CHINA – MEASURES AFFECTING TRADING RIGHTS AND DISTRIBUTION SERVICES FOR CERTAIN PUBLICATIONS AND AUDIOVISUAL ENTERTAINMENT PRODUCTS
Document: Request for the Establishment of a Panel by the United States
Date: 11 October 2007
Document codes: WT/DS363/5
Complainant: U.S.
Respondent: China
Third parties: Australia, EU, Japan, South Korea, Taiwan
Dispute stage: Appellate Body
Agreements cited: Part I, para. 5.2  Protocol of AccessionArt. XI:1, III:4  GATT 1994Art. XVII, XVI  Services (GATS)Part I, para. 1.2, Part I, para. 5.1  Protocol of Accession

CHINA – MEASURES AFFECTING TRADING RIGHTS AND
DISTRIBUTION SERVICES FOR CERTAIN PUBLICATIONS
AND AUDIOVISUAL ENTERTAINMENT PRODUCTS

Request for the Establishment of a Panel by the United States

 The following communication, dated 10 Octobe r 2007, from the delegation of the United
States to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 6.2 of the
DSU.

On 10 April 2007, the United States requested co nsultations 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 ("DSU"), 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 (1) certain measures that restrict trading rights with respect to
imported films for theatrical release, a udiovisual 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 for publications, fo reign suppliers of audiovisual services (including
distribution services) for audiovisual home entertai nment products, and fore ign suppliers of sound
recording distribution services.
1 On 10 July 2007, the United States requested supplemental
consultations with China pursuant to Articles 1 and 4 of the DSU, Article XXII of the GATT 1994,
and Article XXII of the GATS with respect to certain market access concerns related to the
distribution of imported films for theatrical release and the distribution of imported sound recordings,
as well as sound recording distribution services. Specifi cally, the US concerns related to (1) certain
measures that provide less favorable distribution opportunities for imported films for theatrical release
than for like domestic films, and (2) certain me asures that provide less favorable opportunities 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.
2

The United States held consultations with Chin a on 5-6 June, 2007, and 31 July 2007. Those
consultations provided some helpful clarifications but unfortunately did not resolve the dispute.

1 WT/DS363/1.
2 WT/DS363/1/Add.1.

I. Trading Rights

The United States considers that China is acting inconsistently with its obligations under its
protocol of accession to the World Trade Organization
3 ("WTO") and under the GATT 1994 by not
allowing all Chinese enterprises and all foreign enterp rises and individuals to have the right to import
into the customs territory of China the following pr oducts (collectively, the "Products"): films for
theatrical release, publications ( e.g., books, magazines, newspapers, and electronic publications),
audiovisual home entertainment products (e.g., video cassettes and DVDs), and sound recordings.

In the Accession Protocol, China committed to fully open the right to trade, with some limited
exceptions not applicable here, within three years after accession. Despite those commitments, China
reserves to certain Chinese state-designated and who lly or partially state-owned enterprises the right
to import the Products. It also appears that Ch ina accords treatment less favorable to foreign
individuals and enterprises, including those not invested or registered in China, than that accorded to
enterprises in China with r espect to the right to trade (and in part icular, with respect to the right to
import the Products into China).

In this connection, the measures at issue involve:

(1) the Regulations on Administration of the Films Industry
4;

(2) the Provisional Rules on the Entry Criteria for Operating Film Enterprises5;

(3) the Administrative Regulation on Publishing
6;

(4) the Administrative Regulations on Audiovisual Products
7;

(5) the Catalogue for Guidance of Foreign Investment Industries 8;

(6) the Several Opinions of the Ministry of Culture, State Administration of Radio, Film and
Television, General Administration of Press and Publication, National Development and
Reform Commission and the Ministry of Commerce on Introducing Foreign Investment into
the Cultural Sector
9;

7) the Measures for the Administration of Import of Audio and Video Products
10;

3 Protocol on the Accession of the People’s Republic of China , WT/L/432, 23 November 2001 (the
"Accession Protocol").
4 State Council Order No. 342, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
5 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.
6 State Council Order No. 343, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
7 State Council Order No. 341, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
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 Decree No. 23 of the Ministry of Culture and the General Administration of Customs
(17 April 2002).

(8) the Measures for Administration of Chinese Foreign Contractual Distribution Ventures of
Audiovisual Products11;

(9) the Administrative Regulations on Electronic Publications
12; and

(10) the Procedure for Examination and Approva l of Establishment of Publication Importation
Entities13;

as well as any amendments, related measures, or implementing measures.

