. /.   WORLD TRADE  
ORGANIZATION  G/AG/W/67 
11 August 2006 
 (06-3869) 
Committee on Agriculture Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM 
 
Questions to China from the United States in the c ontext of the Transitional Review Mechanism under 
Paragraph 18 of the Protocol of Accessi on of the People's Republic of China  
 
  The following communication, dated 10 Augus t 2006, has been received from the Delegation 
of the United States, with the request that it be ci rculated to Members, for the purposes of the fifth 
Transitional Review to take place at the forthcoming meeting of the Committee. 
 
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VAT Policies   
 1. In connection with China's Trade Policy Revi ew, held on 19 and 21 April 2006, the United 
States submitted written questions addressing China' s value-added tax (VAT) policies for small-scale 
farmers.  Specifically, the United States asked China (a) to identify the applicable laws, regulations or 
other measures governing this programme, (b) to expl ain how China defines "small-scale" farmers, (c) 
to identify what percentage of domestic agricultura l production is represented by sales of small-scale 
farmers, and (d) to explain how China justifies this  apparent discriminatory VAT treatment in light of 
Article III of GATT 1994.  To date, China has not responded to those questions.  The United States 
anticipates that China will submit its Trade Policy Review responses prior to the forthcoming meeting 
of the Committee, when China's Transitional Review  Mechanism is on the agenda.  The United States 
will review China's Trade Policy Review responses  and may ask follow-up questions in connection 
with China's upcoming transitional review. 
2. China has previously explained that the VAT is charged on imports of agricultural goods, 
including grains. 
(a) Is the VAT applied to these imports regardless of whether they are imported by a 
state trading enterprise or a non-state trading enterprise?  Please explain. 
(b) Please indicate the amount of the VAT charged for each type of enterprise. 
Tariff-rate Quotas 
 
3. In 2006, central government a nnouncements of tariff-rate quota (TRQ) allocations for 
agricultural commodities appeared to occur on time.  However, the United States has received reports 
from traders that actual implementation at the provin cial level was sometimes delayed, and that in 
some provinces the responsible government officials did not issue TRQ certificates but instead only 
provided oral notification to recipients of their allo cations for the year.  Can China clarify its central 
and provincial level policies on providing notifica tion to TRQ recipients of their allocations?  G/AG/W/67 
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  4. Can China confirm that, for the agri cultural commodities subject to TRQs: 
(a) the application period for 2007 quota allocati ons will be between 15 and 30 October 
2006; 
(b) specific requirements have been published in  the International Business Daily and the 
China Economic Herald as well as the websit es of the Ministry of Commerce and the 
National Development and Reform Commission one month in advance of the 
application period;  and  
(c) all 2007 TRQ quantities will be allocated by 1 January 2007, in accordance with 
China's WTO commitments and Decree No. 4, the Interim Rules and Regulations for Agricultural Imports Tariff Rate Quota, issued 27 September 2003? 
5. The United States received reports from traders in 2006 that requested information "on the 
entities which received the allocation" under tariff-ra te quotas is not always received promptly and 
sometimes requires a follow-up request before it is provided.  Can China confirm that, in accordance 
with Part I, Section I-B, paragraph 6.F., of the Goods Schedule accompanying its Protocol of 
Accession, China's policy is to provide this type of in formation within 10 days of receipt of a request?   
Cotton  
6. The United States notes that in the past few y ears China has imported cotton far in excess of 
its scheduled TRQ quantity, currently 894,000 MMT, while still charging the in-quota tariff rate.  It 
appears that market demand for cotton now re gularly exceeds domestic production plus the TRQ 
quantity.  Has China considered either perman ently raising the TRQ quantity for cotton, or 
eliminating it altogether? 
 
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