CHINA - CERTAIN MEASURES CONCERNING IMPORTS OF SUGAR REQUEST FOR CONSULTATIONS BY BRAZIL
Document: REQUEST FOR CONSULTATIONS BY
Date: 22 October 2018
Document codes: WT/DS568/1; G/L/1263; G/SG/D62/1; G/LIC/D/53; G/AG/GEN/146
Complainant: Brazil
Respondent: China
Dispute stage: Consultation
Agreements cited: Art. 4.2  AgricultureArt. II:1(a), II:1(b), X:1, X:2, X:3(a), XI:1, XIII:2, , XIII:3(b), XIX:1  GATT 1994Art. 1.2, 1.3, 2.2(a), 3.2, 3.3  Import LicensingArt. 2.1, 3.1, 4.1(a), 4.1(c), 4.2(a), 4.2(b), 4.2(c), 5.1, 7.1  SafeguardsPart I, para. 1.2  Protocol of Accession

CHINA - CERTAIN MEASURES CONCERNING IMPORTS OF SUGAR
REQUEST FOR CONSULTATIONS BY BRAZIL
The following communication, dated 16 October 2018, from the delegation of Brazil to the delegation
of China, is circulated to the Dispute Settlement Body in accordance with Article 4.4 of the DSU.

My authorities have instructed me to request 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 ("DSU"), Article XXII:1 of the General Agreement
on Tariffs and Trade 1994 ("GATT 1994"), Article 14 of the Agreement on Safeguards, Article 6 of
the Agreement on Import Licensing Procedures , and Article 19 of the Agreement on Agriculture
concerning:

1. China's 22 May 2017 safeguard measure on imported sugar;
2. China's administration of its tariff-rate quota ("TRQ") for sugar; and
3. China's so-called "automatic import licensing " system ("AIL System") for out-of-quota
sugar.
These measures are further identified and described below. An indication of the legal basis for the
complaint is equally provided.
I. China's safeguard measure
A. Identification of the measure
On 22 September 2016, the Ministry of Commerce of the People 's Republic of China ( "MOFCOM")
initiated a safeguard investigation into imports of sugar. This investigation was notified to the WTO
Committee on Safeguards (the "Committee") on the same day.1 The investigation covered both raw
and refined sugar.2
On 26 April 2017, China notified the Committee of "findings of serious injury or threat thereof caused
by increased imports" of sugar.3

1 Notification under Article 12.1(a) of the Agreement on Safeguards on Initiation of an Investigation and
the Reasons for it. China (Sugar). G/SG/N/6/CHN/2, circulated on 26 September 2016.
2 According to China’s notification to the Committee on Safeguards, “This product is classified under the
following code of the Customs Import and Export Tariff of the People's Republic of China: 17011200,
17011300, 17011400, 17019100, 17019910, 17019920, 17019990 (among which code 17011300 and
17011400 is classified under code 17011100 in the 2011 version of the Customs Import and Export Tariff of
the People's Republic of China)”. G/SG/N/6/CHN/2.
3 Notification under Article 12.1(b) of the Agreement on Safeguards on Finding a Serious Injury or
Threat Thereof Caused by Increased Imports. China (Sugar). G/SG/N/8/CHN/2, circulated on 27 April 2017.
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

On 22 May 2017, MOFCOM adopted and applied a safeguard measure by publishing its determination
to apply a safeguard measure with respect to imports of sugar (the "Determination")4. On the same
day, China notified the safeguard measure, as laid out in the Determination, to the Committee.5
China's safeguard measure on sugar takes the form of an additional ad valorem duty of 45% for the
first year, followed by 40% in the second year and 35% in the third year of its implementation.
The safeguard duty applies to imports outside the existing TRQ for sugar. When China acceded to
the WTO in 2001, it established a TRQ of 1,945,000 tons for sugar, covering raw and refined sugar.6
The in-quota rate for this sugar is 15%. The out-of-quota rate had been 50%, but with the imposition
of the sugar safeguard, the out-of-quota rate was significantly increased. The three-year safeguard
thus applies as follows:
Duration Additional ad valorem
safeguard duty

