WORLD TRADE  
ORGANIZATION  G/L/722 
10 December 2004 
 
 (04-5453) 
Council for Trade in Goods  
 
  
REPORT OF THE COUNCIL FOR TRADE IN GOODS 
ON CHINA'S TRANSITIONAL REVIEW  
 
 
1. The Council for Trade in Goods (CTG), at its meeting on 25 November 2004, carried out the Transitional Review of China pursuant to paragr aph 18 of the Protocol on the Accession of the 
People's Republic of China (WT/L/432). 
 
2. Japan, the United States and the European  Communities submitted questions and comments 
in writing to China on the CTG-specific informati on requirements contained in Annex 1A of the 
Protocol and on matters raised before subsidia ry bodies.  These questions and comments were 
circulated in documents G/C/W/498, G/C/W/499 and G/C/W/502 respectively.  The Annex 1A  
information provided by China to the Council for the review was circulated in document G/C/W/505. 
 
3. The review proceeded in two stages.  First, the CTG took note of the reviews that had been 
carried out in the CTG subsidiary bodies.  Second , the Council reviewed the information provided by 
China concerning specific parts of Annex 1A of the Protocol and the questions raised by certain Members.  The statements made at the meeting of 25 November 2004 are reflected in the minutes of 
the meeting in document G/C/M/78.  The relevant  paragraphs which reflect the discussion under 
agenda item III are annexed. 
 G/L/722 
Page 2  
 
 ANNEX  
 
III. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA 
 
 
3.1 In accordance with paragraph 18 of the Protocol of the Accession of the People's Republic of 
China ("the Protocol") in document WT/L/432, the Chairman
 said that the CTG would report to the 
General Council on the Transitional Review Mechanism (TRM).  As last year, he suggested that the 
Council proceed in two stages.  First, the CTG su bsidiary bodies were required to transmit their 
reports to the Council for Trade in Goods.  This they had done and, as a first step in today's review process, he wanted to give Members an opportunity  to make general comments on those reports, and 
would then propose that the Council take note of the Reviews that had been carried out in the CTG 
subsidiary bodies.  Then the Council would move on to its own report.  Turning to the reports of the 
subsidiary bodies, the Chairman reminded Members that the following CTG subsidiary bodies had 
carried out the Review:  Committee on Market  Access (document G/MA /155);  Committee on 
Agriculture (G/AG/19);  Committee on Customs Valuation (G/VAL/57 and Corr.1);  Committee on 
Sanitary and Phytosanitary Measures (G/SPS/34) ;  Committee on Technical Barriers to Trade 
(G/TBT/W/249);  Committee on Import Licensing (G/LIC/13);  Committee on Rules of Origin 
(G/RO/58);  Committee on Anti-Dumping (G/ADP/13);  Committee on Subsidies and Countervailing 
Measures (G/SCM/115);  Committee on Safeguards (G/SG/73);  and Committee on Trade-Related 
Investment Measures (G/L/708 and Corr.1).  
3.2 The representatives of the United States
 and the European Communities  noted that many of 
the questions that they had submitted for the transiti onal review sought clar ifications about matters 
that had not been fully answered in some of the CTG subsidiary bodies. 
 
3.3 The representative of China  raised a question concerning the process and procedure of the 
transitional review since some Members had stated that they had already raised the same questions in 
subsidiary bodies;  his question was whether the CTG had the mandate to review those issues which 
should be covered by its subsidiary bodies. 
 
3.4 He also questioned, with regard to docum ent G/C/W/499, submitted by the US, which said 
"many of these questions relate to matters that  were not fully addressed by China during the 
transitional reviews held before the Committees th at report to the CTG", whether it was possible for 
the US delegation to provide the delegation of China with a definition of "fully addressing matters", 
so as to enable his delegation to make appropriate preparations in an attemp t to fully address these 
matters. 
 
3.5 Referring to document G/C/W/498, submitted by Japan, he stated that from the title of this 
document it was not clear that this was a question submitted to China or that Japan expected some 
response from China.  The title was "Communicatio n from Japan" and "Japan's Comments to the 
CTG".  Only after reading the co ntent was he able to see that the document contained a lot of 
requests, demands and expectations.  In light of these observations China urged Japan to do as 
follows:  (i) to make the title of the document more  appropriate;  (ii) to study carefully paragraph 18 
of China's Protocol of Accession, which governed the current exercise;  and (iii) to try to figure out 
what was the exact assignment, from wherever it came, in order to fully understand the rules and 
procedures governing this exercise.  3.6 He then referred to document G/C/W/502,  submitted by the European Communities.  He 
pointed out that the quality of the EC paper was pretty low.  For example, the paper stated in 
paragraph 2, "It is of utmost importance to ensure a proper and meaningful functioning of this 
mechanism.  The objective of the EC was to have, in each subsidiary body of the CTG, a meaningful  G/L/722 
 Page 3 
 
