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(CHAPTER 42)ARRANGEMENT OF SECTIONS

(CHAPTER 42)ARRANGEMENT OF SECTIONS 196. Some members of the Working Party raised specific concerns regarding such matters as (a) registration of initial imports of chemical products, (b) procedures to obtain and apply "CCIB" safety mark and the "Great Wall" mark, (c) automobiles and parts, and (d) the safety and quality licence system for boilers and pressure vessels. In response, the representative of China stated that China would implement the following measures prior to accession, unless otherwise indicated: (a) Registration of Initial Imports of Chemical Products - Enact and implement, within one year after its accession, a new law and relevant regulations regarding assessment and control of chemicals for the protection of the environment, in which complete national treatment and full consistency with international practices would be ensured.

- Ensure that chemicals listed in the "inventory chemicals" annexed to the above new law and its regulations would be exempted from a registration obligation and that a unified assessment procedure would be established for domestic and imported products under the new law and its regulations.

(b) CCIB Safety Mark and the "Great Wall" Mark - Unify the existing certification marks, i.e., the "CCIB" mark and the "Great Wall" mark into a new certification mark. For like imported and domestic goods, all bodies and agencies would issue the same mark and charge the same fee.

- Accept testing reports for products subject to the International Electrotechnical Commission's System for Conformity Testing to Standards for Safety of Electrical Equipment ("IECEE CB Scheme") to which China was a party, and simplify the procedures for obtaining the new, unified certification mark - Shorten the time period needed for importers to obtain both marks regarding the same products, to no more than three months.

(c) Automobiles and Parts - Unify its laws, regulations and standards applied to domestic and imported automobiles and parts.

- Formulate, publish and implement laws and regulations, standards and implementing regulations to establish a transparent system under which all the laws and regulations would be applied so as to accord imported products treatment no less favourable than that accorded to like products of national origin.

(d) Safety and Quality Licence System for Boilers and Pressure Vessels - Accord imported products treatment no less favourable than that accorded to products of national origin, including fees imposed for conformity assessment and the effective period of factory certification.

- Adopt international standards as the basis for technical regulations and exempt imported products from inspection where like domestic products were not subject to such inspection.

The Working Party took note of these commitments.

197. The representative of China confirmed that, except as otherwise specified in the Protocol, China would apply all obligations under the TBT Agreement from the date of accession. The Working Party took note of this commitment.

4. Sanitary and Phytosanitary Measures 198. Some Members of the Working Party expressed concerns in relation to the use by China of sanitary and phytosanitary ("SPS") procedures as non-tariff barriers and raised specific instances where they considered that China's measures were not consistent with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures ("SPS Agreement"). Members sought assurances that China would only use SPS measures to the extent necessary to protect human, animal or plant life or health, and that such measures would be based fully on scientific principles.

199. The representative of China stated that pursuant to the provisions of the SPS Agreement, China applied SPS measures only to the extent necessary to protect the life and health of human beings, animals and plants. He also noted that most of China's SPS measures were based on international standards, guidelines and recommendations. China would not apply SPS measures in a manner which would act as a disguised restriction on trade. In accordance with the SPS Agreement, China would ensure that SPS measures would not be maintained without sufficient scientific evidence. The Working Party took note of these commitments.

200. Members of the Working Party expressed the view that China should comply with the SPS Agreement from the date of China's accession and should ensure conformity with the SPS Agreement of all its laws, regulations, decrees, requirements and procedures relating to SPS measures. In response, the representative of China confirmed that China would fully comply with the SPS Agreement and would ensure the conformity with the SPS Agreement of all of its laws, regulations, decrees, requirements and procedures relating to SPS measures from the date of accession. The Working Party took note of these commitments.

201. Members of the Working Party noted that China's notification of laws, regulations and other SPS measures, referred to in the Protocol, was provided in document WT/ACC/CHN/33. Members of the Working Party agreed that this notification did not prejudge the legal status under the WTO Agreement of the nature or effects of the notified laws, regulations and other SPS measures.

202. The representative of China said that China had set up an SPS notification authority and an SPS enquiry point which would be notified to the SPS Committee. SPS measures, including those relating to inspection, had been published in publications such as the MOFTEC Gazette. Information could also be gathered from the SPS notification authority or from China's SPS enquiry point.

5. Trade-Related Investment Measures 203. The representative of China confirmed that upon accession, as set forth in the Protocol, China would comply fully with the TRIMs Agreement, without recourse to Article 5 thereof, and would eliminate foreign-exchange balancing and trade balancing requirements, local content requirements and export performance requirements. Chinese authorities would not enforce the terms of contracts containing such requirements. The allocation, permission or rights for importation and investment would not be conditional upon performance requirements set by national or sub-national authorities, or subject to secondary conditions covering, for example, the conduct of research, the provision of offsets or other forms of industrial compensation including specified types or volumes of business opportunities, the use of local inputs or the transfer of technology. Permission to invest, import licences, quotas and tariff rate quotas would be granted without regard to the existence of competing Chinese domestic suppliers. Consistent with its obligations under the WTO Agreement and the Protocol, the freedom of contract of enterprises would be respected by China. The Working Party took note of this commitment.

204. In the context of discussions on the government's Industrial Policy for the Automotive Sector, the representative of China confirmed that this policy would be amended to ensure compatibility with WTO rules and principles. The Working Party took note of this commitment.

205. The representative of China added that amendments would be made to ensure that all measures applicable to motor vehicle producers restricting the categories, types or models of vehicle permitted for production, would gradually be lifted. Such measures would be completely removed two years after accession, thus ensuring that motor vehicle producers would be free to choose the categories, types and models they produced. However, it was understood that category authorizations by the government could continue to distinguish between trucks and buses, light commercial vehicles, and passenger cars (including multi-purpose vehicles and sport utility vehicles). The Working Party took note of this commitment.