Total duties on out -of-quota
sugar
May 22, 2017 –
May 21, 2018
45% 95%
May 22, 2018 –
May 21, 2019
40% 90%
May 22, 2019 –
May 21, 2020
35% 85%

China's notification to the Committee also included an extensive list of developing countries that
were exempt from the safeguard measure, as the "import shares of these countries (regions)
collectively are about 2.48%".7
On 17 July 2018, China notified the Comm ittee that the "list of developing countries (regions)
exempted from the safeguard measure should be revoked " and that the safeguard measure "will
apply to the imports of sugar from all developing countries (regions) as from 1 August 2018".8
This part of the consultations request concerns China 's safeguard measure on sugar, including all
decisions and notifications of China mentioned above; any related or implementing measures; and
amendments, successor or replacement measures taken by the authorities in r elation to this
investigation and/or the imposition of the safeguard. The measures at issue are referred to below
as "China's safeguard measure".

B. Legal basis for the complaint
China's safeguard measure appears to be inconsistent with China's obligations under the GATT 1994
and the Agreement on Safeguards, including but not limited to the provisions listed below. In
particular, China appears to have acted inconsistently with:
(a) Article XIX:1(a) of the GATT 1994 because China failed to make a determination
consistent with that provision with respect to the existence of alleged unforeseen
developments, and how those alleged unforeseen developments resulted in
increased imports of the sugar products covered by China's safeguard measure.

4 Announcement No.26 [2017] of the Ministry of Commerce — Announcement on the Application of
Safeguard Measures against Imported Sugar. The Ministry of Commerce of the People’s Republic of China, 22
May 2017.
5 Notification under Article 12.1(b) of the Agreement on Safeguards on Finding a Serious Injury or
Threat Thereof Caused by Increased Imports. Notification Pursuant to Article 12.1(c) of the Agreement on
Safeguards. Notification Pursuant to Article 9, Footnote 2 of the Agreement On Safeguards. China (Sugar).
G/SG/N/8/CHN/2/Suppl.1; G/SG/N/10/CHN/2; G/SG/N/11/CHN/2, circulated on 23 May 2017.
6 Trade Policy Review Body, Report by the Secretariat: China. WT/TPR/S/342, 15 June 2016, Table 4.2.
See also Trade Policy Review Body, Report by the Secretariat: China. WT/TPR/S/375, 6 June 2018, Table 4.4.
7 G/SG/N/8/CHN/2/Suppl.1; G/SG/N/10/CHN/2; G/SG/N/11/CHN/2; circulated on 23 May 2017.
8 Notification under Article 12.1(b) of the Agreement on Safeguards on Finding a Serious Injury or Threat
Thereof Caused by Increased Imports. Notification Pursuant to Article 12.1(c) of the Agreement on Safeguards.
Notification Pursuant to Article 9, Footnote 2 of the Agreement on Safeguards. China (Sugar). Supplement.
G/SG/N/8/CHN/2/Suppl.2; G/SG/N/10/CHN/2/Suppl.1; G/SG/N/11/CHN/2/Suppl.1, circulated on 18 July 2018.
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

