RESTRICTED WORLD TRADE ORGA NIZATION
ORGANISATION MONDI ALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COME RCIOWT/ACC/SPE C/CHN/1 /Rev.6
15 Decembe r 2000
(00-5499)
Working Par ty on the
Accession o f China
DRAFT REPO RT OF THE WO RKING PART Y
ON THE AC CESSION OF C HINA TO THE WT O1
Revision
Following the Chairman's rema rks at the conclusion of the Fourteenth Meeting of the
Working Party on 8 De cembe r 2000, this furthe r revision of the Draft Report of the Working Party on
the Accession of China to the WTO is being circulated on the Chairman 's own responsibility. This
revision takes into account developments during the Fourteenth Meeting and is submitted to the
Working P arty fo r the pu rpose of facilitat ing further disc ussion s.
Groupe de t ravail de
l'accession de la Chine
PROJET DE RAPP ORT DU G ROUPE D E TRAVAIL D E
L'ACCESSIO N DE LA CHIN E À L'OMC1
Révision
Suite aux rema rques formulées par le Président à l'issue de la quator zième réunion du Groupe
de travail le 8 décembre 2000 à l'OMC, cette nouvelle révision duprojet de rapport du Groupe de
travail de l'accession de la Chine à l'OMC est distribuée sous la responsabilité du Président. Cette
révision tient compte des faits nouve aux interve nus au cours de la quato rzième réunion du Groupe de
travail et est soumise au G roupe pour faciliter la suite des débats.
Grupo de Traba jo sob re la
Adhesión de China
PROYECT O DE INFORME DEL G RUPO DE T RABAJO
SOBRE LA AD HESIÓN DE C HINA A LA OMC1
Revisión
Como conse cuencia de las observacion es formulada s por el Presidente al concluir la
decimocuarta reunión del Grupo de Trabajo del 8 de diciembre de 2000, se distribuye esta nuev a
revisión del proyecto de informe del Grupo de Trabajo sobre la Adhesión de China a la OMC bajo la
respo nsabilidad del Presidente. Lapresente revisión tiene en cuenta los nuevo s acontecimientos que
se han producido durante la decimocuarta reunión yse somete al Grupo de Trabajo con el fin de
facilitar la continuación de los d ebates.
1In En glish only./E n anglais seulement./En inglés solamente.
WT/ACC/SPEC /CHN /1/Rev.6
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TABLE OF CO NTENTS
I. INTRODUCTION ..................................................................................................................... 1
1. Documentation pr ovided .......................................................................................................... 1
2. Introdu ctory statements ........................................................................................................... 1
II. ECONOMIC POLICIES .......................................................................................................... 3
1. Non-discrimination (including national trea tment )............................................................... 3
2. Monet ary and Fis cal Policy ...................................................................................................... 6
3. Foreign Exchang e and Paymen ts............................................................................................. 7
4. Balance-of -Paymen ts Measu res............................................................................................. 10
5. Inves tment Regime .................................................................................................................. 11
6. State -Owned and S tate-Inv ested Ent erprise s....................................................................... 12
7. Pricing Policies ......................................................................................................................... 13
8. Competition Policy .................................................................................................................. 15
III. FRAMEWORK FOR MAKING AN D ENFOR CING POLICIES .................................... 16
1. Struc ture an d Powers of the Gov ernment ............................................................................ 16
2. Authority o f Sub-Cen tral Gove rnments................................................................................ 17
3. Uniform Administration of th e Trade Re gime ..................................................................... 17
4. Judicial Review ........................................................................................................................ 18
IV. POLICIES AFFECTING TRA DE IN GOO DS.................................................................... 19
A. TRADING RIGHTS ................................................................................................................. 19
B. IMPORT REGULATION ......................................................................................................... 20
1. Ordinary Customs Dutie s....................................................................................................... 20
2. Other Duties and Charges ...................................................................................................... 21
3. Rules of Origin ......................................................................................................................... 21
4. Fees and Cha rges for Service s Rende red.............................................................................. 22
5. Application of Inte rnal Taxes to Impo rts.............................................................................. 22
6. Tariff Exemptions ................................................................................................................... 23
7. Tariff Rat e Quota s.................................................................................................................. 25
8. Quantitative Impo rt Re strictions, including Prohibitions and Quotas .............................. 27
9. Import Licensing ..................................................................................................................... 31
10. Customs Valuation .................................................................................................................. 33
11. Other Cust oms Formalities .................................................................................................... 34
12. Preshipment In spection.......................................................................................................... 34
13. Anti-Dumping, Countervailing Duties .................................................................................. 35
14. Safegua rds................................................................................................................................ 35
C. EXPORT REGULATIONS ...................................................................................................... 35
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1. Customs Tarif fs, Fe es and Cha rges for Servic es Rende red, Application of
Intern al Taxes to Expor ts....................................................................................................... 35
2. Export Licensing and Exp ortRestrictions ............................................................................ 35
3. Export Subsidies ...................................................................................................................... 37
D. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS ................................. 38
1. Taxes and Char ges L evied on Impor ts and Exp orts............................................................ 38
2. Industrial Policy, including Subsidies ................................................................................... 38
3. Technical Barriers to Trad e................................................................................................... 40
4. Sanitary and Phy tosanitary Meas ures .................................................................................. 40
5. Trade-Relat ed Inv estment Measures..................................................................................... 41
6. State Trading Entities ............................................................................................................. 42
7. Special Economic Areas .......................................................................................................... 44
8. Government Pr ocur ement ...................................................................................................... 46
9. Transit ...................................................................................................................................... 47
10. Agricultural Policies ................................................................................................................ 47
11. Trade in Civil A ircraft ............................................................................................................ 47
12. Textiles ..................................................................................................................................... 48
13. Measu res Maintained Against China .................................................................................... 49
14. Transitional Safegua rds.......................................................................................................... 49
15. Transitional Review Mechanism ............................................................................................ 49
V. TRADE-RELATE D INTELLEC TUAL PROP ERTY REGIME ....................................... 50
A. GENERAL ................................................................................................................................ 50
1. Overview .................................................................................................................................. 50
2. Responsible agencie s for policy formulation and implementation ..................................... 50
3. Participation in interna tional intellectual prope rty ag reements ......................................... 51
4. Application of national and MFN treatment to foreign na tionals ...................................... 51
B. SUBSTANTIVE STANDAR DS OF PROTECTION, INCLUDING PROCE DURES
FOR THE ACQUISITION AND MAINTENANCE OF INTELLECTUAL
PROPERTY RIGHTS ............................................................................................................... 52
1. Copyright pro tection............................................................................................................... 52
2. Trademarks, including ser vice marks ................................................................................... 53
3. Geographical indications, including appellations of origin ................................................. 54
4. Industrial designs .................................................................................................................... 54
5. Patent s...................................................................................................................................... 55
6. Plant variety p rotection.......................................................................................................... 58
7. Layout de signs of int egra ted circuits ..................................................................................... 59
8. Requirements on undis closed info rmation, including trade secrets and t est data ............ 59WT/ACC/SPEC /CHN /1/Rev.6
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C. MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROPERTY RIGHTS ............ 60
D. ENFORCEMENT ..................................................................................................................... 60
1. General ..................................................................................................................................... 60
2. Civil judicia l procedures a nd remedies ................................................................................. 61
3. Provisional measures............................................................................................................... 62
4. Administrative procedu resand remedie s............................................................................. 63
5. Special border mea sures......................................................................................................... 64
6. Criminal procedures ............................................................................................................... 64
VI. POLICIES AFFECTING TRA DE IN SERVICES .............................................................. 65
1. Licensing .................................................................................................................................. 65
VII. OTHER ISSUES ...................................................................................................................... 67
1. Notifications ............................................................................................................................. 67
2. Special Trade Arrang ement s.................................................................................................. 67
3. Transparen cy........................................................................................................................... 67
VIII. CONCLUSIONS ...................................................................................................................... 70WT/ACC/SPEC /CHN /1/Rev.6
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I. INTRODUCTION
1. At its meeting on 4 Mar ch 198 7, the Coun cil established a Working Party to examine the
reque st of the Government of the People 's Republic of China ("China") (L/6017, submitted on
10 July 1986 ) for resumption of its status as a GATT contr acting party, and to submit to the Council
recommend ations which may include a Draft Protocol on the Status ofChina. Ina communication
dated 7 December 1995, the Government of China applied for accession to the Agre ement
Establishing the World Trade Organization ("WTO Agreement") pursuant to Article XII of the WTO
Agreement. Following China's application and pursuant to the decision of the Gene ral Council on
31 Janu ary 1 995, the existing Working Party on China 's Status as a GATT 1947 Contracting Party
was trans forme d into a WTO Accession Working Party, effective from 7 Decembe r 1995. The terms
of reference and the member ship of the Working Party are reproduced in document
WT/ACC/CH N/2/Rev.8.
2. The Working Party on China' s Status as a Contra cting Party met on 20 occasion s between
1987 and 1995 under the Chairmans hip of H.E. Mr. Pierre-Louis Girard (Switzerlan d). The Working
Party on China' s Accession to the WTO Agreeme nt met on _______ ______ ____ and
_________ ______ __ und er the same Chairma n.
1. Documentation pr ovided
3. The Working Party had before it, to serve as a basis for its discussion, a Memoran dum on
China's Fo reign Tr ade Regime (L/6125) and qu estions pos ed by memb ers of the Wor king Party on the
foreign tr ade regime of China, together with replies o f the Chines e autho rities thereto. In addition, the
Government ofChina made available to the Working Party asubstantial amount of documentation,
which is listed in document WT/ACC/C HN/23.
2. Introdu ctory statements
4. In statements to the GATT 1947 Working Party and subsequently to the Working Party on
China's Accession to the WTO, the representative of China stated that China's consistent efforts to
resume its status as a contracting party to GATT and accession to the WTO were in line with its
objective of economic reform to establish a socialist market economy as well as its basic national
policy of opening to the outside world. China believed that its WTO accession would increase its
economic gr owth and enh ance its economic and trade relations with WTO Membe rs.
5. Membe rs of the Working Party welcomed China' s accession to the WTO andconsid ered that
its accession would contribute to a strengthening ofthe multila teral trading system, enhan cing theWT/ACC/SPEC /CHN /1/Rev.6
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universality of the WTO, bringing mutual bene fits to China and to the other Membe rs of the WTO,
and en suring the ste ady d evelopment of the wo rld eco nomy.
6. The representative of China said that China had a territory of 9.6million square kilometres
and, at the endof 1998 a population of 1.25 billion. Since 1979, China had been progressively
reforming its economic system, with the objective of establishing and improving the socialist market
economy. The reform packa ge introdu ced in 1994, covering the banking, finance, taxation,
investment, foreign excha nge ("forex") and foreign trade sectors, had brought about major
breakth rough s in China's socialist market econ omy. State-owned enter prises had been reformed by a
clear definition of property rights and respon sibilit ies, a separation of gove rnment from enterp rise,
and scientific manag ement. A moder n enter prise system had been created for the state-owned secto r,
and the latter was gradually getting on the track ofgrowth throu gh indepe ndent operation, respon sible
for its own profits and losses. A nation-wide unified and open mark et system had been develope d.
An improved macroeconomic regulatory system used indire ct means and market forces to play a
central role in economic manag ement and the allocation of resources. A new tax and finan cial system
was functioning effectively. Financial policy had been separated from commer cial operations of the
central bank, which now focussed on finan cial regulation and supervision. The exch ange rate of the
Chinese currency Renminbi (also "RMB") had been unified and remained stable. The Renminbi had
been made conv ertible on current accou nt. Furthe r liberalization of pricing policy had resulted in the
majority of consume r and pro ducer products b eing subject to mark et price s.The market now played a
much more significa nt role in boosting su pply and meeting dema nd.
7. The representative of China furthe r noted that as a result, in 1999, the Gross Dome stic
Product (GDP) of China totaled RMB 8.2054 trillion yuan (approximately US$ 990 billion). In 1998,
the net per capita income forrural residents was RMB 2,160 yuan (approximately US$ 260), and the
per capita dispens able income for urban dwellers was RMB 5,425 yuan (approximately US$ 655). In
recent years, foreign trade had grown substantially. In 1999, total imports and exports of good s
reached US$ 36 0.65 billion, of which expo rts stood at US$ 194.93 billion, and imports, US$ 165.72
billion. Exports f rom China in 1998 a ccou nted fo r 3.4% o f the world' s total.
8. The representative of China stated that although important achievements had been made in its
economic development, China was still a developing countr y and therefore should have the right to
enjoy all the special and preferential treatment accor ded to developing countr y Memb erspursuant to
the WTO Agreeme nt.
9. Some members of the Working Party indicated that becauseof the significant size, rapid
growth and transitional nature of theChinese economy, a pragmatic approach should be taken inWT/ACC/SPEC /CHN /1/Rev.6
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determining China's need for recourse to transitional periods and other special provisions in the WTO
agreements available to developing country WTO Member s. Each agreement and China' s situation
should be c arefully consider ed and specifically add ressed.
10. At the request of interested membe rs of the Working Party, the rep resentative of China agreed
that China would undertake bilateral market access negotiations with respe ct to industrial and
agricultural pro ducts, an d initial comm itments in services .
11. Some members of the Working Party stated that in addition to undertaking market access
negotiations in goods and services, close attention should also be paid to China 's multilateral
commitments, in particular China's futur e obligations unde r the Multilateral Agreements on Trade in
Goods and the General Agre ement on Trade in Services ("GATS"). This was of vital importance to
ensur e that China would be able to take full bene fit of WTO membe rship as quickly as possible, as
well as to ensure that the value ofany market access conditions undertak en were not adversely
affected by inc onsistent measu res such as some types of no n-tarif f mea sures.
12. The representative of China stated that the achieveme nt of balan ce between rights and
obligations was the basic p rinciple in its negotiation of WTO acce ssion.
13. Some members of the Working Party expressed concern over discr epancies in statistical
information supplied by the Government of China on trade volume/value. Membe rs and China
pursu ed this issue separately in an Informal Group o f Exp erts on E xport Statistics.
14. The Working Party reviewed theforeign trade regime of China. The discu ssions and
commitments resulting therefrom are contained in paragraphs … below and in the Draft Protocol of
Accession ("Draft P rotocol") and in China 's Sch edules a nnex ed to the Dra ft Protocol.
II. ECONOMIC POLICIES
1. Non-discrimination (including national trea tment )
15. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals and enterprise s (whether wholly or partly foreign
funded ). Those membe rs stated that China should enter a commitment to accord non-dis criminatory
treatment to all foreign individuals and enterprise s and foreign-fu nded enterprise s in respect of the
procu rement ofinputs and goods and service s necessary for production of goods and the conditions
under which their goods were produced , mark eted or sold, in the domestic mark et and for export. In
addition, those members said that China should also enter a commitment to guarantee non-
discriminatory treatment in respect of the price s and availability of goods andservices supplied byWT/ACC/SPEC /CHN /1/Rev.6
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national and sub-national authorities and public or state enterprises, in areas including transp ortation,
energ y, ba sic telecommunications, other utilit ies and f actors of production.
16. Some members of the Working Party also raised conc erns over China' s practice of
conditioning or imposing restrictions upon participation in the Chinese economy based upon the
nationality of the entity concerned . Thos e member s in particular raised concerns over such practices
in relation to the pricing and procurement of goods and servic es, and the distribution of import and
export licence s. Member s of theWorking Party requested that China enter into a commitment not to
condition such pr actices o n the nationality of the entity conce rned.
17. In response, the representative of China emph asized the importan ce of the commitments that
the gover nment was undertaking on non-dis crimination. The representative of China noted, howe ver,
that any commitment to provide non-disc riminatory treatment to Chinese enter prises , including
foreign -funded enterp rises, a nd foreign enterp rises and individuals in China, would be subject to other
provisions of the Draft Protocol and, in particular, would not prejudice China 's rights unde r the
GATS, China's Sche dule of Specific Commitments or commitments undertaken in relation to trade-
related investment measu res.
18. The re presentative of China furthe r confirmed that China would p rovide the s ame treatment to
Chinese enterprise s, including foreign-f unded enterprise s, and foreign enterprises and individuals in
China. China would eliminate dual pricing practices as well as differences in treatment accorded to
goods produc ed for sale in China in compa rison to those produced for expo rt. The Working Party
took note of thes e commitments.
19. The representative of China confirme d that, consistent with China's rights and obligations
under the WTO Agr eement and the D raft P rotocol, China would pro vide non -discriminatory treatment
to all WTO Members, including Membe rs of the WTO that were separate customs territories. The
Working P arty took note o f this commitment.
20. Member s ofthe Working Party expressed conce rn about certain provisions of Chines e laws,
regulations, administrative notices and other requir ements which could, directly or indire ctly, result in
less favourable treatment of imported products in contra vention of Article III of the General
Agreement on Tariffs and Trade ("GATT 1994"). Such requir ements included product registration
and certification, internal taxation, price and profit controls and all distinct forms of licensing for
imports, and distribution or sale of imported goods. Even where such requir ements existed in relation
to domestically produced goods, Memb ers re-iterated that any defactoor dejure less favour able
treatment of imported goods hadto be eliminated in order to ensure full confo rmity with the principle
of national treatment.WT/ACC/SPEC /CHN /1/Rev.6
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21. Some members of the Working Party drew China' s attention to the variety of types of
requireme nts which could contrave ne GATT Article III. Specific reference was made to the
proce dures, charges and conditions for granting of busines s licence s, whethe r to import, distribute, re-
sell or retail goods of non-Chines e origin. Reference was also made to taxes and fiscal provisions
whose impact depended, directly or indire ctly, upon the Chines e or non-Chinese origin of the goods
imported or traded. Those membe rs drew the attention of China to its obligation to ensure that
product testing and certification requirements, including procedures for in situinspections, posed no
greate r burden – whether financial or practical - on good s of non-Chinese origin than on dome stic
goods. Those membe rs underlined that confo rmity asses sment procedu res and stand ards, including
safety and other compliance requir ements, had to respect the terms of the WTO Agre ement on
Technical Bar riers to Trad e ("TBT Agre ement") as well as GATT Article II I.
22. The representative of China confirme d that the full respe ct of all laws, regulations and
administrative requirements with the principle of non-dis crimination between domestically produ ced
and imported products would be ensured and enforced by the date of China 's accession to the WTO
unless othe rwise pro vided in the Draft Protocol or Draft Report. The rep resentative of China declar ed
that, by accession, China would repeal and cease to apply all such existing laws, regulations and other
measur es whos e effect was inconsistent with WTO rules o n national treatment.  This commitment was
made in relation to final or interim laws, administrative measur es, rules and notices, or any other fo rm
of stipulation or guideline. The Working P arty took note o f thes e commitments.
23. In particular, the representative of China confirmed that measu reswould be taken at national
and subnational level, including repeal or modification of legislation, to provide full GATT national
treatment in respe ct of laws, regulations andother measures applying to internal sale, offering for
sale, pur chase, tran sportation, distribution or use o f the following:
- After sales service (repair, maintenanc e andassistan ce),including any conditions applying to
its provision, such as the MOFTEC 3rdDecre e of 6 Septembe r 1993, imposing mand atory
licensing proc edures for the supply o f afte r-sales s ervice on va rious imported p roduct s;
- Pharmac eutical products, including regulations, notices and measures which subjected
imported pharma ceuticals to distinct procedu res and formulas for pricing and classification,
or which set limits on profit margins attainable and imports, or which created any other
conditions regarding price orlocal content which could result in less favou rable treatment of
imported produ cts;
- Cigarettes, including unification of the licensing requirem ents so that a single licence
authorized the sale ofall cigarettes, irrespective of their country of origin, and elimination of
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any other restrictions regarding points of sale for imported products, such as could be
imposed by the China National Tobac co Corporation ("CNTC"). It was unde rstood that in the
case of cigarettes, China could avail itself of a transitional period of two years to fully unify
the licensing requir ements. Immediately upon accession, and during the two year transitional
period, the numb er of retail outlets selling imported cigarettes would be substantially
increas ed throu ghout the ter ritory of China;
- Spirits, including requirements applied unde r China's "Administrative Measur es on Imported
Spirits in the Domestic Market", and other provisions which imposed distinct criteria and
licensing for the distribution and sale of different categorie s of spirits, including unification of
the licensing requir ements so that a single licence authori zed the sale ofall spirits irrespe ctive
of their cou ntry of origin;
- Chemicals, including registration proceduresapplicable to imported products, such as those
applied unde r China's "Environmental Control Regulations for Initial Imports of Chemical
Products and Impo rts and Expo rts of To xic Chemical Products";
- Boilers and pressure vessels, including certification and inspe ction procedures which had to
be no lessfavourable than those applied to goods of Chine se origin, and fees applied by the
relevant agencies or administrative bodies, which had to be equitable in relation to those
charg eable for like p roducts o f dome stic origin.
The representative of China stated that in the cases of pharmaceuticals, spirits and chemicals cited
above, China would reserve the right to use a transitional period of one year from the date of
accession in order to amend or repeal the relevant legislation. The Working Party took note of these
commitments.
2. Monet ary and Fis cal Policy
24. The representative of China stated that through the reform and opening up in the last two
decad es, China had established a fiscal manag ement system which was compatible with the principles
of a market economy. With respect to fiscal revenue, a taxation system with a value-add ed tax as the
main element had been established since the taxation reform in 1994. With respe ct to fiscal
expenditure, over recent yea rs the gove rnment had, in line with the public fiscal requirement generally
exercised by market economies, strengthen ed its adjustment of the structure of expenditure and given
priority to public needs s o as to ensure the no rmal ope rations of the gove rnment.