206. The representative of China confirmed that China also agreed to raise the limit within which investments in motor vehicle manufacturing could be approved at provincial government level only, from the current level of US$30 million, to US$60 million one year after accession, US$90 million two years after accession, and US$150 million four years after accession. The Working Party took note of this commitment.

207. With respect to the manufacture of motor vehicle engines, the representative of China also confirmed that China agreed to remove the 50 per cent foreign equity limit for joint-ventures upon accession. The Working Party took note of this commitment.

6. State Trading Entities 208. Some members of the Working Party expressed concern that the activities of China's state trading enterprises were not sufficiently transparent and were not in accordance with WTO obligations. The representative of China indicated, however, that China's state trading enterprises had full management autonomy and responsibility for their own profits and losses and that China had undertaken broad and significant commitments to improve the transparency of state trading enterprises' operation and the measures relating to such operation.

209. The same members of the Working Party also stated that China should ensure that the import purchasing practices and procedures of state trading enterprises were fully transparent, and in compliance with the requirements of the WTO Agreement. They considered that China should also refrain from taking any measure to influence or direct state trading enterprises as to the quantity, value, or country of origin of goods purchased or sold, except in accordance with the requirements of the WTO Agreement. Those members also stated that as part of China's notification under the GATT 1994 and the Understanding on the Interpretation of Article XVII of the GATT 1994, China should also notify information on state trading, including, in the case of state trading of exported goods, domestic procurement prices, contract terms for delivery and financing terms and conditions.

210. In response, the representative of China stated that its state trading enterprises had full management autonomy and responsibility for their own profits and losses. However, some members of the Working Party again stated that China should undertake a commitment to ensure that all state trading enterprises complied with the requirements of the WTO Agreement. The representative of China noted that a list of products subject to state trading had been provided in Annex 2A of the Protocol. He also confirmed that information on state trading enterprises, as required by the Protocol, would be supplied, consistent with the requirements of paragraph 333 of this Report. The Working Party took note of this commitment.

211. Members of the Working Party took note of the specific arrangements that would apply for fertilizers and crude and processed oil. A key feature of those arrangements related to the annual allocation of import quantities. The differences in the regimes that would apply to those products were noted, in particular in regard to the obligation on state enterprises trading in fertilizers to carry over to the next year any unused import quantities.

212. Some members of the Working Party requested assurances that, for oil products, quantities reserved for non-state traders would be allocated in such a manner that they would be fully utilized. In this respect, the representative of China confirmed that imports allocated to non-state traders of crude and processed oil, as specified in Annex 2A of the Protocol, would be carried over to the next year if they were not fully utilized. In addition, the representative of China agreed that China would publish, on a quarterly basis, the requests for imports that had been made by non-state traders, as well as the licences granted, and would supply information relevant to such traders upon request. The Working Party took note of these commitments.

213. Some members of the Working Party noted that prior to accession, some enterprises in China were permitted to import goods for their production purposes, including those goods included in Annex 2A. The representative of China confirmed that, notwithstanding Section 5, paragraph 1, of the Protocol, non-state trading enterprises, including private enterprises, would still be permitted to import such goods for production purposes and that national treatment would be provided to such imports. The Working Party took note of these commitments.

214. Some members of the Working Party expressed concerns about supplies of raw materials in the textiles sector, and particularly in regard to supplies of silk, in the light of China's position as the major world supplier of silk, currently subject to state trading rights concerning exports.

215. In this regard, the representative of China confirmed that China would progressively abolish the system of state trading in respect of silk by measures increasing and extending trading rights, with the result that China would remove completely the silk products set out in numbers 10 and 11 of Annex 2A2 to the Protocol (list of products subject to state trading on exports) and grant the right to trade in such products to all individuals and enterprises no later than 1 January 2005. Pending the implementation of this right, China undertook not to introduce any changes of a more restrictive nature to the existing structures in place for the supply of silk. The representative of China further confirmed that access to supplies of raw materials in the textiles sector would remain at conditions no less favorable than for domestic users, and gave his assurance that access to supplies of raw materials as enjoyed under existing arrangements would not be adversely affected following China's accession. The Working Party took note of these commitments.

216. Members of the Working Party noted that domestic prices for most agricultural commodities in China were higher than world prices, and this differential allowed China's state trading enterprises to import at low prices and then mark up the price when selling the product to wholesalers and end-users. Some members expressed concern that this practice could become more widespread when access opportunities were created under TRQs. Those members were particularly concerned that mark-ups could be used to reduce the competitiveness of imported products and limit the range of qualities and grades available to end-users in China. The representative of China stated that currently state trading enterprises did not mark up imported products; instead, they only charged a nominal transaction fee. Consequently, China's practice was consistent with WTO obligations, did not result in any trade-distorting effect, and that under China's law limits existed on the fees that could be charged by state trading enterprises.

217. The representative of China stated that China would ensure that no price increase in respect to imports, in particular by state trading enterprises, would result in protection beyond that allowed in its Schedule of Concessions and Commitments on Goods or that was not otherwise justified under WTO rules. The Working Party took note of this commitment.

7. Special Economic Areas 218. Members of the Working Party noted that there was insufficient information available concerning special economic areas within China's customs territory, including border trade regions and minority autonomous areas, SEZs, open coastal cities, economic and technical development zones and other areas where special regimes for tariffs, taxes and regulations had been established (collectively referred to as "special economic areas"), in particular their names, geographic boundaries, and relevant laws, regulations and other measures relating thereto.

219. In response, the representative of China stated that since 1979 China had established a number of special economic areas where more open policies were applied. They included five SEZs, 14 open coastal cities, six open cities along the Yangtze River, 21 provincial capital cities and 13 inland boundary cities. Those special economic areas enjoyed greater flexibility in utilizing foreign capital, introducing foreign technology and conducting economic cooperation overseas. At present, foreign investors were entitled to certain preferential treatment.

