WORLD TRADE  
ORGANIZATION  WT/DS363/1/Add.1 
G/L/820/Add.1 
S/L/287/Add.1 
16 July 2007 
 
 (07-2995) 
 Original:   English 
 
 
 
CHINA – MEASURES AFFECTING TRADING RIGHTS AND 
DISTRIBUTION SERVICES FOR CERTAIN PUBLICATIONS 
AND AUDIOVISUAL ENTERTAINMENT PRODUCTS 
 
Request for Consultations by the United States  
 
Addendum  
  
 The following communication, dated 10 July 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 5-6 June 2007, the United St ates and the People's Republic of China 
("China") first held consultations with respect to (1 ) certain measures that restrict trading rights with 
respect to imported films for theatrical releas e, audiovisual home entertainment products ( e.g., video 
cassettes and DVDs), sound recordings, and publications ( e.g., books, magazines, newspapers, and 
electronic publications), and (2) certain measures that  restrict market access for, or discriminate 
against, foreign suppliers of distribution services fo r publications and foreign suppliers of audiovisual 
services (including distribution services) for audiovisual home entertainment products.  My authorities have now instructed me to request suppl emental consultations with the Government of the 
People's Republic of China ("China") pursuant to Articles 1 and 4 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes , Article XXII of the General Agreement on Tariffs 
and Trade 1994  ("GATT 1994"), and Article XXII of the General Agreement on Trade in Services  
("GATS") with respect to certain market access concer ns related to the distribution of imported films 
for theatrical release and the distribution of imported sound recordings, as well as sound recording distribution services, specifically, (1) certain measures that provide less favourable distribution 
opportunities for imported films for theatrical release than for like domestic films, and (2) certain 
measures that provide less favourable opportuniti es for foreign suppliers of sound recording 
distribution services and for the distribution of imported sound recordings than are provided to like service suppliers and like products.  This request supplements and does not replace the request for 
consultations circulated as WT/DS363/1.  I. Distribution of Films for Theatrical Release  
 
Various measures of China appear to provide di stribution opportunities for imported films for 
theatrical release that are less favour able than the distribution opport unities for domestically produced 
films for theatrical release.  WT/DS363/1/Add.1 
G/L/820/Add.1 S/L/287/Add.1 
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  In this connection, the measures at issue include the following: 
 (1) the Regulations on the Administration of the Films Industry
1; 
 
(2) the Provisional Rules on the Entry Criteria for Operating Film Enterprises2; and 
 (3) the Provisional Specific Implementing Ru les for Reforming Film Distribution and 
Exhibition
3;  
 
as well as any amendments, related measures, or implementing measures.  
The measures at issue appear to establish a dual distribution system for films for theatrical 
release.  It appears that imported films can be distributed within China only by two entities and only 
on a nationwide basis.  By contrast, it appears that domestically produced films can be distributed not 
only by those same two entities but also by many  other entities, including entities that operate on a 
local, provincial or interprovincial basis.  
Accordingly, the measures at issue appear to be inconsistent with China's obligations under 
Article III:4 of the GATT 1994 and the provisi ons of paragraph 5.1 of Part I of the Protocol on the 
Accession of the People's Republic of China ,
4 as well as China's obligations under the provisions of 
paragraph 1.2 of Part I of the Accession Protocol (to the extent that it incorporates commitments in 
paragraph 22 of the Report of the Working Party on the Accession of China5).  The Accession 
Protocol 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 .  
 
II. Distribution of Sound Recordings  
 
Various measures of China appear to impose market access restrictions or discriminatory 
requirements on foreign service suppliers seeking to engage in the digital distribution of sound 
recordings and to impose discriminatory restricti ons on sound recordings imported in physical form. 
 
In this connection, the measures at issue include: 
 (1) the Interim Regulations on Internet Culture Administration
6 (the "Interim Regulations"); 
 
(2) the Circular of the Ministry of Culture on Relevant Issues of Implementation of the Interim 
Regulations on Internet Culture Administration7; 
 
                                                      
1 State Council Order No. 342, adopted on 12 Decem ber 2001, promulgated on  25 December 2001 and 
effective as of 1 February 2002. 
2 Decree No. 43, jointly issued by the State Administration of Radio, Film and Television and the 
Ministry of Commerce, promulgated on 10 October 2004 and effective as of 10 November 2004. 
3 Guang Fa Ban Zi [2001] No. 1519, jointly issued by the State Administration of Radio, Film and 
Television and the Ministry of Culture (18 December 2001). 
4 WT/L/432, 23 November 2001 (the "Accession Protocol"). 
5 WT/MIN(01)/3 (the "Working Party Report"). 
6 Promulgated in Order No. 27 of the Ministry of Culture (10 May 2003), amended by Order No. 32 of 
the Ministry of Culture (1 July 2004). 
7 Wen Shi Fa [2003] No. 27, issued by the Ministry of Culture (4 July 2003).  WT/DS363/1/Add.1 
 G/L/820/Add.1 
 S/L/287/Add.1 
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  (3) the Catalogue for Guidance of Foreign Investment Industries
8; 
 (4) the Several Opinions of the Ministry of Cultu re, the State Administration of Radio, Film and 
Television, the General Administration of Pr ess and Publication, the National Development 
and Reform Commission and the Ministry of  Commerce on Introducing Foreign Investment 
into the Cultural Sector
9; and 
 (5) the Several Opinions on the Develo pment and Regulation of Network Music
10; 
 