 
 discussion and detailed replies from the Chinese side  to this limited number of questions."  He 
questioned what the definition of "a meaningful di scussion" was, in light of paragraph 18 of the 
Protocol;  whether China had obligations to re ply in detail to questions from the EC under 
paragraph 18.  Referring to paragraph 3 of G/C/ W/502, which said that, "To ensure an efficient 
functioning of the mechanism, the EC has transmitt ed the questions well in advance of each meeting 
(typically six weeks)", his delegation drew attention to the fact that the EC's questions in the 
Committees on Market Access, Import Licensing and SPS had been submitted less than six weeks 
prior to the meetings, and that his delegation had received these questions for the meeting of the CTG 
only one day prior to the meeting;  thus the document was incorrect. 
 3.7 Referring to paragraph 4 of document G/C/W/502, which stated, "The EC regrets to note that the assessment of this year's TRM exercise in the subsidiary bodies under the CTG is rather 
disappointing.  The EC impression is that China prov ided replies of a very general nature that lacked 
specificity ...", he also questioned what the legal ba sis was for them to make this kind of remark;  
paragraph 18 of the Protocol stated how specific Ch ina's replies should be.  Referring to paragraph 4 
again, which said, "The EC regrets that China provi ded written replies only in very few instances", he 
stated that in accordance with paragraph 18 of the Protocol, China had no obligation to provide any 
written replies at all. 
 
3.8 Referring to paragraph 5 of G/C/W/502, which said that "The issues ... for which the answers 
provided by the Chinese side were not sufficient can be listed as follows:", he requested the EC to 
provide China with a definition of "sufficiency" so as to enable his delegation to prepare sufficient 
responses. 
 
3.9 Referring to China's question on the CTG's mandate, the Chairman
 stated that it was his 
understanding that the CTG was following established practice, and that he was giving Members the 
opportunity to make general comments in order to  review the reports of the Council's subsidiary 
bodies. 
 
3.10 The representative of the United States  stated that the jurisdiction of the CTG was the 
jurisdiction of the subsidiary bodies, and the reports of these bodies were before the CTG.  It was, 
therefore, entirely proper for Members to address th e matters that had been raised in those subsidiary 
bodies.  Last year they had proceeded in the same fashion, and China at that time had responded to the 
questions from other delegations.  As concerned the de finition of "fully addressed", he stated that in 
several areas, for example on export restrictions, the US had had a series of questions, some of which 
had been addressed but some not at all.  The ques tions being asked in the CTG were those which had 
not previously been addressed.  China had not responded to any of the questions in the SPS 
Committee.  The term "fully addressed", therefore, wa s a polite way of saying that the questions listed 
in the US submission had not been answered, and th e US were now seeking answers in this forum. 
 
3.11 The representative of the European Communities  stated that the CTG was simply following 
already established normal rules of procedure.  They had only raised in their submission the issues 
which had not been answered in the subsidiary bodies.  The questions had either not been fully 
answered or had not been answered sufficiently.  As invited by the Chinese delegation, he had quoted 
a phrase from paragraph 18 of the Protocol, whic h said that, "China shall provide relevant 
information", and he believed that this year China, as concerned some issues, had not provided 
relevant information.  However he acknowledged that on some other issues, China had provided 
relevant information, both in this forum and in the context of bilateral fora.  On the issue of 
submitting their questions, he acknowledged that on some occasions they had not been submitted six 
weeks in advance.  However "typically" did not me an that they had done this each time.  That was 
their target and unfortunately in some cases they had been late, but he hoped that this would not cause 
any major problems for China.  His delegation was approaching this meeting with an open mind and 
was looking forward to China providing relevant information on their questions. G/L/722 
Page 4  
 