220. The representative of China further stated that FIEs located in SEZs or the Economic and Technical Development Zones of open coastal cities were entitled to a corporate income tax rate of 15 per cent (the normal income tax was 33 per cent). Profits remitted abroad by foreign investors were exempted from income tax. The preferential income tax rate of 15 per cent was applicable to technology-intensive or knowledge-intensive items or projects with foreign investment of over US$30 million, as well as enterprises that operated in the fields of energy, transport and port construction.

221. The representative of China noted that throughout the customs territory of China, a socialist market economy system was applied. In 1999, the foreign trade volume of SEZs accounted for nearly one fifth of the nation's total. The national laws and regulations on taxation were applicable to SEZs in a uniform manner.

222. In response to further requests for information, the representative of China indicated that there was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs had been eliminated. With the development of China's economic reform and opening up, China would implement its tariff policy uniformly throughout its customs territory. Members of the Working Party expressed concern that imported products introduced from these special economic areas into other parts of China's customs territory should be subject to the same treatment in the application of all taxes, import restrictions and customs duties and other charges as that normally applied to imports into the other parts of China's customs territory. The representative of China stated that China would undertake to ensure such non-discriminatory treatment. The Working Party took note of this commitment.

223. Some members of the Working Party also raised concerns as to whether the assistance provided to minority autonomous regions and other areas of economic poverty was consistent with WTO requirements. In response, the representative of China confirmed that China had a clear commitment to uniform administration of the trade regime within each such area and that, upon accession, China would ensure that such assistance would be implemented consistent with WTO obligations. The Working Party took note of this commitment.

224. Some members of the Working Party requested that China take steps to ensure that all products imported into the other parts of the customs territory of China from special economic areas would be subject to the same normal customs duties and charges as any other product imported into the customs territory of China. In particular, those members requested that China undertake a commitment to apply all taxes, charges and measures affecting imports, including import restrictions and customs and tariff charges, that were normally applied to imports into the other parts of China's customs territory to all imported products, including physically incorporated components, entering China's customs territory from the special economic areas.

225. The representative of China confirmed that China would strengthen the uniform enforcement of taxes, tariffs and non-tariff measures on trade between its special economic areas and the other parts of China's customs territory. The representative of China further confirmed that statistics on trade between China's special economic areas and the other parts of its customs territory would be maintained and improved, and would be notified to the WTO on a regular basis. The Working Party took note of these commitments.

226. Some members of the Working Party requested that China notify the WTO of all the relevant laws, regulations and other measures relating to its special economic areas. They asked that the notification list and identify all those special economic areas. Those members also requested that China notify the WTO promptly, but in any case within 60 days, of any additions or modifications to its special economic areas, including notification of the laws, regulations and other measures relating thereto.

227. The representative of China confirmed that China would provide information in its notifications describing how the special trade, tariff, and tax regulations applied were limited to the designated special economic areas, including information concerning their enforcement. The Working Party took note of this commitment.

228. In response to concerns raised by some members of the Working Party, the representative of China confirmed that any preferential arrangements provided to foreign invested enterprises located within the special economic areas would be provided on a non-discriminatory basis. The Working Party took note of this commitment.

8. Transit 229. The representative of China stated that the current regulation of transit in China, the Regulations of the Customs of the People's Republic of China on the Supervision and Administration of Transit Goods, was consistent with Article V of the GATT 1994.

9. Agricultural Policies 230. The representative of China stated that since China was a country with a vast agricultural base, as well as a vast population, agricultural security and food security in particular, was an issue of supreme importance. China based its policies on domestic agricultural supply, especially on balanced supply and demand of grains. Meanwhile, China actively sought international resources as a necessary supplement.

231. While noting this statement, some members of the Working Party expressed concerns about China's linkage of import policies for agriculture, including TRQ allocations, to domestic production policy and the sub-national supply and utilization situation. Those members requested that China undertake an appropriate commitment to eliminate these practices. In response, the representative of China confirmed that China would base import policies for agriculture on commercial considerations only. The Working Party took note of this commitment.

232. Some members of the Working Party expressed further concerns in relation to administrative guidance provided at the national and sub-national level which could have the effect of influencing the quantity and composition of agricultural imports. Those members considered reform of these practices toward full WTO consistency as an essential element of China's accession. To ensure effective market access opportunities were created for imported products, some members requested assurances from China that agricultural and trade policies would not discriminate in a WTO inconsistent manner against imported products. Consistent with China's commitment to uniform administration, the representative of China confirmed that, by the date of accession, China would not maintain, resort or revert to guidance plans or administrative guidance at the national or sub-national level that regulate the quantity, quality or treatment of imports, or constitute import substitution practices or other non-tariff measures, including those maintained through state trading enterprises at the national or sub-national level. The Working Party took note of this commitment.

233. Some members of the Working Party expressed concern that large stocks in China of grain and cotton had been procured at relatively high prices by state-trading enterprises or other state-affiliated, state-run, or state-controlled entities and noted that exports of these or other government-purchased products at prices lower than the comparable price charged for the like product to buyers in the domestic market could be challenged as an export subsidy or as inconsistent with other WTO obligations. These members requested that China ensure that all entities, including state trading enterprises and any other state-affiliated, state-run, or state-controlled entity at the national or sub-national level operated in accordance with China's WTO obligations, including those on export subsidies. In response, the representative of China confirmed that all entities in China would operate in accordance with China's WTO obligations, including those on export subsidies. Further, the representative of China stated that national and sub-national authorities would not provide fund transfers or other benefits to any entities in China that would be inconsistent with its WTO obligations, including to offset losses accrued through exports. The Working Party took note of these commitments.

234. The representative of China confirmed that by the date of accession, China would not maintain or introduce any export subsidies on agricultural products. The Working Party took note of this commitment.