China's measures thus appear to be inconsiste nt with China's obligations under the provisions
of paragraphs 5.1 and 5.2 of Pa rt I of the Accession Protocol,
14 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 paragraphs 83 and 84 of the Report of the Working Party on the Accession of
China
15). 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.

Furthermore, to the extent that the measures at issue impose prohibitions or restrictions other
than duties, taxes or other charges on the impor tation into China of the Products, these measures
appear to be inconsistent with China's obligations under Article XI:1 of the GATT 1994.

II. Distribution Services for Publications, A udiovisual Home Entertainment Products, and
Sound Recordings

In the Accession Protocol, China made market access and national treatment commitments in
the distribution services and audiovisual services sectors of its Schedule of Specific Commitments on
Services (the "Schedule").
16 The United States considers that, despite those commitments, China is
imposing market access restrictions and discrim inatory limitations on foreign service providers
seeking to engage in the distribution of publicati ons, audiovisual home entertainment products, and
sound recordings inconsistently with China's obligations under the GATS. Certain of these
restrictions and limitations also appear to be inconsistent with China's obligations under the
GATT 1994.

In this connection, China maintains these rest rictions and limitations through measures that
include:

(1) the Administrative Regulation on Publishing
17;

(2) the Administrative Regulations on Audiovisual Products 18;

11 Promulgated by the Ministry of Culture and Ministry of Commerce on 9 February 2004 (superceding
the measures notified by China in S/C/N/219).
12 Order No. 11 of the General Administration of Press and Publication (30 December 1997).
13General Administration of Press and Publication (27 December 2005) (available at:
www.gapp.gov.cn/GalaxyPortal/inner/zsww/zongsu3.jsp?articleid=4923&boardpid=1450&boardid1=11501010
11150c) (visited on 9 October 2007).
14 The Products are not listed in Annex 2A or Annex 2B of the Accession Protocol.
15 WT/MIN(01)/3 (the "Working Party Report").
16 WT/L/432, Annex 9, and WT/MIN(01)/3/Add.2.
17 State Council Order No. 343, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
18 State Council Order No. 341, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.

(3) the Provisions on Guiding the Orientation of Foreign Investment
19;

(4) the Catalogue for Guidance of Foreign Investment Industries
20;

(5) 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
21;

(6) the Administrative Regulations on Management of Foreign-Invested Book, Magazine and
Newspaper Distribution Enterprises
22;

(7) the Administrative Regulations on the Publication Market (revised)
23;

(8) the Administrative Regulations on Electronic Publications
24;

(9) the Administrative Measures on Subscription of Imported Publications 25;

(10) the Procedure for Examina tion and Approval of Establishment of Chinese-Foreign Entities,
Cooperative Joint Ventures, and Wholly Foreign Owned Publication Distribution
Enterprises
26;

(11) the Measures for Administration of Chinese Foreign Contractual Distribution Ventures of
Audiovisual Products27;

(12) Interim Regulations on Internet Culture Administration
28;

(13) the Circular of the Ministry of Culture on Relevant Issues of Implementation of the Interim
Regulations on Internet Culture Administration29; and

(14) the Several Opinions on the Develo pment and Regulation of Network Music30;

19 State Council Order No. 346, promulgated on 11 February 2002.
20 Order [2004] No. 24, jointly issued by the National Development and Reform Commission and the
Ministry of Commerce (30 November 2004).
21 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).
22 Order No. 18 of the General Administration of Press and Publication and the Ministry of Foreign
Trade and Economic Cooperation (17 March 2003).
23 Promulgated by the General Administration of Press and Publication on 16 July 2003, revised on
16 June 2004.
24 Order No. 11 of the General Administration of Press and Publication (30 December 1997).
25 Order No. 27 of the General Administration of Press and Publication (adopted at the fourth
conference of the General Administration of Press and Publication on 9 September 2004 and published on
31 December 2004).
26 General Administration of Press and Publication (27 December 2005).
27 Promulgated by the Ministry of Culture and Ministry of Commerce on 9 February 2004 (superceding
the measures notified by China in S/C/N/219).
28 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).
29 Wen Shi Fa [2003] No. 27, issued by the Ministry of Culture (4 July 2003).
30Ministry of Culture (20 November 2006); available at:
http://www.ccnt.gov.cn/xwzx/whbzhxw/t20061211_32440.htm (visited on 9 October 2007).

as well as any amendments, related measures, or implementing measures.

A. Publications (e.g ., books, newspapers, periodicals, and electronic publications)

In Sectors 4A-4E of its Schedule, China unde rtook market access and national treatment
commitments with respect to the supply through commercial presence in China by service suppliers of
other Members of, inter alia, distribution services for publications.