25. The representative of China furthe r stated that in recent years, while pursuing proactive fiscal
policy, China had implemented proper moneta ry policy and had taken a series of adjusting and ref orm
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measur es which included lowe ring the interest rate for loans from financial institutions, improving the
system of requir ed deposit reserves andlowering the ratio of required reserves, positively increasing
the input of bas e money and en couraging the comme rcial bank s to expan d their c redit.
26. In respect of future fiscal policy, the Gove rnment of China would furthe r improve its taxation
system and would continue to improve the efficiency of fiscal expenditure through implementing
reform measu res such as secto ral budget, centralized payment by the national treasur y and zero base
budget, as well as impro ving manageme nt of fiscal expenditure. With respect to future moneta ry
policy, the central bank would continue to pursue a prudent policy, maintain the stability of RMB,
promote interest r ate liberalization and establish a mode rn commercial ban king system.
3. Foreign Exchang e and Paymen ts
27. Some members of the Working Party raised conce rns about China' s use of forex controls to
regulate the level and composition of trade in good s andservices. In response , the representative of
China stated that its system of forex had undergone rapid change and that China was now a membe r
of the International Monetary Fund ("IMF"). Significant move s had been taken to reform, rationalize
and liberalize the forex market. The practice ofmultiple exchange rates in swap centr es had been
abolished.  China ha d alre ady unified its f orex mark et and r emoved man y of the restrictions on the use
of fo rex.
28. Outlin ing the historical development of China' s forex reform, the representative of China
stated that the purpos e ofChina's forex reform was to reduc e administrative intervention and increase
the role of market forces. From 1979, a forexretention system was applied in China, although forex
swap was gradually developing. In early 1994, official RMB exchan ge rates were unified with the
market rates. The banking exchan ge system was adopted and a nationwide unified inter-bank forex
market was established, with conditional convertibility of the Renminbi on current accounts. Since
1996, foreign investment enterpris es ("FIEs") were also permitted into the banking exchange system,
and the remaining excha nge restrictions on current accounts were eliminated. On 1 December 1996,
China had formally accepted the obligations of Article VIII of the IMF's Articles of Agreeme nt,
removing exchang e restrictions on current account trans actions. Acco rdingly, since then the
Renminbi had been fully conve rtible on current accounts. It was confirmed by the IMF in its Staff
Report on Article IV Consultations with China in 2000 that China had no existing forex restrictions
for current ac count tran sactions.
29. The representative of China stated that the State Administration of Foreign Exch ange
("SAFE") was unde r the auspices of the People' s Bank of China ("PBC"), and was the administrative
organ empower ed to regulate forex. Its main functions were to monitor and advise on balan ce-of-WT/ACC/SPEC /CHN /1/Rev.6
Page 8
payments and forex matters. SAFE was also requir ed to draft appropriate regulations and monitor
compliance.  He f urthe r noted that domestic and fo reign banks, and finan cial institut ions could engag e
in forex busines s, with the appro val of the PBC.
30. In response to requests from members of the Working Party for furthe r information, the
representative of China adde d that for forex payments undercurrent accounts, domestic entities
(including FIEs) could purchase forex at market exchange rates from designated bank s or debit their
forex accounts directly upon presentation of valid documents. For payments such aspre-paym ent,
commission, etc., exceeding the proportion or limit, the entities could also purchase forex from the
banks upon meeting the bona fidetest administered by SAFE. Forex for personal use by individuals
could be purchased directly from the bank s upon presentation of valid documents (within a specified
limit). For amounts exceeding the limit, indiv iduals able to prove their need for additional forex
could purchase it from the banks. He also noted that current account forex receipts owne d by
domestic entities had to be repatriated into China, some of which could be retained and some sold to
the designated banks at market rates. A verification system for forex payme nt (imports) and forex
receipt (e xports ) had also be en ad opted.
31. Concerning the exch ange rate regime in particular, therepresentative of China noted that
since the unification of exchange rates on 1 January 1994, China had adopted a single and manag ed
floating exchan ge rate regime based on supply and demand. PBC published the reference rates of
RMB against the US dollar, the HK dollar and Japanese yen based onthe weighted average prices of
forex trans actions at the interba nk forex market during the previous day's trading. The buying and
selling rates of RMB against the US dollar on the inter-ba nk for ex mark et could fluctuate within 0.3%
of the reference rate. Forthe HK dollar and Japanese yen, the permitted range was 1%. Designated
forex bank s could deal with their clients at an agreed rate. Unde r such contr acts the excha nge rate of
the US dollar was required to be within 0.15% of the reference rate, wher eas forthe HK dollar and
Japan ese yen, the permitted range was 1%. The exchange rates for other foreign currencies were
based on the rates of RMB against the US dollar and cross-ex change rates of other foreign currency
on the international market. The permitted margin between the buying andselling rate could not
excee d 0.5%.
32. The representative of China furthe r noted that since 1 January 1994, designated forex bank s
had become major participants in forex transactions. On 1April 1994, the China Foreign Exchang e
Trading System wasset up in Shanghai andbranche s were opened in dozens of cities. The Shang hai
Foreign Exchange Trading System had adopted asystem of member ship, respective quotation,
concentr ated trading and forex mark et settlement. Designated forex banks dealt on the inter-ban k
market according to the turnover position limit on banking exchange stipulated by SAFE and coveredWT/ACC/SPEC /CHN /1/Rev.6
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the position on the market. Depe nding on its macr o-economic objectives, the PBC could interv ene in
the for ex ope n mark et in orde r to reg ulate market supply and demand, and maintain the stability of the
RMB exch ange rate.
33. The representative of China noted that since 1 July 1996, forex dealing of the FIEs was
carried out through thebanking exch ange system. He furthe r noted that to enco urage foreign direct
investment, China had granted national treatment to FIEs in exchan ge administration. Accordingly,
FIEs were allowed to open and hold forex settlement accounts to retain receipts under current
accounts, up to a maximum amount stipulated by SAFE. Receipts in excess of the maximum amount
were require d to be sold to designated forex banks. No restrictions were maintained on the payment
and transfer ofcurrent transactions by FIEs, and FIEs could purchase forex from design ated forex
banks or debit their forex accounts for any payme nt under current transactions, upon the presentation
of valid documents to the designated forex banks or SAFE for the bona fide test. FIEs could also
open forex accounts to hold foreign -invested capital, and they could sell from these accounts upon the
approv al of SAFE. FIEs could also borrow forex directly from domestic and overseas banks, but
were r equire d to registe r with SAFE afterward s, and obtain approval by SAFE for debt repayment and
service s. FIEs could make payme nts from their forex accou nts or in forex purchased from designated
forex bank s after liquidation, upon app roval by SAFE according to law.
34. The representative of China furthe r noted that the laws and regulations mentioned above
were: Law of thePeople 's Repu blic of China on Chines e-Foreign Equity Joint Venture; Law of the
People's Republic of China on Chinese -Foreign Contractu al Joint Venture; Regulations on the
Exchang e System ofthe People 's Repu blic of China; and Regulations on the Sale and Purchase of and
Payment in Foreign Exc hang e.
35. Some members of the Working Party stated that China should unde rtake appropriate
commitments on i ts refo rm of forex.
36. In response, the representative of China stated that China would implement its obligat ions
with respect to forex matters in accordance with the provisions of the WTO Agreeme nt and related
declarations and decisions that concerned the IMF. The representative further confirmed China' s
acceptan ce of the obligations of Article VIII of the IMF's Articles of Agreeme nt, which provided that
"no member shall, without the approv al of the Fund , impose restrictions on the making of payments
and transfers for current international trans actions". He stated that, in accordance with these
obligations, and unless otherwise provided for in the IMF's Articles of Agre ement, China would not
resort to any laws, regulations or other measures, including any requirements with respect to
contractual terms, that would restrict the availability to any individual or enterprise of forex forWT/ACC/SPEC /CHN /1/Rev.6
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current international transactions within its customs territory to an amount related to the forex inflows
attributable to that individual or enterpris e. He stated, moreover, that China would not subject
individual requests for forex for the making of payments and transfersfor current international
transactions, including the issuance of credit or credit guara ntees for current international trans actions
(e.g., letters of credit; direct loans; guarantee s of loans by financial institutions or other entities; or
insuranc e offinancing by finan cial institut ions or other entities), to any form of appro val or restriction
(including a requirement forthe presentation of an invoic e), in a manner inconsistent with its
obligations under the IMF's Articles ofAgre ement. The Working Party took note ofthese
commitments.
37. In addition, the representative of China stated that China would provide information on
exchan ge measures as required unde r Article VIII, Section 5 ofthe IMF's Articles of Agreement, and
such other information on its exchang e measures as was deemed necessary in the context of the
transitional review mechanism.  Th e Wo rking Pa rty took note of this c ommitment.
4. Balance-of -Paymen ts Measu res
38. Some members of the Working Party stated that China should apply balan ce-of -payments
("BOPs") measur es only under the circum stances provid ed for in the WTO Agreement and not as a
justification for imposition of restrictions on imports for other protectionist purpos es. Those membe rs
stated that measure s taken for BOPs reasons should have theleast trade disruptive effect possible and
should be limited to temporary import surcharges, import deposit requir ements or other equivalent
price-b ased trade measures, and those meas ures should not be used to provide import protection for
specific s ectors , industries o r products.
39. Those membe rs furthe r stated that any such measures should benotified pursuant to the
Understanding on the Balanc e-of-Payments Provisions of theGATT 1994 ("BOPs Unde rstanding")
and to the Gene ral Council not later than the imposition of the measu res, together with a time
schedule fortheir elimination and a programme ofextern al and dome stic policy measur es to be used
to restore BOPs equilibrium. Those membe rs alsostated that following deposit of such a notification,
the Commit tee on Balance-o f-Payments Restrictions ("BOPs Commit tee") should meet to examine
the notification. It was noted that paragraph 4 of the BOPs Understanding would be available to
China in the case of "essential products". Some membe rs stated that the BOPs Commit tee should
review the operation of any BOPs measures taken by China, if so reque sted by China or a WTO
Member .WT/ACC/SPEC /CHN /1/Rev.6
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40. Some other membe rs consider ed that, in respect of meas ures taken for BOP purposes, China
should enjoy the same rights as those accorded to other developing country WTO Membe rs, as
provided in GATT Article XVIII:B and the BOPs Un derstanding.
41. In respon se, the representative of China stated that China consider ed that it should have the
right to make full use of WTO BOPs provisions to protect, if necessary, its BOPs situation. He
confirmed that China would fully comply with the provisions of the GATT 1994 and the BOPs
Understanding. Furthe r to such compliance, China would give preference to application of price-
based measures as set forth in the BOPs Understan ding. If China resorted to measur es that were not
price-b ased, it would transfo rm such measures into price-ba sedmeasu resas soon aspossible. Any
measur es taken would be maintained strictly in accordance with the GATT 1994 and the BOPs
Understanding, and would not exceed what was necessary to address the particular BOPs situation.
The representative of China also confirmed that meas ures taken for BOPs reasons would only be
applied to control the general level ofimports and not to protect specific secto rs or industries. The
Working P arty took note o f these commitments.
5. Inves tment Regime
42. The representative of China stated that since the inception of the reform and opening up
policy in the late 1970's, China had carried out a series of reforms of its investment regime. The
highly centralized investment administration under theplanned econ omy had been progressively
transfo rmed into a new pattern of diver sification of investo rs, multi-channelling of capital sourc es and
diversification of investment modalities. The government encou raged foreign investment into the
Chinese mark et and had uninter ruptedly open ed and expanded the scope for investment. At the same
time, the Government of China also encou raged the development of the non-state-ope rated economy
and was speeding up the opening of areas for non-st ate investment. With China's programme in the
establishment of its market economy, the construction projects of variou s enter prise s utilizing free
capital and financ ed by the credit of the enter prise would be fully subje ct to the decision-making of
the enterp rise concerned and at their own risk. The commercial banks' credit activities to all kinds of
investors would bebased on their own evaluation anddecision-ma king, and would be at their own
risk. The busines s activities of intermediate investment agen cies would be fully subject to the market
and would provide service at the instru ction of the investo rs. These agencies would break up their
administrative relations with government agencies and the service activities financed by the
governme nt would also be s ubject to the terms and c onditions ag reed in the contra cts conc erned.
43. The representative of China furthe r stated that China hadpromulgated investment guidelines
and that the Governme nt of China was in the process of revising and completing these guidelines.
Responding to concerns raised by certain members of the Working Party, he confirmed that theseWT/ACC/SPEC /CHN /1/Rev.6
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investment guidelines and their implementation would be in full conformity with the WTO
Agreement.
6. State -Owned and S tate-Inv ested Ent erprise s
44. The representative of China stated that the state-owned enterprises ofChina basically
operated in accordance with rules of market econ omy. The government would no longe r directly
administer the human, finan ce and material resources, and operational activities such as production,
supply and marketing. The price s of commodities produc ed by state-owned enterprises were decided
by the market and resources in operational areas were fundamentally allocated by the market. The
state-owned banks had been commercialized and lending to state-owne d enter prises took place
exclusively unde r market conditions. China was furthering its reform of state-owne d enterprises and
establishing a modern enterp rise system.
45. In light of the role that state-own ed andstate-inve sted enter prise s played in China 's economy,
some member s of the Working Party expr essed concerns about the continuing gover nmental influenc e
and guidan ce of the decisions and activities of such enterp rises relating to the purcha se and sale of
goods and service s. Such purchases and sales should be based solely on commer cial consider ations,
without any governmental influenc e or application of discriminatory measu res. In addition, those
members indicated the need for China to clarify its unde rstanding of the types of activities that would
not come within the scope of Article III:8(a) of GATT 1994 . For example, any meas urerelating to
state-owned and state-inv ested enterprises importing materials and machinery used in the assembly of
goods, which were then expo rted or otherwise made available for commercial sale or use or for non-
governme ntal purpo ses, would n ot be con sidere d to be a me asure relating to governme nt procu rement.
46. The representative of China emphasize d the evolving nature of China' s economy and the
significant role of FIEs and the private sector in the economy. Given the increasing need and
desirability of competing with private enterp rises in the market, decisions by state-owne d and state-
invested enter prises had to be based on commercial consid erations as provided in the WTO
Agreement.
47. The representative of China furthe r confirmed that China would ensure that all state-owned
and state-inve sted enterprise s would make purcha ses and sales based solely on commercial
consider ations, e.g. p rice, quality, marketability and availabili ty, and that the enterpris es of other
WTO Membe rs would have an adequate opportunity to compete for sales to and purchases from these
enterpris es on non-discriminatory terms and conditions. In addition, the Government of China would
not influence, directly or indirectly, commer cial decisions on thepart of state-own ed or state-inve sted
enterpris es, including the quantity, value or country of origin of any goods purchased or sold, exceptWT/ACC/SPEC /CHN /1/Rev.6
Page 13
in a manner consistent with the WTO Agreeme nt. The Working Party took note of these
commitments.
48. The representative of China confirme d that, without prejudice to China's rights in future
negotiations in the Government Procurement Agreement, all laws, regulations and measures relating
to the procu rement by state-o wned and state-inv ested enterprises of good s and services for
commercial sale, production of good s or supply of services for commer cial sale, orfor non-
governme ntal purpo ses would not be considere d to be laws, regulations andmeasu resrelating to
governme nt procu rement. Thus, such purchases or sales would be subject to the provisions of
Articles II, XVI and XVII of the GATS and Article III of the GATT 1994. TheWorking Party took
note of this commitment.
49. Certain members of the Working Party expressed conce rn about laws, regulations and
measur es in China affecting the trans fer of technology, in particular in the context of investment
decisions. More over, these memb ersexpressed conce rn about measu resconditioning the receipt of
benefits, including investment approvals, upon technology transfer. In their view, the terms and
conditions of technology trans fer, particularly in the context of an investment, should beagreed
between the parties to the investment without government interfe rence. The gove rnment should not,
for example, con dition investment approval upon technology tr ansfer.
50. The representative of China confirme d that China would only impose, apply or enforce laws,
regulations or measures relating to the trans ferof technology, production proce sses, orother
proprieta ry knowledg e to an individual or enterpris e in its territory that were not inconsistent with the
WTO Agreeme nt on Trade-R elated Aspects of Intellectual Prope rty Rights ("TRIPS Agreement") and
the Agreement on Trade-Relate d Investment Measures ("TRIMs Agreement"). China confirmed that
the terms and conditions of technology transfer, production processes or other proprieta ry knowledg e,
particularly in the context of an investment, would only require agreement between the parties to the
investment.  The Wo rking Pa rty took note of the se commitments.
7. Pricing Policies
51. Some members of the Working Party noted that China had made extensive use of price
controls, for example in the agricultural sector. Those memb ers requested that China undertak e
specific commitments concerning its system of state pricing. In particular, those memb ers stated that
China should allow prices for traded goods and services in every secto r to be determined by market
forces, and multi-tier pricing practices for such good s andservices should beeliminated. Those
members noted, howeve r, that China expected to maintain price controls on the goods and servic es
listed in Annex 4 to the Draft Protocol, and stated that any such controls should be maintained in aWT/ACC/SPEC /CHN /1/Rev.6
Page 14
manner consistent with the WTO Agreement, in pa rticular Article III ofthe GATT 1994 and Annex 2,
parag raphs 3 and 4, of the Agreement on Agriculture. Those membe rs noted that except in
exceptional circumstan ces, and subject to notification to the WTO Secretariat, price controls should
not be extende d to goods or services beyond those listed in Annex 4,and China should make its best
efforts to reduce and eliminate those controls. They also asked that China publish in the appropriate
official journal the list of good s and services subject to state pricing an d cha nges the reto.
52. Member s expressed theview that price controls and state pricing in China also encompa ssed
"guidance pricing" and regulation of the range of profits that enterp rises could enjoy. Such policies
and practices would also be subject to China's commitments. In their view, price contr ols should be
adopted only in extraordinar y circumstance s and should beremoved as soon as thecircumstan ces
justifying their adoption were ad dressed.
53. The representative of China said that China currently applied a mechanism of market -based
pricing unde r macro-economic adjustment. He noted that national treatment was applied in the areas
of government pricing forall imported goods. There were presently three types of prices:
governme nt price, government guidance price and market-re gulated price. The gove rnment price was
set by price administration authorities and could not be changed without the approval ofthese
authorities. Products and servic es subject to gover nment pricing were those having a direct bearing on
the national economy and the basic needs ofthe people 's livelihood, including those products that
were s carce in China.
54. He added that the go vernment guidance price me chanism was a more flexible form of pricing.
The price administration authorities stipulated either a basic price or floating ranges. The floating
range of guidance pricing was gene rally 5% to 15%. Enterpris es could, within the limits of the
guidance and taking into account the market situation, make their own decisions on price s. With
market-r egulated prices, enterp rises were free to set prices in accordance with supply and demand to
the extent permitted by gene rally applicable laws, r egulations and policies conc erning p rices.
55. The representative of China stated that in formulating gove rnment price s and gove rnment
guidance prices, thefollowing criteria were taken into account: normal production costs, supply and
demand situation, releva nt gover nment policies and prices of related products. When fixing price s of
consume r good s, consider ation was given to the limits of consumer s' purchasing power. He noted
that due to the continued reform of China 's price system, the share of governme nt prices had droppe d
substantially and that of mark et-regulated price s had incre ased; of social retailing products, the share
of government prices was about 4%, that of gove rnment guidanc e prices 1.2%, and that of market-
regulated prices 94.7%. For agricultural products, theshare of government prices was 9.1%,WT/ACC/SPEC /CHN /1/Rev.6
Page 15
governme nt guidance prices 7.1%, andmarket-r egulated 83.3%. For production inputs, the share of
governme nt prices was 9.6%, that of gove rnment guidanc e prices 4.4%, and market-reg ulated prices
86%. The share of directly gove rnment-contr olled prices had been much reduced . The Governme nt
of China consider ed that China's price system was becoming increasingly rationalized, creating a
relatively fair mark etplace fo r all enter prise s to compete on an eq ual footing.
56. The representative of China recalled that Annex 4 of the Draft Protocol contained a
compreh ensive listing of all produ cts and services presently subject to gove rnment guidanc e pricing
and gov ernment p ricing.
57. The representative of China confirme d that it would publish in the official journal the list of
goods and service s subject to state pricing and changes thereto, together with price -setting
mechanisms an d policies.  The Working Party took note of thes e commitments.
58. The representative of China confirme d that the official journal providing price information
was the Pricing Monthly of the People's Republic of China, published in Beijing. It was a monthly
magazine listing all products and services priced bythe State. He further stated that China would
continue to furthe r its price reform, adjusting the catalogue subject to state pricing and furthe r
liberalize its pricing policies.
59. The representative of China furthe r confirmed that price controls would not be used for
purpos es of affording p rotection to domestic industries or services p rovide rs.  Th e Working Pa rty took
note of this commitment.
60. In addition, the representative of China confirme d that China would apply its current price
controls and any other price contr ols from the entry into force of the Draft Protocol in a WTO-
consistent fashion, and would take account of theinterests of exporting WTO Member s asprovide d
for in Article II I:9 of the GATT 1994.  Th e Wo rking Party took note of th ese commitments.