 3.12 The representative of Japan
 pointed out that their submissions had been made well in 
advance, so that China could prepare their re sponses with enough specificity and without any 
misunderstanding as to the substance of the issues.  As for the points raised in paragraph 18 of the 
Protocol, and on the mandate of the CTG, he shar ed the views expressed by the US and EC.  The 
competence of the CTG covered the competences that were given to the subsidiary bodies.  If any 
points were not fully addressed in those subsidiary  bodies, the CTG itself had the competence to deal 
with those issues.  As concerned the content of Japan's submission, he noted with appreciation that the 
Japanese representatives in Beijing had received some information from the Chinese Government 
concerning some specific questions they had posed on coke and coal.  The total amount of export 
licences to be issued for coke and coal was 14 mi llion tonnes.  However they still wanted to ask 
China, as stated in heading 1(d) of document G/C/W/498, to "specify when and how China will issue export licences for 2005 and what will be the total amount of coke authorized by the export licences".  
The second part of the question had already been resp onded to by China, via their representatives in 
Beijing, but they had not been informed how, and they also questioned the timing of the issuance of 
export licences.  He understood that there had to be some sort of standard practice that would apply to 
export licences.  He would appreciate it if Chin a could provide them with some documentation or 
information on links to websites of the Chinese Government. 
 
3.13 The representative of China
 stated that the previous three speakers seemed to believe that , as 
far as the TRM was concerned, the CTG had a mandate to review those questions that had already 
been taken up by the subsidiary bodies, but none of them was able to provide any legal provision to support this belief.  Therefore he was not convinced that their requests could be agreed to or accepted 
by China. 
 
3.14 With regard to the US' explanation of what "fully addressed" meant, he asked if the US could 
provide this definition in writing, and believed that  such a written submission could help China to 
prepare their responses in a manner which would fu lly address the US' concerns.  Referring to the 
remarks made by the US delegates that China had not made a single response in the SPS Committee 
this year, he urged the US delegates to read the re port of that Committee to see whether or not China 
had addressed some questions, including a question on AQSIQ 73. 
 
3.15 Referring to the statements made by the EC delegate that in accordance with paragraph 18 of 
the Protocol China was required to provide relevant information, he stated that China had provided 
relevant information, contained in document G/C/W/505, and that he would be glad to discuss this 
matter with the EC to see whether the EC's reque st for full and sufficient answers fell under the 
definition of "relevant information" mentioned in paragraph 18.  
3.16 Referring to the statement made by Japan on the mandate of the CTG as contained in 
paragraph 18.1 of the Protocol, he drew attention to the last sentence of that paragraph which stated, 
"Each subsidiary body shall report the results of such review promptly to the relevant Council 
established by paragraph 5 of Article IV of the WT O Agreement, if applicable, which shall in turn 
report promptly to the General Council".  His understanding of the mandate of this body was to 
receive reports from those subsidiary bodies wh ich carried out TRMs, which should be in turn 
reported to the General Council.  Nowhere in paragraph 18 did it say that the CTG had a mandate to 
review those questions that had already been covered by appropriate subsidiary bodies. 
 
3.17 The Chairman
 stated that as concerned the mandate of the CTG, he would suggest consulting 
with the Secretariat's Legal Affairs Division, but it was his understanding that since this was the 
relevant Council, the CTG had the mandate to review the reports of its subsidiary bodies.  The CTG would not reopen the reports, but he invited delega tions to make general comments on the collective 
reports of the subsidiary bodies.  He then suggested moving to the second stage, China's specific 
review exercise, where delegations would have another opportunity to take up some of the issues  G/L/722 
 Page 5 
 
 
 discussed in the first stage.  He also suggested that the CTG take note  of the reports of its subsidiary 
bodies and the statements made. 
 
3.18 It was so agreed . 
 
3.19 The Chairman  said that China was required to prov ide information to the CTG in accordance 
with paragraph 18.1 of the Protocol of Accession.  The relevant information requirements were listed 
in Annex 1A. China had submitted information as required under Annex 1A of the Protocol of 
Accession, contained in document G/C/W/505.  He al so drew attention to the documents by Japan, 
contained in document G/C/W/498, by the United States, contained in document G/C/W/499, and by the European Communities, contained in document G/C/W/502.  
3.20 The representative of China
 stated that over the past three months the 11 subsidiary bodies of 
the CTG had concluded this year's TRM on China.  Some Members had raised a great many written 
questions in these reviews and he thanked these Members for their interests in China's policies, 
measures and practices in its trade regime.  Alth ough China had its own opinion of the Transitional 
Review mechanism they had still faithfully im plemented their commitments upon accession and 
engaged considerable efforts for the review. 
 