The measures at issue, however, appear to prohibit foreign service suppliers (including
wholly or partially foreign-owned or foreign-invest ed enterprises) from engaging at least in types of
distribution described in these measures as the "mast er distribution" or "master wholesaling" of
publications. The measures at issue also appear to prohibit foreign service suppliers (including
wholly or partially foreign-owned or foreign-invested enterprises) from engaging in the distribution of
"electronic publications" (a term that refers to a subset of publications) generally, whether at the
"master wholesale" level, the "wholesale" level, or otherwise.

Furthermore, to the extent that some foreign service suppliers are allowed to engage in some
aspects of the distribution of publications, there app ear to be discriminatory requirements concerning
such suppliers' registered capital and such supp liers' operating term, as well as discriminatory
limitations (e.g., limitations by type, content, or origin of publication) on the publications that such
suppliers may distribute.

The measures at issue therefore appear to acco rd to foreign suppliers of distribution services
for publications treatment less favorable than th at accorded to Chinese suppliers of distribution
services for publications. Moreover, the measures at issue do not appear to fall within the terms,
limitations, conditions, or qualifications on market access or national treatment that China has
specified in its Schedule for the distribution of p ublications through commercial presence in China by
service suppliers of other Members. Accordingly, the measures at issue appear to be inconsistent with
China's obligations under Article XVII of the GATS.

In addition, the measures at issu e also appear to establish diffe rent distribution opportunities
for imported and domestically produced books, ne wspapers and periodicals. Imported books,
newspapers and periodicals are restricted in their distribution opportunities. Certain foreign service
suppliers that are allowed to distribute books, newspapers and periodicals are not allowed to distribute
imported books, newspapers and periodicals. By contrast, domestically produced books, newspapers
and periodicals are not restricted in this way. Acco rdingly, the measures at issue also appear to be
inconsistent with China's oblig ations under Article III:4 of th e GATT 1994 and the provisions of
paragraph 5.1 of Part I of the Accession Protocol as well as China's obligations under the provisions
of paragraph 1.2 of Part I of th e Accession Protocol (to the extent that it incorporates commitments in
paragraph 22 of the Working Party Report).

B. Audiovisual Home Entertainment Products

In Sector 2D of its Schedule, China unde rtook market access and national treatment
commitments with respect to the supply through commercial presence in China by service suppliers of
other Members of distribution services for a range of products including, inter alia, audiovisual home
entertainment products, such as video cassettes and DVDs.

The measures at issue, however, appear to prohibit foreign service suppliers (including
wholly or partially foreign-owned or foreign-i nvested enterprises) from engaging in a type of
distribution described in these measures as the "mast er distribution" or "master wholesaling" of
audiovisual home entertainment products. In addition, to the extent that foreign services suppliers are
permitted to engage in any distribution of those products, the measures at issue appear to impose

requirements that the service be supplied through a fo rm of entity that Chinese persons control, or in
which Chinese persons have a dominant position, or for which there are limitations concerning the
participation of foreign capital. The measures at issue also appear to impose discriminatory
limitations on foreign service suppliers' operating term in China; such limitations do not appear to be
applied to Chinese suppliers of distribution services for audiovisual home entertainment products.

The measures at issue therefore appear to impo se restrictions on the market access of foreign
service suppliers of audiovisual distribution servi ces for audiovisual home entertainment products.
The measures at issue also appear to accord to foreign suppliers of audiovisual distribution services
for audiovisual home entertainment products treatment that is less favorable than that accorded to
Chinese suppliers of audiovisual distribution services for audiovisual home entertainment products.
Moreover, the measures at issue do not appear to fall within the terms, limitations, conditions, or
qualifications on market access or national treatment that China has specified in its Schedule for the
distribution of such products through commercial pr esence in China by service suppliers of other
Members. The measures at issue th erefore appear to be inconsiste nt with China's obligations under
Articles XVI and XVII of the GATS.

C. Sound Recordings

In Sector 2D of its Schedule, China unde rtook market access and national treatment
commitments with respect to the supply of sound recording distribution services through cross-border
supply and through commercial presence in China by service suppliers of other Members.

The measures at issue, however, appear to pl ace market access restrictions and discriminatory
requirements on foreign service suppliers seeking to engage in the digital distribution of sound
recordings. For example, the Interim Regulations on Internet Culture Administration (the "Interim
Regulations") define "internet cultural activiti es" as including activities such as wholesaling and
retailing of "internet cultural products" on the intern et (including to mobile telephones). The Interim
Regulations further define "internet cultural pr oducts" as including various kinds of "network
audiovisual products," including both audiovisual products that have been produced specifically for
transmission over the 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 definition of "internet cultura l products" extends to digital sound recordings, and
that the definition of "internet cultural activities" extends to the digital distribution of such products.