8. Competition Policy
61. The representative of China noted that the Gover nment of China encou raged fair competition
and was against acts of unfair competition of all kinds. The Law of thePeople' s Repu blic of China on
Combating Unfair Competition, promulgated on 2 Septembe r 1992 and implemented on
1 Decembe r 1992, was the basic law to maintain the order of comp etition in the market. In addition,
the Price Law, the Law on Tend ering and Bidding, the Criminal Law and other relevant laws also
contained provisions on anti-monopoly and unfair competition. China was now formulating the Law
on Anti-Monopoly.WT/ACC/SPEC /CHN /1/Rev.6
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III. FRAMEWORK FOR MAKING AN D ENFOR CING POLICIES
1. Struc ture an d Powers of the Gov ernment
62. The representative of China informed memb ers of the Working Party that in accordance with
the Constitut ion and the Law on Legislation of the People 's Republic of China, the National People 's
Congres s was the highest organ of state powe r. Its perma nent body was its Standing Commit tee. The
National People's Cong ress and its Standing Committee exercise d the legislative power of the State.
They had thepower to formulate the Constitut ion and laws. The State Coun cil, i.e., the Central
People's Governme nt of China, was the executive body of the highe st organ of state power . The State
Council, in accord ance with the Constitut ion and relevant laws, was entru sted with the power to
formulate administrative regulations. The ministries, commissions and other competent depa rtments
(hereinafte r referred to as "departments' ') of the State Council could issue departmental rules within
the jurisdiction of their respective departments and in accordance with the laws and administrative
regulations. The provincial people's cong resses and their standing committees could adopt local
regulations. The provincial governments had the power to make local gove rnment rules . The
National People's Cong ress and its Standing Committee had the power to annul the administrative
regulations that contradicted the Constitution and laws as well as the local regulations that
contradicted the Constitut ion, laws and administrative regulations. The State Council had the power
to annul depa rtmental rules and local gove rnment rules that were incon sistent with the Consti tution,
laws or administrative regulations. The Gove rnment of China believed that these features of the
Chinese legal system would ensure an effective andunifo rm implementation of the obligations after
China's a ccession.
63. The representative of China stated that China had been consistently performing its
international treaty obligations in good faith. Acco rding to the Constitution and the Law on the
Proced ures ofConclusion ofTreaties, the WTO Agreement fell within the category of "important
international agreeme nts" subject to the ratification by the Standing Committee of the National
People's Congress. China would ensure that its laws and regulations pertaining to or affecting trade
were in conformity with the WTO Agreement andwith its commi tments so as to fully perform its
international obligations. For this purpos e, China had commenc ed a plan to systematically revise its
relevant dome stic laws. There fore, the WTO Agre ement would be implemented by China in an
effective and uniform manne r through revising its existing domestic laws and enacting new ones fully
in compliance with the WTO Agreement.
64. [In response to questions from some memb ersof the Working Party, the representative of
China stated that pursu ant to Article 142 of the General Principles of Civil Law, if any international
treaty conclud ed or acceded to by China contained provisions differing from those in China 's civilWT/ACC/SPEC /CHN /1/Rev.6
Page 17
laws, the provisions of the intern ational treaty would apply, unless the provisions were ones on which
China had announc ed reservations for ratification. Upon ratification by the National People' s
Congres s, the WTO Ag reeme nt would have the status of d omestic law.]
2. Authority o f Sub-Cen tral Gove rnments
65. Sever al members of the Working Party raised concerns about the continued presence of
multiple trade instruments used by different levels of gove rnment within China. Those membe rs
consider ed that this situation resulted in a lesse ning of the security and predictability of access to the
Chinese mark et. These Memb ers raised specific concerns regarding the autho rity of sub-national
governme nts in the areas of fiscal, finan cial and budg etary activities, specifically with respect to
subsidies, taxation, trade policy and other issues covered bythe WTO Agreement and the Draft
Protocol.  In addition, some member s expressed conc erns about whethe r the central gove rnment could
effectively ensure that trade-r elated measu res introduced at the sub-national level would conform to
China's commitments in the WTO Agreement an d the Dra ft Protocol.
66. The representative of China stated that sub-n ational gover nments had no autonomou s
authority over issues of trade policy to the extent that they were related to the WTO Agre ement and
the Draft Protoc ol. The representative of China further confirme d that the centr al gover nment would
ensur e that China's laws, regulations and other measu res, including those of local governments at the
sub-n ational level, confo rmed to China' s obligations unde rtaken in the WTO Agreeme nt and the Draft
Protocol.  The Working P arty took note o f this commitment.
3. Uniform Administration of th e Trade Re gime
67. Member s ofthe Working Party stated that it should be made clear that China would apply the
requireme nts of the WTO Agre ement and its other accession commitments throughout China's entire
customs territory, including border trade regions, minority autonomous areas, Special Economic
Zones ("SEZs"), open coastal cities, economic and technical development zones and other special
economic a reasand at all levels of gove rnment.
68. Some members of the Working Party raised conce rns in relation to the uniformity of
administration of the foreign trade and economic regime within China. In particular, those member s
raised conce rns about measures taken by sub-national autho rities in China. In this regard, the
representative of China confi rmed that the central gover nment would ensurethat China's laws,
regulations and other measures, including local regulations, rules and other measures of government
agencies of the sub-national level confo rmed to the obligations unde rtaken by China in the WTO
Agreement and the Draft Protocol. This included all fiscal, financial and budg etary activities
performed b y the sub -central gove rnments.  Th e Working Pa rty took note o f this commitment.WT/ACC/SPEC /CHN /1/Rev.6
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69. Those membe rs of the Working Party also raised concerns about whethe r China's central
governme nt would be sufficiently informed about non-unifo rm practices and would take necessary
enforcement actions. Those member s stated that China should establish a mech anism by which any
conce rned person could bring to the attention of the central government cases of non-uni form
application of the trade regime and receive prompt and effective action to address situations in which
non-unifo rm application was e stablished.
70. The representative of China confirme d that the provisions of the WTO Agreem ent, including
the Draft Protoc ol, would be applied unifo rmly througho ut its customs territory, including in SEZs
and other areas where special regimes for tariffs, taxes and regulations were established and at all
levels of gov ernme nt.  The W orking Pa rty took note o f this commitment.
71. In respon se to questions from Membe rs, the representative of China confirme d that laws,
regulations and other measures include d decrees, orders, directives, administrative guidanc e and
provisional and interim measu res. He stated that in China, local governments include d provincial
governme nts, including autonomous regions and municipalities directly under the centr al gover nment,
cities, counties and townships. The representative of China further stated that local regulations, rules
and other measures were issued by local gove rnments at the provincial, city and county levels acting
within their respe ctive constitutional powers and functions and applied at their corresponding local
level. Townships were only autho rized to implement measure s. Special economic areas were also
authorized to issu e and implement local rules and r egulations.
72. The representative of China furthe r confirmed that the mechanism established pursuant to
Section 2(A) o f the Draft Protocol would be ope rative upon entry into force of the Draft Protocol. All
individuals and entities could bring to the attention of centr al gove rnment authorities cases of non-
uniform application of China 's trade regime, including its commitments under the WTO Agre ement
and the Dra ft Protocol.  Su ch ca ses wo uld be r eferred pr omptly to the respon sible gove rnment agency,
and when non-uniform application was established, the authorities would act promptly to address the
situation utilizing the remedies available unde r China' s laws, taking into conside ration China's
international obligations and the need to provide a meaningful remedy. The individual or entity
notifying China's autho rities would be informed promptly in writing of any decision and action taken.
The Wo rking Pa rty took note of the se commitments.
4. Judicial Review
73. Some members of the Working Party stated that China should designate independ ent
tribunals, contact points, andprocedures fo r the prompt review of all administrative actions relating to
the implementat ion of laws, regulations, judicial decisions and administrative rulings of generalWT/ACC/SPEC /CHN /1/Rev.6
Page 19
application referred to in Article X:1 of the GATT 1994, including administrative actions relating to
import or expo rt licences, non-tarif f measures and tariff-rate quota administration, conformity
assessment procedures and other measures. These memb ers sought explicit confirmation that certain
types of measures, such as decisions relating to standard s and chemical registration, would be subje ct
to judicial review. Some members of the Working Party also stated that the administrative actions
subject to review should also include any actions require d to be reviewed unde r the relevant
provisions of the TRIPS Agreeme nt and the GATS. These membe rs stated that such tribunals should
be indepen dent of the agenci es entr usted with administrative enfor cement of the matter and should not
have a ny sub stantial interest in the outcome of the matter.
74. Those membe rs of the Working Party stated that such review procedures should include the
opportunity for appeal, without penalty, by individuals or enterp rises affected by anyadministrative
action subject to review. If an initial right of appeal were to an administrative body, there should be
an oppo rtunity to choose to make a further appeal to a judicial body. Any decision by anyappellate
body and thereasons there fore would be communicated in writing to the appellant, together with
notification of any right to fu rther appe al.
75. The re presentative of China confirme d that it would revise its relevant laws and regulations so
that its relevant domestic laws and regulations would be consistent with the requirements of the WTO
Agreement andthe Draft Protocol on procedures for judicial review of administrative actions. He
furthe r stated that the tribunals respon sible for such reviews would be impartial and indep endent of
the agenc y entru sted with administrative enforc ement, and would not have any subst antial interest in
the outcome of the matter.  T he W orking Pa rty took note o f this commitment.
76. In response to questions from members of the Working Party, the representative of China
confirmed that administrative actions related to measu rescove red unde r Article X:1 of the
GATT 1994 included those relating to national treatment, confo rmity asses sment, the regulation,
control, supply or promotion of a service , including the grant or denial of a licenc e to provide a
service and other matters, and that such administrative actions would be subject to the procedu res
established for prompt review under Section 2(D) of the Draft Protoc ol, and information on such
proce dures would be available through the enquir y point that China would establish upon accession.
The Wo rking Pa rty took note of the se commitments.
IV. POLICIES AFFECTING TRA DE IN GOO DS
A. TRADING RIGHTS
[To be completed]WT/ACC/SPEC /CHN /1/Rev.6
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B. IMPORT REGULATION
1. Ordinary Customs Dutie s
77. Member s ofthe Working Party welcomed China' s decision to bind tariffs forall products in
its schedule on ma rket ac cess for goods. This action would increa se the certainty and predictability of
this aspect of China 's trade regime. Member s also noted the substantial unilateral tariff reductions
made in many se ctors b y China in re cent ye ars.
78. The representative of China provided member s of the Working Party with a copy of the
Customs Import and Export Tariff of the People's Republic of China ("Customs Tarif f") and related
laws and regulations. He noted that the Customs Tariff of China was a charge imposed on imported
goods. The purpose of levying tariffs was twofold: (a) to regulate imports so as to promote and
support dome stic produ ction; and (b) to serve as an important source of revenue forthe treasury of
the central government. China 's tariff policy was to promote economic reform and opening of the
economy. The basic principles for establishing duty rates were as follows. Duty-fre e or low duty
rates were applied to imported goods which were needed for the national economy andthe people 's
livelihood but which were not produ ced sufficiently domestically. Import duty rates on raw mate rials
were generally lower than those on semi-manu factu red or manu factur ed products. For parts or
components of machine ry, equipment and instruments which were not produ ced dome stically, or at a
sufficiently high standa rd, the import duty was lower than the duty on finished products. Highe r duty
rates were applied to products which were produced domestically or which were consider ed non-
essential for the national economy and the people' s livelihood. A higher duty was applied to
imported produ cts, the equivalent of which were produce d domestically and the local manu factu rer of
which needed protection.
79. The representative of China said that China had adopted the Harmonized Commodity
Description and Coding System (HS) as from 1 January 1992 and joined the International Convention
on the Harmonized Commodity Description and Coding System in the same year. There were
21 sections, 97chapters and 7062 eight-digit tariff headings based on the six-digit HS'96 version in
the Customs Tariff for the year 2000. Tariff rates were fixed bythe State Council. Partial adjustment
to the duty rates was subject to deliberation and final decision by the State Council Tarif f
Commission. The simple avera ge of China' s import duties in 2000 was 16.4%. Among the 7062
tariff headings, tariff rates for 525 headings were below 5%, 1488 were between 5% (inclusive) and
10% (exclusive ), 2022 between 10% (inclusive) and 15% (inclusive) and 3027 were abov e 15%.
Information on tariff rates for specific products and import statistical data for recent years had been
provided to the Working P arty.WT/ACC/SPEC /CHN /1/Rev.6
Page 21
80. He also noted that currently there were two columns of import duty rates: general rates and
preferential rates. The preferential rates applied to imports originating in countries and region s with
which China had concluded recipr ocal tariff agreements, whereas the general rates applied to imports
from othe r sou rces.
81. The representative of China confirme d that upon accession China would participate in the
Information Technology Agreeme nt ("ITA") and would eliminate tariffs on all information
technology products as set out in China' s schedule. Furthermo re, upon accession, China would
eliminate all other duties and charges for ITA products. The Working Party took note of these
commitments.
82. Certain members of the Working Party expressed particular conc erns about tariff treatment in
the auto sector . In respons e to questions about the tariff treatment for kits formotor vehicles, China
confirmed that it had no tariff lines for completely knocked -down kits for motor vehicles or semi-
knocked down kits for motor vehicles . If China created such tariff lines, the tariff rates would be no
more than 10%.  Th e Wo rking Pa rty took note of this commitment.
83. China undertook bilateral market access negotiations on goods with members of the Working
Party. The results of those negotiations were contained in the Schedule of Conce ssions and
Commi tments on Goods and forme d Annex 10 to the Dra ft Protocol.
2. Other Duties and Charges
84. The representative of China confirme d that China had agreed to bind at zero other duties and
charg es in its Sched ule of Concessions andCommitments, pursuant to Article II:1(b ) of theGATT
1994.  The Working Party took note of that commitment.
3. Rules of Origin
85. Some members of the Working Party requested information about the adoption and
application of rules of origin in China, whether in the context of free trade agreements or otherwise,
and also requested China to confirm that its rules of origin for both preferential and non-pre ferential
trade complied fully with the WTO Agreeme nt on Rules of Origin.
86. The representative of China noted that the criteria for making the determination of substantial
transfo rmation was: (a) change in tariff classification of afour-digit tariff line in the Customs Tariff;
or (b ) the value-a dded compo nent was 30% o r more in the total value o f a new produ ct.
87. He furthe r noted that under current arrangements, and in accordance with the criteria outlined
above, wh en an imported product was p rocessed and ma nufactured in several cou ntries, the country ofWT/ACC/SPEC /CHN /1/Rev.6
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origin of the p roduct was determined to be the last country in which the product unde rwent substantial
transfo rmation. The rules oforigin applied for statistical purposes were the same. Howev er, for
statistical purposes, the General Customs Administration ("Customs") also recorded countries of
consumption and tra ding countrie s.
88. The re presentative of China stated that China's r ules o f origin fo r import and expo rt were non-
preferential rules of origin. Once the intern ational harmonization of non-preferential rules oforigin
was conclud ed, China would fully adopt and apply the internationally harmonized non-pre ferential
rules of origin. A mech anism that met the requirements of Articles 2(h) and 3(f),and Annex II,
parag raph 3(d) of the Agreement, which required provision upon reque st of anassessme nt of the
origin of an import or an expo rt and outlined the terms under which it would be provided, would be
established in China's legal framework by the date of accession. The Working Party took note of
these commitments.
89. The representative of China furthe r stated that China would not use the rules of origin as an
instrument to pursue tr ade o bjectives directly or indirectly.  He also c onfirmed that China would apply
rules o f origin equ ally for all pur poses.  The Working Party took note of the se commitments.
90. The representative of China confirme d that from the date of accession, China would ensure
that its laws, regulations and other measures relating to rules of origin would be in full confo rmity
with the WTO Agreement on the Rules of Origin and that it would implement such laws, regulations
and other measures in full confo rmity with that Agreement. The Working Party took note of this
commitment.
4. Fees and Cha rges for Service s Rende red
91. Member s ofthe Wo rking Pa rty noted that as a condition of accession, China should unde rtake
a commitment to ensure con formity of Customs fees and charges with Article VIII of the GATT 1994.
The representative of China confirme d that China would comply with Article VIII of GATT 1994 in
this regar d.  The Working Party took n ote of this commitment.
5. Application of Inte rnal Taxes to Impo rts
92. Some members of the Working Party expressed concern that some internal taxes applied to
imports, including a value-a dded tax ("VAT") were not administered in conformity with the
requireme nts of the GATT 1994, particularly Article III.Thos e member s of theWorking Party noted
that China appear ed to permit the application of discriminatory internal taxes and charges to imported
goods and service s, including taxes and charges applied by sub-national authorities. Those membe rsWT/ACC/SPEC /CHN /1/Rev.6
Page 23
reque sted that China reaffirm that all such internal taxes and charges would be in conformity with the
requireme nts of the GATT 199 4.
93. In response, the representative of China noted that there were three major types of taxes
levied on products and services: (a) VAT levied ongood s and services for processing, maintena nce
and assembling; (b) the Consumption Tax on some selected consumer products; and (c) the Business
Tax on providing services, transferring intangible assets and selling real estate. Both the VAT and
the Consumption Tax wer e applicable to entities importing goods. VAT and the Consumption Tax on
imported goods were collected by Customs at the point of entry. He noted that VAT was reimbur sed
once go ods we re exported. Expo rted good s wer e exempted from the Co nsumption Tax.
94. He furthe r noted that the State Council determined all policies concer ning the levying of VAT
and the Consumption Tax, adjustment of tax types and tax rates (tax value ), as well as the tax
exemption of VAT, the Consumption Tax and the Busine ss Tax. The laws and regulations were
interpreted and implemented by the Ministry of Finance and the State Administration of Taxation.
VAT and the Consumption Tax were levied and administered by the State competent departments of
taxation, while the Business Tax wascollected and administered by thelocal competent departments
of taxation.
95. The representative of China confirme d that from the date of accession, China would ensure
that its laws, regulations and other measures relating to internal taxes and charges levied on imports
would be in full confo rmity with its WTO obligations and that it would implement such laws,
regulations and other measures in full conformity with those obligations. The Working Party took
note of this commitment.
6. Tariff Exemptions
96. The representative of China stated that the tariff exemption policy of China was developed
and implemented in accordanc e with the Customs Law of the People's Republic of China andthe
Regulations of the People's Republic of China on Import and Expo rt Duties. The coverage of specific
tariff reduction or exemption was provided for by the State Council. All the tariff reductions and
exemptions were applied on an M FN ba sis.
97. The representative of China noted that in accordance with international practices and
provisions of China' s Customs Law, import duty reductions or exemptions were available for the
following goods:
(a) A consignment of goods, onwhich customs duties were estimated below
RMB 10 yuan;WT/ACC/SPEC /CHN /1/Rev.6
Page 24
(b) advertising a rticles and sample s, which wer e of no commer cial value;
(c) goods and materials, which were rende red gratis by intern ational organizations or
foreign gove rnments;
(d) fuels, stores, beverages and provisions for use en route loade d by any mean s of
transpo rt, which were in tran sit acro ss the bo rder;
(e) exported goods being r eplaced;
(f) goods d amaged p rior to Customs releas e;
(g) goods covered by international treaties providing for tariff reductions and exemptions
which China had ente red into or acceded to;
(h) goods tempor arily imported;
(i) goods imported un derinward p rocessing p rogrammes;
(j) goods imported at z ero cost fo r replaceme nt purpo ses;
(k) domestic- or foreign- funded proje cts enco uraged by China;
(l) articles fo r scientific re search,education and the disa bled.
He noted that goods so imported were require d to be put under Customs supervision and control. The
Customs duty was required to be recove redif such good s were sold, transferred or used for other
purpos es du ring the time period o f sup ervision a nd contr ol.
98. Some members of the Working Party expressed conc erns over the availability and application
of tariff reductions andexemptions for avariety of enter prise s and other entities, including state
trading enterp rises, state-owne d enter prise s, foreign-inve sted enterpris es and not-for -profit entities.
Similar conce rns also existed for exemptions from application of other duties, taxes and charges.
These membe rs noted the negative effect such reductions or exemptions could have on reven ues and
predictability and certainty in application of tarif f and othe r trad e mea sures.
99. The representative of China confirme d that upon entry into force of the Draft Protocol, China
would adopt and apply tariff reductions and exemptions so as to ensure MFN treatment for imported
goods.  Th e Wo rking Pa rty took note o f this commitment.WT/ACC/SPEC /CHN /1/Rev.6
Page 25
7. Tariff Rat e Quota s
100. Sever al members of the Working Party expressed conce rn over the lack of transparency,
uniformity and predictability of China's administration of its tariff rate quota (TRQ) regime. Thos e
members reque sted that China enter a commitment to administer TRQs in a simple, transpare nt,
timely, predictable, uniform, non-discriminatory, and non-trade restrictive manner, and in a way that
would not cause tr ade distortions.  T hose memb ers aske d that China ensure that its TRQ arrangeme nts
be no more administratively burden some than absolutely necessary, and also expressed the hope that
China would move as quickly as po ssible to a mark et-bas ed TRQ allocation proc ess.
