WORLD TRADE  
ORGANIZATION  G/C/W/561 
8 November 2006 
 
 (06-5364) 
Council for Trade in Goods Original:   English 
  
 
 
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18  
OF THE PROTOCOL ON THE ACCESSION OF THE  
PEOPLE'S REPUBLIC OF CHINA ("CHINA")  
 
Questions and Comments of Japan on the Implementation by China
 
of its Commitments to the Council for Trade in Goods  
 
 
 The following communication, dated 7 November 2006, is being circulated at the request of 
the delegation of Japan. 
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 Japan welcomes China’s efforts to carry ou t the commitments under the Protocol of its 
Accession to the WTO. 
 Japan submits its questions and comments in ad vance so that the Chin ese authorities are able 
to reply and submit necessary information at  the next Council for Trade in Goods session. 
 
1. Customs duty regarding “Complete Automobile Feature”  
 "Customs General Administration Joint Bulletin No. 38" dated 5 July 2006, announced that it 
had decided to postpone implementing the customs ru le that would allow authorities to impose higher 
tariffs on imported auto parts if cars made in China contain a certain percentage or certain 
combination of these imported parts.   In this context, Japan would like China to clarify whether implementation of all 
provisions/requirements in “the Rules for the Admi nistration of the Importation of Automotive Parts 
and Components Constituting Complete Vehicles (Decr ee No. 125, issued 28 February 2005)” have 
been fully postponed until 2008.  In particular, Japan  is much interested in whether China will not 
impose the higher tariffs on imported auto parts until 2008.  
 Even if China has fully postponed the implemen tation of the said Rules, Japan is concerned 
that there still exist undue circumst ances that force auto manufacturer s to raise local content ratio 
before 2008.  Therefore, Japan strongly urges Chin a to fully repeal “Decree No.125” and all other 
related regulations.  2. Export restrictions on fluorite
 
 In the TRM of the Council of Trade in Goods  held in 2004, China explained its export 
restrictions on fluorite was justified pursuant to GATT Article XX(g).  In this regard, GATT 
Article XX (g) provides that concerned measures shall be made effective in conjunction with 
domestic production or consumpti on.  However, contrary to gradual decrease of E/L quota, the 
production volume of fluorite in China has been incr easing.  Japan considers that China is regulating 
the export of fluorite in order to satisfy growing domestic demand.  G/C/W/561 
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   Japan would like China to explain how e xport restriction is c onsistent with GATT 
Article XX(g) taking account of Japan's view above.  
 China published "China’s mineral resources polic y" in December 2003, in which China states 
as state policy, "With regard to mineral resources in which China has advantages, such as tungsten, 
tin, antimony, rare earths, fluorspar and barite, the government will improve the export structure, 
increase the added value of the export products.” 
 
 Please provide detailed information on the sp ecific measures that China has taken to 
(i) improve (and/or will improve) its export structure;  and (ii) increase (and/or will increase) the 
added value of the export products. 
 
 Please explain whether the reduction of E/L quota of fluorite is based on the above-cited 
mineral resources policy.  
 
 In the TRM of the Council of Trade in Goods  held in 2004, China explained that “China 
expects that quantity of domestic consumption and th e export quantity of fluorite to decrease because 
of function of the market economy.”  Please e xplain why China continues to impose quantitative 
restrictions only on the export of fluorite.  Japan considers that not only domestic consumption, but 
also export quantity should be adjust ed accordingly to market mechanisms. 
 3. Export restrictions on coke
 
 Japan remains interested in China’s implementation of licensing restriction on exports of 
cokes.  In particular, Japan is concerned about th e consistency of the measure with GATT Article XI, 
which stipulates the prohibition of quantitative restri ctions, and also about the applicability of GATT 
Article XX (g), general exception for the conserva tion of exhaustible natural resources, which 
requires concerned measures to be applied in conjun ction with restrictions on domestic production or 
consumption.   In this regard, China explained, at the pr evious TRM, that China implements various 
measures to restrict domestic produc tion of cokes.  However, it is still unclear whether those measures 
have effectively reduced the production of coal, whic h is an ingredient of cokes.  Please explain in 
quantitative terms how those measures actua lly reduced domestic production of coal. 
 
 Furthermore, if there are any plans to reform  the export licensing measure, we would like to 
know the details.  4. Distribution services
 
 With regards to "the Measures for the Admini stration of Foreign Investment in Commercial 
Fields", Japan believes licensing procedures in the Measures are unclear and requests China to make 
the procedures publicly available and to provide licenses to foreign capital enterprises that fulfils the 
procedures, as indicated in the paragraph 308(a) of the Working Party Report. 
 
 According to China’s accession schedule of specific commitments on services (WT/ACC/CHN/49/Add.2), part of the reservations ma de in mode 3 of retailing services is as follows; 
 
Foreign service suppliers will be permitted to enga ge in the retailing of all products, except 
for the retailing of books, newspapers and magaz ines within one year after accession, the 
retailing of pharmaceutical pr oducts, pesticides, mulching films and processed oil within 
three years after accession and retailing of chem ical fertilizers within five years after 
accession.  G/C/W/561 
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None, within three years a fter accession, except for: 
 retailing of chemical fertilizers, within fi ve years after accession; and-those chain stores 
which sell products of different types and bra nds from multiple suppliers with more than 
30 outlets.  For such chains stores with mo re than 30 outlets, foreign majority ownership 
will not be permitted if those chain stores dist ribute any of the following products: motor 
vehicles (for a period of five years after acc ession at which time the equity limitation will 
have been eliminated), and products listed above
 and in Annex 2a of the Protocol of 
China's WTO Accession.  
 
 Japan would like to know whether it has beco me possible for chain stores with foreign 
majority ownership having more than 30 outlets to retail books, newspapers and magazines one year 
after accession, to retail pharmaceutical products, pes ticides, mulching films, processed oil three years 
after accession, and to retail chemical fertilizers five years after accession. 
 
 Japan would like to know the progress in Chin a of drafting of the laws and regulations 
regarding the establishment of branches in the distri bution sector in relation to the third paragraph of 
the market access column in horizontal commitm ents, according to which “the establishment of 
branches by foreign enterprises is unbound, unless otherwise indicated in specific sub-sectors, as the laws and regulations on branches of fore ign enterprises are under formulation.”.  
 5. Government procurement
 
 At the Working Party for the WTO accession, China made clear its commitment to initiate 
negotiations for its membership in the Governme nt Procurement Agreement (GPA) by tabling an 
Appendix 1 offer as soon as possible (see Report of the Working Party, para. 341).  
 China answered at the TPRM he ld in this April that “Chin ese government plans to commence 
formal negotiations to join the GPA and submit its Appendix I GPA offer of coverage by no later than 
December 2007”.  As almost five years have alrea dy passed by since China’s accession to the WTO, 
Japan is interested to know China’s view on the schedule of the coming negotiations for its accession 
to the GPA including the preparation process for the negotiations.  
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