. /.   WORLD TRADE  
ORGANIZATION  G/MA/W/94 
1 October 2008 
 (08-4602) 
Committee on Market Access Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM  
 
Communication from the United States
 
  
 The following communication, dated 26 September 2008, is being circulated at the request of 
the Delegation of the United States.  
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Export Restrictions  
 
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 and export duties, 
particularly on raw materials.  In 2008, China c ontinued these policies, and in many cases made them 
even more restrictive.  The United States rema ins very concerned about all of these actions. 
 
2. In 2008, China also took new actions on certain  raw materials.  Fo r example, effective 
20 May 2008, China raised its export duties on natural phosphates, including natural calcium  phosphates, natural aluminum calcium phosphates and phosphatic chalk, and yellow phosphorus from 
10-20 percent to 110-120 percent in 2008, even tho ugh it is the world’s leading producer of these 
inputs.  In addition, China has imposed minimu m prices on export sales of natural phosphates and 
yellow phosphorus.  It appears that these actions not only discourage exports of natural phosphates 
and yellow phosphorus from China, but also cr eate disadvantages for foreign downstream producers 
of industrial chemicals by artificially increasing China’s export prices for these inputs, which also drives up the world prices.  At the same time, Chin a’s actions appear to artificially lower China’s 
domestic prices for natural phosphates and yellow phosphorus due to domestic oversupply, enabling 
China’s domestic downstream producers of industr ial chemicals to produce lower-priced products 
from these inputs and thereby creating significan t advantages for China’s domestic downstream 
producers of industrial chemicals when competing ag ainst their foreign counterparts both in the China 
market and in export markets.  Indeed, since China took these actions, the world price of yellow phosphorus, for example, reportedly has doubled and now totals $9,000 per metric ton (MT), while 
China’s domestic price ranges between $3,000 and $3,500 per MT. 
 (a) Please explain the purposes underlying China’s imposition of (i) export duties and 
(ii) minimum export prices on natural phosphat es and yellow phosphorus.  It is the United 
States’ understanding that natural phosphates are prim arily used to produce fertilizer in China, 
while yellow phosphorous is primarily used in China to produce sodium phosphates, 
phosphorus trichloride and ot her phosphorus chemicals. 
 
(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.  Natural phosphates do not appear on the Annex 6 list.  Where a good 
is listed in Annex 6, China committed not to  exceed the listed percentage cap.  Yellow 
phosphorus appears on the Annex 6 list, with a cap of 20 percent.  Please explain how China G/MA/W/94 
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  justifies (i) the imposition of any export duti es on natural phosphates and (ii) the imposition 
of export duties in excess of 20 percent on yell ow phosphorus in light of the commitments 
that China made in Section 11.3 of Part I of its Protocol of Accession.  
(c)  Please explain how China justifies its use of minimum export prices under Article XI of the 
General Agreement on Tariffs and Trade 1994.   
 (d) Does China have any plans to eliminate (i) its  export duties and (ii) its minimum export prices 
on natural phosphates and yellow phosphorus?  Please explain. 
 
3. In connection with last year’s transitional re view, the United States raised concerns about 
China’s export duties on refined metal lead.  The Un ited 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 pe rcent on exports of refined metal lead, and this 
duty remains in place in 2008.  These actions have caused a steep decline in China’s exports of 
refined metal lead 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.  Last year, the United States asked Chin a the questions set forth below, but China did not 
respond to them.  The United States asks that Ch ina 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  
 
4. 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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