3.21 Firstly, prior to the session of the relevant body, China had submitted the information 
required by Annex 1A to the Acce ssion Protocol.  Secondly, with regard to the written questions 
raised by Members, after consulting the competen t authorities they had provided accurate and serious 
responses.  As for the questions raised before this Council, many of them had already been responded 
to by China in previous reviews.   However in the spir it of cooperation China would still explain and 
clarify these repetitive questions.  Thirdly, in orde r to facilitate the unde rstanding of China's  
implementation of its commitment on trading rights, China had provided for this meeting the full text 
of the English version of the Rules of Registrati on of Foreign Trade Operators, which was enforced 
on 1 July 2004.  Lastly, China had drafted a notif ication of Quantitative Restrictions and would 
submit it to the Committee on Import licensing shortl y.  All these efforts demonstrated China's 
sincerity and resolution in implementing its comm itments upon accession.  He believed that the TRM 
required China's cooperation and also the understanding and good will of other Members.   
 
3.22 In addition, she made some remarks in terms of the notification of Ch ina's subsidy policies.  
As they had emphasized, the Chinese Government attached great importance to the implementation of 
the transparency obligation of the WTO Agreement on Subsidies and Countervailing Measures.  They 
had also taken note of concerns of Members on vari ous occasions.  In recent years the Ministry of 
Commerce had endeavoured to coordi nate all the relevant authorities,  to collect information and to 
study the notification requirements including tran slating the WTO Notification Handbook.  This 
project alone had already cost a large amount of ma npower and financial resources.  With all this 
effort China, at the present stage, had finished some major technical work and planned to submit the 
notification of China's subsidy policies to the SCM Committee in the next year.  Next, she responded 
to specific questions and comments posed to  China prior to this review, as follows: 
 
(i) Export restrictions on coke 
3.23 Coke was an exhaustible resource, while the coke industry was highly pollutive and 
energy-consuming.  Therefore in order to protect the environment and achieve sustainable 
development, China had taken a series of measures to reduce the output of coke.  Meanwhile pursuant 
to GATT Article XX(g), as well as the relevant do mestic laws and regulations, coke export was under 
a global quota administration in China.  However, it might take some time to see the results of their 
efforts in terms of restricting coke production of domestic industry.  In the year 2004 the demand for 
coke in international markets had risen tremendo usly, which had drawn great attention from the 
Chinese Government.  China, on the one hand, had made efforts to further improve administration on G/L/722 
Page 6  
 
 domestic production and trade and, on  the other hand, had tried its best to maintain a quantity of coke 
exports.  On 27 May 2004, nine Ministries had jointly issued certain guidelines on administration  and 
control over the coke industry, which further cleared up the industry by closing coke companies 
which could not meet the requirements of environm ental protection.  On 23 July 2004, MOFCOM had 
issued urgent notice on an administrating order of  coke export which required local government and 
relevant enterprises to strictly comply with the export administration restriction to actively improve 
their operations and to thoroughly eliminate sales of export licences for coke.  The above measures 
had been proved effective.  At pres ent China's exportation of coke was stable and prices had declined 
rapidly.  The export quota for coke in the year  2005 would be 14 million tonnes.  The time of 
applying for export licences was determined by an enterprises when their quota was allocated.  Besides, MOFCOM Announcement No. 74 of 2004 cl early stipulated conditions for coke-exporting 
companies and the procedures for quota application.  The allocation of quota was based on standards 
in line with WTO rules, such as applied quantity and historical performance.  Commercial interest 
was the priority of Chinese coke-exporting companie s when choosing their importers.  The prices of 
coke were determined by the market.  China hoped that WTO Members would realise the sacrifices 
China had made as well as the pressure and the d ilemma China was facing in terms of environmental 
protection and natural resource preservation.  As a WTO Member China would continue to abide by 
WTO rules in the future and take measures on the basis of non-discrimination, publicity and 
transparency to maintain the stable supply of coke in the international markets. 
 
(ii) Export restrictions on fluorite 
3.24 In order to protect fluorite, an irreproducible resource, pursuant to GATT Article XX(g) as 
well as the relevant domestic la ws and regulations, China imposed export quota administration on 
fluorite.  The quota was allocated by tendering.  As  the resources of fluorite kept reducing, the output 
of fluorite was constantly declining rather than incr easing.  In addition, with  the increasing costs of 
production and transportation, the price of fluorite both at home and abroad was rising, which in turn 
led to a decline in the volume of domestic consumption and exportation.  This phenomenon was 
caused by the law of market economy, rather than  the administration of the Chinese Government. 
 
