WORLD TRADE  
ORGANIZATION  WT/DS358/1/Add.1 
G/L/813/Add.1 
G/SCM/D74/1/Add.1 G/TRIMS/D/25/Add.1 
2 May 2007 
 
 
(07-1828) 
 Original:   English 
 
  
CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR 
EXEMPTIONS FROM TAXES AND OTHER PAYMENTS 
 
Request for Further Consultations by the United States
 
 
Addendum  
  
 The following communication, dated 27 April 2007, from the delegation of the United States 
to the delegation of China and to the Chairman of  the Dispute Settlement Body, is circulated in 
accordance with Article 4.4 of the DSU.  
_______________ 
  
 As you know, on 20 March 2007, pursuant to the request of the United States (DS358/1), the People's Republic of China and the United States held consultations con cerning certain measures 
granting refunds, reductions, or exemptions from ta xes or other payments otherwise due to the 
government by enterprises in China.  Through those c onsultations held pursuant to Articles 1 and 4 of 
the Understanding on Rules and Procedures Governing 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"), and confirmed by 
subsequent review, we understand that China has repealed a subsidy program based on the 
disbursement of loans at discounted lending rates, identified in our initial c onsultation request as the 
Circular of the People’s Bank of China, the State Administration of Foreign Exchange, the Ministry of 
Foreign Trade and Economic Cooperation and the St ate Administration of Taxation Concerning 
Printing and Distribution Detailed Rules on Rewa rding and Punishment Concerning Provisional 
Regulations over Examination of Ex port Collections of Foreign Exchange .  In addition, with regard to 
the Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and 
Foreign Enterprises , also identified in our initial consulta tion request, we have learned that China 
recently adopted a new income tax law, the Enterprise Income Tax Law of the People’s Republic of 
China .   
 
To take these developments into account, my au thorities have instructed me to modify our 
identification of the measures at issue and request supplemental consultations with the Government of 
the People’s Republic of China pursuant to Articles 1 and 4 of the  DSU, Article XXII:1 of the GATT 
1994, Articles 4 and 30 of the SCM Agreement, and Ar ticle 8 of the TRIMs Agreement, with regard 
to certain measures granting refunds, reductions, or exemptions from taxes or other payments 
otherwise due to the government by enterprises in China.  As required by Article 4.2 of the SCM 
Agreement, a Statement of Available Evidence is  attached to this request for supplemental 
consultations. WT/DS358/1/Add.1, G/L/813/Add.1,  
G/SCM/D74/1/Add.1, G/TRIMS/D/25/Add.1 Page 2 
 
 
  These measures include the following, as well as any amendments and any related or 
implementing measures:  
• 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 ;
1 
• Circular of the Ministry of Finance and the State Administration of Taxation Concerning 
the Issue of Tax Credit for Bu siness Income Tax for Homem ade Equipment Purchased by 
Enterprises with Foreign Investment and Foreign Enterprises ,2 read in conjunction with 
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 ;3  
• Circular on Distribution of Interim Measures Concerning Reduction and Exemption of 
Enterprise Income Tax for Invest ment in Domestically Made Equipment for Technological 
Renovation ;4 
• Articles 75(7) and 75(8) of the Rules for Implementation of the Income Tax Law of the 
People’s Republic of China on Enterprises with Foreign Investment and Foreign 
Enterprises ,5 read in conjunction with Articles 8 and 9 of the Provisions of the State 
Council on the Encouragement of Foreign Investment6 and Articles 6 and 8 of the Income 
Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and 
Foreign Enterprises ;7  
• Article 73(6) of the Rules for Implementation of the Income Tax Law of the People’s 
Republic of China on Enterprises with Foreign Investment and Foreign Enterprises ,8 read 
in conjunction with Articles 6 and 7 of the Income Tax Law of the People’s Republic of 
China on Enterprises with Foreign Investment and Foreign Enterprises9 and Section XIII 
of the Catalogue for the Guidance of Foreign Investment Industries;10 
• Article 81 of the Rules for Implementation of the Inco me Tax Law of the People’s Republic 
of China on Enterprises with Foreign  Investment and Foreign Enterprises ,11 read in 
conjunction with Articles 6 and 10 of the Income Tax Law of the People’s Republic of 
China on Enterprises with Foreign Investment and Foreign Enterprises12 and Article 10 of 
the Provisions of the State Council on the Encouragement of Foreign Investment ;13 
                                                      