235. In implementing Article 6.2 and 6.4 of the Agreement on Agriculture, the representative of China confirmed that while China could provide support through government measures of the types described in Article 6.2, the amount of such support would be included in China's calculation of its Aggregate Measurement of Support ("AMS"). He noted that China's Total AMS Commitment Level was set forth in Part IV, Section I of China's Schedule. The representative of China further confirmed that China would have recourse to a de minimis exemption for product-specific support equivalent to 8.5 per cent of the total value of production of a basic agricultural product during the relevant year. The representative of China confirmed that China would have recourse to a de minimis exemption for non-product-specific support of 8.5 per cent of the value of China's total agricultural production during the relevant year. Accordingly, these percentages would constitute China's de minimis exemption under Article 6.4 of the Agreement on Agriculture. The Working Party took note of these commitments.

236. China's concessions on agricultural tariffs, and commitments on domestic support and on export subsidies for agricultural products were contained in the Schedule of Concessions and Commitments on Goods annexed to the Protocol as Annex 8.

237. Some members of the Working Party noted that the domestic support tables of China in WT/ACC/CHN/38/Rev.3 showed China's base total AMS as zero in DS:4. They also noted that product specific support was negative in DS:5.

238. Some members of the Working Party noted that although WT/ACC/CHN/38/Rev.3 did provide a basis for supporting the commitments in China's Schedule, this document still contained issues which required further methodological clarification relating to policy classification. The representative of China confirmed that this clarification would be addressed in the context of China's notification obligations under the Agreement on Agriculture. The Working Party took note of this commitment.

10. Trade in Civil Aircraft 239. In response to questions from members of the Working Party, the representative of China indicated that China was not in a position to commit to joining the Agreement on Trade in Civil Aircraft at the present stage.

240. The representative of China confirmed that China would not impose any provisions of offsets or other forms of industrial compensation when purchasing civil aircraft, including specified types or volumes of business opportunities. The Working Party took note of this commitment.

11. Textiles 241. Some members of the Working Party proposed and the representative of China accepted that the quantitative restrictions maintained by WTO Members on imports of textiles and apparel products originating in China that were in force on the date prior to the date of China's accession should be notified to the Textiles Monitoring Body ("TMB") as being the base levels for the purpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC"). For such WTO Members, the phrase "day prior to the date of entry into force of the WTO Agreement", contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to the date of China's accession. To these base levels, the increase in growth rates provided for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of China's accession. The Working Party took note of these commitments.

242. The representative of China agreed that the following provisions would apply to trade in textiles and clothing products until 31 December 2008 and be part of the terms and conditions for China's accession: (a) In the event that a WTO Member believed that imports of Chinese origin of textiles and apparel products covered by the ATC as of the date the WTO Agreement entered into force, were, due to market disruption, threatening to impede the orderly development of trade in these products, such Member could request consultations with China with a view to easing or avoiding such market disruption. The Member requesting consultations would provide China, at the time of the request, with a detailed factual statement of reasons and justifications for its request for consultations with current data which, in the view of the requesting Member, showed: (1) the existence or threat of market disruption; and (2) the role of products of Chinese origin in that disruption; (b) Consultations would be held within 30 days of receipt of the request. Every effort would be made to reach agreement on a mutually satisfactory solution within 90 days of the receipt of such request, unless extended by mutual agreement; (c) Upon receipt of the request for consultations, China agreed to hold its shipments to the requesting Member of textile or textile products in the category or categories subject to these consultations to a level no greater than 7.5 per cent (6 per cent for wool product categories) above the amount entered during the first 12 months of the most recent 14 months preceding the month in which the request for consultations was made; (d) If no mutually satisfactory solution were reached during the 90-day consultation period, consultations would continue and the Member requesting consultations could continue the limits under subparagraph (c) for textiles or textile products in the category or categories subject to these consultations; (e) The term of any restraint limit established under subparagraph (d) would be effective for the period beginning on the date of the request for consultations and ending on 31 December of the year in which consultations were requested, or where three or fewer months remained in the year at the time of the request for consultations, for the period ending 12 months after the request for consultations; (f) No action taken under this provision would remain in effect beyond one year, without reapplication, unless otherwise agreed between the Member concerned and China; and (g) Measures could not be applied to the same product at the same time under this provision and the provisions of Section 16 of the Protocol.

The Working Party took note of these commitments.

12. Measures Maintained Against China 243. The representative of China stated that WTO Members should eliminate all discriminatory non-tariff measures maintained against Chinese exports from the date of China's accession. In response, some members of the Working Party stated that, in their view, such measures did not need to be phased out until such time as China's foreign trade regime fully conformed to WTO obligations.

244. In light of the above, it was agreed that any prohibitions, quantitative restrictions or other measures maintained against imports from China in a manner inconsistent with the WTO Agreement would be listed in Annex 7 to the Protocol. It was further agreed that all such measures would be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables as specified in said annex.

13. Transitional Safeguards 245. With respect to implementation of the product-specific safeguard, the representative of China expressed particular concern that WTO Members provide due process and use objective criteria in determining the existence of market disruption or trade diversion, because WTO Members did not have wide experience in implementing the provisions of Section 16 of the Protocol. He stated that with respect to trade diversion, WTO Members needed to apply objective criteria to determine whether an action by China or another WTO Member under the product-specific safeguard to prevent or remedy market disruption caused or threatened to cause significant diversion of trade. Such criteria should include the actual or imminent increase in market share or volume of imports from China, the nature or extent of the action taken by China or the other WTO Member and other similar criteria. In addition, WTO Members should provide an opportunity for importers, exporters and all interested parties to submit their views on the matter.