101. Those membe rs of the Working Party also raised concerns regarding the administration of
China's TRQ system and the practices of state trading enterp rises in relation to importing such
products. Thes e concerns included thecurrent lack of transparent regulations for administering
TRQs; use of administrative guidance; distortions introduce d into the market dueto allocations
based on government determinations of subnational supply and utilization rather than consumer
preferences and end-user dema nd; failure to establish and publish annual TRQ quantities; trade-
restrictive and non-competitive practices of state trading enterp rises; and general uncertainty,
inconsistency and discrimination in trade of bulk commodities. Those memb ers expressed similar
conce rns about the operation of China 's TRQ system forproducts subject to designated trading.
Those membe rs requested that China reduce tariffs for commodities subject to TRQs, enter into
access commitments for these commodities, improve the administration of the TRQ regime, and
ensur e that trade would not be distorted by unjustified gove rnment regulation. Certain members of
the Working Party also requested that a numb er of specified products be removed from China 's TRQ
system and that, upon import, these p roducts be su bject only to tariffs.
102. The representative of China noted that in 1996, for the first time, China published a list of
import products subject to TRQs, together with the tariff rates applicable to imports both in and out
quota. Allocation of TRQ was based on historical performa nce and state trading administration,
although China had also tried several other ways of administration, including import at applied tariff
rates, first-come -first-served at the point of entry , and bonded import which was strictly monitored by
Customs. China was trying to simplify the TRQ administration regime and procedu res in a bid to
facilitate use, enha nce efficien cy an d implement further reform.
103. The representative of China furthe r noted that, in undertaking market-ori ented reform in the
agricultural sector, China had made progress in freeing agricultural products from state pricing and in
guiding farme rs to adjust the structure of agricultural production based on the demand s of the market.
In connection with that reform process, in the bilateral negotiations with Members, China committed
that as soon as it became a Memb er of the WTO, it would eliminate TRQs on a number of productsWT/ACC/SPEC /CHN /1/Rev.6
Page 26
and subje ct these only to tariffs. The products concerned were barley, soyb eans, rapeseed, peanut oil,
sunflower seed oil, corn oil, and cottonseed oil. In addition, China would replac e quantitative import
restrictions on sugar, cotton and three types offertilizers (DAP, NPK and urea) by TRQs. The
Working P arty took note o f these commitments.
104. The representative of China stated that from entry into force of the Draft Protocol, China
would ensur e that TRQs were administered on a transparent, predictable, unifo rm, fair and non-
discriminatory basis using clearly specified timeframes, administrative proce dures and requirements
that would provide effective import oppo rtunities; that would reflect consume r preferences and end-
user demand; andthat would not inhibit the filling of each TRQ. China would apply TRQs fully in
accordance with WTO rules and principles and with the provisions set out in China's Schedule of
Concession s and Commitments on Goods.  Th e Wo rking Pa rty took note o f these commitments.
105. The representative of China confirmed that forthe good s listed in Annex 2 ofthe Draft
Protocol that were subject to a TRQ, China would also apply the provisions of its Sche dule relating to
TRQ administration and related commitments in the Draft Protocol, including the grant of trading
rights to non-state trading entities to import the TRQ allocat ions set aside for importation by such
entities. For produ cts in Annex 2 of the Draft Protoc ol that were subje ct to designated trading, China
confirmed that it would ensur e that additional enterprise s granted trading rights in accordance with
China's commitments to phase out designated trading would not be disad vantaged in the allocation of
TRQ.  The Wo rking Party took note of the se commitments.
106. Some members o f the Working P arty expressed the view that allocation decisions were based,
in large part, on gove rnment-d etermined provincial supply and utilization rather than on commercial
market criteria that reflected consume r preferences and end-us er deman d. Thos e membe rs expressed
conce rn that China's stated intention to allocate quota to sub-ce ntral autho rities and to authorize those
authorities to then allocate that quota to end-u sers in separate processes would add an unnec essary,
burden some step in the procedures and reduce the likelihood that quotas would be filled. Furthe r,
those member s stated that China's stated intention with regards to TRQ procedu res would not be
consistent with China's commitments to uniform administration of its trade regime. Those membe rs
sought confirmation that China would not establish a separate process of allocation to sub-centr al
authorities, as well as confirmation that all allocation and reallocation decisions would be made by a
single, central autho rity in China.
107. The representative of China confirme d that the role of sub-central bodies would be limited to
purely administrative operations, such asreceiving applications from end-users and forwa rding them
to the central authority; receiving querie s and transmitting these to the central autho rity; reporting onWT/ACC/SPEC /CHN /1/Rev.6
Page 27
allocation and reallocation decisions made by the central authority and providing information
regarding such allocations and reallocations upon request; checking the information in the
applications to verify that it met the published criteria; notifying applicants of any deficiencies in
their applications; and providing applicants with an opportunity to cure deficiencies in their
applications. After the central autho rity decided on allocations of quota to end-us ers, the sub-cen tral
bodies would issue TRQ certificates accordingly. The representative of China also confirmed that
China would administer a consistent national allocation (and reallocation) policy forTRQs, that it
would not establish a separate process of allocation to sub-centr al authorities and that decisions
regarding all allocations and reallocations to end-users would be made by a single, central autho rity.
The Wo rking Pa rty took note of the se commitments.
8. Quantitative Impo rt Re strictions, including Prohibitions and Quotas
108. In response to requests for information from member s of the Working Party, the
representative of China noted that China prohibited or restricted the importation of certain
commodities, including weapons, ammunition and explosives , narcotic drugs, poison s, obscene
materials and those foodstuffs, medicines, animals and plants which were incon sistent with China's
technical regulations [ and sta ndards] on food, medicines, animals and plants.
109. Some members of the Working Party noted that there were a large numb er of non-tar iff
measur es in existenc e in China, both at the national and sub-na tional levels, which appeared to have a
trade restrictive or trade distorting effect. Those membe rs requested that China undertak e a
commitment to eliminate and not to introduce, re-intr oduce or apply non-tarif f measures other than
those specifically identified and subject to phased eliminat ion in Annex 3 to the Draft Protocol. The
representative of China confi rmed that China would not introduc e, re-introduce or apply non-tarif f
measur es other than listed in Annex 3 of the Protocol unless justified under the WTO Agre ement.
The Wo rking Pa rty took note of this c ommitment.
110. Some members o f the Working P arty also raised conc erns that many non-ta riff measures were
imposed by sub-n ational authorities in China on a non-trans parent, discr etionary and discriminatory
basis. Those membe rs of the Working Party asked that China unde rtake a commitment to ensure that
non-tariff measures would only be imposed by the central gove rnment or by sub-national autho rities
with clear authorization from the centr al gover nment. Actions lacking autho rization from the national
authorities should not be implemented or enfo rced. Therepresentative of China clarified that only the
central government could issue regulations on non-tariff measuresand that these measu res would be
implemented or enforced only by the central government or sub-national authorities with
authorization fr om the central government. He further stated that sub-na tional authorities had no right
to formulate non-tarif f measu res.  The Working Pa rty took note of the se commitments.WT/ACC/SPEC /CHN /1/Rev.6
Page 28
111. Some members of the Working Party noted that China had provided a list of non-tariff
measur es in respect of which China was prepared to commen ce phased elimination, contained in
Annex 3 of the Draft Protocol. Those membe rs stated that China should eliminate the measure s listed
in accor danc e with the schedule provided in Annex 3, during the periods specified in Annex 3. For
measur es subject to phase d elimination, China should provide for growth in the quota over the
relevant period specified in Annex 3. Thos e member s also noted that the protection afforded by the
measur es listed in Annex 3 should not be increased or expand ed in size, scope, or duration, nor any
new measu res be ap plied, unless justified und er the p rovisions o f the WTO Agreeme nt.
112. Those membe rs of the Working Party noted that all non-ta riffmeasu resadministered by
China, whether or not referred to in Annex 3of the Draft Protocol, which were applied after China's
accession to the WTO, should be allocated and otherwise administered in strict confo rmity with the
provisions of the WTO Agreement, including Article XIII of theGATT 1994 andthe Agre ement on
Import Licensing P rocedures, including notification requir ements.
113. The representative of China stated that China had modified Annex 3 on the basis of the
comments raised by certain member s of the Working Party. Heconfirmed that only the machine ry
and electro nic products listed in Annex 3 were subject to specific tendering requireme nts and that
these requirements would beadministered pursuant to Chapter III ofthe Regulation entitled "Interim
Meas ures for Impo rt Administration of Machinery and Electronic s Products" (approved by the State
Council on 22 Septembe r 1993 and promulgated in Orde r No. 1 by the State Economic and Trade
Commission and Ministry of Foreign Trade and Economic Coope ration on 7 Octobe r 1993). Healso
confirmed that Anne x 3 containe d all of the products subject to quotas, licenc es and such tende ring
requireme nts in China and that, during the relevant phase-out period, China would implement the
growth rates for quotas as indicated in Anne x 3.  The Working Pa rty took note of the se commitments.
114. Some members of the Working Party reque sted information on how China would implement
the quota and licensing requir ements for products listed in Annex 3, in particular the procedures and
criteria for grant of quota allocations and licensing during the phase-ou t period for these restrictions.
Member s expressed conc ern about requirements forobtaining a licence or quota allocation which
often r equired approvals from va rious a uthorities within an organization as well as approval from both
the central andsub-n ational level. Those membe rs sought a transparent, streamlined system that
would issue quota allocations an d licences through a simple, con solidated appr oval process that would
ensur e full use of the quota and its equitable distribution among importers. Thos e member s also
reque sted information on how China would establish the value of imports for those products whose
quota was established in terms ofvalue of imports. The representative of China confirme d that the
administration of quotas and import licenses would be consistent with the WTO Agreement, includingWT/ACC/SPEC /CHN /1/Rev.6
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Article XIII of theGATT 1994 and the Agre ement on Impo rt Licensing Procedures. Theallocation of
quotas and issuance of import licenses would gothrough a simple and transparent procedure, so as to
ensur e the full utilization of quota. He further stated that the establishment of value of imports would
be bas ed on the in formation collected by the Customs authorities and provisions of the WTO Customs
Valuation Agreement. For quota quantities specified in terms of value, China would determine the
value of any shipment based on the c.i.f. ship value listed on the bill of lading. The Working Party
took note of thes e commitments.
115. [The representative of China confirmed that the products currently covered unde r the HS
categories listed in Annex 3 as of the date of accession were the only produ cts that would be subje ct
to these quotas during the agreed phase-o ut periods. Any non-tarif f measures covering additional
products would need to be justified unde r the WTO Agreement. Further, the representative of China
stated that for products listed in Annex 3as being subject to quota and licensing requireme nts, any
entity [that will possess the right to trade in the quota year] [possessing the right to trade], including
enterpris es po ssessing trading rights to import such p roducts or inputs for p roduction purpo ses under a
particular quota catego ry, could apply for a quota allocation and licence to import products listed in
Annex 3.  Th e Wo rking Pa rty took note of the se commitments.]
116. The representative of China furthe r confirmed that for products listed in Annex 3, China' s
system for quota allocation and licen sing would ensure that those entities with quota allocat ions
would also receive any necessary import licence. This system would confo rm to WTO rules,
including the WTO Agreement on Import Licen sing Procedures, and would be trans parent, timely,
respo nsive to mark et conditions and would minimize the burden on trade. Applications for a quota
allocation would need to be submitted to only one organization, at onelevel (cent ral or sub-nat ional)
for approval. The releva nt organiz ation would then issue an import licens e based on thequota
allocation, in most cases within 3 working days and, in exceptional cases,within a maximum of 10
working days after a request for the license. A licen se would be issued for thefull amount of the
quota and would be valid forthe calend ar year issued . Such licen se would be extende d once, upon
reque st, for up to 3 months, if therequest was made before 15 Decembe r of thecurrent quota year.
Imports occurring under an extend ed license would be counted against the relevant quota amount for
the year in which the allocation took place. The representative of China confirme d that the releva nt
organization for issuing quota allocations and licen ces, amount of quota, including the growth in
quota provide d for in Annex 3 , the eight-digit tariff codes and full descriptions of all produ cts covered
by each quota and procedu res for application for a quota allocation and license , including the
beginning and end date of the application period and any other relevant procedures or criteria, would
be published in the official journal referred to in paragraph 2(C)(2) of the Draft Protocol at least 21
days prior to the beginning of the application period. Such application period would be from 1-31WT/ACC/SPEC /CHN /1/Rev.6
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August. Quotas would be allocated to applicants no later than 60 days after closure of the application
period.  Th e Wo rking Pa rty took note of the se commitments.
117. The representative of China stated that China would allocate the quota in accordance with the
following criteria and procedures which would be published in advance and would be applied in
confo rmity with WTO requirements, including the Agre ement on Impo rt Licensing Procedures. In
applying these criteria, China would consider the need to allow for equitable participation by
produc ers from WTO Member s and take into account the need to maximize the potential for quota
fill.
– If the relevant quota quantity excee ded total requests for quota allocations, all
reque sts would be a pproved.
– In other cases, the criteria fo r allocation would be a s follows:
• Historical perfo rmance of applicants wher e relevant (in cases in
which aver age imports ov er the 3-year period immediately prior to the yea r of
China's accession, for which data is available, amounted to less than
75 per cent of the relev ant quota, other criteria would be more important);
• Production or processing capacity, in the case of intermediate
products and raw materials;
• Experienc e and ability in producing, importing, marketing, or
servicing in international mark ets, in the cas e of finished products or products
destined fo r wholesale o r retail distribution;
– In cases in which average imports over the3-year period immediately prior to the
year of China 's accession, for which data is available, exceeded 75 percent of the
relevant quota, applicants that had not previously been allocated quota would be
allocated 10 percent of the total quota in the first year and the majority of any quota
growth in any su bsequ ent yea r.
– In other cases in the first year, twenty-fiv e percent of the total quota would be
allocated to applicants that had not previously been allocated quota, and in
subseq uent years, two-thirds of quota growth would be allocated to such firms, if
quota fill remained below 75 p ercent.WT/ACC/SPEC /CHN /1/Rev.6
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– In all cases, a quota-holder that has fully utilized or contr acted for its quota allocation
shall, upon application, receive an allocation in the following year for a quantity no
less than the quantity imported in the previous year. A quota-hol der that does not
import its full al location wil l receive a pr oportional r eduction in its quota allocation in
the subse quent year unless the quantity is returned forreallocation by [1 September]
[1 October ].
The Wo rking Pa rty took note of the se commitments.
118. The representative of China confirmed that all commercial terms of trade, including product
specifications, product mix, pricing, and packaging, would be at the sole discretion ofthe quota
holder, solong as the prod ucts are within the relevant quota categor y. Allocations would be valid for
any article or mixture of articles subject to the same quota as specified in Annex 3 of the Draft
Protocol. Allocations would be valid for a period of one calenda r year from the opening ofthe quota
import period. Howeve r, if the holde r of a quota allocation had not contr acted for import of the total
quantity allocated to by [1 Septembe r] [1 Octobe r], the holder was to immediately return the unused
portion of the allocation to the relev ant authority which would reallocate the quota immediately, if
unfilled reque sts wer e pending, or othe rwise within 10 days after rec eipt of a request fo r an allocation.
The relev ant organization would publish notice of the availability of additional allocations after
collecting any unuse d quotas returned bythe quota holde rs. Licenses for goods imported under
reallocated quota would be exten ded once, upon reque st, for up to 3 months, if the request was made
before 15 Decembe r ofthe current quota year. Imports occurring under an extend ed license would be
counted against the releva nt quota amount for the year in which the re-all ocation took place . The
Working P arty took note o f these commitments.
9. Import Licensing
119. The representative of China confirme d that the list of all entities respon sible for the
authorization or approval of imports would be updated and republishe d in the official journal, the
MOFTEC Gazette, within one month of any chang e thereto. The Working Party took note of this
commitment.
120. In response to requests for additional information about its system of import licensing, the
representative of China said that the import licensing system was administered without discrimination
among countrie s or regions . In 1984, the State Coun cil had promulgated the "Interim Regulations on
Licensing System for Import Commodities", and MOFTEC and Customs had issued "Detailed RulesWT/ACC/SPEC /CHN /1/Rev.6
Page 32
for the Implementation of the Interim Regulations on Licensing System for Import Commodities".
The Interim Regulations were unifo rmly implemented throughout China. In1999, of the total import
value of US$ 1 65.7 billion, imports subject to licensing represented 8.45%, covering US$ 14 billion.
MOFTEC determined which products should besubject to import licensing according to the relevant
provisions o f the "Foreign T rade Law".
121. The representative of China furthe r stated that in 1993, Chin a had applied import restrictions
to 53 produ ct categorie s. By 1999, the numbe r had been reduce d to 35. Products cove red were (1)
Proce ssed oil; (2) Wool; (3)Polyester fibre; (4) Acrylic fibres; (5) Polyeste r fillet; (6) Natural
rubbe r; (7) Vehicles tyres; (8) Sodium cyanide; (9) Sugar; (10) Fertilizer; (11) Tobacco and its
products; (12) Acetate tow; (13) Cotton; (14) Motor vehicles and their keyparts; (15) Motor cycles
and their engine s andchassises; (16) Colou r television sets and TV kinesc ope; (17) Radios, tape
recorders and their main parts; (18) Refrigerator s and their comp ressor; (19) Washing machines;
(20) Recording equipment and its keyparts; (21) Camera s and their bodies (without lenses); (22)
Watches; (23) Air conditioners and their compres sor; (24) Audio and video tape duplication
equipment; (25) Crane lorries and their chassis es; (26) Electronic micro scopes; (27) Open-end
spinning machines; (28) Electro nic colour scanners; (29) Grain; (30) Vegetable oil; (31) Wine;
(32) Colou r sensitive material; (33) Chemical unde r supervision and control that were used for
chemical weapon; (34) Chemicals used to produc e narcotics; and (35) Laser disc production
facilities. He also noted that in 1999, there were 13 commodity categories which were imported by
the foreign trade companies designated by MOFTEC. These catego ries were asfollows: (1)
Proce ssed oil; (2) Fertilizer; (3) Tobacco; (4)Vegetable oil; (5) Grain; (6) Natur al rubber; (7) Wool;
(8) Ac rylic fiber s; (9) S ugar; (10) Cotton; (11 ) Crud e oil; (12) Steel; and (13) Plywood .
122. Concerning the granting and administration of import licences, the representative of China
said that the examination and approval of the licence took two to three working days. Applications
for import licence s could besubmitted to the Quota and Licenc e Administrative Bureau of MOFTEC,
or Special Commissioner Offices in 16 provinces, or Commissions of Foreign Economic Relations
and Trade of various province s, autonomou s regions, and municipalities directly under the central
governme nt and those with independent budg etary status. Licensing agencie s authoriz ed by MOFTEC
could issue import licence s on the basis of import documents submitted by the applicants, approved
by the competent departments. A licence could not be bought, sold or transferred, and was valid for
one calen dar year.  Impo rt licences could be extended once for up to thre e months.
123. Some members of the Working Party expressed conc ern that China 's Provisional Procedures
for the Administration of Automatic Registration for the Import of Special Commodities
(13 August 199 4), in particular the criteria for approval of registration, would act as arestraint onWT/ACC/SPEC /CHN /1/Rev.6
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imports. The representative of China emphasiz ed that the purpose of the registration system was only
to gather statistical information. He confirme d that China would bring its automatic licensing system
into conformity with Artic le 2 of the Agreement on Import Licensing Procedures upon entry into
force ofthe Dra ft Protocol.  The Working Party took note of this commitment.
124. Some members of the Working Party noted that enterprises and individuals seeking to import
products subject to tariff quota administration requir ements hadto go throug h extensive procedu res to
receive a quota allocation and that the quota certificate would indicate whether the subject good was
to be imported through a state trading enterp rise or a non-state trading enterp rise and would be valid
for acertain period of time. Moreover, the entity importing the good would need trading rights. In
the light of these multiple requirements, a quota allocation certificate should satisfy any impo rt
licensing requir ement that might apply.
125. The representative of China confirme d that China would not requir e a separate import licence
approv al forgood s subject to a TRQ allocation requirement but would provide any necessary import
licence in the procedu re that granted a quota allocation. If quota were reallocated pursuant to China's
TRQ administration commit ments, the provisions relating to licensing of such reallocated quantities
would apply.  The Working P arty took note o f this commitment.
10. Customs Valuation
126. Some members expressed concern regarding the methods used by China to determine duty-
paying value of goods, in particular regarding the practice of using minimum or reference prices for
certain good s, which would be inconsistent with the Agreement on Implementation of Article VII of
the GATT 1994 ("Customs Valuation Agreement"). Othe r WTO-co nsistent mean s were available to
Member s doubting the v eracity o f decla red tr ansaction values.
127. In respon se, the representative of China stated that China had ceased to use and would not
reintroduc e minimum or reference prices as a means to determine customs value. TheWorking Party
took note of this commitment.
128. The representative of China conside red that there would not be situations where the "normal
transaction value" could not be "ascertained" since the Customs Valuation Agreeme nt provided
several methods f or valuation.
129. The representative of China recalled that the overwhelming majority of China' s customs
duties were ad valorem duties. The customs or duty-paying value of imported good s was assessed
according to the c.i.f. price based on the transaction value, as defined in the Customs Valuation
Agreement. If the transaction value of imported goods could not be determined, the duty-payingWT/ACC/SPEC /CHN /1/Rev.6
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value was determined based onother means provided forin the Customs Valuation Agreement. He
also noted that the Customs Law provided for appeal procedures. In the event of a dispute over
calculation of duty paid or payable with the Customs, the dissatisfied importer could apply to
Customs for a reconside ration of thecase. If the appeal was rejected theimporter could sue at the
People's Co urt.
