a) Can China confirm that it has published in an official journal the amounts of TRQ
actually allocated for 2002, the amounts of TRQ reserved for importation by STEs
and non-STEs, and the amounts of TRQ reserved for the "processing trade"?
(b) We understand that TRQ reserved for processing trade refers to TRQ that can be used
only to import product that will be proces sed and re-exported.  Is this understanding
correct?  If not, please define "processing trade" as used with respect to TRQs.  What
are the consequences if TRQ reserved for processing is used to import product that is
consumed in the domestic market and not re-exported?G/AG/W/51
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3. Neither China's Working Party Report nor the TRQ and headnote commitments for
agricultural products (Part I, Section I-B of Schedule CLII - People' s Republic of China) provide for
a sub-quota for processing trade.  These document s do, however, state that "China will equitably
distribute allocations within each portion of the tariff-quota to ensure complete tariff-quota utilization
and to establish a tariff-quota system that is open, transparent, fair, responsive to market conditions,timely, minimally burdensome to trade and reflects end-user preferences" (headnote 3.A), and that
"China would ensure that TRQs were administered on a transparent, predictable, uniform, fair and
non-discriminatory basis using clearly specified timeframes, administrative procedures and
requirements that would provide effective import opportunities; that would reflect consumer
preferences and end-user demand; and that would no t inhibit the filling of each TRQ" (Working Party
Report, paragraph 116).  Requiring that some portion of the TRQ be reserved for processing and
re-export appears not to meet these criteria.
(a) In light of China's market access and national treatment commitments for agricultural
commodities, China is requested to justify these restrictions regarding use of a portion
of the TRQ for processing trade.
(b) Please indicate when China will eliminate the processing trade restrictions on TRQs
for any 2002 quota that has not yet been utilized, and for 2003 and subsequent years'
quota.
4. In paragraph 116 of its Working Party Report, China committed that it would ensure that
TRQs were administered on a transparent, predictable, uniform, fair and non-discriminatory basisusing clearly specified time-frames, administrative procedures and requirements that would provide
effective import opportunities; that would reflect consumer preferences and end-user demand; and
that would not inhibit the filing 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 TRQ to ensure complete TRQ utilization, and to establish a TRQ system that isresponsive to market conditions and minimally burdensome to trade.
(a) Please provide the following information: (i) the volume of TRQ requested, both for
initial allocation and for reallocation; (ii) the volume of TRQ requests denied; (iii) fill
rates to date for each TRQ; (iv) the amount of any goods entered at the out-of-quota
rate; (v) time taken to grant TRQ allocation; and (vi) time taken to grant any import
licenses necessary to import TRQ product (see comments below regarding China's
requirement of a separate import license for TRQ products).
(b) For each of the commodities subject to TRQ,  please provide a list of enterprises that
applied for TRQ allocation.
(c) For each of the commodities subject to TRQ,  please provide a list of enterprises that
have received allocations, as well as indication of nature of enterprise (state-owned
enterprise, foreign-invested enterprise, cooperative enterprise, etc.), whether
enterprise has received TRQ reserved for importation through state trading
enterprises or enterprises other than state trading enterprises, and  whether enterprise
has received TRQ reserved for "processing trade" or "general trade".G/AG/W/51
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5. China committed that allocations would be made in commercially viable shipping quantities.
Reports from traders, however, indicate that some  allocations are in commercially unviable amounts.
(a) Please provide a list showing the size of each allocation of 2002 TRQ.
(b) What measures did China take to ensure that these allocations were for commercially
viable quantities?
6. The United States has a number of concerns regarding the Interim Measures on the
Administration of Tariff-Rate Quota for Agricultural Imports , issued by State Development and
Planning Commission on 30 January 2002, in addition to the distinction made between "processing
trade" and "general trade" discussed above.
Article 2 of the WTO Agreement on Import Licensing Procedures confirms that there is no
government discretion allowed in granting automatic import licenses and  it further prohibits
administration of automatic import licenses in a manner that has trade-restrictive or -distortive effects
on imports.
Additionally, Paragraph 138 of China's Working Party Report explicitly states that any
necessary licenses will be granted in the procedure that granted a quota allocation.  Paragraph 6Afurther states:  "Any additional requirement for importation will be automatic under the terms of the
Agreement on Import Licensing."