246. Members of the Working Party noted that the Protocol included specific requirements that WTO Members needed to follow in connection with an action under that Section. Members of the Working Party confirmed that in implementing the provisions on market disruption, WTO Members would comply with those provisions and the following: (a) An action to address market disruption would be taken only after an investigation by the competent authorities of the importing WTO Member pursuant to procedures previously established and made available to the public; (b) The competent authority of the importing Member would publish notice of the commencement of any investigation under the product-specific safeguard provisions of the Protocol and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means for the purpose of permitting interested parties to present evidence and their views as to the appropriateness of whether or not to take a measure and to respond to the presentations of other parties; (c) In determining whether market disruption existed, including the causal link between imports which were increasing rapidly, either absolutely or relatively, and any material injury or threat of material injury to the domestic industry, the competent authorities would consider objective factors, including (1) the volume of imports of the product which was the subject of the investigation; (2) the effect of imports of such product on prices in the importing WTO Member's market for the like or directly competitive products; (3) the effect of imports of such product on the domestic industry producing like or directly competitive products; (d) The competent authorities would publish any measure proposed to be taken and provide the opportunity, including a public hearing, if requested, or provide other appropriate means, for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest; (e) The competent authority would promptly publish notice of the decision to apply a measure, including an explanation of the basis for the decision and the scope and duration of the measure; (f) The period of application of the measure could be extended, provided that the competent authorities of the importing WTO Member had determined that action continued to be necessary to prevent or remedy market disruption. The competent authorities of the importing WTO Member would publish notice of the commencement of any proceeding to consider whether to extend the duration of an action and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means for the purpose of permitting all interested parties to have an opportunity to present evidence or their views and to respond to the presentations of other parties; (g) Except for good cause, no investigation under Section 16 of the Protocol on the same subject matter could be initiated less than one year after the completion of a previous investigation; and (h) A WTO Member would apply a measure only for such period of time as was necessary to prevent or remedy market disruption.

247. Trade diversion referred to an increase in imports from China of a product into a WTO Member as the result of an action by China or other WTO Members pursuant to paragraphs 2, 3 or 7 of Section 16 of the Protocol. Members of the Working Party also noted that the Protocol required a determination that any trade diversion was significant and that the action taken to address market disruption had caused or threatened to cause the diversion.

248. Members of the Working Party agreed that objective criteria had to be applied in determining whether actions to prevent or remedy market disruption caused or threatened to cause significant diversion of trade. Among the factors to be examined were: (a) the actual or imminent increase in market share of imports from China in the importing WTO Member; (b) the nature or extent of the action taken or proposed by China or other WTO Members; (c) the actual or imminent increase in the volume of imports from China due to the action taken or proposed; (d) conditions of demand and supply in the importing WTO Member's market for the products at issue; and (e) the extent of exports from China to the WTO Member(s) applying a measure pursuant to paragraphs 2, 3 or 7 of Section 16 of the Protocol and to the importing WTO Member.

249. A measure taken to address significant diversions of trade would be terminated not later than 30 days after the expiration of the action taken by the WTO Member or Members involved against imports from China.

250. If the WTO Member or Members taking an action to address market disruption notified the WTO Committee on Safeguards of any modification of an action, the competent authorities of the WTO Member addressing trade diversion would determine whether a significant diversion of trade continued to exist and determine whether to modify, withdraw or keep in place the action taken.

V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME A. GENERAL 1. Overview 251. The representative of China stated that China had made the protection of intellectual property rights ("IPRs") an essential component of its reform and opening-up policy and socialist legal construction. The formulation of laws and regulations in this field could be traced back to the late 1970s. Since then, China had joined relevant international conventions and had actively participated in the activities sponsored by relevant international organizations. It had intensified its exchanges and cooperation with countries throughout the world in the field of IPR protection. As a result, notwithstanding the initial stage of its development, China's IPR protection system aimed at achieving world dimension and world standards. Lists of administrative rules concerning intellectual property rights currently in force in China were presented below in Table A. The status of ongoing reforms and other relevant information was presented in Table B in the following paragraph. Other laws, regulations and measures relating to the implementation of the TRIPS Agreement had been or would be notified to the WTO and would be made available upon request.

Table A: The Administrative Rules of China Concerning Intellectual Property Rights The following three parts were the administrative rules regarding protection of intellectual property right, which were still in force in China. As an important part of China's IPR legal system, these rules had a great effect on IPR protection, enforcing the IPR law, etc.