(iii) Reallocations of TRQs 
3.25 In 2003 the number of reallocations of ch emical fertilizer was as follows:  NPK 350,000 
tonnes;  DAP 12,000 tonnes;  Urea 20,000 tonnes.  All applications for reallocation had been satisfied.  
In 2004, as the price of fertilizer in international markets was higher than in domestic markets, there 
was no profit for Chinese importers.  Therefore, none of the  three types of fertilizer fulfilled their 
TRQs.  After the publication of MOFCOM's announcement No. 51 of 2003, which announced the 
reallocation of the returned TRQs, there was no ne w application, so there was no application denied 
either. 
 
(iv) Transparency 
3.26 With regard to the laws of China, Article 7 of the Legislation Law of the People's Republic of 
China  stipulated that laws were made and amended by the National People's Congress, or its Standing 
Committee.  According to Article 52 the final version of the law should be published on the 
Announcements of the National People's Congress or of its Standing Committee.  With regard to the 
regulations according to Article 52 and 62 of the Legislation Law , the regulations should be made by 
the State Council and published on its Announcements .  With regard to other measures, Articles 71 
and 77 of the Legislation Law  required that administrative measures should be made and published by 
the relevant authorities.  In addition the Foreign Trade and Economic Cooperation Gazette of 
MOFCOM  published all laws and regulations con cerning foreign trade and investment. 
  G/L/722 
 Page 7 
 
 
 (v) Border trade 
3.27 The Member which had raised this question s eemed to have serous misunderstanding:  part 14 
of Annex 5A to the Protocol of Accession was th e subsidy notification on tariff and import duties 
reduction and exemption made to the SCM Committ ee, in which China had never committed to 
eliminate preferential import duties for border trade.   As for paragraph 2A of the Protocol, it simply 
required China to apply the provisions of a WTO Agreement and the Protocol to the entire customs 
territory of China, including the border trade regions.  Moreover, the WTO allowed Members to 
regard border trade as an exemption to MFN and to  grant certain preferential arrangements.  At 
present, except for the following three categories of goods:  (a) goods that were prohibited or 
restricted to import by laws and the regulations;  (b) cigarettes, wine, cosmetics and other goods that 
the Government required to pay full duties;  and (c) goods that were subject to anti-dumping measures 
and safeguards, all other goods that residents of border areas imported for their own needs enjoyed a 
border trade preferential treatment, which was 50 per cent reduction of import duties and VAT.  The 
purpose of this policy was to promote and facilita te the economic developm ent of frontier provinces 
and the regions, especially the minority's group region and the western areas.  China was further improving the administration of border trade.  In fact, the current total amount of border trade accounted for less than 1 per cent of the total import and export amount. 
 
(vi) Government procurement 
3.28 Compared with those foreign governments that had decades of experience in government 
procurement, China had fewer than ten years of experi ence in dealing with this  issue.  Nevertheless, 
since accession China had been actively implem enting its commitments in terms of government 
procurement.   The present Government Procurement Law of the People's Republic of China  
contained neither discriminatory regulations nor restrictive measures on non-domestic suppliers or 
non-domestic goods, projects and services.  All fore ign suppliers enjoyed the same treatment and had 
the same opportunities for governme nt procurement projects.  The Chinese Government would take 
foreign suppliers' suggestions and comments into consideration during its process of drafting the specific implementing rules for the Government Procurement Law .  China was establishing a 
systematic government procurement  framework.  At the same time the Chinese Government had 
invited experts and scholars to look into the is sue.  However the process was still very much 
unfinished, and China needed time to study on the occasion of GPA.  Therefore China was not in a 
position to provide a timetable at this stage.  (vii) Tariff lines for SKD and CKD 
3.29 China had made clear explanations on this issue in the TRM in the Committee on Market 
Access.  As set forth in paragraph 93 of the Working Party Report, there were no changes in the tariff 
lines for CKD and SKD. 
 
(viii) SPS measures 
3.30 In regard to the risk analysis of SPS meas ures, in order to ensure that SPS measures were 
based on risk assessment and science, the Chinese Government had made and publicized Management 
Practices of Risk Analysis on Imported Plant and Plant Products  and Management Practices of Risk 
Analysis on Imported Animals .  In addition, in order to strengthen the coordination of the risk analysis 
China had established a cross-departmental China Risk Analysis Commission  with the participation 
from various authorities concerned. 
 
3.31 With regard to SPS measures and product quality requirements, the former was clearly 
distinguished from the latter in the Chinese admi nistration.  The already-mentioned notification on 
Foodstuff Health Standards did not contain any requirements on moisture and impurities.  For some G/L/722 
Page 8  
 
 products moisture or temperatur e would cause microbes to propagate.  Therefore, China had made 
requirements in this respect with the purpose to ensure human health. 
 