as well as any amendments, related measures, or implementing measures.  
The Interim Regulations define "internet cu ltural activities" as including activities such as 
wholesaling and retailing of "internet cultural pr oducts" on the internet (including to mobile 
telephones).  The Interim Regulations further defi ne "internet cultural products" as including various 
kinds of "network audiovisual products," including bo th audiovisual products that have been produced 
specifically for transmission over th e internet and products that are the result of the transformation of 
an audiovisual product existing in physical form into a format that can be transmitted over the 
internet.  It appears, therefore, that the definiti on of "internet cultural products" extends to digital 
sound recordings, and that the definition of "int ernet cultural activities" extends to the digital 
distribution of such products. 
 
The Interim Regulations and the other measur es at issue appear, however, to prohibit any 
foreign-owned or foreign-invested entity from obtai ning the licenses necessary to engage in "internet 
cultural activities."  As a result, the measures at issu e appear to prohibit any foreign-owned or foreign-
invested entities from digital distribution of "interne t cultural products," incl uding sound recordings in 
digital form.  
In addition, even if foreign-invested entiti es can engage in the distribution of sound 
recordings in digital form, the measures at issue a ppear to accord foreign suppliers of sound recording 
distribution services less favourable treatment than  that accorded to Chinese suppliers of sound 
recording distribution services.  The measures at issu e appear to provide that any "imported" music 
(which appears to include music in which certain  rights are held by a foreign-owned or foreign-
invested enterprise) is subject to content review be fore digital distribution.  However, music in which 
such rights are held by Chinese enterprises without foreign investment is subject to registration but not prior content review before digital distribution.   Consequently, it appears that foreign-owned and 
foreign-invested sound recording distribution enterp rises in China, as well as enterprises that supply 
cross-border sound recording distribution services, are treated less favourably than like sound recording distribution enterprises th at are wholly Chinese-owned.   
 
In Sector 2D of China's Schedule of Specific Commitments on Services (the "Schedule"),
11 
China undertook market access and national treatment  commitments with respect to the supply of 
sound recording distribution services through cr oss-border supply and through commercial presence 
                                                      
8 Order [2004] No. 24, jointly issued by the National Development and Reform Commission and the 
Ministry of Commerce (30 November 2004). 
9 Wen Ban Fa [2005] No. 19, jointly issued by the Ministry of Culture, the State Administration of 
Radio, Film and Television, the General Administration of Press and Publication, the National Development and 
Reform Commission, and the Ministry of Commerce (6 July 2005). 
10 Ministry of Culture (20 November 2006); available at: 
http://www.ccnt.gov.cn/xwzx/w hbzhxw/t20061211_32440.htm (visited on 9 July 2007). 
11 WT/L/432, Annex 9, and WT/MIN(01)/3/Add.2. WT/DS363/1/Add.1 
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  in China by service suppliers of other Members.  Mo reover, the measures at issue do not appear to fall 
within the terms, limitations, conditions, or qualifi cations on market access or national treatment that 
China has specified in its Schedule with respect to the supply of the se services.  The measures at issue 
therefore appear to be inconsistent with Chin a's obligations under Articles XVI and XVII of the 
GATS.  
The measures at issue also appear to require  that sound recordings imported into China in 
physical form but intended for digital distribu tion must undergo content review prior to such 
distribution within China; domestically produced s ound recordings appear not to be subject to this 
requirement but can instead be digitally distribu ted immediately.  It thus appears that sound 
recordings imported into China in physical form ar e treated less favourably than sound recordings 
produced in China in physical form .  The measures at issue therefore appear to be inconsistent with 
China's obligations under Article III:4 of the GAT T 1994, and the provisions of paragraph 5.1 of 
Part I of the Accession Protocol, as well as China's ob ligations under the provis ions of paragraph 1.2 
of Part I of the Accession Protocol (to the extent that it incorporates commitments in paragraph 22 of 
the Working Party Report).    
*  *  *  *  * 
 
The measures cited in this request for consulta tions also appear to nullify or impair the 
benefits accruing to the United States directly  or indirectly under the cited agreements. 
  We look forward to receiving your reply to the present request and to fixing a mutually 
convenient date for consultations. 
 
__________