- The requirement for a signed contract prior to issuing permission to utilize the quota
is burdensome, contrary to practice in other WTO Members, and, in the view of the
United States, inconsistent with Paragraph 138 of China's Working Party Report.Please explain why it is necessary, under Article 17 of the Interim Measures , that an
end-user have a signed contract before it can apply for an Agricultural Product Tariff
Quota Certificate.
- Article 17 sets out a separate licensing procedure that follows quota allocation,
despite China's commitment discussed above regarding a single licensing procedure.
Please provide a time-frame for the elimination of the separate licensing procedure in
Article 17.
- Similarly, by requiring detailed commercial information prior to obtaining an import
license and limiting what commercial terms can be changed (Article 40), the Interim
Measures  limit an end-user's ability to adjust to market conditions and operate based
on commercial considerations.  We call China's attention to its commitment that all
commercial terms of trade will be at the sole determination of the importer and
exporter taking into full account the demands of the end-user.  (TRQ headnote, para.
6.E.)  Please indicate when China will eliminate these requirements or justify these
requirements in light of the TRQ headnote and the Agreement on Import LicensingProcedures.
- Please confirm that, under Article 11 of the Interim Measures , an end-user can apply
for a quota allocation in any location and use that allocation for importation anywhere
in China, without any restrictions on end-use or product destination?
- Article 19 of the Interim Measures  limits extensions of Agricultural Product Tariff
Quota Certificates to February 15 of the following year.  The United States notes that
any needed extensions must be automatic and immediate upon presentation of
documents, and there is no limit on the duration of the extension, provided theG/AG/W/51
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product is on the water by December 31.  (TRQ headnote, para. 8.D.)  When will
China revise Article 19 accordingly?
- Please explain why "contract-based", first-come-first-served, and processing trade are
excepted from Article 10's and Article 27's time deadlines.  Please identifyspecifically what rules apply to those applications?
- Under the TRQ headnote for agricultural products, if the TRQ reserved for import
through state-trading enterprises has not been contracted for by 15 August, the quota
holder will have the right  to import through any entity with trading rights.  No SDPC
approval should be required, as co ntemplated by Article 25 of the Interim Measures .
When will China revise Article 25 to eliminate the requirement of SDPC approval?
- Under the TRQ headnote, initial allocations should be designated for importation
through state trading enterprises or through non-state trading enterprises, as specified
in China's TRQ schedule.  (In contrast, reallocated  quota of the latter type can be
imported through either a state-trading enterprise or a non-state trading enterprise.)Please confirm that TRQ for importation through non-state trading shall be reserved
for importation by non-state trading enterprises only, and that holders of such TRQ
are not required to utilize state trading ente rprises to import covered product.  In this
regard, we note that Article 4 of the Interim Measures  states that "TRQs for non-state
trade shall be imported either by state owned trading companies or non-state ownedtrading companies which have trading rights."  Please indicate how China intends to
clarify Article 4 to make clear that TRQs for non-state trade are reserved for
importation by entities other than state trading enterprises.
Questions related to export subsidies
1. For the years 2000 through 2002, please provide the following prices, on a monthly basis if
possible, for corn, cotton, and rice:
- Government grain bureau procurement prices
- Representative domestic market prices- Government grain bureau sales prices to trading companies for sale in the domestic
market
- Government grain bureau sales prices to trading companies for sale in export markets- Trading company export prices
2. For the years 2000 through 2002, please provide the quantities, on a monthly basis if possible,
of government grain bureau sales of corn, cotton, and rice to trading companies for (1) sale in thedomestic market, and (2) sale in export markets.
3. For the years 2000 through 2002, please provide the quantities, on a monthly basis if possible,
of corn, cotton, and rice that trading companies exported.G/AG/W/51
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4. For 2002, please describe support provided to corn, cotton, and rice producers, government
grain bureaux, and exporters of corn, cotton, and ri ce.  Please identify any support that is linked to
exportation.  This includes preferential transportation rates, tax and fee rebates, storage and upgrading
expenses, debt forgiveness, and other revenue transfers and revenues foregone.
5. Please explain how China has been able to export substantial quantities of corn and cotton in
2002, when domestic market prices are higher than export prices.
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