(b) Article XIX:1(a) of the GATT 1994 because China failed to make a determination
consistent with that provision with respect to the effect of obligations incurred by
China under the GATT 1994, and how that effect resulted in the alleged increase in
imports of the sugar products under investigation.
(c) Articles 2.1, 3.1 and 4.2(a) of the Agreement on Safeguards and Article XIX:1(a) of
the GATT 1994 because China failed to make a determination consistent with those
provisions with respect to alleged increase in imports of the sugar products under
investigation.
(d) Articles 2.1, 4.1(a), 4.1(c), 4.2(a), and 4.2(b) of the Agreement on Safeguards and
Article XIX:1(a) of the GATT 1994 because China fai led to define the domestic
industry in accordance with those provisions, among other reasons by excluding
producers of the like or directly competitive products, and by failing to ensure that
the domestic industry is limited only to those producers of prod ucts that are like or
directly competitive with the subject imports, thus also failing to make a proper
determination as to whether the alleged increased imports caused serious injury to
the relevant domestic industry.
(e) Articles 2.1, 4.1(a), 4.1(c), 4.2(a) and 4.2(b) of the Agreement on Safeguards and
Article XIX:1(a) of the GATT 1994 because China failed to make a determination
consistent with those provisions with respect to the existence of an alleged serious
injury to the domestic industry.
(f) Articles 2.1, 4.2(a), and 4.2(b) of the Agreement on Safeguards and Article XIX:1(a)
of the GATT 1994 because China failed to establish the existence of a causal link
between the alleged increased imports and the alleged serious injury to the domestic
industry, and failed to determine that the alleged serious injury caused by factors
other than the increased imports was not attributed to increased imports.
(g) Articles 5.1 and 7.1 of the Agreement on Safeguards and Article XIX:1(a) of the
GATT 1994 because China's safeguard measure was not imposed only to the extent
necessary to prevent or remedy the alleged serious injury and to facilitate
adjustment.
(h) Articles 3.1 and 4.2(c) of the Agreement on Safeguards and Article XIX:1(a) of the
GATT 1994 because China failed to set forth adequate findings and reasoned
conclusions reached on all pertinent issues of fact and law and to provide a detailed
analysis of the case under investigation, as well as a demonstration of the relevance
of the factors examined.
(i) Article 8.1 of the Agr eement on Safeguards because China did not endeavour to
maintain a substantially equivalent level of concessions and other obligations to that
existing under the GATT 1994 between it and Brazil.
(j) Article 12.3 of the Agreement on Safeguards because China fai led to provide
adequate opportunity for prior consultations with Brazil, which has a substantial
interest as one of the main exporters of sugar to China prior to the safeguard
measure.
(k) Article 11.1(a) of the Agreement on Safeguards because China imposed th e
safeguard measure in violation of Articles 2.1, 3.1, 4.1(a), 4.1(c), 4.2(a), 4.2(b),
4.2(c), 5.1, 7.1, 8.1 and 12.3 of the Agreement on Safeguards as well as Article
XIX:1(a) of the GATT 1994.
(l) Article II:1(a) and (b) of the GATT 1994 because in applying its safeguard measure,
China failed to accord treatment no less favourable to sugar products from Brazil
than that provided for in the appropriate part of China's Schedule.
China's safeguard measure therefore nullifies or impairs benefits accruing to Brazil directly or
indirectly under the Agreement on Safeguards and the GATT 1994.
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

II. China's administration of its tariff rate quota for sugar
A. Identification of the measure
China's Schedule of Concessions and Commitments on Goods provides for a TRQ to permit the
importation of specified volumes of sugar at lower in-quota duty rates.9 However, China appears to
administer the TRQ for sugar inconsistently with its WTO obligations. In particular, China 's
administration of its TRQ for sugar appears to be inconsis tent with its commitments specified in
paragraph 1.2 of Part I of the Protocol on the Accession of the People's Republic of China (WT/L/432)
("Accession Protocol") which incorporates the commitments in paragraph 116 of the Report of the
Working Party on the Accession of China (WT/MIN(01)/3) ("Working Party Report"), as well as with
Articles X:3(a), XI:1, XIII:2 and XIII:3(b) of the GATT 1994.

