WORLD TRADE  
ORGANIZATION  G/C/W/530 
12 October 2005 
 (05-4653) 
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 From the UNITED STATES to CHINA
 
 
 
 The following communication, dated 11 Octobe r 2005, has been received from the delegation 
of the United States. 
______________ 
 
 The United States wishes to pose the following  questions to China in  connection with the 
10 November 2005 meeting of the Council for Trade in Goods for the purposes of the transitional review mandated by China’s Protocol of Accession.  Several of these questions relate to matters that 
were raised by the United States and other Member s during the transitional reviews held before the 
committees that report to the Council for Trade in Goods, but China deferred responding to them until 
the transitional review before the Council for Tr ade in Goods.  The United States notes that it may 
submit additional questions, depending on the outcomes of other upcoming transitional reviews before 
committees that report to the Council for Trade in Goods.  A. E
XPORT RESTRICTIONS  
1. The United States and other Members raised c ontinuing concerns regarding China’s export 
quota on coke, a key steel input, as well as other goods  during the transitional review held by the 
Committee on Market Access on 3 October 2005.  Ch ina responded by stating that it would address 
these matters during the transitional review before the Council for Trade in Goods. 
2. As the United States explained in its submission before the Committee on Market Access, 
China is the world’s largest producer of coke , with total production exceeding 208 million MT in 
2004, a 14 per cent increase over 2003.  For 2005, China announced an export quota of 14.3 million 
MT, similar to the level to which China eventually  raised the quota in 2004.  China’s export quota on 
coke, combined with the illegal sale of export q uota certificates, causes the export price for Chinese 
coke to remain artificially high.  Although the Mi nistry of Commerce (MOFCOM) has taken steps to 
stamp out the practice of selling export quota certificates, a significant portion of the export price remains attributable to these fees.  Despite the fact that WTO rules establish a general prohibition 
against export restrictions, with only limited exceptio ns, China has not yet issued a measure formally 
eliminating its coke export quota system, although an  official from the National Development and 
Reform Commission (NDRC) has stated publicly that it will be eliminated effective 1 January 2006.  
Can China confirm that it will eliminate its export quota system for coke effective 1 January 2006? 
3. China also maintains export quotas and license fe es on other raw materials, such as fluorspar.  
What are China’s plans for bringing these me asures into compliance with WTO rules? G/C/W/530 
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 B. B
OOKS , NEWSPAPERS AND MAGAZINES  
4. Within the context of China’s WTO commitmen ts, the concept of “trading rights” includes 
the right to import goods into China and the right to export goods from China, as explained in China’s Protocol of Accession.  The right to sell goods in  China is principally governed by commitments 
relating to “distribution services” set forth in Ch ina’s Services Schedule.  In the business world, 
trading rights and distribution services are fundament ally inter-related, and often an enterprise will 
need both of them to carry out its business plan. 
5. The United States submitted questions to Ch ina regarding trading rights for books, 
newspapers and magazines in connection with the transitional review before the Market Access 
Committee.  The United States also submitted questi ons to China regarding distribution services for 
books, newspapers and magazines in connection with  the transitional review before the Council for 
Trade in Services.  At the Council for Trade in Services’ transitional review, held on 23 September 
2005, China stated that it preferred to respond to the distribution services questions during the Market Access Committee’s transitional review, scheduled for 3 October 2005, so that it could respond to 
them at the same time that it responded to the Unite d States’ trading rights questions.  However, at the 
Market Access Committee’s tr ansitional review, China stated that  it viewed the transitional review 
before the Council for Trade in Goods as the appr opriate venue for responding to these questions. 
6. As the United States explained in its submissions to the Market Access Committee and the 
Council for Trade in Services, in its Protocol of Accession, China committed to eliminate its system 
of examination and approval of trading rights and ma ke full trading rights automatically available for 
all Chinese enterprises, Chinese-foreign joint ventur es, wholly foreign-owned enterprises and foreign 
individuals, including sole proprieto rships, within three years of its accession, or by 11 December 
2004, the same deadline for China to eliminate most restrictions in th e area of distribution services.  
The only exceptions applied to products listed in Annexes 2A and 2B, such as grains, cotton and 
tobacco, for which China reserved the right to engage  in state trading.  In April 2004, the National 
People’s Congress issued the revised Foreign Trade Law   Except with regard to products reserved for 
state trading, the new law provided for trading rights to be automatically available through a 
registration process for all domestic and foreign entiti es and individuals, effective 1 July 2004.  These 
rights were also reflected in the Measures on the Management of Foreign Investment in the 
Commercial Sector , issued by MOFCOM in April 2004.  Under this measure, licensed foreign service 
suppliers of wholesaling services, commission agents ’ services and retail services could also engage 
in importing and exporting. 
7. The United States is concerned because, despite these measures, other measures issued by the 
Chinese government appear to provide different tr eatment for wholly foreign-owned enterprises 
seeking to engage in the importing and exportin g of books, newspapers and magazines.  The 
Catalogue for the Guidance of Foreign Investment Industries , issued by NDRC and MOFCOM in 
November 2004 and effective January 2005, several m onths after the effective date of the revised 
Foreign Trade Law , lists the “importing of books, newspapers and periodicals” under  the category of 
“prohibited” foreign investment.  Similarly, the  Administrative Regulations on Publishing , issued by 
the State Council in December 2001, wholly reserv es the importation of books, newspapers and 
periodicals for state trading enterprises.   
(a) Please clarify how the Administrative Regulations on Publishing  and the Catalogue 
for the Guidance of Foreign Investment Industries are consistent with China’s 
commitments to make trading rights au tomatically available for all Chinese 
enterprises, Chinese-foreign joint ventures,  wholly foreign-owned enterprises and 
foreign individuals, including sole proprietorships, by 11 December 2004.  G/C/W/530 
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 (b) If the above-described measures do not fu lly implement China’s trading rights 
commitments, please describe China’s pl ans for bringing those measures into 
conformance with these commitments.   
8. Meanwhile, in the Services Schedule accompan ying its Protocol of Accession, China 
committed that, within three years after accession (or by 11 December 2004), it would permit foreign 
service suppliers to supply wholesaling services, commission agents’ services and retail services 
through wholly foreign-owned enterprises wit hout any market access or national treatment 
limitations, with the exceptions of chemical fertiliz ers, processed oil and crude oil, salt and tobacco 
(and except with regard to certain chain stores).  In March 2003, the State Press and Publication 
Administration and the Ministry of Foreign Trade and Economic Cooperation issued the Measures 
Governing Foreign-Funded Books, Newspap ers and Magazines Distribution Enterprises   T h i s  
measure appeared to permit foreign-funded enterpri ses to engage in retaili ng of books, newspapers 
and magazines as of 1 May 2003 and wholesali ng of books, newspapers and magazines as of 
1 December 2004.  In April 2004, MOFCOM issued the Measures on the Management of Foreign 
Investment in the Commercial Sector .  This measure lifted market access and national treatment 
restrictions on wholly foreign-owned enterprises engaging in wholesaling services, commission 
agents’ services and retail services and removed then-existing product exceptions for books, 
newspapers, magazines, pharmaceutic al products, pesticides and mulchi ng films (but not for chemical 
fertilizers, processed oil, crude oil, salt and tobacco) as of the scheduled phase-in date of 11 December, 2004.  
9. The United States is concerned because, despite  these two measures, other Chinese measures 
appear to provide different treatment for wholly foreign-owned enterprises seeking to engage in the 
provision of wholesaling services, commission ag ents’ services and retail services for books, 
newspapers and magazines.  The Catalogue for the Guidance of Foreign Investment Industries lists 
“wholesale or retail business of books, newspaper a nd periodicals” under the “restricted” category, 
which suggests that an investment requires specia l government approvals, although a footnote adds 
that “wholly foreign-owned enterprises will be pe rmitted no later than 11 December 2004, and can 
engage in the distribution of boo ks, newspapers, [and] magazines.”  In addition, in September 2004, 
two months after the effective date of the Measures on the Management of Foreign Investment in the 
Commercial Sector , the General Administration of Press and Publication adopted the Administrative 
Measures on Subscription of Imported Publications , which appear to restrict the distribution of 
imported publications by subscription to the state trading enterprises described in the Administrative 
Regulations on Publishing .  
(a) Please clarify how the Administrative Regulations on Publishing, the Administrative 
Measures on Subscription of Imported Pub lications and the Catalogue for the 
Guidance of Foreign Investment Industries are consistent with China’s commitments 
to lift market access and national treatmen t restrictions on wholly foreign-owned 
enterprises seeking to engage in whole saling services, commission agents’ services 
and retail services for books, newspapers and magazines by 11 December 2004.   
(b) If the above-described measures do not fu lly implement these commitments, please 
describe China’s plans for bringing tho se measures into conformance with these 
commitments. 
 
