S/C/W/ 376 
 
23 February 2018  
(18-1181) Page: 1/2 
Council for Trade in Services  Original: English  
 
COMMUNICATION FROM T HE UNITED STATES  
MEASURES ADOPTED AND  UNDER DEVELOPMENT BY  CHINA  
RELATING TO ITS CYBE RSECURITY LAW  
The following communication, dated 23 February 2018 , from the delegation of the United States is 
being circulated to the Members of the  Council for Trade in Services.  
 
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1.  On 26 September  2017, the United States submitted a communication (S/C/W/374) to the 
Council for Trade in Services (CTS) expressing concerns with certain measures China has adopted, 
and with related implem enting measures under development, that could significantly impair cross -
border transfers of information. The United States brought this matter before the Council because 
the potential effects extend across all service sectors and have bearing on the right s of other 
Members.  During the CTS meeting  held on 6 October , a number of other WTO M embers also 
expressed a high degree of concern regarding China 's existing and proposed regime regarding 
cross-border transfers of data, including application of proposed r estrictions on so called 
"important data " and on "personal information. "  
2.  As reported in September, t he United States has communicated its concerns directly to high -
level officials and relevant authorities in China and requested that China refrain from iss uing or 
implementing final measures until such concerns are addressed.  At the 6 October CTS meeting, a 
number of other WTO Members also asked China not to move forward with any measures until and 
unless key concerns had been addressed.  At that CTS meeting,  China noted that it was still open 
to receiving input from Members but otherwise did not provide meaningful feedback on the issues 
raised.  Since then, China has not provided any assurance that it will resolve these concerns.  
3.  Within the US (and foreign) bu siness community, the level of concern about the direction of 
China 's policies remains high.  US industry is particularly concerned that the measures 
contemplated by China would disrupt communications between a company 's China facilities and its 
other globa l operations, increase costs, and reduce rather than enhance data security.  Industry 
has emphasized, and we concur, that there are other, more effective ways of achieving legitimate 
policy objectives without disrupting commercial operations and that global  best practices provide a 
clear way forward.  
4.  In a separate but related troubling development, China has recently issued a Circular entitled 
"Cleaning up and Regulating the Internet Access Service Market "1 (set to enter into force 
on 31 March 2018) that wo uld seem to impose new restrictions on the use of virtual private 
networks (VPNs) and leased lines .2 This Circular raises numerous concerns and would add to the 
burdens and restrictions that China 's implementation of its Cybersecurity Law would place on 
cross-border transfers of information.  
                                                
1 G.X.B.X.G.H. No.[2017] 32, issued 17 January 2017, by the Ministry of Industry and Information 
Technology . 
2 Leased lines and VPN services are specialized services companies use for critical communications for 
either intra -corporate communications or communications with customers or suppliers.  Leased lines rely on a 
dedicated circuit for exclusive use of a custo mer; VPN services use encryption to create a "virtual " dedicat ed 
channel for the same purpose.  S/C/W/ 376 
 
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  5.  In particular, the Circular would restrict cross -border information transfers through leased lines 
and VPNs to information used "exclusively for internal office purposes. " The Circular would 
expressly prohibit the use of leased lines and VPNs "for connecting domestic and foreign data 
centers " or to enable "business platforms to provide telecommunications services. " The potential 
impact of the Circular both on foreign service suppliers and their customers in China appear s to be 
quite severe.  Leased lines and VPNs are commonly used to ensure the security and confidentiality 
of information transferred into and out of a country in the course of supplying services.  For 
example, to the extent that it relied on such services, how might a travel agent based in China 
access international flight information without connecting to a foreign data center?  How could data 
processing or accounting services be supplied on a cross -border basis to Chinese clients/customers 
without some connection to a foreign data center?  As another key example, many software 
platforms enable text messaging for technical support and customer service purposes – how would  
an online "chat" between a fo reign accounting firm and its client in China, provided over a VPN or 
leased line be treated for the purpose of the Circular?  
6.  The Circular, as with China 's proposed regime relating to cross -border transfer of information, 
would appear to create significan t new constraints on market access opportunities for cross -border 
service suppliers. The range of "data centers " and "business platforms " that could be subject to 
this prohibition is large, potentially encompassing any service that is beyond what might be used 
to facilitate a company 's internal communications.  This is particularly concerning, since many such 
affected services are covered by China 's GATS commitments.  One obvious example would be 
cross-border data processing services, for which VPNs or leased  lines are a key mechanism to 
ensure the security and confidentiality of such information.  Is it China 's intention to restrict use of 
leased lines and VPN for accessing such services?  If so, how does China reconcile this with its 
obligations under its spec ific commitment with respect to cross -border data processing services?  
7.  In addition, since the Circular would have a direct and significant effect on the ability of cross -
border service suppliers (including sectors such as cross -border data processing servi ces), to 
access and use of public telecommunication services (i.e. VPNs and leased lines), it would appear 
to fall within the scope of Article 5(c) of the Annex on Telecommunications of the General 
Agreement on Trade in Services ( "the Annex "). This provisi on was designed specifically to ensure 
access to leased lines and other services (e.g. VPN services) that suppliers use to facilitate the 
cross-border supply of any scheduled service.  Additionally, this provision, for measures 
significantly affecting acces s to and use of telecommunications networks and services, requ ires 
notification of other WTO M embers and provides for consultation with affected Members.  If China 
does indeed plan to move forward with implementation of the Circular, does China intend to 
provide such a notification  and the opportunity for consultation?   
8.  Since this measure is due to enter into force by 31 March 2018, we request that China 
expeditiously respond to these questions and concerns.  
9.  The United States urges China to address these con cerns quickly and pursue new policies that 
promote rather than disrupt cross -border transfers of information and trade in services.  The United 
States will continue to monitor developments in China and provide further updates to the Council.  
We also welcome  the views of other potentially affected WTO Members.  
 
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