130. The representative of China confirme d that, from the entry into force of the Draft Protoc ol,
China would apply fully the Customs Valuation Agreement, including the customs valuation
methodologies set forth in Articles 1 through 8 of the Agreement. In addition, China would apply the
provisions o f the Decision on th e Tre atment of Inte rest Cha rges in Customs Value of Imported Goods,
and the Decision on theValuation of Carrier Media Bearing Software for Data Processing Equipment,
adopted by the WTO Committee on Customs Valuation (G/VAL /5). In accordance with these latter
provisions, only the cost of thecarrier medium itself would be accounted for in determining the
customs value of carrier media bearing software . The Working Party took note of these
commitments.
11. Other Cust oms Formalities
131. The representative of China said that China joined the International Convention on the
Simpl ification and Harmonisation of Customs System in 1988 and on 15June 2000 signed the
Protocol on the Amendment ofthe International Convention on the Simplification and Harmonisation
of Customs System. The Customs autho rities of China had only adopted such customs formalities as
declaration, examination, levying of duties and release which were consistent with international
practices.
12. Preshipment In spection
132. The representative of China stated that, currently, there were trade and comme rce inspection
agencies (including joint-ventur e agencies ) engaged in preshipment inspection. China committed
itself to comply with the Agreement on Preshipment Inspection, and would regulate the existing trade
and commer ce inspection agen cies andpermit the qualified agencies to beenga ged in preshipment
inspection in line with the government mand ate or the te rms and conditions of commercial contr acts.
133. Some members of the Working Party reque sted information on whether China used the
service s ofa private preshipment inspection entity. The representative of China confirmed that China
would ensur e that, upon a ccession, a ny laws and regulations relating to preshipment inspection by any
inspection agency, including private entities, would be consistent with relevant WTO agreeme nts, in
particular, the Agreement on Preshipment Inspe ction and the Customs Valuation Agreement.
More over, any fees charged in conn ection with such preshipment inspection would be commensu rateWT/ACC/SPEC /CHN /1/Rev.6
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with the service provided, in conformity with Article VIII:1 of the GATT 1994. The Working Party
took note of thes e commitments.
13. Anti-Dumping, Countervailing Duties
[To be completed]
14. Safegua rds
134. The representative of China stated that upon accession, China would implement its
Regulation on Safeg uard by which the future safegua rd measures would be regulated. The drafting
work of this regulation was still under way. The contents of this new regulation would be fully
consistent with the Agreement on Safeguards. He noted that, at present, China was in the process of
drafting safeguard legislation in accord ance with Article 29 of the Foreign Trade Law and the
Agreement on S afeguards.  Th e Wo rking Pa rty took note o f this commitment.
C. EXPORT REGULATIONS
1. Customs Tarif fs, Fe es and Cha rges for Servic es Rende red, Application of Internal Taxe s
to Expor ts
135. Some members of the Working Party raised concerns over taxes and charges applied
exclusively to expo rts. In their view, such taxes and charges should be eliminated unless applied in
confo rmity with G ATT Article VIII or listed in Annex 6to the Dra ft Protocol.
136. The representative of China noted that the majority of products were free of expo rt duty,
although 36 items, including tungsten ore,Ferrosilicon and some aluminum produ cts, were subject to
export duties. He noted that the duty-pa ying value of exported goods was the F.O.B. price of the
goods.
2. Export Licensing and Exp ortRestrictions
137. The representative of China confirme d that the list of all entities respon sible for the
authorization or approval of exports would be updated and republished in the official journal, the
MOFTEC Gazette, within one month of any chang e thereto. The Working Party took note of this
commitment.
138. The representative of China said that China applied its export licenc e system to certain
agricultural products, resour ce products and chemicals. China's expo rt licencing system was
administered in accordance with the "Interim Procedure s for the Export Licen cing System". In 1992,
there were 143 catego ries ofproducts subject to export licencing which accou nted for 48.3% of the
total value of the China's expo rts, but by 1999, the total number of products subject to expo rtWT/ACC/SPEC /CHN /1/Rev.6
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licensing had been reduc ed to 58 categories and 73 items with an export value of US$ 18.5 billion,
taking up only 9.5% of total expo rts. Export licenc es for these products were issued according to the
stipulated commodity scope respectively by the Administrative Burea u of Quota and Licen ce
(ABQL), the Special Commissioner Offices (SCO) locate d in 16 provinces and the Commissions of
Foreign Economic Relations and Trade (COFTEC) of variou s provinces, autonomous regions ,
municipali ties directly under the central governme nt and those with indepen dent budg etary status.
The main criteria used in determining whethe r a product was subject to export licensing, asset down
in the Foreign Trade Law, were: (1) maintenan ce of national security or public interests;
(2) p rotection against shortage of supply in the domestic mark et or exhaustion of natur al resources;
(3) limited market capacity of importing countries or regions; or (4) obligations stipulated in
international treaties.  Export licensing was also us ed fo r statistical purposes.
139. He furthe r noted that an application for an export licence had to be submitted to the licence
issuing institut ions authorized by MOFTEC, together with docume nts approving the export by the
competent departments, and other relevant materials (such as the Export Qualification Certificate for
the enterp rises, export contract and so on). The procedur es were the same for all export destinations.
A decision on the r eque st for an export licence normally took three working days. Licences were valid
for six months and could be extended once. FIEs engag ed in exporting products not produc ed by
them were required to obtain export licence s if the products to be exported were subject to the
licensing requir ement. If theproducts were not subject to licensing, customs clearance would be
given afte r examination by Customs on the basis o f export co ntracts a nd other releva nt documents.
140. Certain members of the Working Party noted the conditions in the GATT 1994 in regardto
non-automatic licensing and expo rt restrictions.  Th ey pointed out that expo rt prohibitions, restrictions
and non-automatic licensing could only tempor arily be applied under Article XI of the GATT 1994 to
preve nt or relieve critical shortag es of foodstuf fs or other products essential to an expo rting WTO
Member . Article XX of the GATT 1994 also allowed forrestrictive export measures, but only if such
measur es were made effective in conjun ction with restrictions on domestic production or
consumption.
141. Member s ofthe Wo rking Pa rty welcomed the stea dy reduction in the number products subject
to export licensing in China. Certain membe rs reiterated their request for the submission of a
complete list of restrictions presently applied. These membe rs expressed concern that the remaining
number was still high, covering about 10 per cent of expo rt trade, and requested that they be either
reduc ed furthe r or eliminated by the date of accession in order to achieve full compatibili ty with
GATT requirements. Some member s expressed particular concern about expo rt restrictions on rawWT/ACC/SPEC /CHN /1/Rev.6
Page 37
materials or intermediate products that could be subje ct to further processing, such as tungsten ore
concentr ates, rare earths and other metals.
142. The representative of China confirme d that China would abide by WTO rules in respect of
non-automatic expo rt licensing and expo rt restrictions. The Foreign Trade Law would also be
brought into conformity with GATT requirements. Moreover, expo rt restrictions and licensing would
only be applied, after the date of accession, in those cases where this was justified by GATT
provisions. The representative of China further confirme d that expo rt restrictions on tungsten ore
concentr ates would be eliminated upon entry into force of the Draft Protoc ol. The Working Party
took note of thes e commitments.
143. The representative of China stated that China prohibited expo rt of narcotic drugs, poisons,
materials containing State secr ets, pr ecious and r are animals and plants.
144. Some members of the Working Party expressed concern about China' s restrictions on exports
of silk. Certain other memb ersexpressed conce rn about expo rt restrictions on other goods, in
particular raw materials or interme diate produ cts that could be subject to further processing, such as
tungsten ore conc entrates, rare earths and other metals. Member s of the Working Party urged China
to ensur e that any such restrictions that were impose d or maintained complied with the terms of the
WTO Agreeme nt and the Dr aft Protocol.
145. The representative of China confirme d that upon entry into force of the Draft Protocol,
restrictions on exports would be eliminated unless they could be justified under the WTO Agre ement
or the Dra ft Protocol.  Th e Wo rking Pa rty took note of this c ommitment.
3. Export Subsidies
146. Some members of the Working Party noted that China had provided a list of prohibited
subsidies falling within the scope of Article 3 of the SCM Agre ement and a timetable for their
eliminat ion, in Annex 5b of the D raft Pr otocol.  Those member s con sidere d this list to be incomplete.
147. The representative of China confirme d that it would eliminate all export subsidies, within the
meaning of Article 3.1( a) of the SCM Agre ement, by the time of accession, including fiscal or other
financial measu res re ferred to in Article 1 ofthe SCM Agreement which were contingent upon export
performan ce. To this end, China would, by accession, cease to maintain all pre-existing expo rt
subsidy programmes and, upon accession, make no furthe r payme nts or disbursements, nor forego
reven ue or confer any other benefit, under such programmes. This commitment covered subsidies
granted at all levels of gover nment, including tax exemptions, reductions, deferrals or forgivene ss toWT/ACC/SPEC /CHN /1/Rev.6
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enterpris es, which were contingent, in law or in fact, upon an obligation to export. The Working
Party took note o f this commitment.
148. On the same basis, the representative of China confirmed that China would eliminate, upon
accession, all subsidies contingent upon the use of domestic over imported goods, within the meaning
of Article 3.1(b ) ofthe SCM Agr eement.  Th e Wo rking Pa rty took note of this c ommitment.
D. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS
1. Taxes and Char ges L evied on Impor ts and Exp orts
149. Some members o f the Working P arty ex pressed conc ern about the ap plication of the VAT and
additional charge s levied by sub-central governme nts on imports. Non-discriminatory application of
the VAT and other intern al taxes was deemed essential.
150. The representative of China confirme d that from the entry into force of the Draft Protoc ol,
China would ensur e that its laws and regulations relating to all fees, charges or taxes levied on
imports and expo rts would be in full confo rmity with its WTO obligat ions, including Articles I, III:2
and 4, and XI:1 ofthe GATT 1994, and that it would also implement such laws and regulations in full
confo rmity with these obligations.  The W orking Pa rty took note o f this commitment.
2. Industrial Policy, including Subsidies
151. Some members of the Working Party expressed conc ern that the special feature s of China 's
economy, in its present state ofreform, still created the potential for a certain level of trade-dis torting
subsidization; this could have animpact not only on accessto China's domestic market, but also on
the performan ce of Chinese expo rts in the markets of other WTO Membe rs, and should be subject to
effective SCM Agreement disciplines. In view of this, some memb ersfelt that it would be
inapprop riate for China to bene fit from ce rtain pro visions of A rticles 27 and 29. Therepresentative of
China, in turn, conside red that certain provisions ofthese Articles should be available to China, and
informed the Working Party of the efforts being undertak en, as part of its ongoing reform process, to
reduc e the availabili ty of certain types of subsidies. China was committed to implement ing the
SCM Agreeme nt in a manner that was fairand equitable to China and to other WTO Member s. [In
line with this approach, the representative of China stated his intention to reserve the right to benefit
from the provisions of [Articles 27.10, 27.11, 27.12 and 27.15 ] of theSCM Agreement, while
confirming that China would not seek to invok e [Articles 27.8, 27.9, 27.13 and 29.2] of the
SCM Agreeme nt.  The W orking Pa rty took note o f these commitments.]
152. Some members of the Working Party, in view of the special characteristics ofChina's
economy, sought to clarify that when state-ow ned enterp rises (including bank s) provided financialWT/ACC/SPEC /CHN /1/Rev.6
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contributions, they were doing so as government actors within the scope of Article 1.1(a ) of the
SCM Agreeme nt. The representative of China noted, however, that such financial contributions
would not neces sarily give rise to a benefit within the meaning of Article 1.1(b) of the
SCM Agreeme nt. He pointed out that China's objective was that state-owned enterpri ses,including
banks, should be run on a comme rcial basis and beresponsible for their own profits and losses. The
Working P arty took note o f this commitment.
153. Some members of the Working Party, while unde rstanding the difficulties involved in
gathering information, raised conc erns over the comp rehensiven ess of the subsidy notification which
China had provided in Annex 5to theDraft Protocol, as last modified on 31 May2000. Some
members of the Working Party explained that, as an illustration of the above, certain types of
subsidies did not appear in Annex 5. Those memb ers of the Working Party first identified state
support through the banking system, notably gove rnment-ow ned banks, in the form of policy loans,
the automatic roll-over of unpaid principal and interest, forgive n and non-pe rforming loans, and the
selective use of below-mar ketinterest rates. Some membe rs also referred to unreported tax subsidies,
investment subsidies and subsidies provided by sub-central gove rnments, some of which favoured
exporting firms. Othe r member s mentioned subsidies granted to the telecommunications and
shipbuilding sectors. The representative of China explained that, in common with many other
Member s, China h ad exp erienc ed dif ficulty in obtaining accurate data abo ut all types of subsidies. He
also indicated that China was attempting to reduce the availability of certain types of subsidies, in
particular by reforming its tax system and making gover nment-ow ned bank s operate on a commer cial
basis. The representative of China stated that China would progressively work toward s a full
notification of subsidies, as contemplated by Article 25 of the SCM Agreement. The Working Party
took note of this commitment.
154. Some members of the Working Party also raised concerns regarding the subsidies that China
provided in connection with SEZs and other special econ omic areas. Some of these appeared to be
contingent upon export performanc e or on the use of domestic good s. The representative of China
noted that the main purpos e of such subsidies was to promote regional development and foreign
investment. He confirmed that China would, upon accession, eliminate any such subsidies which
were incon sistent with the SCM Agreement.  The Working P arty took note o f this commitment.
155. Some members of the Working Party requested information from China on the subsidies
provided to the Chines e footwear industr y that were contingent upon the u se of domestic materials. In
respo nse, the representative of China explained that no such subsidy programme existed.
[……… ……… ……… ……… ……… ……… ]WT/ACC/SPEC /CHN /1/Rev.6
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156. Some members of the Working Party reque sted information from China on the Steel Import
Substitut ion Programme, which appeared to provide expo rt subsidies to the big four steel groups in
China.  In r esponse, the representative of China explained that China did not collect VAT on imported
and domestically-produ ced steel used as raw material by processing trade enterprises . Such a policy
was consistent with WTO rules and identical to the practice s of VAT rebate of many WTO Members ,
and thus sh ould not be c onsider ed subsidies. […… ……… ……… ……… ………… …]
157. Some members of the Working Party reque sted information from China on the "China
High-Tech Produ ct Export Catalogue", which set forth central governme nt export policies for the
telecommunications, computer software, aviation and aerospace, lasers, pharma ceuticals, medical
equipment, new materials and energy industrie s. In respons e, the representative of China explained
that products listed in the Catalogue would be give n full VAT rebate tr eatment, in contrast with partial
VAT rebate applied to other expo rted products. Such policy was consistent with Artic le XVI of the
GATT 1994 and relevant Anne xes o f the SCM Agreement. […………… ……… ……… ……… …...]
3. Technical Barriers to Trad e
[To be completed]
4. Sanitary and Phy tosanitary Meas ures
158. Sanitary and Phytosanitary Measures Some membe rs ofthe Working Party expressed
conce rns in relation to the use by China of sanitary and phytos anitary ("SPS") procedures as non-tariff
barrie rs and raised specific instanc es where they conside redthat China's measures were not consistent
with the WTO Agreement on the Application of Sanitary and Phyto sanitary Measures ("SPS
Agreement"). These membe rs sought assurances that China would not use SPS measu resto restrict
trade, that SPS measu res would only be impose d to the extent necessary to protect human, animal or
plant life or health, and that su ch mea sures would be based fully on s cientific principles.
159. The representative of China stated that pursuant to the provisions of the SPS Agreement,
China applied SPS measu res only to the extent necessary to protect the life and health of huma n
beings, animals and plants. He also noted that most of China' s SPS measures were equivalent to
international standard s, guidelines and recommendations. China would not apply SPS meas ures in a
manner which would act as a disguised restriction on trade. In accordanc e with the SPS Agreement,
China would ensur e that SPS measu reswould not be maintained without sufficient scientific
evidence. The Working P arty took note o f thes e commitments.
160. Member s expressed theview that China should apply the SPS Agreeme nt from the date of
China's accession and should ensure conformity with the SPS Agreement of all its laws, regulationsWT/ACC/SPEC /CHN /1/Rev.6
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and practices relating to SPS measur es. In response, the rep resentative of China confirmed that China
would fully apply the SPS Agre ement from the date of accession and would ensure the conformity
with the SPS Agreement of all of its laws, regulations and practices relating to SPS measu res. The
Working P arty took note o f these commitments.
161. Member s ofthe Working Party noted that China's notification of laws, regulations and other
SPS measur es, referred to in the Draft Protocol, was provided in docume nt WT/ACC/CHN /33.
Member s ofthe Working Party agreed that this notification did not prejudge the legal status unde r the
WTO Agreeme nt of the nature or effects of the notified laws, regulations and other measu res. The
representative of China also submitted an action plan forimplementation of China's SPS
commitments, circulated to the Working Party in WT/ACC/CHN /XX. The action plan outlined the
steps that China was taking to ens urefull implementation of the SPS Agreement, including revision of
its laws, regulations and othe r meas ures.
162. The representative of China said that China had set up an SPS notification authority and an
SPS enquiry p oint which would be notified to the SPS Commit tee. Laws, regulations, rules, standa rds
and procedu res relating to SPS measu res, including inspection, had been published in publications
such as the MOFTEC Gazette. Information could also be gathe redfrom the SPS notification
authority or f rom China' s SPS enq uiry point.
5. Trade-Relat ed Inv estment Measures
163. The representative of China confirme d that upon accession, as set forth in the Draft Protocol,
China would comply fully with the TRIMs Agre ement, without recour se to Article 5 thereo f, and
would eliminate foreign -exchang e balancing and trade balan cing requirements, local content
requireme nts and expo rt performan ce requireme nts. Chinese authorities would not enforce the terms
of contr acts containing such requireme nts. The allocation, permission or rights for importation and
investment would not be conditional upon performance requirements set by national or sub-national
authorities, or subject to secon dary conditions covering, for example, the conduct ofresearch, the
provision of offsets or other form s ofindustrial compens ation including specified types or volumes of
business oppo rtunities, the use of local inputs or the transfer of techn ology. Permission to invest,
import licences, quotas and tariff rate quotas would be granted without regard to the existenc e of
competing Chinese dome stic suppliers.  Th e Wo rking Pa rty took note o f this commitment.
164. In the context of discu ssions onthe gove rnment' s Industrial Policy for the Automotive Sector ,
the representative of China confirmed that this policy would be amen ded to ensure compatibility with
WTO rules and p rinciples.  The Working Party took note of this commitment.WT/ACC/SPEC /CHN /1/Rev.6
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165. The representative of China added that amendments would be made to ensurethat all
measur es applicable to motor vehicle produce rs restricting the categ ories, types or models of vehicle
permitted for production, would gradually be lifted. Such meas ures would be completely removed
two years after accession, thus ensuring that motor vehicle producers would be free to choo se the
categories , types and models they produced. Howeve r, it was unde rstood that catego ry authorizations
by the gove rnment could continue to distinguish between truck s and buse s, light commercial vehicles,
and passeng er cars (including multi-purpos e vehicles and sport utility vehicles). The Working Party
took note of this commitment.
166. The representative of China confirme d that China also agreed to raise thelimit within which
investments in motor vehicle manuf acturing could be approved at provincial governm ent level only,
from the current level of US$ 30 million, to US$ 60 million one year after accession, US$ 90 million
two years after accession, and US$ 150 million four years after accession. TheWorking Party took
note of this commitment.
167. With respe ct to the manufactu re of motor vehicle engines, therepresentative of China also
confirmed that China agreed to remov e the 50% foreign equity limit for joint-venture s upon
accession.  The Working Pa rty took note of this c ommitment.
6. State Trading Entities
168. Some members of the Working Party expressed conc ern that the activities of China's state
trading enterp rises were not sufficiently transpa rent and were not in accordance with WTO
obligations. The representative of China indicated, howeve r, that China's state trading enterprises had
full management autonomy and responsibili ty for their own profits andlosse s and that China had
undertak en broad and significant commitments to improve the transp arency of state trading
enterpris es' operation and the mea sures relating to such op eration.
169. The same membe rs of the Working Party also stated that China should ensure that the import
purch asing practices and proced ures ofstate trading enterpris es were fully transpa rent, and in
compliance with the requirements of the WTO Agreeme nt. They consider ed that China should also
refrain from taking any measure to influenc e ordirect state trading enterp rises as to the quantity,
value, or country of origin of goods purchased or sold, except in accordance with the requir ements of
the WTO Agreeme nt. Those memb ersalso stated that aspart of China' s notification under the
GATT 1994 and the Understan ding on the Interp retation of Article XVII of the GATT 1994, China
should notify information on state trading, including, in the case of state trading of exported goods,
domestic procu rement p rices, contract terms for delivery and financing terms and co nditions.WT/ACC/SPEC /CHN /1/Rev.6
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170. In response, the representative of China stated that its state trading enterprise s had full
management autonomy and respon sibility for their own profits and losse s. Howev er, some member s
of the Working Party again stated that China should undertake a commitment to ensure that all state
trading enterp rises complied with the requirements of the WTO Agreement. The representative of
China noted that a list of produ cts subject to state trading had been provided in Anne x 2a of the Draft
Protocol. He also confirmed that information on state trading enterp rises, as require d by the Draft
Protocol, would be supplied, but stated that such notification should be without prejudice to the
commercial interests o f the state trading enterp rises.