3.32 The Live and Frozen Bird Product Standard  notified by China on 9 August 2002 
(G/TBT/N/CHN/6) was still under review and not yet o fficially approved.  During the review process 
China would take all the concerns of variou s interested parties into consideration. 
 
3.33 With regard to the AQSIQ Ordinance 7 and Decree 25, the applicant's qualification of 
quarantine permit was set by two rules which stipulated  that enterprises or agents as an independent 
legal person which could sign a trading contract with  foreign parties were qu alified to apply import 
quarantine permits from AQSIQ.  The criteria for AQ SIQ to accept applications to import quarantine 
permit was set forth by Article 7 of the AQSIQ Decr ee No. 25.  Article 6 of Ordinance 7 required the 
owner of the goods to be imported or their agent to provide relevant information.  The purpose of this 
requirement was to enable the competent authority to understand the status of imported goods and 
therefore to make an accurate assessment of the goods' potential risks.  
 3.34 In terms of administration of agricultural product processing companies, the functions of 
AQSIQ and Industrial and Commercial Management  Bureau (ICMB) were fundamentally different.  
ICMB was mainly responsible for the administration and supervision on markets, i.e. to administer 
and supervise the operation in the region of circulat ion in accordance with the relevant laws;  whereas 
AQSIQ was held responsible for the monitoring and inspecting of the status of the processing companies in terms of safety, sanitation and quality.  As a result, the contents and the requirements of 
the two inspections of the facilities conducte d by these two author ities were different. 
 
3.35 As to the question of why importers had to reapply for a new import inspection permit after 
the original one expired, that was because China's quarantine requirements were mainly reflected by 
the quarantine permit to importers.  Since frequent changes took place in animal and plant epidemics, 
import quarantine requirements might vary from differ ent countries or regions, or in different time 
periods.  If importers did not import the commoditie s covered by an import inspection permit shortly 
after it was granted or if major ch anges had taken place in the situation of epidemics of the exporting 
county of the commodities, the importers had to  reapply for a new import inspection permit, by 
simply returning the original permit to AQSI Q and applying to change another new permit. 
 
3.36 As to the reason why an importer had to  specify certain information about a commodity 
before signing the contract and why it was necessa ry to reapply for a permit when certain changes 
happened, this was to facilitate import risk assess ment, to identify import quarantine requirements and 
to schedule import quarantine work. 
 
3.37 On the issue of the AQSIQ De cree No. 73, this only reiterated the requirements of Article 11 
of the Border Animal and Plant Quarantine Law  which was enforced on 1 April 1992 and had been 
notified to the WTO.  This was not a new requirement.  Obtaining an import quarantine permit before 
signing an import contract allowed importers to understand whether they were permitted to import 
relevant animal or plant products from a certain country or region, and if so, the specific quarantine 
requirements.  On the other hand exporters were also able to identify China's import quarantine 
requirements from the trading contr act.  This would also allow the quarantine inspection authority of 
the exporting country to implement quarantine measur es and to produce quarantine certification, in 
accordance to China's requirements set out by the contract.  This would prevent products which did 
not meet with China's requirements from being exported to China and therefore prevent importers as well as exporters from suffering unnecessary economic losses.  
3.38 In regard to the AQSIQ Announcement 111, the HS codes of animal and plant products that 
were exempted from entry quarantine review an d approval would be published on a website.  These 
exemptions were based on the fact that the epidemic risks did not exist for these products any more.   G/L/722 
 Page 9 
 
 
 3.39 The representative of Japan  requested China to submit the in formation on export restrictions 
for coke (including the information received bi laterally in Beijing) in writing to the CTG. 
 
3.40 The representative of the United States  thanked the Chinese delega te for her very detailed 
responses.  He believed that the TRM was a very  important exercise.  When China acceded to the 
WTO, many of its laws and regulations and other me asures in trade areas had not yet been issued, so 
there was a need to examine those regulations and measures, once they were issued.  In addition, 
China had been given many transition periods to  become WTO-compliant, and that was another 
purpose for this TRM exercise.  The TRM could be very beneficial, both for China and other 
Members, and would help to clarify China's implementation efforts and also to convey Members' expectations to China.  It could further clarify areas where there was agreement or disagreement on certain issues.  In the US submission, some of the questions addressed matters that had not been fully 
addressed in subsidiary bodies, and there were also some new issues that they were raising.  For the 
most part their questions were simply seeking clarifications regarding Chinese regulations and 
measures or Chinese trade practices, or simply seeking relevant data.  He highlighted a few areas of 
concern that the US were trying to convey through their questions: 
 
