WORLD TRADE  
ORGANIZATION  WT/DS358/13 
13 July 2007 
 
 (07-2980) 
 Original:   English 
  
CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR 
EXEMPTIONS FROM TAXES AND OTHER PAYMENTS 
 
Request for the Establishment of  a Panel by the United States
 
  
 The following communication, dated 12 July 2007, from the delegation of the United States 
to the Chairman of the Dispute Settlement Body, is  circulated pursuant to Article 6.2 of the DSU. 
 
_______________ 
  On 2 February and 27 April 2007, the Unite d States requested consultations with the 
Government of the People's Republic of China ("China") pursuant to Articles 1 and 4 of the 
Understanding on Rules and Procedures Go verning the Settlement of Disputes  ("DSU"), Article 
XXII:1 of the General Agreement on Tariffs and Trade 1994  ("GATT 1994"), Articles 4 and 30 of the 
Agreement on Subsidies and Countervailing Measures  ("SCM Agreement"), and Article 8 of the 
Agreement on Trade-Related Investment Measures ("TRIMs Agreement"), with regard to certain 
measures granting refunds, reductions, or exempti ons from taxes otherwise due to the government.
1  
The United States held consultations with China on 20 March and 22 June 2007.  Unfortunately, those 
consultations did not resolve the dispute.   Certain of the measures that were the subject  of the above consultations provide refunds, 
reductions, or exemptions to enterprises in China from taxes otherwise due to the government on the 
condition that those enterprises purchase domestic over imported goods.  Accordingly, these measures 
appear to be inconsistent with Article 3.1(b) a nd 3.2 of the SCM Agreement.  Furthermore, because 
they condition advantages on an enterprise's purch ase of domestic over imported equipment, these 
measures appear to accord imported products treatme nt less favourable than that accorded "like" 
domestic products, inconsistent w ith Article III:4 of the GATT 1994 and Article 2.1 and Annex 1, 
paragraph 1(a), of the TRIMs Agreement.  For the same reasons, these measures appear not to comply 
with China's obligations under paragraphs 7.2-7.3 an d 10.3 of Part I of its Protocol of Accession and 
paragraph 1.2 of Part I of its Protocol of Accession (to the extent that it incorporates paragraph 203 of 
the Report of the Working Party on the Accession of China).  The measures that give rise to these 
apparent inconsistencies include the following,  as well as any amendments and any related or 
implementing measures: 
 1. Circular of the State Administration of Taxation Concerning Transmitting the Interim 
Measure for the Administration of Tax Refunds  to Enterprises with Foreign Investment for 
Their Domestic Equipment Purchases ,
2 read in conjunction with the Circular of the State 
Administration of Taxation and the National Development and Reform Commission of the 
People's Republic of China, on Printing and Issuing the Trial Measures for the Administration of Tax Rebate for the Purcha se of Domestically-Produced Equipment in 
Foreign Investment Projects .
3 
                                                      
1 WT/DS358/1 and WT/DS358/1/Add.1. 
2 GuoShiFa [1999] No. 171 (20 August 1999). 
3 GuoShuiFa [2006] No. 111 (24 July 2006). WT/DS358/13 
Page 2  
 
  2. Circular of the Ministry of Finance and the St ate Administration of Taxation Concerning the 
Issue of Tax Credit for Business Income Ta x for Homemade Equipment Purchased by 
Enterprises with Foreign Investment and Foreign Enterprises ,
4 read in conjunction with the 
Circular of the State Administration of Taxation on Printing and Distributing the Measures 
Concerning Business Income Tax Credit on th e Investment of Enterprises with Foreign 
Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment .5  
Subsidies under this program will continue to be granted under the Enterprise Income Tax 
Law of the People's Republic of China ,6 by virtue of Article 57 of that Law. 
 3. Circular on Distribution of Interim Measur es Concerning Reduction and Exemption of 
Enterprise Income Tax for Investment in Dom estically Made Equipment for Technological 
Renovation .
7  Subsidies under this program w ill continue to be granted under the Enterprise 
Income Tax Law of the People's Republic of China ,8 by virtue of Article 57 of that Law. 
   Certain of the measures that were the subject of those consultations grant refunds, 
reductions, or exemptions from taxes otherwi se due to the government on the condition that 
the beneficiary enterprises meet certain export performance criteria.  These measures thus 
appear to be inconsistent with Article 3.1(a) and 3.2 of the SCM Agreement and, 
consequently, paragraph 10.3 of Part I of Chin a's Protocol of Accession,  and paragraph 1.2 of 
Part I of its Protocol of Accession (to the ex tent that it incorporates paragraph 167 of the 
Report of the Working Party on the Accession of Ch ina).  The measures that give rise to these 
apparent inconsistencies include the following,  as well as any amendments and any related or 
implementing measures: 
 4. Article 75(8) of the Rules for Implementation of the Income Tax Law of the People's Republic 
of China on Enterprises with Forei gn Investment and Foreign Enterprises ,
9 read in 
conjunction with Article 9 of the Provisions of the State C ouncil on the Encouragement of 
Foreign Investment10 and Article 6 of the Income Tax Law of the Pe ople's Republic of China 
on Enterprises with Foreign Investment and Foreign Enterprises .11  Subsidies under this 
program will continue to be granted under the Enterprise Income Tax Law of the People's 
Republic of China ,12 by virtue of Article 57 of that Law. 
 