171. Member s ofthe Working Party took note of thespecific arrangements that would apply for
fertilizers and crude and processed oil. A key feature ofthose arrangements related to the annual
allocation of import quantities. The differences in the regimes that would apply to those products
were noted, in particular in regard to the obligation on state enterp rises trading in fertilizers to carry
over to the n ext yea r any unuse d import quantities.
172. Some members of the Working Party requested assurances that, for oil products, quantities
reserved for non-state traderswould be allocated in such a manner that they would be fully utilized.
In this respect, the representative of China confirmed that imports allocated to non-state traders of
crude and processed oil, as specified in Anne x 2a of the Draft Protocol, would be carried over to the
next year if they were not fully utilized. In addition, the representative of China agreed that China
would publish, on a quarterly basis, the reque sts for imports that had been made by non-state traders,
as well as the licence s granted, and would supply information releva nt to such traders upon request.
The Wo rking Pa rty took note of the se commitments.
173. Some members of the Working Party noted that prior to accession, some enterpris es in China
were permitted to import goods for their production purposes, including those goods included in
Annex 2a. The representative of China confirmed that, notwithstanding section 5, paragraph 1, ofthe
Draft Protocol, non-state trading enter prise s, including private enterpris es, would still be permitted to
import such good s for production purposes and that national treatment would be provide d to such
imports.  The Wo rking Pa rty took note of these commitments.
174. Some members of the Working Party expressed conc erns about supplies ofraw mate rials in
the textiles sector, and particularly in regard to supplies of silk, in the light of China's position as the
major world supplier o f silk, cu rrently subject to state trading rights con cerning expo rts.
175. In this regard, the representative of China confirme d that China would progressively abolish
the system of state trading in respect of silk by meas ures increasing and extending trading rights, with
the result that China would remove completely the silk products set out in numbers 10 and 11 ofWT/ACC/SPEC /CHN /1/Rev.6
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Annex 2a -2 to the Draft Protocol (list of products subject to state trading on expo rts) and grant the
right to trade in such prod ucts to all individuals and enterp rises no later than 1 January 2005. Pending
the implementat ion of this right, China unde rtook not to introduce any change s of a more restrictive
nature to the existing structu res in place for the supply of silk. The representative of China further
confirmed that access to supplies of raw materials in the textiles sector would remain at conditions no
less favorable than for dome stic users, andgave his assurance that access to supplies of raw materials
as enjoye d unde r existing arrangements would not be adve rsely affected following China's accession
to the WTO.  The W orking Pa rty took note o f these commitments.
176. Member s ofthe Working Party noted that domestic price s for most agricultural commodities
in China were highe r than world prices, and this differential allowed China's state trading enterprises
to import at low prices and then mark up the price when selling the produ ct to wholesalers and
end-use rs. Some member s expressed concern that this practice could become more widespr ead when
access opportunities were created under TRQs. Those memb ers were particularly concerned that
mark-up s could be used to reduce thecompetitiveness of imported products and limit the range of
qualities and grades available to end-u sers in China. The representative of China stated that currently
state trading enterp rises did not mark up impo rted products; instead, they only charged a nominal
transaction fee. Consequently, China claimed that its practice was consistent with WTO obligations,
did not result in any trade-distorting effect, and that unde r China' s law limits existed on the fees that
could be ch arged by state trading ente rprise s.
177. The re presentative of China stated that China would ensure that no price increase in respect to
imports, in particular by state trading enter prise s, would result in protection beyond that allowed in its
Schedule of Conc essions and Commitments on Goods orthat was not otherwise justified under WTO
rules.  Th e Wo rking Pa rty took note of this c ommitment.
7. Special Economic Areas
178. Member s ofthe Working Party noted that there was insuf ficient information available
conce rning special econ omic areas within China's customs territory, including border trade region s
and minority autonomous areas, Special Economic Zones ("SEZs"), open coastal cities, economic and
technical development zones and other areas wherespeci al regimes for tariffs, taxes and regulations
had been established (collectively referred to as "special economic areas"), in particular their names,
geogr aphic boun darie s, and relev ant laws, reg ulations and othe r measu res relating ther eto.
179. In respon se, the representative of China stated that since 1979 China had established a
number of special economic areas where more open policies were applied. They included five SEZs,
14 open coastal cities, six open cities along the Yangtze River, 21 provincial capital cities and 13WT/ACC/SPEC /CHN /1/Rev.6
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inland bounda ry cities. Thos e special economic areas enjoye d greater flexibility in utilizing foreign
capital, introducing foreign technology and conducting economic coop eration overseas. At present,
foreign inv estors w ere entitled to certain pref erential treatment.
180. The representative of China furthe r stated that FIEs located in SEZs or the Economic and
Technical Development Zones of open coastal cities were entitled to a corpo rate income tax rate of
15% (the normal income tax was 33%). Profits remitted abroad by foreign investors were exempted
from income tax. The preferential income tax rate of 15% was applicable to technology-intensive or
knowledge-intensive items orprojects with foreign investment of over US$30 million, as well as
enterpris es that ope rated in the fields of energy, tran sport a nd po rt constru ction.
181. The representative of China noted that througho ut the customs territory of China, a socialist
market eco nomy system was applied. In 1999, the foreign trade volume of SEZs accounted for nearly
one fifth of the nation's total. The national laws and regulations on taxation were applicable to SEZs
in a uniform mann er.
182. In respon se to fu rther requests for in formation, the r epresentative of China indicated that there
was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs had
been eliminated. With the development of China 's economic reform and opening up, China would
implement its tariff policy uniformly throug hout its customs territory. Membe rs of the Working Party
expre ssed concern that imported produ cts introduce d from these special economic areas into other
parts of China's customs territo ry should be subject to the same treatment in the application of all
taxes, import restrictions and customs duties and other charges as that normally applied to imports
into the other parts of China' s customs territory. The representative of China stated that China would
undertak e to ensure such non-dis criminatory treatment. The Working Party took note of this
commitment.
183. Some members of the Working Party also raised concerns asto whether the assistanc e
provided to minority autonomous regions and other areas of economic poverty was consistent with
WTO requir ements. In respon se, the representative of China confirmed that China had a clear
commitment to uniform administration of the trade regime within each such area and that, upon
accession, China would ensure that such assistan ce would be implemented consistent with WTO
obligations.  The Wor king Party took n ote of this commitment.
184. Some members of the Working Party reque sted that China take steps to ensure that all
products imported into the other parts of the customs territory of China from special economic areas
would be subject to the same normal customs duties and charges as any other product imported into
the customs territory of China. In particular, those member s requested that China undertak e aWT/ACC/SPEC /CHN /1/Rev.6
Page 46
commitment to apply all taxes, charges and measures affecting imports, including import restrictions
and customs and tariff charges, that were norm ally applied to imports into the other parts of China's
customs territory to all imported products, including physically incorpo rated compo nents, entering
China's cu stoms territory from the special ec onomic ar eas.
185. The representative of China confirme d that China would strengthen the unifo rm enforcement
of taxes, tariff s and non-ta riff measures on trade between its special economic areas and theother
parts of China's customs territo ry. China furthe r confirmed that statistics on trade betwe en China' s
special eco nomic are as and the other parts of its customs territory would be maintained and improve d,
and would be notified to the WTO on a regula r basis. The Working Party took note of these
commitments.
186. Some members of the Working Party reque sted that China notify the WTO Secretari at of all
the relevant laws, regulations andother measures relating to its special economic areas. They asked
that the notification list and identify all those special econ omic areas. Those membe rs also requested
that China notify the WTO Secretariat promptly, but in any case within 60 days, of any additions or
modifications to its special economic areas, including notification of the laws, regulations and other
measur es relating thereto.
187. The representative of China confirme d that China would provide information in its
notifications describing how the special trade, tariff, and taxregulations applied were limited to the
designated special economic areas, including information conc erning their enforceme nt. The
Working P arty took note o f this commitment.
188. In response to concerns raised by some membe rs of the Working Party, the representative of
China confirmed that any preferential arrangements provided to enterprise s located within the special
economic areas would be provided on a non-disc riminatory basis. The Working Party took note of
this commit ment.
8. Government Pr ocur ement
189. The representative of China stated that in order to promote China 's governme nt procu rement,
the Ministry of Finan ce promulgated the Interim Regulations on Gover nment Procureme nt in
April 1998. The Interim Regulations were stipulated in line with the spirit of the WTO Agreeme nt on
Government Procurement ("GPA") and on thebasis of the relevan t provisions of the United Nations
Model Law on Procurement of Goods, Construction andServices while making reference to the laws
and regulations of some WTO Membe rs on gove rnment procurement. The policy and procedu re
regarding government procurement provided for therein were consistent with international practice.WT/ACC/SPEC /CHN /1/Rev.6
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China stuck to the fundamental principles of being open, fair, equitable, efficient and in the public
interest when carrying out gove rnment procurement. At present, China was formulating the
Government Pro curement Law.
190. Some members o f the Working P arty stated that China sh ould become a Signatory to the GPA
and that prior to its accession to the GPA, China should cond uct all governme nt procu rement, within
the meaning of the Draft Proto col, in a trans parent and non-disc riminatory manne r. Those membe rs
noted that China's public entities engag ed exclusively in commercial activities would not be
conducting government procurement andthus laws, regulations and other measures regulating these
entities' procu rement pr actices would be fully subject to WTO r equirements.
191. The representative of China stated that China intended to become a Signatory to the GPA and
that until such time, all government entities at the central and sub-ce ntral level would conduct their
procu rement in a transparent manne r and provide all foreign supplier s with equal opportunity to
participate in that procur ement pur suant to the principle o f MFN tre atment.  Such pr ocurements would
be subject only to laws, regulations, judicial decisions, administrative rulings of general application,
and procedu res (including stand ard contra ct clause s) which had been published and made available to
the public.  The Wo rking Pa rty took note o f these commitments.
192. Noting China's intention to become a Signatory of the GPA, some memb ers of the Working
Party stated that China should, u pon entr y into for ce of the Dra ft Protocol, s eek to be come an observer
to the GPA, and should initiate negotiations for member ship in the Agreeme nt by tabling an
Appendix 1 offer within two years of accession. The representative of China respon ded that China
would give serious consider ation to this requ est.
9. Transit
193. The representative of China stated that the current regulation of transit in China, the
Regulations of the Customs of the People's Republic of China onthe Supe rvision and Administration
of Tr ansit Goods, was consistent with Article V of the GATT 1994.
10. Agricultural Policies
[To be completed]
11. Trade in Civil A ircraft
194. In response to questions from members of the Working Party, the representative of China
indicated that China was not in a position to commit to joining the Agreement on Trade in Civil
Aircraft at the p resent stage.WT/ACC/SPEC /CHN /1/Rev.6
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195. The representative of China confirme d that China would not impose any provisions of offsets
or other forms of industrial compens ation when purchasing civil aircraft, including specified types or
volumes of bu siness oppo rtunities.  Member s ofthe Wo rking Pa rty took note of this c ommitment.
12. Textiles
196. Some members of the Working Party propos ed and the representative of China accepted that
the quantitative restrictions maintained by WTO Membe rson imports of textiles and apparel products
originating in China that were in force on the date prior to the date of the accession of China to the
WTO should be notified to the Textiles Monitoring Body ("TMB") as being the base levels for the
purpos e ofapplication of Articles 2 and 3 of the WTO Agreeme nt on Textiles and Clothing ("ATC").
For such WTO Membe rs, the phrase "day prior to the date of entry into force of the WTO
Agreement", contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to the
date of accession of China to the WTO. To these base levels, the incre asein growth rates provided
for in Articles 2.13 and 2.14 of the ATC should beapplied, as appropriate, from the date of accession
of China to the WTO.  Th e Wo rking Pa rty took note o f these commitments.
197. The representative of China agreed that the following provisions would apply to trade in
textiles and clothing products until 31 Decembe r 2008 and be part of the terms and conditions for
China's a ccession to the WTO:
(a) In the event that a WTO Memb er believed that imports of Chines e origin of textiles
and apparel products cove red by the ATC were, due to market disru ption, threatening
to impede the orderly development of trade in these products, such Memb er could
reque st consultations with China with a view to easing or avoiding such market
disruption.  The M ember requesting con sultations would provide China, at the time of
the request, with a detailed factual statement of reasons and justifications for its
reque st forconsultations with current data which, in the view of therequesting
Member , showe d:  (1) the existence or threat of market disruption; and (2) the role of
products of Chines e origin in that disruption;
(b) Consultations would be held within 30 days of receipt of the request. Every effort
would be made to reach agreement on amutually satisfactory solution within 90 days
of the r eceipt of such request, unles s extend ed by mutual ag reement;
(c) Upon receipt of the request for consultations, China agree d to hold its shipments to
the requesting Membe r oftextile or textile products in the catego ry or catego ries
subject to these consultations to a level no greater than 7.5 per cent (6 per cent forWT/ACC/SPEC /CHN /1/Rev.6
Page 49
wool product categ ories ) above the amou nt entered during the first 12 months of the
most recent 14 months preceding the month in which the request for consultations
was made;
(d) If no mutually satisfa ctory solution were reached during the 90-da yconsultation
period, consultations would continue and the Membe r requesting consultations could
continue the limits under subpa ragraph (c)for textiles or textile products in the
category or categorie s subje ct to these con sultations;
(e) The term of any restraint limit establ ished unde r subparagraph (d) would be effective
for the period beginning on the date of the request for consultations and ending on
31 Decembe r of theyear in which consultations were requested, or wher e three or
fewer months remaine d in the year at the time of the request for consultations, for the
period en ding 12 months a fter the request fo r con sultations;
(f) No action taken unde r this provision would remain in effect beyond one year, without
reapplication, unless otherwise agreed between the M ember conc erned and China .
The Wo rking Pa rty took note of the se commitments.
13. Measu res Maintained Agains t China
198. The representative of China stated that WTO Memb ers should eliminate all discriminatory
non-tarif f meas ures maintained against Chines e exports from the date of China 's accession to the
WTO. In response , some membe rs of the Working Party stated that, in their view, such measu res did
not need to be phased out until such time as China's foreign trade regime fully confo rmed to WTO
obligations.
199. In light of the abov e, it was agreed that any prohibitions, quantitat ive restrictions or other
measur es maintained against imports from China in a manner inconsistent with the WTO Agreement
would be listed in Annex 8 to the Draft Protocol. It was furthe r agreed that all such meas ures would
be phased out or otherwise dealt with in accordan ce with mutually agreed terms and timetables as
specified in s aid annex .
14. Transitional Safegua rds
[To be completed]
15. Transitional Review Mechanism
[To be completed]WT/ACC/SPEC /CHN /1/Rev.6
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V. TRADE-RELATE D INTELLEC TUAL PROP ERTY RE GIME
A. GENERAL
1. Overview
200. The representative of China stated that China had made the prote ction of intellectual property
rights an essential component of its reform andopening-up policy and socialist legal construction.
The formulation of laws and regulations in this field could betrace d back to the late 1970s. Since
then, China had joined relevant international conventions and had actively participated in the
activit ies sponso red by relevant international organizations. It had intensified its exchange s and
coope ration with countries througho ut the world in the field of IPR prote ction. As a result,
notwithstanding the ini tial stage of its development, China's IPR protection system aimed at achieving
world dimension and world standa rds. Lists of administrative rules concerning intellectual prope rty
rights cur rently in for ce in China a re presented in Table A.
201. The representative of China stated that for accession to the WTO and compliance with the
TRIPS Agreeme nt, furthe r amen dments had been made to the Patent Law. The amendme nts to the
Copyright Law and the Trademark Law, as well as relevant implementing rules covering different
areas ofthe TRIPS Agr eement, would also b e accomplished upo n China's accession to the WTO. The
representative of China stated that laws adopted by the National People's Cong ress and administrative
regulations, including implementing rules, issued by the State Council were applied and enforced by
the people's courts. The Working Party took note of this commitment. The status of ongoing reforms
and other relev ant information is pre sented in Ta ble B.
2. Responsible agencie s for policy formulation and implementation
202. The representative of China said that, at present, different agen cies were respon sible forIPR
policy formulation and implementation. The State Intellectual Prope rty Office (SIPO) was
respo nsible for patent approval; the Tradema rks Office under theState Administration for Industry
and Commerc e (SAIC ) was responsible for trademark s registration; the Copyright Office was
respo nsible for copyright policy making; SAIC was respon sible for anti-unf air competition, including
the protection of trade secrets; the State Drug Administration (SDA) was responsible for
administrative protection of pharmac euticals; the General Customs Administration was responsible
for border measures; the Ministry of Agriculture and the State Administration of Forestry were
respo nsible for protection of plant varieties; the Ministry of Information Industr y was responsible for
the protection of layout designs of integrated circuits; the State Burea u of Quality and Technical
Supervision and SAIC were responsible for combating counterfeiting activit ies. Other agencies likeWT/ACC/SPEC /CHN /1/Rev.6
Page 51
the agenc y for press and publications, the people's courts and police were also involved in the
protection of IPR in China.
3. Participation in interna tional intellectual prope rty ag reements
203. The representative of China said that China became a membe r ofthe World Intellectual
Prope rty Organization in 1980; in 1985, China became a membe r of the Paris Convention for the
Protection of Industrial Property; China was one of the first countries that signed the Treaty on
Intellectual Property in Resp ect ofInteg rated Circuits, the negotiation of which was concluded in
1989; in 1989, China became amember of the Madrid Agreement Concerning the International
Registration of Marks; in 1992 , China became a membe r of the Berne Conv ention forthe Protection
of Literar y and Artistic Works; in 1993, China became a membe r of the Convention for the
Protection of Produc ers of Phonogr ams Against Unautho rized Duplication of Their Phonog rams; in
1994, China became a memb er of the Patent Coop eration Treaty; in 1994, China became a member
of the Nice Agreement Conce rning the Intern ational Classification of Goods and Services for the
Purpos es of the Registration of Marks; in 1995, China became a membe r of the Budap est Treaty on
the Intern ational Recognition of the Deposit of Microo rganisms forthe Purposes of Patent Procedure.
In 1995, China applied for membe rship in the Protoc ols of the Madrid Agre ement Conce rning the
International Registration of Marks; in 1996, China becam e a membe r of theLoca rno Agre ement on
Establishing an Intern ational Classification for Industrial Designs; and in 1997, China became a
member of the Strasbourg Agreeme nt Concer ning the International Patent Classification. Besides the
above efforts, China participated in the TRIPS negotiations during the Urugu ay Roun d and initialled
the Final Act.
4. Application of national and MFN treatment to foreign na tionals
204. Some members of the Working Party expressed conc ern that certain provisions of China's
copyright and tradema rk laws, as well as China' s Rules on Banning the Infring ement of Busine ss
Secrets (23 November 1995 ) did not provide national treatment to foreign right-holder s. The Rules
on Banning Infring ements of Business Secrets, for example, defined the "owne r" of a trade secret as a
"citizen, corporation, and other organization" and did not explicitly provide protection for foreign
individuals or organizations. Some membe rs of the Working Party further stated that national
treatment should be fully applied, so that copy right enforceme nt action by local copy right bureaux
involving foreign right-h olders , would no longe r require clear ance by the National Copyright
Administration in Be ijing.
205. The representative of China responde d that China's IPR laws provided that any foreigner
would be treated in a ccordanc e with any ag reement co ncluded between the foreign country and China,WT/ACC/SPEC /CHN /1/Rev.6
Page 52
or in accordance with any intern ational treaty to which both countries were party, oron the basis of
the principle of recipro city. The representative ofChina furth er confirme d that China would modify
relevant laws, regulations and other measures so as to ensure national and MFN treatment to foreign
right-holders regarding all intellectual property rights across theboard in compliance with the TRIPS
Agreement. This would include adjustments of the clearance requir ement mentioned in the previous
parag raph to ensu re national treatment.  The Wo rking Pa rty took note of the se commitments.
B.SUBSTANTIVE STANDAR DS OF PROTECTION, INCLUDING PROCE DURES FOR THE
ACQUISITION AND MAINTENANCE OF INTELLECTUAL PROPERTY RIGHTS
1. Copyright pro tection
206. The representative of China said that the Copyright Law was promulgated in 1990, which
established the basic copy right protection system in China together with the Implementing Rules of
the Copyright Law (30 May 1991), the Provisions on the Implementation of the International
Copyright Treaty (25 September 1992) and other related laws and regulations. In principle, this
system was in compliance with the international IPR treaties and practices. For the protection of
copyright and neighbou ring rights, not only civil and criminal liabilities but also administrative
liabil ities, were provided for in this system, hence the infringing activities could be curbed in a timely
and e ffective manner and the legitimate rights of the right-holde rs could be p rotected.
207. Some members of the Working Party expressed conc erns about the consistenc y of China 's
current law on the pr otection of cop yright and related rights with the TRIPS Agr eement. In particular,
members noted theneed to clarify the rights of performe rs and produc ersto bring them into
confo rmity with the requireme nts of Article 14 of the TRIPS Agreeme nt. In addition, improvements
were needed with respect to enforcement ofcopy right to provide expressly for provisional meas ures
to prese rve evidenc e, including docume ntary evidence and for remedies sufficient to deter furthe r
infringements.