(i) Firstly, export restrictions on coke:  In 2004 this became a significant problem, as the prices 
for coke, a key steel-related import, more than tripled from the 2003 level, and this was due largely to 
the shrinking export quota in 2004 as well as the selling of export licences.  The US had discussed 
these issues with China as they arose, and had been  pleased with China's shor t-term response.  China 
had expanded the 2004 quota and cracked down on the selling of export licences, and as a result the price of coke had gone down substantially and more quantities were available.  He cautioned, 
however, that these were just short-term fixes.  Th e US appreciated the measures taken but would also 
like to see China eliminate export quotas, in particular the export quota system for coke and other raw 
materials.   
 
(ii) Another concern dealt with SPS measures in China.  This was an area where the US was 
looking for improvements, particularly with regard to the use and publication of risk assessments.  
 
(iii) The last area of concern involved govern ment procurement.  The US was in support of 
China's initiating GPA negotiations, and there had be en some recent developments that in the US' 
view were taking a step backwards.  China was in the process of drafting regulations on their 
procurement of software, and MOFCOM, the Ministry of Commerce and the Ministry of Finance had 
recently held a public forum where they discussed the proposed guidelines in the area of software 
procurement.  The US had appreciated the opportunity of being part of that forum, but its key concern 
at this point was the definition of domestic indust ry and domestic software that seemed to be going 
forward, which was one that was likely to exclude US software companies from procurements.  The 
US viewed these potential regulations as not benefiting China.  It would certainly decrease foreign 
investment in this sector and could severely limit the future growth of China's software industry.  
Getting this regulation right was also critical for anothe r reason, i.e. the high so ftware piracy rates in 
China.  It was critical that the Chinese Government  remain in the market as a purchaser of foreign 
software.  Therefore this issue was attracting si gnificant attention in Washington and among US 
industry, and in this light his delegation wanted to be able to work with the Chinese Government to 
work out a mutually agreeable solution before the regulations were finalized.  Finally, although the 
delegate of China had given a very lengthy, detaile d set of responses to the US questions, he felt he 
might have missed one of the responses.  The third US question dealt with data regarding the annual 
consumption of two types of fertilizer in China, a nd he felt he did not have a clear understanding of 
China's response to this question.  
3.41 The representative of the European Communities
 thanked the Chinese delegation for their 
statement, and requested them to ci rculate their statement.  He also apologised if in his intervention he 
raised questions which have already, in part, been answered by China.  His first point of concern was G/L/722 
Page 10  
 
 export restrictions on raw materials.  He had heard from China some element of answers to the 
questions that they had put in their paper.  If hi s understanding was correct, those answers had mainly 
focused on coke.  However the EC had also posed the same question regarding another raw material, 
rare earths.  Therefore he would welcome additional information from China, both on coke and rare 
earth, and more precision on whether China inte nded to impose any due domestic restriction and 
whether China had any timetable for eliminating th e export quota system on both products.  The 
second was automobiles, and here he had not had much precision on the question that the EC had 
posed, so he would welcome an answer to the questio n.  On subsidy notifications, he understood that 
the Chinese delegate had said that China would pro ceed in the next year with  the notification of the 
new sets of subsidies that had been put in place since accession;  if that was so, he looked forward to a full and exhaustive notification of this subsidy scheme.  The EC also had concerns raised in point 
three of their paper, in the last paragraph, where they had raised a question on subsidies taking the 
format of VAT reimbursement, and they would welc ome any additional information in that regard.  
Turning to SPS measures, the EC had posed the same question as the US, and they had added to that 
issues regarding the extent to which Chinese regulati ons were based on international standards.  They 
would welcome some precision from China on their assessment of whether they conformed to international standards and, when they did not conf orm to those international standards, whether they 
completed sound risk assessment.  On the last poin t, on government procurement, he had heard China 
say that they had been applying non-discriminatory basic rules for public procurement but that they 
had not yet finished this business.  He asked China to be more explicit on that point;  to what extent 
had they not yet finished?  Also, when did they inte nd to start negotiations to join the GPA, as they 
had committed to in the Protocol?  
3.42 The representative of China
 stated that with regard to th e request for written answers, she 
would like on behalf of the Chines e delegation to repeat China's pos ition that the information they had 
submitted in writing prior to this meeting, and the an swers provided during the course of the meeting, 
were sufficient and meaningful.  Providing written answers to Members' ques tions went beyond the 
provisions of paragraph 18 and would be overly burdensome for China. 
 