 1 GuoShiFa [1999] No. 171 (20 August 1999), available at www.fdi.gov.cn.  
 2 CaiShuiZi [2000] No. 49 (14 January 2000), available at www.fdi.gov.cn.  
 3 GuoShuiFa [2000] No. 90 (18 May 2000), available at www.fdi.gov.cn.  
 4 CaiShui [1999] No. 290 (8 December 1999).  
 5 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn.  
 6 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.  
 7Order [1991] No. 45 of the President of the People’s Republic of China (9 April 1991), available at 
www.fdi.gov.cn.  
 8 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn.  
 9 Order [1991] No. 45 of the President of the People’s Republic of China (9 April 1991), available at 
www.fdi.gov.cn.  
 10Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People’s Republic of China (30 November 2004), available at www.fdi.gov.cn.  
 11 Decree [1991] of the State Council (30 June 1991), available at www.fdi.gov.cn.  
 12Order [1991] No. 45 of the President of the People’ s Republic of China (9 April 1991), available at 
www.fdi.gov.cn.  
 13 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.   WT/DS358/1/Add.1, G/L/813/Add.1,  
 G/SCM/D74/1/Add.1, G/TRIMS/D/25/Add.1  Page 3 
 
 
  • Parts IV and VIII of the Enterprise Income Tax Law of the People’s Republic of China ;
14 
• Article 3 of the Provisions of the State Council on the Encouragement of Foreign 
Investment ;15 
• Circular of the State Council Concerning th e Adjustment in the Taxation Policy of 
Imported Equipment ,16 read in conjunction with Section XIII of the Catalogue for the 
Guidance of Foreign Investment Industries .17 
 
These measures appear to provide such refunds, reductions or exemptions to enterprises in 
China on the condition that those enterprises purchase domestic over imported goods, or on the 
condition that those enterprises meet certain export pe rformance criteria.  Accordingly, the measures 
appear to be inconsistent with Article 3 of the SCM Agreement .  Furthermore, to the extent the 
measures accord imported products treatment less favorable than that accorded "like" domestic 
products, they appear inconsistent with Article  III:4 of the GATT 1994 and Article 2 of the TRIMs 
Agreement.  The measures also appear not to co mply with China’s obligations under paragraphs 
7.2-7.3 and 10.3 of Part I of its Accession Protocol,18 as well as paragraph 1.2 of Part I of its 
Accession Protocol (to the extent that it incorporat es paragraphs 167 and 203 of the Report of the 
Working Party on the Accession of China,19) which forms part of the terms of accession agreed 
between China and the WTO and is an integral part of the Marrakesh Agreement Establishing the 
World Trade Organization .  
  We  look forward to receiving your reply to th e present request and to fixing a mutually 
convenient date for consultations. 
 
                                                     
 
 14Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007), available at 
www.fdi.gov.cn.  
 15GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.  
 16GuoFa [1997] No. 37 (29 December 1 997), available at  www.fdi.gov.cn.  
 17Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People’s Republic of China (30 November 2004), available at www.fdi.gov.cn.  
 18WT/L/432.  
 19WT/MIN(01)/3.  WT/DS358/1/Add.1, G/L/813/Add.1,  
G/SCM/D74/1/Add.1, G/TRIMS/D/25/Add.1 Page 4 
 
 
  Statement of Available Evidence
 
 
• 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 Purchases20 
• Circular of the Ministry of Finance and the State Administration of Taxation Concerning 
the Issue of Tax Credit for Business Income Tax for Homemade Equipment Purchased by 
Enterprises with Foreign Invest ment and Foreign Enterprises21  
• Circular of the State Administration of Taxation on Printing and Distributing the Measures 
Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment
22  
• Circular on Distribution of Interim Measu res Concerning Reduction and Exemption of 
Enterprise Income Tax for Investment in Do mestically Made Equipment for Technological 
Renovation23  
• Provisions of the State Council on the Encouragement of Foreign Investment24  
• Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment 
and Foreign Enterprises25  
• Rules for Implementation of the Income Tax Law of the People’s Republic of China on 
Enterprises with Foreign Invest ment and Foreign Enterprises26  
• Enterprise Income Tax Law of the People’s Republic of China27 
• Circular of the State Council Concerning the Adjustment in the Taxation Policy of 
Imported Equipment28 
• Catalogue for the Guidance of Foreign Investment Industries29 
 
__________ 
 
 
                                                      
 20GuoShiFa [1999] No. 171 (20 August 1999), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).  
 21CaiShuiZi [2000] No. 49 (14 January 2000), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).  
 22GuoShuiFa [2000] No. 90 (18 May 2000), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).  
 23CaiShui [1999] No. 290 (8 December 1999) (English translation).  
 24GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).  
 25Order [1991] No. 45 of the President of the People’ s Republic of China (9 April 1991), available at 
www.fdi.gov.cn  (English translation by Ministry of Commerce of People’s Republic of China).  
 26Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn  (English 
translation by Ministry of Commerce of People’s Republic of China).  
 27Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007), available at 
www.fdi.gov.cn . (English translation by Ministry of Commerce of People’s Republic of China).  
 28GuoFa [1997] No. 37 (29 D ecember 1997), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).  
 29Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People’s Republic of China (30 November 2004), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People’s Republic of China).