The legal instruments through which China has established its TRQ for sugar include, but are not
limited to, the following, operating separately or collectively:

• Foreign Trade Law of the People's Republic of China (Adopted at the 7th Session of Standing
Committee of the Eighth National People's Congress on May 12, 1994; revised at the 8th
Session of the Standing Committee of the Tenth National People's Congress on April 6, 2004;
and amended in accordance with the Decision on Amending Twelve Laws Including the
Foreign Trade Law of the People's Republic of China adopted at the 24th Session of the
Standing Committee of the Twelfth National People's Congress on November 7, 2016);

• Customs Law of the People's Republic of China (adopted at the 19th Meeting of the Standing
Committee of the Sixth National People's Congress on 22 January 1987, amended at the
30th Meeting of the Standing Committee of the Twelfth National People 's Congress on 4
November 2017);

• Regulation of the People's Republic of China on the Administration of the Import and Export
of Goods (Decree of the State Council No. 332, adopted at the 46th executive meeting of
the State Council on 31 October 2001, effective 1 January 2002); and

• Regulation of the People 's Republic of China on Import and Export Duties (Decree of the
State Council No. 392, adopted at the 26th executive meeting of the State Council on 29
October 2003, amended 1 March 2017, in Decree No. 676).

The legal instruments through which China administers its TRQ for sugar include, but are not limited
to, the following, operating separately or collectively:

• Directory of State-Trading Importing Enterprises (published by the Ministry of Commerce on
17 January 2003);

• Provisional Measures on the Administration of Import Tariff -Rate Quotas for Agricultural
Products (Decree of the Ministry of Commerce and the National Development and Reform
Commission [2003] No. 4, 27 September 2003, effective 27 September 2003);

• Public Notice on Authorized Agencies for Agricultural Product Import Tariff -Rate Quotas
(Announcement of the Ministry of Commerce and the National Development and Reform
Commission, [2003] No. 54, 15 October 2003);

• Detailed Rules on the Application and Allocation of Sugar Import Tariff-rate Quotas in 2018
(Announcement of the Ministry of Commerce [2017] No. 59, 30 September 2017);

9 China’s most recent notification of tariff rate quotas to the WTO Committee on Agriculture, dated
2 February 2016 (G/AG/N/CHN/30), states that the TRQ for sugar applies to these products:
• Raw cane sugar, in solid form 17011300 17011400
• Raw beet sugar, in solid form 17011200
• Cane or beet sugar, chemically pure sucrose, containing added flavouring or colouring 17019100
• Granulated sugar 17019910
• Superfine sugar 17019920
• Other cane or beet sugar, chemically pure sucrose, in solid form, n.e.s. 17019990
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

• Notice on the Publication of Applicant Enterprises for Import Tariff-Rate Quotas for Sugar in
2018, (published by the Ministry of Commerce on 29 November 2017); and

• Public Notice on the Reallocation of Import Tariff -Rate Quotas for Agricultural Products in
2018 (Announcement of the Ministry of Commerce and the Natio nal Development and
Reform Commission [2018] No. 9, 8 August 2018).

This part of the consultations request concerns China's administration of its TRQ for sugar, including
all measures, decisions and notifications of China mentioned above; any related or implementing
measures; and amendments, successor or replacement measures taken by the authorities in relation
to China's administration of its sugar TRQ.

B. Legal basis for the complaint
China's administration of its TRQ for sugar appears to be inconsistent with China's obligations under
the Accession Protocol and the GATT 1994, including but not limited to the provisions listed below.
In particular, China appears to have acted inconsistently with:
(a) Paragraph 1.2 of Part I of the Accession Protocol, which incorporates the
commitments in paragraph 116 of the Working Party Report10, because:
• China has failed to ensure that it administers its sugar TRQ on a tr ansparent,
predictable, uniform, fair and non-discriminatory basis.
• China has failed to ensure that it administers its sugar TRQ using clearly specified
timeframes, administrative procedures and requirements that would provide
effective import opportunitie s and reflect consumer preferences and end -user
demand.
• China has failed to ensure that it administers its sugar TRQ using administrative
procedures and requirements that would not inhibit the filling of the TRQ.
• China has failed to apply its sugar TRQ in full accordance with WTO rules and
principles and with the provisions set out in China's Schedule of Concessions and
Commitments on Goods.
(b) Article X:3(a) of the GATT 1994, because China has failed to administer its sugar
TRQ in a uniform, impartial and reasonable manner.
(c) Article XI:1 of the GATT 1994, because China institutes or maintains restrictions on
importation of sugar, including those made effective through quotas.
(d) Article XIII:2 of the GATT 1994, because China has failed to aim at a distribution of
trade in sugar approaching as closely as possible the shares which the various WTO
Members might be expected to obtain in the absence of such restrictions.
(e) Article XIII:3(b) of the GATT 1994, because China has failed to give public notice of
the total quantity or value of sugar which will be permitted to be imported during a
specified future period and of any change in such quantity or value.
China's administration of its sugar TRQ therefore nullifies or impairs benefits accruing to Brazil
directly or indirectly under the Accession Protocol and the GATT 1994.

