WORLD TRADE
ORGANIZATIONG/LIC/8
30 September 2002
(02-5204)
Committee on Import Licensing
24 September 2002Original:  English
STATEMENT MADE BY THE UNITED STATES
UNDER AGENDA ITEM C1
The following statement, made by the representativ e of the United States at the meeting of the
Committee on Import Licensing on 24 September 2002, is being circulated at the request of the
Permanent Mission of the United States.
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Transitional Review under Section 18 of the Protocol of Accession of China
Statement and additional questions for China
1. We thank China for its notifications and submissions contained in G/LIC/W/18,
G/LIC/N/1/CHN/1 and Add.1 and G/LIC/N/3/ CHN/1 circulated late last week.  They have been
forwarded to Washington for review .  We will submit to China as soon as possible any additional
questions or requests for clarification that we might have based on those notifications and other
information, and we ask that China provide written responses to these questions in time for them to be
included in the report.  These questions and China’s responses should be considered an integral part of
this committee’s review of China’s implementation.
2. We are disappointed that China did not provide written responses in advance of this meeting
to the questions submitted by the United States and other Members.  The information requested in
those questions is precisely the type of information relevant to China’s implementation of the WTO
Agreement and China’s Protocol that is required by the Transitional Review Mechanism (TRM)established in Section 18 of China’s Protocol.  This review was an essential element of China’s
accession package, and China’s agreement to provide information under this review was a part of that
commitment.  We ask that China provide written responses to the questions that we already submitted,
in time for the responses to be included in the report.
3. Can China agree to this (i.e. to provide written responses in time to be included in the report)?
4. While we welcome the additional information provided by China last week, we received it
only three working days prior to the review.   If in formation is to be considered part of the review,
Members must at least have the opportunity to read and review it.  China’s failure to provideinformation on time does not mean that the obligation has disappeared.
                                                     
1 Transitional Review under Section 18 of the Protocol of Accession of the People's Republic of China
(WT/L/432).G/LIC/8
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5. As this is a multilateral review of China’s implementation of the Import Licensing Procedures
Agreement and not a bilateral review, we respectfully note that China’s responses must be made to the
Committee as a whole.
6. While we will always welcome the opportunity to discuss these important issues bilaterally, it
is our strong view that both the questions and answers submitted in the context of the TRM should be
made available multilaterally and should be reflecte d in the permanent record of this discussion.  We
believe that other Members may have an interest in knowing China’s responses to the question posed
by this delegation;  we certainly have an interesting in knowing China’s responses to the questions
posed by other Members.
Administration of Agricultural Tariff rate quotas (TRQs)
7. We thank China for meeting with us bilaterally on 11 and 12 September 2002 for
consultations on its administration of agricultural and fertilizer TRQs, as provided for in its schedule
of concessions.  The consultations were useful in that they allowed us to exchange views on some of
the more difficult issues surrounding TRQ administration that have arisen since the TRQs wereallocated in April of this year.
8. The United States recognizes the difficulties that Members can encounter when implementing
new regulations and for China, this issue was compounded given the number of regulations that were
promulgated or revised during the first year of WTO implementation.
9. While China has succeeded in making enormous, and generally useful,  changes to its TRQ
administration system in a relatively short period of time, a few important wrinkles remain to be
ironed out in order for the system to function as smoothly as envisioned in China’s WTO accession
agreement.
10. We seek to assist China in identifying thos e wrinkles so that the regulations and actual
practice are consistent with China’s market access obligations for commodities under TRQs.  To that
end, we respectfully request that the Chinese delegation respond in writing to the whole Committee to
each of the questions raised in our August 2002 submission.
11. We would also like to take this opportunity to make some observations and pose additional
questions based on our bilateral consultations.
Licensing
12. Paragraph 138 of the Report of the Working Party2 states that China will not require a
separate import licence approval for goods subject to a TRQ allocation requirement, but will provide
any necessary import licence in the procedure that granted a quota allocation.  Yet China requires that
end-users apply to the State Development and Planning Commission (SDPC) two times for a single
allocation - once for the initial allocation and a second time for SDPC’s approval to use that allocation
once the importer has a signed contract.
13. Quota-holders are then required to apply for and obtain, at both the local and national level,
an additional import licence from the State General Administration for Quality Supervision and
Inspection and Quarantine (AQSIQ) before the product can be imported.  There appears to be no
legitimate quarantine objectives for these additional licensing requirements that could not easily beachieved through other less burdensome means.
                                                     
2 WT/ACC/CHN/49.G/LIC/8
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14. For entities that wish to import under TRQs reserved for processing, there is yet another
licence required.  End-users are required to obtain a separate processing trade business licence in
order to obtain a TRQ allocation.
15. These separate and multiple licensing requirements and the additional time and effort that it
takes importers to fulfill them are an undue burden on trade and appear to be in conflict with China’s
commitments for TRQ commodities.
16. It is also important that China not unduly restrict end-users' ability to adjust to market
conditions and to operate based on commercial considerations.  Paragraph 6.A of the TRQ headnote
requires China to “establish a tariff-quota system that is open, transparent, fair, responsive to market
conditions, timely, minimally burdensome to trade, and reflects end-user preferences.”  However,China requires quota-holders to provide detailed, time-sensitive commercial information, such as
price and origin, prior to obtaining an import licence, and it restricts the commercial terms that can be
changed thereafter.