3.43 Another representative of China , referring to Japan's question on the allocation of China's 
quotas for coke, stated that he had downloaded Announcement No. 68 of 2004 of the Ministry of 
Commerce from the Ministry's website, on quotas fo r coke, which was 14 million tonnes for the year 
2005.  In this specific announcement, it was also stat ed that with regard to the application for quotas, 
the timing period for application was from 1-15 November, and after that the authorities would 
allocate the quota before the end of the year.  On the question from the US regarding data on the two 
fertilizers, he noted that this ma tter had been addressed in the Market Access Committee, and stated 
that China was working on this issue and would inform the US as soon as they had the statistics. 
 
3.44 On the questions from the EC with regard to the VAT  reimbursement issue, if this referred to 
the Chinese policy regarding the copper industry, he said that China had responded to this issue in 
great detail in the SCM Committee.  He therefore s uggested that the EC delegate look at the minutes 
of that meeting.  On the issue of the GPA, the situation in China was that they were at a very initial 
stage of establishing, rather than reforming, their GPA system.  The law was fairly new, and a lot of 
regulations still had to be drafted, so there was a lot of work to do with regard to further improving the 
legal system with regard to govern ment procurement.  In the meantime, as noticed by other Members, 
China was doing a lot of preparatory work with regard to their accession to the GPA Agreement.  
With regard to the rare earth issue, China's position was very clear.  They believed that for exhaustible 
resources they had the right to have export administ ration.  Since the situatio n was more or less like 
the situation of coke, they were also trying to  find detailed statistics which would support the 
understanding of their side.  On SPS-related issues , China had already stated very clearly detailed 
answers.  He also informed the Council that, as he had promised in the TRMs of the Market Access 
and Import Licensing Committees, China was providing more notifications and other information to 
the relevant subsidiary bodies of the Council.  In  the Import Licensing Committee they had recently  G/L/722 
 Page 11 
 
 
 submitted more than ten regulations which would be very helpful for Members in understanding 
China's efforts to comply with their obligations to  the WTO;  also in the Market Access Committee 
China was finalizing its quantitative restrictions not ification, a full one, for the year 2004, which 
would be submitted shortly, in which some of th e questions raised by the EC and other Members 
would be fully addressed, including information on quotas and other details. 
 
3.45 The representative of the European Communities  thanked China for their response and 
requested further information on the following questions: 
 
(i) the precise point in time when the identifica tion of complete vehicles and assemblies occurred 
after importation; (ii) the meaning of the reference to so-called "re gulated amounts" in respect of classification of 
assemblies and completed vehicles and th eir consistency with WTO rules;  and 
(iii) how China intended to implement the provis ion of its new automobile policy relating to 
custom classifications. 
 3.46 He then followed up on rare earths and clar ified that the EC was not asking for statistics as 
such;  their questions were aimed more at identifying the domestic limitations applied on domestic 
production in accordance to Article 20, which China had to implement in order to justify a restriction 
on imports. 
 3.47 The representative of China
 clarified that China did not have any new separate tariff headings 
or tariff lines for CKD and SKD of automobiles.  The existing practice was that SKD and CKD were 
all treated as the vehicles themselves, under HS heading 87.03.  This was exactly the situation 
described in paragraph 93 of the Working Party Report on China's Accession.  On the specific 
question on the "regulated amounts", as he had responded in the meetin g of the Market Access 
Committee, the automobile policy itself was simply a framework, and a lot of detailed implementing 
rules were still to be drafted.  He therefore sugges ted that the delegate of the EC keep an eye on the 
development of the drafting of these regulations in China.  The people concerned would be provided 
with the opportunity to comment on this issue.  On the VAT policy, he drew Members' attention to 
page 5 of document G/SCM/115, in which there were three paragraphs with regard to the VAT rebate 
granted for imports of copper raw materials, which were fairly detailed.  Re garding rare earth, China 
was working on that matter and would provide further information when available. 
 
3.48 The Chairman  thanked the delegation of China for the answers that it had provided and also 
those delegations that had raised questions and made comments.  Regarding the form of the CTG report, he suggested
 that the Council proceed in the manner it did last year.  This would mean that a 
brief factual report would be prepared with references  to the relevant documents and attached to it the 
portion of the minutes of this meeting which rela ted to the Transitional Review.  The CTG report, 
together with the reports of the subsidiary bodies , would then be transmitted to the General Council. 
 
3.49 It was so agreed . 
 
__________