 
  WORLD TRADE  
ORGANIZATION  G/MA/W/60 
8 September 2004 
 (04-3800) 
Committee on Market Access Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM 
 
Communication from Japan
 
  
 The following communication, dated 8 September 2004, is being circulated at the request of 
the Delegation of Japan.  
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Questions and Comments of JAPAN on the Implementation by CHINA of its
 
Commitments on Market Access  
  
1. Japan welcomes that, in the third year afte r accession, implementation by China of its 
commitments on market access has progressed and en tered into a cruising phase. In a transitional 
period of evolving regulations, the importance of re gulatory transparency, predictability, stability and 
consistency is paramount; the value of market acce ss commitments and the efforts to implement them 
could be easily clouded out by a shortness of such el ements either in regulations themselves or in their 
application. The transitional review mechanism coul d be useful for making those transitional efforts 
more efficient and productive, and it is a pleasu re for Japan to contribute to this process. 
 2. In this context, China is further invited to ta ke necessary steps to ensure regular and effective 
application of public comments procedures, well- in-advance publication of laws and regulations, 
avoidance of abrupt regulatory change, clear demarcation of departmental responsibilities, improvement in inter-departmental and central- provincial coordination and consistency, etc. 
 
3. In accordance with Paragraph 18 of the Protocol  on the Accession of the People’s Republic of 
China, which states that “China shall provide releva nt information to each subsidiary body in advance 
of the review” and in the spirit of cooperation to render the TRM process most efficient and effective, 
Japan requests China to provide in advance of the meeting of the Committee on Market Access, 
responses and relevant information to the following questions and comments. 
 1.   Tariff policy
 
 
(1)  Tariff rates on photographic products 
 
(a) The tariff concessions provided by China when  acceding to the WTO clearly states China’s 
commitment to reduce tariffs on photographic products (HS37) to 0-53.5% in the form of ad valorem 
(levied on yuan/yuan) duties as of 2002. Howeve r, for 35 items of photographic products, including 
ordinary photographic film, China has not applie d the committed concession rates. Instead, China has 
imposed specific duties (levied on yuan/square metre basis) equivalent to far more excessive tariff 
rates. For example, though the concession rate fo r the finished 35mm color negative film should be G/MA/W/60 
Page 2  
 
 30%, the duty currently imposed on is a specific duty, 120 yuan/m
2, which is equivalent to over 100% 
in ad valorem terms. 
 
In this context, Japan would like to urge China:  
- to clarify the legitimate reason, if any, why China keeps these specific duties in spite of the 
commitment China has made to the concession tari ff rates in the form of ad valorem duties. 
- to provide a specific schedule for the applicati on of tariff concessions committed at the time 
of WTO accession in the form of ad valorem duti es with regard to the 35 items of photographic 
products.  
(b)  Although Japan has no intention of admitti ng the current Chinese position on using specific 
duties, we are prepared to discuss this problem in  a bilateral manner which China offered at the WTO 
Market Access meeting in October 2003. Japan w ould like to ask China to provide us with a 
framework on the experts meeting, including res ponsible organizations, titles of participants, 
schedule, and venue. 
 
(2)   Tariff classification
 
 
(a) Some cases can be seen in Chin a where the decisions in the application of tariff classifications 
differ among the officials even in the same customs zone. As a result, some Japanese companies are 
obliged to pay higher tariffs without being able to  appeal. With respect to the tariff classification 
issue, Japan understands that China has two types of formal decisions on tariff classification: one is an 
Advance Decision and the other is an Administra tive Ruling. Compared to an Advance Decision, 
which is valid only for one year and only in the governing customs zone, Japan believes that an 
Administrative Ruling is more desirable for it is made  public all over China and is effective to all the 
importers on a permanent basis. However, it is sai d that in practice there have not been any cases 
where an Administrative Ruling has been issued.  
(b) In this context, we would like to urge China to improve the situation by using the 
Administrative Ruling scheme effectively as well as to  resolve cases such as th e one described below. 
 
[case]  A company exports commercial AV equipmen t to China. Previously the company’s product 
was allowed to clear through customs without any tariffs being imposed under the oral guidance given by the officials of the local customs zone in Shanghai. One day, however, 
another organization in the same customs zone he ld an investigation and, as a result, a  30% 
tariff was imposed, to which the company could not make an appeal. The company has been 
applying for an Advance Decision regarding th is product’s tariff classification since the end 
of last year, without receiving any clear response. 
 
2.   Automobile policy
 
 (1)  Auto Industry Development Policy 
 
(a)    Prohibition of sales of both Chinese-made and imported automobiles  
At the follow-up meeting of the Japan-China ec onomic partnership consu ltation in June 2004, 
China clearly stated that the Auto Industry De velopment Policy which took effect on and after 
1 June 2004 does not prohibit any dealers from se lling both Chinese-made and imported automobiles 
in China. 
 
 In this context, Japan would like to urge China:  G/MA/W/60 
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- to confirm that the Chinese government’s statem ent means that even if any other regulation 
exists, dealers are always allowed to sell bot h Chinese-made and imported automobiles without 
any conditions. 
- to confirm that there is no sales discriminati on, in any fashion, between Chinese-made and 
imported automobiles. 
 
 In addition, at the same meeting, China al so stated that it is now preparing a new 
legislation/regulation in order to control automobil es’ brands in a manner consistent with WTO rules. 
 