5. Article 75(7) of the Rules for Implementation of the Income Tax Law of the People's Republic 
of China on Enterprises with Fo reign Investment and Foreign Enterprises ,13 read in 
conjunction with Article 8 of the Provisions of the State C ouncil on the Encouragement of 
Foreign Investment14 and Article 6 of the Income Tax Law of the Pe ople's Republic of China 
on Enterprises with Foreign Investment and Foreign Enterprises .15  Subsidies under this 
program will continue to be granted under the Enterprise Income Tax Law of the People's 
Republic of China ,16 by virtue of Article 57 of that Law.  
 
                                                      
4 CaiShuiZi [2000] No. 49 (14 January 2000). 
5 GuoShuiFa [2000] No. 90 (18 May 2000). 
6 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
7 CaiShui [1999] No. 290 (8 December 1999). 
8 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
9 Decree [1991] No. 85 of the State Council (30 June 1991). 
10 GuoFa [1986] No. 95 (11 October 1986). 
11 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991). 
12 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
13 Decree [1991] No. 85 of the State Council (30 June 1991). 
14 GuoFa [1986] No. 95 (11 October 1986). 
15 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991). 
16 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007).  WT/DS358/13 
 Page 3 
 
 
  6. Article 73(6) of the Rules for Implementation of the Income Tax Law of the People's Republic 
of China on Enterprises with Fo reign Investment and Foreign Enterprises ,17 read in 
conjunction with Article 7 of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Invest ment and Foreign Enterprises18 and Section XIII of the 
Catalogue for the Guidance of  Foreign Investment Industries .19  Subsidies under this program 
will continue to be granted under the Enterprise Income Tax Law of the People's Republic of 
China ,20 by virtue of Article 57 of that Law. 
 7. Article 81 of the Rules for Implementation of the Income  Tax Law of the People's Republic of 
China on Enterprises with Forei gn Investment and Foreign Enterprises ,
21 read in conjunction 
with Article 10 of the Income Tax Law of the People's Republic of China on Enterprises with 
Foreign Investment and Foreign Enterprises22 and Article 10 of the Provisions of the State 
Council on the Encouragement of Foreign Investment .23  Subsidies under this program will 
continue to be granted under the Enterprise Income Tax Law of the People's Republic of 
China ,24 by virtue of Article 57 of that Law.   
 
8. Article 3 of the Provisions of the State Council  on the Encouragement of Foreign 
Investment .25 
 9. Circular of the State Council Concerning the Ad justment in the Taxation Policy of Imported 
Equipment ,
26 read in conjunction with Section XIII of the Catalogue for the Guidance of 
Foreign Investment Industries .27   
 10. Article 25 of the Enterprise Income Tax Law of the People's Republic of China ,
28 read in 
conjunction with Section XIII of the Catalogue for the Guidance of Foreign Investment 
Industries .29   
 
11. Article 28 of the Enterprise Income Tax Law of the People's Republic of China ,30 read in 
conjunction with Section XIII of the Catalogue for the Guidance of Foreign Investment 
Industries .31 
12. Article 31 of the Enterprise Income Tax Law of the People's Republic of China ,32 read in 
conjunction with Section XIII of the Catalogue for the Guidance of  Foreign Investment Industries .33 
                                                      
17 Decree [1991] No. 85 of the State Council (30 June 1991). 
18 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991). 
19 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004). 
20 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
21 Decree [1991] No. 85 of the State Council (30 June 1991). 
22 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991). 
23 GuoFa [1986] No. 95 (11 October 1986). 
24 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
25 GuoFa [1986] No. 95 (11 October 1986). 
26  GuoFa [1997] No. 37 (29 December 1997). 
27 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004). 
28 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
29 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004). 
30 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). 
31 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004). 
32 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007). WT/DS358/13 
Page 4  
 
   China's measures also appear to nullify or impa ir the benefits accruing to the United States 
directly or indirectly under the cited agreements.   Accordingly, the United States respectfully re quests, pursuant to Article 6 of the DSU and 
Article 4 of the SCM Agreement, that the Dispute Settlement Body establish a panel to examine this 
matter, with the standard terms of reference as set out in Article 7.1 of the DSU. 
 
__________ 
 
 
                                                                                                                                                                    
 
33 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004).