 G/C/W/530 
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 C. B
ORDER TRADE  
10. Previously, the United States has expressed concern about imports from border areas that 
continue to benefit from preferential treatment in  the form of reduced import duties and/or value-
added tax (VAT) pursuant to measures such as Bulle tin No. 27 and Bulletin No. 39, issued by the 
General Administration of Customs on 1 May 2003 and 11 June 2003, respectively.  In explaining its 
concerns, the United States has referenced China’ s WTO commitments, as set forth in Part XIV of 
Annex 5A to China’s Protocol of Accession (where China stated that it would eliminate preferential 
import duties for border trade) a nd paragraph 2(A) of China’s Pr otocol of Accession (where China 
extended its obligations under the WTO Agreement and the commitments that it made in its Protocol 
of Accession to border trade regions as part of its commitment to apply uniformly its trade regime).  
Has China eliminated preferential border area treatmen t for any products during the past year?   Does 
China have any plans to review its prefer ential treatment of imports from border areas?  
11. The United States understands that, outside of border areas, China applies a VAT of 13 per 
cent on logs and a VAT of 17 per cent on sawn wood.  Does China still charge Chinese companies 
located along the Sino-Russian border a VAT of 6.5 per cent on logs and a VAT of 8.5 per cent on 
sawn wood? 
D. GOVERNMENT PROCUREMENT  
12. In paragraph 341 of the Working Party Report accompanying its Protocol of Accession, 
China committed to initiate negotiations for China’s accession to the WTO’s Government 
Procurement Agreement (GPA) “as soon as possible.”  Please describe all of the steps that China has 
taken to prepare for the initiation of GPA negotiations. 
E. TRANSPARENCY  
13. In Section 2(C) of its Protocol of Accession,  China committed to provide a reasonable period 
for public comment on all new or modified trade-re lated laws, regulations an d other measures before 
implementing them, except in certain specified in stances.  Please describe an y progress that China has 
made during the past year in implementing this commitment. 
14. In Section 2(C) of its Protocol of Accession, China also committed to establish or designate 
an official journal dedicated to the publication of all trade-related measures.  However, the Chinese 
Government continues to utilize numerous journals and other publications to invite comments on the 
drafts of prospective trade-related laws, regula tions and other measures and to announce the issuance 
of final ones.  Please describe any progress that Ch ina has made during the past year to consolidate 
these publications into a single official j ournal in keeping with its commitment. 
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