In this context, Japan would like to urge China: 
 
- to explain the latest status of this legislation/regulation. - to provide a legislation/regulation draft, if there is any. 
 (b)    Authorizing system of complete automobile feature 
 
(i) Japan is very concerned about the Chapter XI  of the Auto Industry Development Policy. 
In particular, under the certain conditions of wh ich the Articles 55, 56 and 57 stipulate, the 
Chinese authorities shall identify sets of component s for automobile at their discretion as to 
what constitutes complete automobile feature. Consequently, despite the legitimate import of 
sets of components, these Articles may perm it the customs authorities to impose higher 
customs duty, which equals to that of complete automobiles, upon the sets of components. 
 
(ii)  Japan understands that the customs duties shall be imposed at the point of time when 
goods are entering the importing country. If the unit of imported goods is an automobile 
component only, the customs duty shall be for an  automobile component as itself. Therefore, 
in cases where customs authorities impose different higher tariff rates such as that of complete 
automobile on automobile components, we suspect  its inconsistency with the Article II of the 
GATT. 
 
In this context, Japan would like to urge Ch ina to clarify its understanding on this issue. 
 
(iii)  In addition, according to Paragraph 93 of the Working Party Report on the accession of 
China, China clearly confirmed that it had no ta riff lines for completely knocked-down kits or 
semi-knocked down kits for automobiles and stat ed as well that if Chin a were to create such 
tariff lines, the tariff rates would be no more than 10 per cent. 
 
In this context, Japan would like to urge China to confirm that even if China were to create 
new tariff lines on automobile components in order to  prevent any customs loss, the tariff rates would 
be determined in accordance with the paragra ph 93 of the Working Party Report on the accession of 
China. 
 
(iv)  As noted above, Japan takes a great inte rest in the Auto Industry Development Policy 
which was publicized on 1 June 2004 in terms of WTO rules.  In this context, Japan would 
like to urge China to implement the Policy in consistency with WTO rules and would like to 
request, in line with the transparency require ments under WTO rules, relevant information 
such as implementation legislations/regula tions will be open well in advance so that 
comments from WTO members incl uding Japan could be taken into account appropriately. 
 G/MA/W/60 
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 (2)   Implementation of import quotas for automobiles 
 
China has committed in Paragraph 124 of the Working Party Report and Annex 3 of the 
Protocol to completely abolish by 1 January 2005 an y import restrictions which are inconsistent with 
the WTO rules, specifically Article XI of the GATT 1944. 
 
   In this context, Japan would like to urge Ch ina to confirm that China will completely abolish 
by 1 January 2005 all import restrictions includi ng import quotas for automobiles and automobile 
primary parts, specified in Annex 3 of the Prot ocol, and will not maintain  any non-tariff measures 
regarding automobiles thereafter. 
 (3)  Transparency in issuing import licenses on automobiles  
(a) The Chapter IV of the Measures on the Admini stration of Import of Machinery and Electronic 
Products which entered into force on 1 January 200 2 provides that any applications for import of 
products which are subject to this  Act shall be approved in any circumstances. In real practice, 
however, there seem to be cases, for example, where certifications of permission for automobile imports of 30 or above passenger buses were issued on ly for half of the applications. Furthermore, in 
such cases, Chinese authority did not respond suffici ently to the applicants’ request for providing 
specific reasons for limited certifications. 
 
In this context, Japan would like to urge China:  
- to clarify whether China will maintain the Automatic Import License System provided in 
Chapter IV of the Measures on the Administration of Import of Machinery and Electronic 
Products after 1 January 2005. 
- to explain the objective of this system if Chin a were to maintain this system even after 1 
January 2005 since it could be regarded as a non-tariff measure which is inconsistent with 
WTO rules. 
- to approve all imports applications in accord ance with the Measures on the Administration of 
Import of Machinery and Electronic Products, if Ch ina were to maintain the Measure even after 
1 January 2005, given that the system is ope rated in consistency with the WTO rules. 
 
3.   Import policy
 
 Import prohibition of used goods 
 
(a)  China implements an across- the-board prohibition on imports of used goods including worn 
clothing in terms of the necessity “to protect human, animal or plant life or health.” However, Japan 
is greatly concerned about the co nsistency of these import prohib ition measures with WTO rules, 
especially the GATT Article XI. 
 (b)  Worn clothing exported from Japan has not raised any hygiene-related problems with any 
other importing coun tries. Therefore, Japan considers th e import prohibition measure imposed by 
China as not justified under the WTO rules. 
 
(c)  In this context, Japan would like to urge China:  
-  to abolish such impo rt prohibition measures. 
- to explain the understanding of the Chinese G overnment on the consistency, if any, with 
WTO rules regarding the im port prohibition measure. 
  G/MA/W/60 
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 4.   Specific policies  
 (1) Integrated circuits(ICs) VAT refund 
 
(a) Japan understands that the US and China have  reached an agreement on the ICs VAT issue, 
and we also welcome the fact that the China will completely abolish its VAT refund program by the 
end of March 2005. 
 
(b) In this context, Japan would like to urge China: 
 
- to confirm that the companies that have al ready made an application under the present 
program will receive a proper VAT refund no later than the end of March 2005.  
(c) Japan would also like to ask whether China h as any plan to formulate any financial or non-
financial support program for domestic ICs manufacturers.  If so, please provide information 
including details of such support program s and timetables for its implementation. 
 
(2)   Trading rights 
 
Japan understands that the revised Foreign Trade Law entered into force on 1 July 2004 so as 
to implement the commitments on the accession to the WTO, including the granting of trading rights. Japan requests China to implement the revised  Act consistently with the WTO rules. 
 In this context, Japan would like to urge China to explain the current status of the 
implementation of granting the trading rights. 
 
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