III. China's Automatic Import Licensing System for Sugar (the "AIL System")
A. Identification of the measure
With respect to imports of sugar not covered by the TRQ, MOFCOM requires that importers and
refiners obtain an import license, which China labels as an "automatic" import license. However,
before such requests for import licenses are made, MOFCOM provides verbal instructions to
importers and refiners, informing each o f them of the maximum amount of sugar that they will be

10 As specified in China's Accession Protocol, Part I, paragraph 1.2 (incorporating commitments
referenced in paragraph 342 of China's Working Party Report, including paragraph 116).
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

permitted to import outside of the TRQ. Importers and refiners make their import requests based
on such instructions, and they refrain from requesting authorization to import sugar above the
pre-determined amounts.

Despite its name, the AIL System is thus not an "automatic" licensing system. Approval is granted
only up to the maximum level approved by MOFCOM. China makes this restriction effective through
import licenses, which are granted only if t he request presented by the importer does not exceed
the amount set by MOFCOM. Furthermore, under the AIL System, if imports increase too rapidly,
MOFCOM can reduce or stop the issuance of licenses to import sugar at any time. China is thus
restricting the importation of out-of-quota sugar.

The measure being challenged consists of the AIL System and the requirements imposed by China
in the context of its AIL System that limit the amount of sugar for which importers and refiners may
request an import lice nse. The relevant legal provisions include those identified in Section II.A of
this request, plus those that implement the AIL System:

• Administrative Licensing Law (adopted at the 4th Meeting of the Standing Committee of the
Tenth National People's Congress on 27 August 2003, effective 1 July 2004);

• Administrative Measures for Automatic Import License of Goods (Decree of the Ministry of
Commerce and the General Administration of Customs [2004] No. 26, 10 November 2004,
effective 1 January 2005);

• Measures for the Administration of Issuing Authorities of Import and Export Commodity
Licenses (Decree of the Ministry of Commerce [2010] No. 3, 12 September 2010, effective
12 September 2010);

• Measures on the Administration of the Certificates of Import and Export Licenses (Decree of
the Ministry of Commerce [2012] No. 1, 4 February 2012, effective 5 March 2012);

• Public Notice on the Inclusion of Sugar in the Catalogue for Commodities Subject to
Automatic Import Licenses (Announcement of the Ministry of Comm erce and the General
Administration of Customs and Commerce Ministry [2014] No. 71, 13 October 2014,
effective 1 November 2014);

• Detailed Rules on the Administration of Automatic Import Licenses of the Foreign -Invested
Enterprises (Decree of the Ministry of Foreign Trade and Economic Cooperation and the
General Administration of Customs, [2002] No. 4, 8 February 2002, amended by Decree of
the Ministry of Commerce [2015] No. 2, 28 October 2015, effective 28 October 2015);

• Catalogue for Commodities Subject to Automatic Import Licenses in 2018 (Announcement
of the Ministry of Commerce, the General Administration of Customs, and the General
Administration of Quality Supervision, Inspection and Quarantine, [2017] No. 87, 10
December 2017, effective 1 January 2018); and

• Tariff Adjustment Program for 2018 (Notice of the Customs Tariff Committee of the State
Council [2017] No. 27, 12 December 2017, effective 1 January 2018).

as well as any amendments, or successor, replacement or implementing measures.