The Interim Regulations and the other measures at issue appear to prohibit any foreign-owned
or foreign-invested entity from obtaining the licen ses necessary to engage in "internet cultural
activities." As a result, the measures at issue a ppear to prohibit any foreign-owned or foreign-
invested entities from digital distribution of "internet cultural products," including 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 favorable treatment than that accorded to Chinese suppliers of sound
recording distribution services. The measures at is sue provide that any "imported" music (which
appears to include music in which certain rights, su ch as the rights described in the first sentence of
Article 41 of the Copyright Law of the People's Repub lic of China, are held by a foreign-owned or
foreign-invested enterprise) is subject to conten t review by the Chinese Government before digital
distribution. However, music in which such rights are held by Chinese enterprises without foreign
investment is not subject to such content review before digital distribution within China.

Consequently, it appears that foreign-owned and foreign-invested sound recording
distribution enterprises in China, as well as ente rprises that supply cross-border sound recording

distribution services, are treated less favorably than like sound recording distribution enterprises that
are wholly Chinese-owned. Moreover, the measures at issue do not appear to fall within the terms,
limitations, conditions, or qualifications on market access or national treatment that China has
specified in its Schedule with respect to the supply of these services. The measures at issue therefore
appear to be inconsistent with China's obligations under Article XVII of the GATS.

III. Distribution of Films for Theatrical Release

The United States also considers that China is acting inconsistently with its obligations under
the GATT 1994 and the Accession Protocol by providing distribution opportunities for imported films
for theatrical release that are less favorable than the distribution opportunities for domestically
produced films for theatrical release.

China appears to establish a dual distribution sy stem for imported and domestically produced
films for theatrical release. Imported films can be distributed within China only by two entities, each
of which operates on a nationwide basis. By contr ast, 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 other subnational basis.

In this connection, the measures at issue involve:

(1) the Regulations on the Administration of the Films Industry
31;

(2) the Provisional Rules on the Entry Criteria for Operating Film Enterprises
32; and

(3) the Provisional Specific Implementing Ru les for Reforming Film Distribution and
Exhibition
33;

as well as any amendments, related measures, or implementing measures.

Accordingly, the measures at issue appear to be inconsistent with China's obligations under
Article III:4 of the GATT 1994 and the provisions of paragraph 5.1 of Part I of the Accession Protocol
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 Working Party
Report).

IV. Distribution of Sound Recordings

The United States considers that China is acting inconsistently with its obligations under the
GATT 1994 and the Accession Protocol by providing di stribution opportunities for sound recordings
imported into China in physical form that are le ss favorable than the distribution opportunities for
sound recordings produced in China.

China appears to require that sound recordings imported into China in physical form but
intended for digital distribution must undergo cont ent review by the Chinese Government prior to
such distribution within China. However, domestic ally produced sound recordings appear not to be

31 State Council Order No. 342, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
32 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.
33 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).

subject to this requirement, but can instead be digita lly distributed immediately. It thus appears that
sound recordings imported into Ch ina in physical form are treated less favorably than sound
recordings produced in China in physical form.

In this connection, the measures at issue involve:

(1) the Interim Regulations on Internet Culture Administration
34;

(2) the Circular of the Ministry of Culture on Relevant Issues of Implementation of the Interim
Regulations on Internet Culture Administration
35;

(3) the Catalogue for Guidance of Foreign Investment Industries 36;

(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
37; and

(5) the Several Opinions on the Develo pment and Regulation of Network Music
38;

as well as any amendments, related measures, or implementing measures.

The measures at issue therefore appear to be inconsistent with China's obligations under
Article III:4 of the GATT 1994 and the provisions of paragraph 5.1 of Part I of the Accession
Protocol, as well as China's obligations under the pr ovisions of paragraph 1.2 of Part I of the
Accession Protocol (to the extent that it incorpor ates commitments in paragraph 22 of the Working
Party Report).

Accordingly, the United States respectfully request s, pursuant to Article 6 of the DSU, that
the Dispute Settlement Body establish a panel to ex amine these matters, with the standard terms of
reference set out in Article 7.1 of the DSU.

Ministry of Commerce (30 November 2004).
37 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).
38 Ministry of Culture (20 November 2006); available at:
http://www.ccnt.gov.cn/xwzx/whbzhxw/t20061211_32440.htm (visited on 9 October 2007).