Part I List of Administrative Rules Regarding Protection of Patent Right Part II List of Administrative Rules Regarding Protection of Trademark Part III List of Administrative Rules Regarding Protection of Copyright Part I List of Administrative Rules Regarding Protection of Patent Right (i) Methods on the Showing the Identification of Right of Priority to Applicant made by Patent Office of China (1 March 1988) (ii) Opinions of the Patent Office of China concerning the Implementation of the Regulations on Patent Commissioning (19 April 1991) (iii) Explanation of the Patent Office of China on Certain Matters Relating to the Commissioning Involving Foreign Interests (16 November 1987) (iv) Decree of Patent Office of China (No.26) (20 November 1989) (v) Decree of Patent Office of China (No.27) (21 December 1989) (vi) Decree of Patent Office of China (No.31) (14 March 1991) (vii) Procedures for Administrative Reconsideration of Patent Office of the People's Republic of China (for Trial Implementation) (21 December 1992) (viii) Methods of Handling the Patent Disputes by the Administrative Authorities for Patent Affairs (4 December 1989) Part II List of Administrative Rules Regarding Protection of Trademark (i) Circular on the Commodities Demanded to Use Registered Trademark made by the State Administration for Industry and Commerce (14 January 1988) (ii) Circular on the Prohibition from Registering the Other Person's Trademark Abroad without Being Authorized made by State Administration for Industry and Commerce and the Ministry of Foreign Economy and Trade (19 November 1990) (iii) Interim Provisions on Claims for Priority in Applying for Registration of Trademarks made by State Administration for Industry and Commerce (15 March 1983) (iv) Methods of the Application International Registration of Trademark of Madrid made by the State Administration for Industry and Commerce (2 March 1989) (v) Circular on the Stopping Using the Literal of "Xiang Bin" or "Champagne" in Varieties of Commodities of Alcohol made by the State Administration for Industry and Commerce (26 October 1989) (vi) Circular on Printing and distributing " the Rules regarding the Question of Using Trademark in Can Food for Export" (15 October 1991) (vii) Provisions on the Control over the Surrogate of Trademark (viii) Provisions on the Registration of and the Control over the Collective Trademark and Certified Trademark (issued on 30 December 1994, revised on 3 December 1998) (ix) Provisions on the Control over the Printing of Trademark (issued on 5 September 1996, revised on 3 December 1998) Part III List of Administrative Rules Regarding Protection of Copyright (i) Opinions of the National Copyright Administration on Questions Relating to Reprinting the Programs in Advance in Broadcast and Television (12 December 1987) (ii) Circular of the National Copyright Administration of Printing and Distribution "Report Relating to Appropriate Handling the Copyright Question in the Process of Culture Communication with Taiwan" and "Interim Provisions Relating to the Copyright Question of Pressing the Works Written by Taiwan Compatriots" (8 February 1988) (iii) Circular of National Copyright Administration regarding the Points for Attention of Transferring Copyright to Taiwan's Press Person (26 December 1987) (iv) Opinions of National Copyright Administration on Matters Relating to Local Work on Copyright Management (May 1988) (v) Circular of the National Copyright Administration concerning Procedures of Examining and Verifying the Copyright Trading Contract Between the Mainland and Hong Kong, Macao and Taiwan (2 November 1988) (vi) Opinions on Certain Matters of the National Copyright Administration concerning Handling Copyright Cases (27 December 1988) (vii) Circular of the National Copyright Administration concerning the Standard of Paying Author's Remuneration When the Press Reprint and Extract the Published Works at Present (27 August 1991) (viii) Interim Provisions of the Standard of Paying Author's Remuneration When the Press Reprint and Extract the Published Works with the Consent by Law (1 August 1993) (ix) Interim Provisions of the Standard of Paying Author's Remuneration When Perform the Published Works with the Consent by Law (1 August 1993) (x) Interim Provisions of the Standard of Paying Author's Remuneration When Record the Published Works with the Consent by Law (1 August 1993) (xi) Direction of the Chinese Center of Receiving and Transmitting Author's Remuneration concerning Receiving and Transmitting Remuneration About the Press Extract the Published Works (xii) Circular of the National Copyright Administration concerning Enforcing "the Memorandum of Understanding between the Government of the People's Republic of China and the Government of the United States of America on the Protection of Intellectual Property" (29 February 1992) (xiii) Urgent Circular concerning Strengthening Administration of Reproducing Compact Discs and Laser Discs (12 April 1994) (xiv) Circular of Enforcing "Urgent Circular concerning Strengthening Administration of Reproducing Compact Discs and Laser Discs" (12 May 1994) (xv) Cooperate Circular of the Ministry of Judicial and National Copyright Administration concerning Bringing Notary Office into Play in Dealing with the Infringing Copyright Cases (29 August 1994) (xvi) Measures of the Registration of Copyright of Computer Software (4 June 1992) (xvii) Guide to Classified Coding of Software in Computer Software's Registration (xviii) The Item and Standard of Registration Expenses of Computer Software (18 April 1992) 252. The representative of China stated that for accession to the WTO Agreement and compliance with the TRIPS Agreement, further amendments had been made to the Patent Law. The amendments to the Copyright Law and the Trademark Law, as well as relevant implementing rules covering different areas of the TRIPS Agreement, would also be accomplished upon China's accession. The representative of China stated that laws adopted by the National People's Congress and administrative regulations, including implementing rules, issued by the State Council were applied and enforced by the people's courts. The Working Party took note of these commitments.

Table B: Revision of China's IPR Laws in Conformity with the TRIPS Agreement The People's Republic of China had conducted an intensive work programme to examine and revise the IPR laws, administrative regulations and department rules relating to the implementation of the WTO Agreement and China's accession commitments. A list of China's IPR laws, administrative regulations and department rules to be revised and abolished was hereby notified to the Working Party. Part I of the list contained eight laws and regulations. Part II of the list contained four department rules to be revised or abolished for the same reason. This list included the names of laws, regulations and department rules, reasons for revision or abolishment, and dates of implementation.

Part I Laws and Administrative Regulations Laws and Regulations Date of Implementation 1. Copyright Law of the People's Republic of China Upon accession 2. Regulations for the Implementation of the Copyright Law of the People's Republic of China Upon accession 3. Regulations for the Protection of Computer Software Upon accession 4. Trademark Law of the People's Republic of China Upon accession 5. Detailed Rules for the Implementation of the Trademark Law of the People's Republic of China Upon accession 6. Regulations of the People's Republic of China on the Protection of New Varieties of Plants Effective as of 1 October 1997 7. Law of the People's Republic of China Against Unfair Competition Effective as of 1 December 1993 8. Regulations on the Implementation of the Integrated Circuit Layout Design To be effective as of 10 October 2001 Part II Department Rules Department Rules Date of Implementation 1. Interim Rules on the Administration of Patents in Agriculture, Animal Husbandry and Fisheries To be abolished upon accession 2. Notice on the Interim Regulation on the Protection of Copyright of Books and Magazines To be abolished upon accession 3. Notice on the Issuance of the "Detailed Rules of Interim Regulations on the Protection of Copyright of Books and Magazines", "Publication Intention Contracts" and "Publication Contracts" To be abolished upon accession 4. Interpretation of Article 15(4) of the "Interim Regulation on the Protection Copyright of Books and Magazines" To be abolished upon accession 2. Responsible agencies for policy formulation and implementation 253. The representative of China stated that, at present, different agencies were responsible for IPR policy formulation and implementation. The State Intellectual Property Office ("SIPO") was responsible for patent approval; the Trademarks Office under the State Administration for Industry and Commerce ("SAIC") was responsible for trademarks registration; the Copyright Office was responsible for copyright policy making; SAIC was responsible for anti-unfair competition, including the protection of trade secrets; the State Drug Administration ("SDA") was responsible for administrative protection of pharmaceuticals; the General Customs Administration was responsible for border measures; the Ministry of Agriculture and the State Administration of Forestry were responsible for protection of plant varieties; the Ministry of Information Industry was responsible for the protection of layout designs of integrated circuits; and the State General Administration of the People's Republic of China for Quality Supervision and Inspection and Quarantine and SAIC were responsible for combating counterfeiting activities. Other agencies like the agency for press and publications, the people's courts and police were also involved in the protection of IPR in China.

