CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR EXEMPTIONS FROM TAXES AND OTHER PAYMENTS
Document: Request for Further Consultations by the United States Addendum
Date: 2 May 2007
Document codes: WT/DS358/1/Add.1; G/L/813/Add.1; G/SCM/D74/1/Add.1; G/TRIMS/D/25/Add.1
Complainant: U.S.
Respondent: China
Third parties: Argentina, Australia, Canada, Chile, Colombia, Egypt, EU, Japan, Taiwan
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3.1(b), 3.2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994Art. 2.1, Annex 1  Trade-Related Investment Measures (TRIMs)Part I, para. 1.2, Part I, para. 7.2, Part I, para. 7.3, Part I, para. 10.3  Protocol of Accession

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subsequent review, we understand that China has repealed a subsidy program based on the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 Export 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

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 Investment 6 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 Enterprises 9 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 Enterprises 12 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

• 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 1997), 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

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 Investment 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 Investment 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).