208. The representative of China responde d that, realizing that there were some existing
differ ences betwee n China's copy right laws and the TRIPS Agre ement, the amendment to the
Copyright Law had been accele rated at present. The amendment would soon be submitted to the
Standing Commit tee of the National People's Congress. The propos ed amen dments would clarify the
payment system by broadcasting organizations which use the recording products and also includ e the
following provisions: rental rights in respect of compute r program s and movies , mecha nical
performan ce rights, rights of communication to the public and related protection meas ures, protection
of datab ase compilation, provisional measur es, increasing the legitimate compensation amount and
strengthening the measures against infringing activit ies. China's copyright regime including the
Implementing Rules of the Copy right Law and the Provisions on theImplementation of theWT/ACC/SPEC /CHN /1/Rev.6
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International Copy right Treaty would be amended so as to ensure full consistency with China's
obligations under the TRIPS Agre ement.  The Working P arty took note o f thes e commitments.
2. Trademarks, including ser vice marks
209. The representative of China stated that the Trademark Law, its implement ing rules and other
relevant laws, administrative regulations and department rules constituted the existing trademark legal
system in China. The objective of these laws was to provide protection to right-holder s in line with
the international conventions and prevailing practices regarding intellectual prope rty rights, which
was embodied both in the regulations on the substan ce and procedures for trademark registration and
in the protection of trademark exclusive right. In order to prote ct the tradema rk exclu sive right,
China's Tradema rk Law contained not only civil and criminal liabil ities but also administrative
punishment against tradema rk infringers . This "double-tr acksystem" of the protection of tradema rk
exclusive right could prevent tradema rk infringements in a timely and effective mann er and protect
the legiti mate rights and interests of the holde rs of tradem ark exclusive rights, which had been
appre ciated by various parties. In recent years, China's judicial and administrative bodies had steppe d
up their efforts to protect tradema rk exclusive rights within their respective autho rization. They had
settled a great deal of cases that were influential, domestically and abroad, which provide adequate
protection to the legitima te rights and interests of both Chine se and foreign holde rs of trademark
exclusive right, thus rec eiving a positive re spons e from domestic and foreign right-holde rs.
210. Some members of the Working Party reiterated concerns about whether certain provisions of
China's Tradema rk Law provided national treatment to foreign trademar k owne rs. They noted that
China's law required foreign tradema rk owners to use designated trademar k agents, while Chinese
nationals were permitted to file directly with China's Trademar ks Office. Membe rs also noted that
China's Tradema rk Law did not consider certain signs as eligible for protection as require d unde r the
TRIPS Agreeme nt. Thes e included names, letters, numerals and colours capable of distinguishing
goods and service s. In addition, if registra bility of a trademark depe nds on use, China's Trademark
Law should provide that a non-distinctive mark could qualify for registration when it has acquired
distinctiveness based on use. Membe rs also noted that it was not clear under China' s law that actual
use o f a mar k was n ot requir ed be fore a p arty co uld file to register a mark.
211. Some members of the Working Party also raised conc erns about the protection of well-known
trademark s in China, in particular those not registere d in China. China's laws and regulations did not
specifically state the criteria for determining whether a mark was well-known and therefore membe rs
could not determine if it confo rmed to the requireme nts of Article 16 of the TRIPS Agreem ent.
More over, while China had provided protection to "well-known trademar ks" owned by Chinese
nationals, such protection had, as yet, not been granted to the well-known tradema rks of foreign ers.WT/ACC/SPEC /CHN /1/Rev.6
Page 54
Member s also noted that certain provisions of China' s tradema rk law needed to be extend ed to
unregister ed well-known tra demar ks.
212. The representative of China stated that with the development of China' s mark et economy and
the furthe r implementation of the TRIPS Agre ement, China's legislative and law-enf orcing bodies had
also realized that their existing Tradema rk Law fell somewhat short of fulfilling the requir ements of
the TRIPS Agre ement and the Paris Conv ention in a few aspects and were therefore preparing to
amend the existing Trademar k Law to fully meet the requirements of the TRIPS Agreement.
Modifications would mainly be made to the following aspects: to include the tradema rk registration of
three-dimension al symbols, combination of colours, alphab ets and figure s; to add the content of
collective trademark and certificate tradema rk (including geog raphic al indications); to introduce
official symbol protection; to protect well-known trademark s; to include priority right; to modify
existing trademark right confirmation system and offer the intere sted party oppo rtunity for judicial
review concerning the confirmation of trademark right; to crack down all serious infringeme nts; and
to improve the system of compen sation.  The Working P arty took note of thes e commitments.
3. Geographical indications, including appellations of origin
213. The representative of China said that the relev ant rules by SAIC and the State Burea u of
Quality and Technical Super vision partly provided protection for the geographical indications
including appellations of origin and that the amendment to the Trademark Law would have a specific
provision on the p rotection of geog raphical indications.
214. The member s of the Working Party took note of the progress achieved ongeog raphic al
indications and reiterated the importance forthe Chinese legislation to comply with the obligations
under the TRIPS Agreement (Articles 22,23 and 24). The representative of China shared this
assessment and reiterated China 's intention to fully comply with relevant articles in the TRIPS
Agreement on g eographical indications. The Working Party took n ote of this commitment.
4. Industrial designs
215. Some members of the Working Party noted that the industrial design provisions of China 's
Patent Law appea red to implement substantial portions of the TRIPS Agreement requirements relating
to industrial designs. One notable exception was the area of textile designs. These membe rs noted
that designs of WTO Member s could beprote cted under China' s Provisions on the Implementation of
the Intern ational Copyright Treaty as work s of applied art. Membe rs urged China to incorpo rate this
protection into its law and to provide suc h prote ction to domestic textile designs.WT/ACC/SPEC /CHN /1/Rev.6
Page 55
5. Patent s
216. The representative of China said that in preparation for the accession to the WTO, China
revised its Patent Law in 1992 for the first time. China had taken meas ures to enhance consisten cy
with the TRIPS Agreement in terms of majo r pro visions and protection stand ards.  In order to incr ease
the awaren ess of the general public on IPR protection, and patent protection in particular, and to be
consistent with the TRIPS Agreement and to build up a sound social environment for the promotion
and commer cialization of inventions, the National People's Congress approved the second revision of
the Patent Law on 25 August 2000. The revised Patent Law, which would take effect on1 July 2001,
included the following elements: (1) Patent owne rs would have the right to preve nt others from
offering for sale the patented product without its consent (Article 11); (2) For utility model and
design applications or patents, the final decision of re-examination and invalidation would be made by
the people's courts other than the inventions that were alrea dy covered (Articles 41and 46); (3)
Patent owners could, before instituting legal proce edings, request the people's court to take
provisional measu res such as to order the suspension of infringing acts and to provide property
preservation (Article 61); (4) Conditions forgranting compulsory licen se would be further clarified
and made consistent with the TRIPS Agreeme nt.
217. Since its establishment, SIPO had paid great attention to strengthen its contact and
coordination with relevant departments and ministries in the field of IPR law enforcement, especially
in the areas of settling inter-agency problems and resolving key cases. At the same time, SIPO had
taken app ropriate me asures to improve the pe rformance of loc al patent authorities in law enfor cement.
For example, in June 1999, SIPO conv ened a nationwide working conference, which was attended by
representatives from local patent administrative authorities. The participants summarized their law
enforcement practices overthe previous two years and also exchanged their experienc es in their local
legislative works with a view to intensifying patent protection. The conference also called for the
introduction of important patent cas es reporting and r ecording system.
218. The representative of China stated that so far as the range of patent protection and protection
for new plant varieties were concerned, China had already met the requir ements of Article 27 of the
TRIPS Agreeme nt. When amending the Patent Law in 1992, China modified Article 25 therein with
reference to relevant stipulations in the final text of the TRIPS Agreement andexpanded the coverage
of patent protection to food, beverage, flavou rings, pharma ceuticals and mate rials obtained by
chemical methods. The scope of patent exclusions would be limited to "scient ific discoveries , rules
and methods of intellectual activit ies, diagnostic and therapeutic methods for the treatment of
disease s, animals and plant varieties, as well as materials obtained by the chan ge of nucleu s".WT/ACC/SPEC /CHN /1/Rev.6
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219. He furthe r stated that Article 5 of China 's Patent Law stipulated that inventions that viola te
laws of China orsocial morality or prejudice public interest would not be entitled to patent right.
There fore, literally, there was a difference between Article 5 of China 's Patent Law and the TRIPS
Agreement. Howev er, in practice, during the review of patent applications, the interpr etation of
"violat ing laws of China" had been restricted to "if laws of China prohibit the sale of a certain
patented product, or prohibit the sale ofproducts manu factu red by a patented method , the granting of
patent right cannot be denied to this product invention or this invention of product manufa cturing
method by relying on Article 5 of the Patent Law". Henc e, in essence, he conclud ed that there was no
differ ence between Article 5 of the Patent Law as applied and the TRIPS Agreement. Nonetheless,
China would amend the Implementing Rules of the Patent Law to ensure that this provision would be
implemented in full compl iance with Article 27.2 of the TRIPS Agreement, which stipulated that:
"Members may exclud e from patentability inventions, the prevention within their territory of the
commercial exploitation of which is necessary to protect ordre public or morality, including to protect
human, animal or plant life or health or to avoid serious prejudice to the enviro nment, provided that
such exclusion is not made merely becau se the exploita tion is prohibited by their law". The
Working P arty took note o f this commitment.
220. Regarding Article 28 of the TRIPS Agreeme nt (rights conferred), therepresentative of China
stated that China's Patent Law had fully complied with the requirements of the TRIPS Agreement
becau se of the following reasons. First, in the 1992 amendment to the Patent Law, Article 11 was
modified as follows: "any entity or individual is, without prior licensing from the patente e, prohibited
from making, using or selling patented products or patented processes, or using or selling products
directly obtained by the patented processes forthe purpose of production and operation". It was also
prohibited for any entity or individual to import patented products or products directly obtained by
patented processes forthe purpose of production and operation. This modification expanded the
scope of patentees ' right, namely the new content of "the right to prohibit import" and "the effect of
patented processes is extended to products directly obtained bypatented processes". Seco nd, in 2000,
when the se cond ame ndment was mad e to the Patent Law, Article 11 was once again modified. A new
stipulation was introduced granting patentees the right to prohibit others from offering for sale the
patented products or products directly obtained by patented processes without the consent of
patentees. Therefore, so far as "the right of patente es" is conc erned, China 's Patent Law had fully
accommodated the requir ements of the TRIPS Agr eement.
221. Further to the 1992 amendme nt, China's Patent Law provided for compulso ry license s based
on reasona ble terms, on public interest and fordepe ndent patents. With regard to the conditions of
compulsory licens es for d ependent patents, the Pate nt Law provide d that the latter invention should be
technically more advanced than the earlier one. The TRIPS Agreement provides that "the inventionWT/ACC/SPEC /CHN /1/Rev.6
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claimed in the second patent shall involve an important technical advanc e of conside rable economic
significance in relation to the invention claimed in the first patent" (Article 31(l)(i)). Since the
provisions of the TRIPS Agreeme nt were more transparent and easie r to operate, the relevant
expre ssions contained in the TRIPS Agreeme nt were adopted in the new revision. In addition, the
following restrictive conditions for granting compulsory licens es contained in the Implementing Rules
of the Patent Law of 1992 had been move d into the Patent Law in order to make it more autho ritative:
the decision of SIPO on the granting ofa compulso ry licens e for exploitation would be limited in
terms of its scope and duration; when the circumstanc es which led to such compulsory licen se ceased
to exist and were unlikely to recur, SIPO, upon the request of the patentee, could terminate the
compulsory licens e after examination; were incorpo rated into the Law (former Article 68 of the
Implementing Rules of the Patent Law of 1992 had now been moved into Article 51 of the revised
Patent Law).
222. The representative of China stated that following the 1992 amendment, the regulations on
compulsory licensing in China 's Patent Law and its implementing rules, as a whole, had fulfilled the
requireme nts of the TRIPS Agreement. Howeve r, some wording and expressions in the Chines e
regulations were still not ident ical to the TRIPS Agreement and these regulations still needed
improvement in respect of the administrative legal proce edings concerning compulso ry licensing.
There fore, in the second amendment to the Patent Law in 2000, the corresponding amen dments and
modifications to the stipulat ions on compulso ry licensing were mainly made in the following two
points: (1) Article 53 of the Patent Law was modified from "a patented invention or utility model is
technically more advan cedthan theinventions or utility models which have obtained patent right
earlier" into "a later invention or utility model is an important technical prog ress with striking
economic significance as comp ared to the earlier invention or utility model" ; and (2) having been
subject to appro priate adjustments, the regulations on the time, scope and termination of compulso ry
licensing enforcement in Article 68 ofthe Implementing Rules of thePatent Law of 1992 were
integrated into Article 52 of the amend ed Patent Law. Following the abov e-mentioned amendments,
China's Patent Law had regulations on compulso ry licensing with clear er structure and improv ed
content. In the representative of China's view, these regulations were fully consistent with the TRIPS
Agreement. He also added that up to now China had not issued any compulsory licen sing for patent
enforcement.
223. Some members of the Working Parity noted the improveme nts in the provisions regarding
compulsory licensing forpatents that the representative of China cited. Some member s howev er,
reque sted clarific ation of the subject matter that would be subject to compulsor y licensing under the
Patent Law.WT/ACC/SPEC /CHN /1/Rev.6
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224. In respon se, the representative of China agreed that still not all the requirements of Article 31
of the TRIPS Agreement had been incor porated into Chinese law, and that Implementing Rules of the
Patent Law would therefo re be modified soas to ensure that: (1) use without authorization of the right
holder would only be permitted if, prior to such use, the proposed user had made efforts to obtain
authorization from the right-holde r on reasonable commercial terms and conditions (Article 31(b)),
(2) the right-holder would be paid adequat e remune ration in thecircumst ance s of each case,
taking into account the economic value of the authorization (Article 31(h)); (3) any such use would
be authoriz edpred ominantly for the supply of the domes tic marke t(Article 31(f)); and (4) in the
case of semi-condu ctor techn ology, the scope and duration of such use would only be for public non-
commercial use or to remedy a practice determined after judicial or administrative proce ss to be anti-
competitive (Article 31(c)). The Working P arty took note o f thes e commitments.
225. Regarding Article 32 of the TRIPS Agreeme nt (revocation/for feiture ), the representative of
China stated that in light of Articles 41 and 46 of the amend ed Patent Law, patent applicants or
patentees of inventions, as well as applicable utility models and designs, could institute legal
proce edings in the people's court if they were not satisfied with the review or nullity decisions made
by the Patent Review Board . This modification enabled China 's Patent Law to be fully consistent
with TRIPS regarding administrative decisions which we re subje ct to judicial review.
226. On the duration of patent right protection, the representative of China stated that as early as
1992 when China made an initial amendment to the Patent Law, Article 45 (later converted into
Article 42 after the seco nd amendme nt) was modified as: "the duration of inventions patent right is 20
years and the duration of patent right for applicable utility model and designs is 10years, counted as
of the date of application". Therefo re, China 's Patent Law had for a long time accor ded with
Articles 26 and 33 of the TRIPS Agre ement conc erning the d uration o f patent rights.
227. Regarding Article 34 of the TRIPS Agreeme nt (process patents: burden of proof), the
representative of China stated that China's Patent Law was modified in 1992 and2000, and was now
in full conformity with the TRIPS Agreement. The amende d paragraph 2of Article 57 reads: "when
any infring ement dispute relates to a process patent for the manu facture of a new product, any entity
or individual manufactu ring the identical produ ct shall furnish proof to the effect that a different
proce ss is u sed in the manuf acture of its or his p roduct".
6. Plant variety p rotection
228. The representative of China confirme d that China was a party to the 1978 text of the UPOV
Convention on the Prote ction of Plant Varieties. In March 1997, the State Coun cil formulated and
promulgated the Regulation on the Protection of New Plant Varieties, thus offering protection for newWT/ACC/SPEC /CHN /1/Rev.6
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plant varieties in asui generis form consistent with the requirements ofthe TRIPS Agreement. [Brief
explanation of the Re gulation.]
7. Layout de signs of int egra ted circuits
229. The re presentative of China said that China was on e of the first co untries to sign the T reaty on
Intellectual Property in Resp ect ofInteg rated Circuits in 1989. The specific draft Regulation on the
Protection of Layout Designs of Integ rated Circuit, which would comply with China's obligations
under Section 6 of theTRIPS Agreement, was being prepared and was expected to be accomplished
upon China' s accession. [Brie f explan ation of the Regulation.] The representative of China stated that
China was stren gthening the protection of the layout desig ns to support the rapid development of the
software indu stry.
8. Requirements on undis closed info rmation, including trade se crets and t est data
230. Some members of the Working Party expressed concern about China's protection against
unfair commercial use and disclosure of undisclosed test and other data submitted to authorities in
China to obtain marketing approval for pharmac euticals and agricultural chemicals. They noted that
China's laws appeared to prohibit the release of information by governme nt officials but did not
include provisions regarding the prevention of unfair commercial use, as requir ed under Article 39.3
of the TRIPS Agreement. Some members requested that China specifically provide in its law and
regulations that it would protect against unfair commercial use ofundisclos ed test or other data
submitted in support of applications for marketing approval of pharmaceutical or of agricultural
chemical produ cts which utilize new chemical entities, by providing that no person other than the
perso n that submitted such data may, without the permission of the person initial ly submitt ing the
data, rely on such data in supp ort of an application for product approval fora period ofat least six
years from the date on which marketing approval to the person that submitted the data had been
granted.
231. The representative of China said that Article 10 of the Anti-unf air Competition Law provided
that a business operator must not infring e upon tr ade secrets.  Und er the s ame Article, obtaining, using
or disclosing an other 's trade secrets by a third party who clearly knew or ought to have known that the
case fell unde r the unlawful acts listed in the prece ding paragraph was deeme d infringeme nt upon
trade secrets. Trade secrets referred to any technology information or business operation information
which was unknown to the public, could bring about economic benefits to the obligee, had practical
utility and about which the obligee had adopted secret-ke eping meas ures. He also stated that
Article 219 of the Criminal Law had similar definitions on trad e secrets.WT/ACC/SPEC /CHN /1/Rev.6
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232. The representative of China furthe r confirmed that China would, in compliance with
Article 39.3 of the TRIPS Agreeme nt, provide effective protection against unfair commer cial use of
undisclosed test or other data submitted to authorities in China as required in support of applications
for marketing approval of pharmace utical or of agricultural chemical produ cts which utilized new
chemical entities, except wher e the disclosu re of such data was necessary to protect the public, or
where steps were taken to ensure that the data are protected against unfair comme rcial use. This
protection would include introduction and enactment of laws and regulations to make sure that no
perso n, other than the person who submitted such data, could, without the permission of the person
who submitted the data, rely on such data in suppo rt of an application for product approval for a
period of at least six years from the date on which China granted marketing approval to the person
submitt ing the data. During this period, any secon d applicant for market authoriz ation would only be
granted market autho rization if he submits his own data. This prote ction of data would be available
to all pharmaceutical and agricultural products which utilize new chemical entities, irresp ective of
whether they we re patent-protected or not.  The W orking Pa rty took note o f these co mmitments.
C. MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROPERTY RIGHTS
233. The representative of China said that there were provisions relating to compulsory licen ses in
the Patent Law to preve nt abuse of patent right. He also stated that the Tradema rk Law provided that
the trademar k registrant may, by concluding a tradema rk licensing contract, autho rize another person
to use its register ed trademark. The licenso r would supervise the quality of the good s on which the
licensee used the licenso r's registered tradema rk and the licensee would guarantee the quality of the
goods on which the re gistered tr adema rk was to b e used .
234. Some members of the Working Party expressed some concerns as to the comp atibili ty of
China's rules on control of anti-competitive licensing practices or conditions with the corresp onding
obligations under Article 40 of the TRIPS Agreement. The representative of China stated in respon se
that China's legislation would comply with these obligations, notably as to the reque st for
consultations with other Membe rs. He stated that these rules would apply across the boardto all
intellectual property rights. The Working Party took note of this commitment.
D. ENFORCEMENT
1. General
235. Some members of the Working Party expressed conc ern that there was a continued need for
additional enforc ement efforts by the Gove rnment of China. They also said that China should
strengthen the legislative framework for the enforcement ofintellectual property rights for all right-
holders. The representative of China stated that wher e an infringement of intellectual property rightsWT/ACC/SPEC /CHN /1/Rev.6
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was found in China, the person concerned could bring a lawsuit to a court. Since 1992, special IPR
courts have been set up in major cities such as Beijing and Shanghai on the basis of their specialized
collegial panels. Acco rding to China's legislation, individuals and enterprises would be held
respo nsible for all their IPR infringing activities and subject to civil and/or criminal liabilities. Wher e
any person [passed off] the IPR of anothe r person and the circumstanc es were serious, the person
directly responsible would be prosecuted for his criminal liabil ity by applying relevant provisions of
the Criminal Law. If found guilty, the person directly respo nsible could be senten ced to a fixed-term
imprisonment of no mor e than s even y ears or be subject to detention or a fine.