3. Participation in international intellectual property agreements 254. The representative of China stated that China became a member of the World Intellectual Property Organization in 1980. In 1985, China became a member of the Paris Convention for the Protection of Industrial Property. China was one of the first countries that signed the Treaty on Intellectual Property in Respect of Integrated Circuits, the negotiation of which was concluded in 1989. In 1989, China became a member of the Madrid Agreement Concerning the International Registration of Marks and in 1992, China became a member of the Berne Convention for the Protection of Literary and Artistic Works. In 1993, China became a member of the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms. In 1994, China became a member of the Patent Cooperation Treaty and a member of the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks. In 1995, China became a member of the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure and applied for membership in the Protocols of the Madrid Agreement Concerning the International Registration of Marks. In 1996, China became a member of the Locarno Agreement on Establishing an International Classification for Industrial Designs; and in 1997, China became a member of the Strasbourg Agreement Concerning the International Patent Classification. Besides the above efforts, China participated in the TRIPS negotiations during the Uruguay Round and initialled the Final Act.

4. Application of national and MFN treatment to foreign nationals 255. Some members of the Working Party expressed concern that certain provisions of China's copyright and trademark laws, as well as China's Rules on Banning the Infringement of Business Secrets (23 November 1995) did not provide national treatment to foreign right-holders. The Rules on Banning Infringements of Business Secrets, for example, defined the "owner" of a trade secret as a "citizen, corporation, and other organization" and did not explicitly provide protection for foreign individuals or organizations. Some members of the Working Party further stated that national treatment should be fully applied, so that copyright enforcement action by local copyright bureaux involving foreign right-holders, would no longer require clearance by the National Copyright Administration in Beijing.

256. The representative of China responded that China's IPR laws provided that any foreigner would be treated in accordance with any agreement concluded between the foreign country and China, or in accordance with any international treaty to which both countries were party, or on the basis of the principle of reciprocity. The representative of China further confirmed that China would modify relevant laws, regulations and other measures so as to ensure national and MFN treatment to foreign right-holders regarding all intellectual property rights across the board in compliance with the TRIPS Agreement. This would include adjustments of the clearance requirement mentioned in the previous paragraph to ensure national treatment. The Working Party took note of these commitments.

B. SUBSTANTIVE STANDARDS OF PROTECTION, INCLUDING PROCEDURES FOR THE ACQUISITION AND MAINTENANCE OF INTELLECTUAL PROPERTY RIGHTS 1. Copyright protection 257. The representative of China stated that the Copyright Law, which was promulgated in 1990, established the basic copyright protection system in China together with the Implementing Rules of the Copyright Law (30 May 1991), the Provisions on the Implementation of the International Copyright Treaty (25 September 1992) and other related laws and regulations. In principle, this system was in compliance with the international IPR treaties and practices. For the protection of copyright and neighbouring rights, not only civil and criminal liabilities but also administrative liabilities, were provided for in this system. Hence the infringing activities could be curbed in a timely and effective manner and the legitimate rights of the right-holders could be protected.

258. Some members of the Working Party expressed concerns about the consistency of China's current law on the protection of copyright and related rights with the TRIPS Agreement. In particular, members noted the need to clarify the rights of performers and producers to bring them into conformity with the requirements of Article 14 of the TRIPS Agreement. In addition, improvements were needed with respect to enforcement of copyright to provide expressly for provisional measures to preserve evidence, including documentary evidence and for remedies sufficient to deter further infringements.

259. The representative of China responded that, realizing that there were some existing differences between China's copyright laws and the TRIPS Agreement, the amendment to the Copyright Law had been accelerated. The proposed amendments would clarify the payment system by broadcasting organizations which use the recording products and also include the following provisions: rental rights in respect of computer programs and movies, mechanical performance rights, rights of communication to the public and related protection measures, protection of database compilations, provisional measures, increasing the legitimate compensation amount and strengthening the measures against infringing activities. China's copyright regime including Regulations for the Implementation of the Copyright Law and the Provisions on the Implementation of the International Copyright Treaty would be amended so as to ensure full consistency with China's obligations under the TRIPS Agreement. The Working Party took note of these commitments.

2. Trademarks, including service marks 260. The representative of China stated that the Trademark Law, its implementing rules and other relevant laws, administrative regulations and department rules constituted the existing trademark legal system in China. The objective of these laws was to provide protection to right-holders in line with the international conventions and prevailing practices regarding intellectual property rights, which was embodied both in the regulations on the substance and procedures for trademark registration and in the protection of trademark exclusive rights. In order to protect the trademark owner's exclusive rights, China's Trademark Law contained not only civil and criminal liabilities but also provided for administrative punishment of trademark infringers. This "double-track system" for the protection of exclusive rights in trademarks could prevent trademark infringements in a timely and effective manner and protect the legitimate rights and interests of these exclusive rights. In recent years, China's judicial and administrative bodies had stepped up their efforts to protect trademark exclusive rights within their respective authority. They had settled a large number of cases that were influential, domestically and abroad, which provided adequate protection to the legitimate rights and interests of both Chinese and foreign holders of exclusive rights in trademarks, and received a positive response from domestic and foreign right-holders.

