. /.   WORLD TRADE  
ORGANIZATION  G/MA/W/98 
22 September 2009 
 (09-4443) 
Committee on Market Access Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM 
 
Communication from the United States
 
  
 The following communication, dated 21 September 2009, is being circulated at the request of 
the Delegation of the United States.  
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Export Restraints  
 
1. In past transitional reviews before this Committee and the Council for Trade in Goods, the 
United States has expressed strong concerns about  China’s use of export quotas, export duties and 
other export restraints, particularly on raw material s.  In 2009, China continued these policies, and in 
many cases made them even more restrictive.  The United States remains very concerned about all of 
these actions.  2. In June 2009, the United States and the Eu ropean Communities requested WTO dispute 
settlement consultations with China regarding Chin a’s export quotas, export duties and/or other export 
restraints on nine of these raw materials, incl uding bauxite, coke, fluorspar, magnesium, manganese, 
silicon carbide, silicon metal, yellow phosphorus an d zinc.  Mexico subsequently requested WTO 
dispute settlement consultations w ith China regarding these same ex port restraints in August 2009. 
 3. In August 2009, Chinese media reports explained that China’s Ministry of Industry and 
Information Technology (MIIT) had drafted a report en titled “Special Plan for the Development of the 
Rare Earths Industry 2009-2015” recommending stri cter export restraints on rare earths, which 
comprise a group of 17 elements, including ceriu m, dysprosium, erbium, europium, gadolinium, 
holmium, lanthanum, lutetium, neodymium, praseodymi um, samarium, terbium, thulium, ytterbium, 
yttrium, ferrocerium, monazite, bastnasite a nd mischmetal.  According to these reports, China 
currently accounts for more than 95 percent of the world’s annual mining output of rare earths, which 
are used in green technologies, like hybrid cars an d low-energy light-bulbs, as well as in hard-disk 
drives, magnets, lasers, Blackberries, iPods, mob ile phones, plasma TVs, catalytic converters, 
navigation systems and missiles, among other pr oducts and technologies.  MIIT is reportedly 
proposing a total ban on exports of dysprosium, lu tetium, terbium, thulium and yttrium, and a 
reduction in the export quota on other rare earth s such as cerium, europium, lanthanum and 
neodymium.  Currently, China also imposes expor t duties of 25 percent on all rare earths.  
 
(a) Please explain the purposes underlying the expor t quotas that China currently imposes on rare 
earths.    
(b) Please explain how China justifies its use of  export quotas on rare earths under Article XI of 
the General Agreement on Tariffs and Trade 1994.   
 G/MA/W/98 
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  (c) Please explain the purposes underlying the export duties that China currently imposes on rare 
earths.   
 (d) In Section 11.3 of Part I of its Protocol  of Accession, China committed not to impose export 
duties on any goods not appearing on the list of goods subject to export duty in Annex 6 of its 
Protocol of Accession.  Rare earths do not a ppear on the Annex 6 list.  Please explain how 
China justifies the imposition of export duties on ra re earths in light of the commitments that 
China made in Section 11.3 of Part I of its Protocol of Accession. 
 (e) Please explain the status of MIIT’s prop osed report entitled “Special Plan for the 
Development of the Rare Earths Industry 2009-2015.”  
 (f) Please explain how China could justify a total ban on exports of dysprosium, lutetium, 
terbium, thulium and yttrium under Article XI of the General Agreement on Tariffs and Trade 
1994. 
 
4. In connection with past transitional reviews be fore this Committee and the Council for Trade 
in Goods, the United States raised concerns about China’s export duties on refined metal lead.  The 
United States explained that, after China decided to eliminate the 13 percent value-added tax (VAT) rebate available upon export of refined metal lead in 2006, it decided, in 2007, to impose a duty of 
10 percent on exports of refined me tal lead, and this duty remains in place.  These actions have caused 
a steep decline in China’s exports of refined metal le ad and contributed to a sharp rise in world prices.  
Meanwhile, Chinese domestic prices reportedly have  declined because of China’s captive refined 
metal lead production, giving China’s downstream  producers a significant competitive advantage over 
foreign downstream producers.  In past years, th e United States asked China the questions set forth 
below, but China did not respond to them.  The Un ited States asks that China respond to them during 
this year’s transitional review before this Committee. 
 (a) Please explain the purposes underlying China’s imposition of export duties on refined metal 
lead. 
 (b) In Section 11.3 of Part I of its Protocol  of Accession, China committed not to impose export 
duties on any goods not appearing on the list of goods subject to export duty in Annex 6 of its 
Protocol of Accession.  Refined metal lead does not appear on the Annex 6 list.  Please 
explain how China justifies its imposition of export duties on this product in light of the 
commitment that China made in Section 11.3 of Part I of its Protocol of Accession. 
 VAT Applied to Diammonium Phosphate  
 
5. The United States continues to have concerns regarding the Circular on the VAT Exemption 
Policy for Certain Farming Materials (No. 113/2001), jointly issued by the Ministry of Finance and the State Administration of Taxation on 20 July 2001, which exempts all phosphate fertilizers except 
diammonium phosphate (DAP) from China's value-adde d tax.  DAP, which is produced in the United 
States, competes with similar phosphate fertiliz ers produced in China, such as monoammonium 
phosphate (MAP).  This measure discourages use of DAP, for which China committed to permit 
access under the TRQ commitments set forth in th e Goods Schedule accompanying its Protocol of 
Accession, in favor of products that are not impor ted.  Does China have any plans to revise this 
Circular, particularly to eliminate the discriminatory treatment of DAP?   
 
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