236. Some members of the Working Party further urged China to ensure the vigoro us application
by Chinese authorities of the enforcement legislation in order to conside rably reduce the existing high
levels of copyright pirac y and tradema rk counter feiting. Action should include the closur e of
manufactu ring facilities as well as mark ets and retail shops that had been the object ofadministrative
convictions fo r infringing activities. The representative of China stated that the measu res forcracking
down on intellectual property piracy were alway s severein China. In judicial aspects, courts at all
levels were continuously paying attention to the trial of IPR cases. As for administration aspects, the
administrative authorities at all levels were putting emphasis on strengthening anti-piracy work. In
addition, the administrative authorities were also enhancing the legal publication and education to the
gener al public in a bid to ensure the legal environment of China to meet the requir ements for
enforcing the TRIPS Ag reeme nt.  The W orking Pa rty took note o f these commitments .
2. Civil judicia l procedures a nd remedies
237. Some members of the Working Party expressed concern about certain practices relating to the
filing of civil judicia l actions that made it difficult for intellectual property right-holde rs to pursue
their rights in China's courts. China 's system of basing filing fees on the amount of damage s
reque sted make s large -scale infring ement actions unnecessarily costly. Membe rs also expressed
conce rn regarding the calculation of damag es based on the infring er's profits. This, combined with
China's rules on establishing the level of profits which require evidenc e of actual sale and which
disrega rd inventor y and past activity, often resulted in damage amounts inade quate to compe nsate for
the injury that the right-holder h as su ffered.
238. The representative of China stated that Article 118 of the General Principles of the Civil Law
provided that if the rights ofautho rship (copy rights), patent rights, rights on exclusive use of
trademark s, rights of disco very, rights of invention or rights for scientific and technological research
achievements of citizens or juridical persons were infringed upon bysuch means as plagiarism,
alteration or imitat ion, they had the right to demand that the infringement be stopped, its ill effects beWT/ACC/SPEC /CHN /1/Rev.6
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eliminated and the damages be comp ensated for. He furthe r stated that the Trademark Law, the
Patent Law and the Copy right Law had similar pro visions.
239. The representative of China furthe r confirmed that, Articles 42 and 43 of the TRIPS
Agreement would be effectively implemented under the judicial rules of civil procedure. The
Working P arty took note o f this commitment.
240. The representative of China confirme d that the relev ant implementing rules would be
amended to en sure full compliance with Articles 45 and 46 of the TRIPS Agreement, to the effect that
damages paid by the infringer to the right-holder would be adequate to compens ate for the injury
suffered because of an infringement of that person's intellectual property right by aninfringe r who
knowingly, or with reaso nable ground s to know, engaged in infringing activity. The Working Party
took note of this commitment.
3. Provisional measures
241. Member s ofthe Working Party noted that the TRIPS Agreement required that judicial
authorities have the authority to order prompt and effective provisional meas ures to (1) prevent an
infringement of intellectual prope rty from occu rring, in particular to prevent the distribution or sale of
infringing goods, and (2) to p reserve the evide nce o f alleged in fringement.
242. The representative of China stated that in China's Civil Procedu re Law there were provisions
on property preservation, but as yet no explicit stipula tions had been provide d to authorize the
people's court to take measu res for the prevention of infringements prior to formal institution of a
lawsuit by a party involved. In order to enhan ce the deterrent powe r of law against infringements and
to guarante e that the legitima te rights and interests of patentees would not suffer from irreparable
harm as well as to comply with the TRIPS Agreement, China, when amending the Patent Law forthe
second time in 2000, introduced Article 61 to regulate provisional measu res, which provided as
follows: "where a patentee or any interested party who can provide any reasonable evidenc e that his
right is being infringed or that such infring ement is imminent, and any delay to stop the acts is likely
to cause irreparable harm to his or its legiti mate rights and interests, he or it may, before instituting
legal proce edings, request the people's court to order the suspension of related acts and to provide
prope rty pre servation".
243. Some Membe rs of the working party expressed concern that Article 61 of the Patent Law did
not fully incorpor ate all requireme nts of Article 44 of the TRIPS Agreement, and that it was still
unclear whether holde rs of intellectual prope rty rights other than patents could rely on a similar
proce dure.WT/ACC/SPEC /CHN /1/Rev.6
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244. The representative of China stated that Article 61 of the Patent Law would beimplemented in
a way fully consistent with Artic le 50.1-4 of the TRIPS Agreeme nt. He also stated that "reasonable
evidence" in Article 61 of the Patent Law would be, through implementing rules, clarified to mean
"any reasonably available evidenc e in order to satisfy with sufficient degree of certainty that the
applicant is the right-holder and that the applicant's right is being infringed or that such infringement
is imminent, and to order the applicant to provide a security or equiv alent assurance sufficient to
protect the de fendant and to pr event ab use". The Working Pa rty took note of this commitment.
4. Administrative procedu resand remedie s
245. Member s ofthe Working Party noted that most IPR enforcement in China was done throu gh
administrative actions. In this conn ection, some membe rs expressed concern about the inadequate
levels of administrative sanctions in China which, when coupled with the high threshold for initiating
criminal prosec utions, made IPR enforcement in China difficult. Administrative sanctions generally
amounted to small fines and theloss of infringing invento ry. Member s also stressed the need for
administrative authorities to refer more cases, including those involving repeat offende rs and willful
piracy a nd cou nterfeiting, to the appropriate authorities for initiat ion of criminal actions.
246. The representative of China said that the Trademark Law provided that in the event of any
infringement of the right to the exclusive u se of a registere d trademark, the infringed could reque st the
administrative department forindustry and comme rce at or above the county level for disposition.
The relev ant administrative department for industry and commerc e had the power to order the
infringer to stop the infringing act immediately and to compensate the infringed for its or his losses .
SAIC and its local agen cies above the county level could also impos e a fine upon the infringe r. The
Patent Law provided that the patentee and interested party could request the administrative authority
for p atent af fairs to ha ndle the infringing act.  The administrative authority could order the infringer to
stop the infringing act immediately and mediate on dama ges at the request of the parties conce rned.
The Copyright Law provided that anyone who committed acts of infringem ent were subjected bythe
copyright administration depa rtment to such administrative penalties as confiscation of unlaw ful
income from the act or imposition of a fin e.
247. The representative of China stated that most IPR enforcem ent actions in China resulted in
administrative measure s to address the infringeme nt. He noted ongoing efforts to strengthen the
sanctions that were available to administrative authorities and the increased attention given to
enforcement of IPRs. The representative of China confirmed that the governme nt would continue to
enhanc e its enforceme nt efforts, including throu gh the application of more effective administrative
sanctions. Relev ant agencies, including the State Administration for Industry and Commerc e, the
State Bureau o f Quality and Tech nical Supe rvision and the Copyright Office, now hadthe authority toWT/ACC/SPEC /CHN /1/Rev.6
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confisc ate equipment used for making counter feit and pirated products and other evidence of
infringement. These relevant agencies would be encouraged to exercise their authority to seize and
preserve eviden ce of infringeme nt such as invento ry and documents. Administrative authorities
would have the autho rity to impose sufficient sanctions to prevent or deter further infringement and
would be encouraged to exercise that authority. Approp riate cases, including those involving repeat
offenders and willful piracy and counter feiting, would be referredto releva nt authorities for
prose cution unde r the c riminal law provisions.  The Wo rking Pa rty took note o f these commitments.
5. Special border mea sures
248. The representative of China said that on 5 July 1995 the State Coun cil of the People's
Republic of China had issued a special legislation in respect of border measures of intellectual
prope rty rights – the Regulations of the People's Republic of China Governing Customs Protection of
Intellectual Property Rights – which came into effect on 1 October of the same year. According to
this legislat ion, China's Customs offices must take meas ures to intercept importation or exportation of
goods that were proved to be infringing the rights of trademark s, patents or copyrights legally
protected in China. China 's Customs offices were granted autho rity to investigate any suspected
shipment and con fiscate the g oods in c ase in fringement was proved.
249. Some members of the Working Party expressed conc erns asto the compatibili ty of existing
borde r meas ures with obligations under Articles 51 to 60 of the TRIPS Agre ement; particularly the
provisions on suspension of release into free circulation by custom authorities (Article 51), rules on
evidence forinitiat ing this procedur e (Article 52), requirements on the security needed to protect the
defen dant (Article 53), rules on notice of the suspension (Article 54) and its duration (Article 55),
rules on indemnification o f the importer in c ase o f wron gful detention (Article 56) andoppo rtunity for
the right-holder to have the goods detained inspe cted (Article 57). Moreover some expressed their
conce rn as to compatibili ty of rules on actions ex-officio by competent authorities and the conditions
attached (Article 58 ), as w ell as to the remedies provided against infringing goods (Article 59) and the
quantities subject to the de minimis rules (Article 60).
250. In respon se, the representative of China stated that China would provide holde rs of
intellectual property rights with procedu res related to border measures that comply fully with the
relevant provisions of the TRIPS Agreement (Articles 51 to 60).The Working Party took note of this
commitment.
6. Criminal procedures
251. The representative of China stated that Articles 213 to 220 of the Criminal Law (Crimes of
Infringing on Intellectual Prop erty Rights) provided that whoev er seriou sly infringes the right-holde rs'WT/ACC/SPEC /CHN /1/Rev.6
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rights of registere d trademar ks,patents, copyrights or trade secrets would be sentenced to fixed-term
imprisonment and would also be fined.
252. Some members of the Working Party expressed concerns that criminal proce dures could not
be used effectively to address pirac y and counte rfeiting. In particular, the monetary thresholds for
bringing a criminal action, as currently applied, were very high and seldom met. Those thresholds
should be lower ed soas to permit effective action that would deter future piracy andcounterfeiting.
In respon se, the representative of China stated that China's administrative authority would recommend
that the judicial authority make necess ary adjustments to lower the thres holds so as to address these
conce rns.  T he W orking P arty took note o f this commitment.
253. Noting the advanced state of protection for intellectual property rights in China, the
representative of China confi rmed that upon accession China would fully apply the provisions ofthe
TRIPS Agreeme nt.  The Wo rking P arty took note o f this commitment.
VI. POLICIES AFFECTING TRA DE IN SERVICES
1. Licensing
254. Some members of the Working Party welcomed the broad-ranging and comp rehensive
commitments that China was unde rtaking to increa se transparency and to provide information to
governme nts and service provider s on any matter relating to the GATS including China's Schedule of
Specific Commitments. These member s nonethele ss expressed concerns regarding the lack of
transpa rency in China's current service s regime, in particular with respect to obtaining, extending,
renewing, denying and terminating licenses and other approvals require d to provide services in
China's market and appeals of such actions (hereafter referredto as "China's licensing procedu resand
conditions"). To be consistent with the provisions of theWTO Agreement, including the [Draft]
Protocol and China 's Schedule of Specific Commitments, Members of the Working Party noted that
China's licensing procedures and conditions should not in themselves act as a barrier to mark et access
and should not be more trade restrictive than necessary. Those membe rs also expressed the view that
upon its acce ssion, China should publish ( 1) alist of authorities res ponsible fo r authorizing, approving
or regulating those service sector s in which China made specific commitments and (2) China 's
licensing proc edures and con ditions.
255. The representative of China confirme d that paragraph [214] regarding publication of a list of
all organizations that were responsible for autho rizing, approving or regulating servic e activities for
each servic e sector, including those organizations delegated such authority from the centr al
governme nt authorities, would apply. The representative of China also confirmed that China wouldWT/ACC/SPEC /CHN /1/Rev.6
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publish in the official journal all of China' s licensing procedures and conditions upon accession. The
Working P arty took note o f these commitments.
256. The representative of China also confirmed that upon accession China would ensure that
China's licensing procedures andconditions will not act as barriers to market access and will not be
more trade restrictive than necessary. In accordance with China's commitments under the WTO
Agreement, the [Draft] Protocol and its Schedule of Specific Commitments, the repres entative of
China confirmed that for thos e service s included in China' s Sch edule of Specific Commitments, China
will ensure that:
(a) China's licensing procedures and conditions are published prior to becoming
effective;
(b) In this publication, China will specify reasonable time frames for review anddecision
by all relevant autho rities in China's licensing pro ceduresand conditions;
(c) Applicants wil l be able to requ est licensing without individual invitat ion;
(d) Any fees charged, which are not deemed to include fees determined through auction
or a tendering process, would be commens urate with the administrative cost of
proce ssing an application.
(e) The competent autho rities of China would, after receipt of an application, inform the
applicant whether the application is considere d complete under China 's dome stic laws
and regulations and in the case of incomplete applications, identify the additional
information that is required to complete the application and provide the opportunity
to cure d eficiencies;
(f) Decisions will be taken promptly on all applications;
(g) If an application is terminated or d enied, the ap plicant will be informed in writing and
without  delay the reason s for such a ction. The applicant would hav e the possibility of
resubmitting, at its discretion, a new application that addre sses the reasons for
termination or denial;
(h) If anapplication is approved, the applicant will be informed in writing and without
delay. The information provid ed will include the date of entry into force of theWT/ACC/SPEC /CHN /1/Rev.6
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license or approval [(i.e the right to start the commer cial operations forwhich the
license was issued)] which normally should be immediate and in accordance with
China's Sch edule o f Specific Commitments;
(i) Wher e China required an examination to license professio nals, such examinations
would be sch eduled at r easonable interv als.
The Wo rking Pa rty took note of the se commitments.
257. Some members of the Working Party also expressed concern about maintaining the
independen ce of regulators from those they regulate. The representative of China confirmed that for
the servic es included in China 's Schedule of Specific Commitments, relevant regulatory authorities
will be separate from, andnot accountable to, any service suppliers they regulate, except for courie r
and railway transpo rtation service s. For these excepted secto rs, China will comply with other relevant
provisions of the WTO Agreement and this [Draft] Protocol. The Working Party took note of these
commitments.
VII. OTHER ISSUES
1. Notifications
258. Member s ofthe Working Party requested that China provide to the WTO Secretariat the
notifications describe d in par agraphs … of this Dr aft Repo rt.
2. Special Trade Arrang ement s
259. Some members of the Working Party raised specific conce rns in relation to some of China 's
special trade arrangements, including barter trade arrangements, with third countries and separate
customs territories, which tho se membe rs conside red not to be in conformity with WTO requirements.
In respon se, the representative of China noted that China would undertak e a commitment in the Draft
Protocol to eliminate or bring into confo rmity with WTO requirements, all such special trade
arrangements that were not in conformity with those requireme nts, by no later than the date of entry
into force o f the Dr aft Protoc ol.
3. Transparen cy
260. Some members of the Working Party expressed conc ern about the lack of transparency
regarding the laws, regulations and other measures that applied to matters covered in the WTO
Agreement andthe Draft Protocol. In particular, some membe rs noted the difficulty in finding and
obtaining copies of regulations and other measu resunde rtaken by various ministries as well as thoseWT/ACC/SPEC /CHN /1/Rev.6
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taken by provincial and local authorities. Transparency of regulations and other measures,
particularly of sub-centr al authorities, was essential since these authorities often provide d the details
on how the more gene ral laws, regulations and other measures of the central gove rnment would be
implemented and often differed among variou s jurisdictions. Thos e member s empha sized the need to
receive such information in a timely fashion so that gover nments and traders could be prepared to
comply with such provisions and could exercise their rights in respect of implementation and
enforcement of such meas ures. The same membe rs emphasize d the importance of such pre-
publication to enhancing secure, predictable trading relations. Thos e member s noted the development
of the Internet andother means to ensure that information from all governme nt bodies at all levels
could be assembled in one place and made readily available. The creation and maintenanc e of a
single, authoritative journal and enquiry point would greatly facilitate dissemination of information
and help p romote compliance.
261. In respon se, the representative of China noted that the Government of China regularly issued
publications providing information on China 's foreign trade system, such as the: "Almanac of Foreign
Economic Relations and Trade" and"The Bulletin of MOFTEC" published by MOFTEC; "Statistical
Yearboo k of China", published by the State Statistical Bureau; "China's Customs Statistics
(Quarte rly)", edited and published by the Customs. China's laws and regulations of the State Council
relating to foreign trade were all published, as were rules issue d by departments. Such laws,
regulations and rules were available in the "Gazette of the State Council", the "Collection of the Laws
and Regulations ofthe People 's Republic of China" and the "MOFTEC Gazette". The administrative
regulations and directives relating to foreign trade were also published on MOFTEC' s official website
(http:/ /www.moftec.gov.cn) a nd in pe riodicals.
262. He furthe r noted that there were no FOREX restrictions affecting import or export.
Information on FOREX measur es was published by the SAFE and was available on SAFE's website
(http:/ /www.safe.gov.cn ) and via the news media.
263. The representative of China noted that information conc erning the administration of imports
and exports would be published in the "Inter national Business" news pape r and the "MOFTEC
Gazette".
264. He also noted that information on China 's customs laws andregulations, import and export
duty rates, and customs procedures was published in the "Gazette of the State Council" and in the
press media, andwas available upon reque st. The procedures concerning application of duty rates,
customs value and duty determination, drawba ck and duty recovery, as well as the proced ures
conce rning duty exemptions and reduction, were also published. Customs also published monthlyWT/ACC/SPEC /CHN /1/Rev.6
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customs statistics, calculated according to country of origin andfinal destination, on the basis of
eight-digit HS levels.
265. The representative of China noted that any bilateral trade agreements conclud ed between
China and its trading partners , and protocols on the exchang e of goods negotiated under them were
published in "The Treaty Series of the PRC". He also noted that the "Directory of China's Foreign
Economic Relations and Trade Enterprises" and "China' s Foreign Trade Corporations and
Organizations" were two publications which identified foreign trade corporations and other
enterpris es in China en gaged in for eign trade .
266. The representative of China stated that the full listing of official journals was as follows:
Gazette of the Standing Committee of the National People's Congress of the People's Republic of
China; Gazette of the State Council of the People's Republic of China; Collection of the Laws of the
People's Republic of China; Collection of the Laws and Regulations of the People's Republic of
China; Gazette of MOFTEC of thePeople 's Repu blic of China; Proclamation of the People' s Bank of
the People's Republic of China; and Proclamation of the Ministry of Financ e of the People' s Repu blic
of China.
267. The representative of China confirme d that publication of all laws, regulations and other
measur es pertaining to or affecting trade in goods, service s, TRIPS or the control of FOREX would
include the effective date of these measu res. It would also include theproducts and services affected
by a particular measu re, identified by appropriate tariff line and CPC classification. The Working
Party took note o f these commitments.
268. The representative of China confirme d that China would publish in the official journ al, by
approp riate classific ation and by servic e wher e relevant, a list of all organizations, including those
organizations delegated such authority from the national authorities, that were respon sible for
authorizing, approving or regulating servic es activit ies whether throu gh grant of licenc e orother
approv al. Procedures and the conditions for obtaining such licenc es or approval would also be
published.  The Working Party took n ote of thes e commitments.
269. The representative of China confirme d that none of the information requir ed by the
WTO Agreement or the Draft Protocol to be disclosed would be withheld as confidential information
except for those reasons identified in Section 2(C) of the Draft Protocol or unless it would
demonstrably prejudice the legitimate commercial interests of particular enterp rises, public or private.
The Wo rking Pa rty took note of this c ommitment.WT/ACC/SPEC /CHN /1/Rev.6
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270. The representative of China confirme d that China would make available to WTO Membe rs
translations into one or more of the official language s of theWTO all laws, regulations and other
measur es pertaining to or affecting trade in goods, service s, TRIPS or the control of FOREX, and to
the maximum extent possible would make these laws, regulations and other measu resbefore they
were implemented or enforced, but in no case later than 90 days after they were implemented or
enforced. The Working P arty took note o f thes e commitments.
271. Member s ofthe Working Party also reque sted that China set up an enquir y point where
information relating to all laws, regulations, judicial decisions and administrative rulings of general
application and other measures pertaining to or affecting trade in goods, services, TRIPS or the
control of FOREX could b e obtained.
272. The representative of China confirme d that China would establish or designate one or more
enquiry points where all information relating to the laws, regulations and other meas ures pertaining to
or affecting trade in good s, service s, TRIPS or the control of FOREX, as well as the published texts,
could be obtained and would notify the WTO of any enquiry point and its respon sibility. The
information would include the names of national or sub-na tional authorities (including contact points)
respo nsible for implementing a particular meas ure. The Working Party took note of these
commitments.
VIII. CONCLUSIONS
273. The Working Party took note of the explanations and statements of China concerning its
foreign trade regime, as reflected in this Draft Report. The Working Party took note of the
commitments given by China in relation to certain specific matters which are reprod uced in
parag raphs […] of this Draft Report and noted that these commitments are incorpo rated in
parag raph 1.2 o f the Dra ft Protocol.
274. Having car ried out the ex amination of the fo reign trad e regime of China and in the light of the
explanations, commitments and concession s made by China, the Working Party reached the
conclusion that China should be invited to acced e to the Marrakesh Agreement Establishing the WTO
under the provisions of Article XII. For this purpose, the Working Party prepared the Draft Decision
and Draft Protocol reproduce d in the Appendix to this Draft Report, and took note of China's
Schedule of Conc essions and Commitments on Goods [(document WT/ACC/SPEC/C HN…)] and
China's Schedule of Specific Commitments on Service s [(document WT/ACC/SPEC/CH N…)] that
were annexe d to the Draft Protocol. It was propo sed that these texts be adopted by theGene ral
Council when it adopted the Draft Report. When the Draft Decision was adopted, theDraft Protocol
would be open foracceptanc e by China which would become aWTO Member 30 days after itWT/ACC/SPEC /CHN /1/Rev.6
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accepted thesaid Draft Protocol. The Working Party agreed, therefore, that it had completed its work
conce rning the ne gotiations for the a ccession o f China to the WTO Agr eement.
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