B. Legal basis for the complaint
China's AIL System, a non -automatic import licensing system as described above, appears to be
inconsistent with China 's obligations under the GATT 1994, the Agreement on Import Licensing
Procedures, the Agreement on Agriculture and the Accession Protocol. In particular, China appears
to have acted inconsistently with:

(a) Article X:1 of the GATT 1994, because China has failed to publish this measure
promptly in such a manner as to enable governments and traders to become
acquainted with it.
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

(b) Article X:2 of the GATT 1994, because China has enforced this measure prior to
publication.
(c) Article X:3(a) of the GATT 1994, because China has failed to administer this measure
in a uniform, impartial and reasonable manner.
(d) Article XI:1 of the GATT 1994, because China institutes or maintains restrictions on
the importation of sugar, including those made effective through import licenses.
(e) Article XIII:2 of the GATT 1994, because China has failed to aim at a distribution of
trade in sugar approaching a s closely as possible to the shares which the various
WTO Members might be expected to obtain in the absence of such restrictions.
(f) Article XIII:3(a) of the GATT 1994, because in issuing import licences in connection
with import restrictions, China has fail ed to provide all relevant information
concerning the administration of the restrictions.
(g) Article 1.2 of the Agreement on Import Licensing Procedures, because China has
failed to ensure that the administrative procedures used to implement this import
licensing regime are in conformity with the relevant provisions of GATT 1994.
(h) Article 1.3 of the Agreement on Import Licensing Procedures, because China has
failed to ensure that the rules for these import licensing procedures are neutral in
application and administered in a fair and equitable manner.
(i) Article 2.2(a) of the Agreement on Import Licensing Procedures, because China has
failed to ensure that that automatic licensing procedures are not administered in
such a manner as to have restricting effects on imports subject to automatic
licensing, should the AIL System be considered a form of automatic import licensing.
(j) Article 3.2 of the Agreement on Import Licensing Procedures, because China has
failed to ensure that non -automatic licensing does not have trade -restrictive or
trade-distortive effects on imports additional to those caused by the imposition of
the restriction.
(k) Article 3.3 of the Agreement on Import Licensing Procedures, because China has
failed to ensure that in the case of licensing requirements for purposes other than
the implementation of quantitative restrictions, it has published sufficient
information for other Members and traders to know the basis for granting and/or
allocating licences.
(l) Article 4.2 and footnote 1 of the Agreement on Agriculture, because China has failed
to ensure that it does not maintain, reso rt to, or revert to certain measures of the
kind which have been required to be converted into ordinary customs duties,
including quantitative import restrictions and discretionary import licensing.
(m) Paragraph 1.2 of Part I of the Accession Protocol, because China has failed to ensure
that it has complied with the commitments in paragraphs 120, 122, 127 and 136 of
the Working Party Report 11, as well as paragraphs 2(C)(1) and 8(1)(a) of the
Accession Protocol.
The AIL System System therefore nullifies or impairs benefits accruing to Brazil directly or indirectly
under the GATT 1994, the Agreement on Import Licensing Procedures, the Agreement on Agriculture
and the Accession Protocol.
For all of the measures identified in all parts of this request, Brazil reserv es the right to raise
additional claims and measures and address additional legal and factual issues under other

11 As specified in China's Accession Protocol, Part I, paragraph 1.2 (incorporating commitments
referenced in paragraph 342 of China's Working Party Report, including paragraph 116).
WT/DS568/1 • G/L/1263 • G/SG/D62/1 • G/LIC/D/53 • G/AG/GEN/146

provisions of the covered agreements during the course of the consultations and in any future
request for panel proceedings.

Brazil looks forw ard to receiving China 's reply to this request and to determining a mutually
convenient date for consultations.