17. This requirement unduly restricts an end-user’s ability to adjust to market conditions and
operate based on commercial considerations.  We call China’s attention to its commitment in the TRQ
headnotes stipulating that all commercial terms of trade will be at the sole determination of the
importer and exporter taking into full account the demands of the end-user.
- Please explain why it is necessary for an end-user to have a signed contract before it can apply
for an Agricultural Product Tariff Quota Certificate?  What purpose does this additional step
serve?
- Please explain the steps China will take to eliminate the additional licensing requirements for
TRQ commodities or how it will bring these re quirements into accordance with its WTO
commitments.
18. China prohibits the sale of products imported under “processing” TRQ from being sold on the
domestic market.  End-users who do sell these commodities or their products onto the domestic
market are subject to penalties and to out-of-quota tariffs.  This restriction on utilisation would appear
not to accord with Article 3 of the Agreement on Import Licensing Procedures, which prohibits such
restrictions.
- Can China please explain how this restriction is consistent with its obligations under the
Agreement on Import Licensing Procedures, or explain what steps it will take to remove this
restriction?
AQSIQ licensing requirements
19. The import licensing regulation implemented by AQSIQ pursuant to AQSIQ Ordinance 7
(effective 20 March 2002) does not appear to serve a legitimate SPS concern and does not appear to
be consistent with the terms of the Agreem ent on Import Licensing Procedures on automatic
licensing.  Instead, it is unduly burdensome, non-automatic licensing requirement that appears to be
an additional quantitative restriction.  The AQSIQ licence does not replace inspection at port, but is a
separate licence that must be obtained in advance of importation.  It applies only to imported goods.
20. The AQSIQ licensing process requires multiple approvals at several different levels of
government. Applications at each level of government can take up to 30 days and those applications
that are finally approved take 30 days after issuance to become effective.G/LIC/8
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21. In addition, these licences are only valid for 90 days from the date of issue.  The short period
of validity for these licences places unjustified constraints on importers and exporters.  In practice, the
period of validity is much shorter, according to reports from our industry.
22. Applicants for an AQSIQ import licence mu st state commodity weight (in advance of
shipment), country of origin, and port of destinat ion.  Requiring such information in advance of a
contract being signed is unrealistic, burdensome to trade, and interferes with a quota-holder’s right to
determine the commercial terms of trade.
23. If it is necessary to give quarantine officials advance notice of  shipments, there are less
trade-restrictive ways to gather this information that are consistent with China’s WTO obligations.
- Can China explain what objective it is trying to achieve with this additional AQSIQ licensing
requirement and how this requirement is in accordance with China’s commitments?
- Could China please describe the steps it will take to eliminate or bring its licensing
requirements into accordance with China’s obligations?
Administration of auto quotas
24. According to paragraph 4 of "Implementation Rules on the Quota Administration on Imports
of Machinery and Electrical Products," the Ministry of Foreign Trade and Economic Cooperation(MOFTEC) is responsible for examining and supervising the status of allocation of import licences.
- Please provide relevant information on the current status of import quota allocation
distributed by the following entities: all provinces, autonomous regions, municipalities
directly under the central government and those with independent budgetary status, coastalopen cities, and by external economic trading management departments of special economic
zones and State Council-related machinery/electrical products import/export administrative
offices.
25. We agree with the comment of our Japanese colleague.  Paragraph 129 of the Working Party
Report provides that import licences could be extended once, upon request, for up to three months, if
the request is made before 15 December.
- We would appreciate it if China would ensure that for 2002, the effective period for all quotas
and related  import licences be extended by period for which the quota allocation was
delayed.
26. China has only very recently given to the Committee its list of licensing requirements that
remain in effect;  information on its import licensing procedures in the form of responses to the annual
questionnaire required by Article 7.3 of the Agreement, including information on the purposes,
criteria, and other administrative requirements of the licensing system;  an explanation of the
circumstances which give rise to the licensing requirement and a justification for its continuation.This information should have been provided along with the appropriate tariff rates and quantities
associated with the import restriction sufficiently in advance of this meeting to permit review and
comment.
27. We commend China’s effort to revise its import licensing regulations to comply with WTO
requirements.  However Articles 1.4(a)/8.2(b) of the Agreement state that all rules and information
concerning import licensing procedures should be published and the information notified and made
available to the Committee on Import Licensing.  This has been done too late to permit review.G/LIC/8
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28. Furthermore, in accordance with Section 8.1 (a) of China’s Protocol of Accession, China is
required to publish on a regular basis in the MOFTEC Gazette a list of all entities responsible for the
authorization or approval of imports, and notify th is list to the WTO.  Although various regulations
governing import licensing have appeared on the MOFTEC website, it is not clear if MOFTEC’s
“Import Licensing Affairs Bureau” is the only agency responsible for the authorization or approval ofimports.  China should notify this list to the Committee.
29. Lastly, paragraph 334 of the Report of the Working Party on the Accession of China requires
China to provide translations into one or more of the official WTO languages of all measures
pertaining to or affecting trade in goods, in no case later than 90 days after they were implemented or
enforced.   With regard to import licensing, while we received a number of China’s regulations to
review last week, China clearly failed to fully comply with this aspect of its accession commitments.
- The United States requests China confirm that products listed in Annex 3 of China’s Protocol
of Accession that are subject to import quotas (e.g., fertilizer, agriculture and autos) receive
automatic import licences as part of the application process for quota allocation.  China
should affirm its intention to comply with the scheduled phase-out of licensing requirementsin Annex 3 of China’s Protocol of Accession.
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