261. Some members of the Working Party reiterated their concerns about whether certain provisions of China's trademark law provided national treatment to foreign owners of trademarks. They noted that China's law required foreign owners of trademarks to use designated trademark agents, while Chinese nationals were permitted to file directly with China's Trademark Office. Members also noted that China's trademark law did not consider certain signs as eligible for protection as required under the TRIPS Agreement. These included names, letters, numerals and colours capable of distinguishing goods and services. In addition, if registrability of a trademark depends on use, China's trademark law should provide that a non-distinctive mark could qualify for registration when it has acquired distinctiveness based on use. Members also noted that it was not clear under China's law that actual use of a mark was not required before a party could file to register a mark.

262. Some members of the Working Party also raised concerns about the protection of well-known trademarks in China, in particular those not registered in China. China's laws and regulations did not specifically state the criteria for determining whether a mark was well-known and therefore members could not determine if it conformed to the requirements of Article 16 of the TRIPS Agreement. Moreover, while China had provided protection to "well-known trademarks" owned by nationals, such protection had, as yet, not been granted to the well-known trademarks of foreigners. Members also noted that certain provisions of China's trademark law needed to be extended to unregistered well-known trademarks.

263. The representative of China stated that with the development of China's market economy and the further implementation of the TRIPS Agreement, China's legislative and law enforcement bodies had also realized that the existing trademark law fell somewhat short of fulfilling the requirements of the TRIPS Agreement and the Paris Convention in a few aspects and were therefore preparing to amend the existing trademark law to fully meet the requirements of the TRIPS Agreement. Modifications would mainly be made to the following aspects: to include the trademark registration of three-dimensional symbols, combinations of colours, alphabets and figures; to add the content of collective trademark and certification trademark (including geographical indications); to introduce official symbol protection; to protect well-known trademarks; to include priority rights; to modify the existing trademark right confirmation system and offer interested parties the opportunity for judicial review concerning the confirmation of trademark rights; to crack down on all serious infringements; and to improve the system for providing damages for trademark infringement. The Working Party took note of these commitments.

3. Geographical indications, including appellations of origin 264. The representative of China stated that the relevant rules of the SAIC and the State General Administration of the People's Republic of China for Quality Supervision and Inspection and Quarantine partly provided protection for geographical indications, including appellations of origin, and that the amendments to the trademark law would have a specific provision on the protection of geographical indications.

265. Members of the Working Party took note of the progress achieved on providing protection for geographical indications and reiterated the importance of China's legislation complying with the obligations under the TRIPS Agreement (Articles 22, 23 and 24). The representative of China shared this assessment and reiterated China's intention to fully comply with relevant articles in the TRIPS Agreement on geographical indications. The Working Party took note of this commitment.

4. Industrial designs 266. Some members of the Working Party noted that the industrial design provisions of China's patent law appeared to implement substantial portions of the TRIPS Agreement requirements relating to industrial designs. One notable exception was the area of textile designs. These members noted that designs of WTO Members could be protected under China's Provisions on the Implementation of the International Copyright Treaty as works of applied art. Members urged China to incorporate this protection into its law and to provide such protection to domestic textile designs.

5. Patents 267. The representative of China stated that in preparation for its accession, China revised its patent law in 1992 for the first time. China had taken measures to enhance consistency with the TRIPS Agreement in terms of major provisions and protection standards. In order to increase the awareness of the general public on IPR protection, and patent protection in particular, to be consistent with the TRIPS Agreement, and to build up a sound social environment for the promotion and commercialization of inventions, the National People's Congress approved the second revision of the Patent Law on 25 August 2000. The revised patent law, which would take effect on 1 July 2001, included the following elements: (1) patent owners would have the right to prevent others from offering for sale the patented product without their consent (Article 11); (2) for utility model and design applications or patents, the final decision on re-examination and invalidation would be made by the people's courts other than for inventions that were patented prior to the amendment (Articles 41 and 46); (3) patent owners could, before instituting legal proceedings, request the people's court to take provisional measures such as to order the suspension of infringing acts and to provide property preservation (Article 61); and (4) conditions for granting a compulsory licence would be further clarified and made consistent with the TRIPS Agreement.

268. The representative of China further stated that since its establishment, SIPO had paid great attention to strengthening its contacts and coordination with relevant departments and ministries in the field of IPR law enforcement, especially in the areas of settling inter-agency problems and resolving key cases. At the same time, SIPO had taken appropriate measures to improve the performance of local patent authorities in law enforcement. For example, in June 1999, SIPO convened a nationwide working conference, which was attended by representatives from local patent administrative authorities. The participants summarized their law enforcement practices over the previous two years and also exchanged information on their experiences in their local legislative work with a view to intensifying patent protection. The conference also called for the introduction of important patent cases reporting and recording system.

269. The representative of China stated that so far as the range of patent protection and protection for new plant varieties were concerned, China had already met the requirements of Article 27 of the TRIPS Agreement. When amending the Patent Law in 1992, China modified Article 25 therein with reference to the relevant stipulations in the draft of the TRIPS Agreement and expanded the coverage of patent protection to food, beverages, flavourings, pharmaceuticals and materials obtained by chemical methods. The scope of patent exclusions would be limited to "scientific discoveries, rules and methods of intellectual activities, diagnostic and therapeutic methods for the treatment of diseases, animals and plant varieties, as well as materials obtained by the change of nucleus".

270. He further stated that Article 5 of China's Patent Law stipulated that inventions that violate laws of China or social morality or prejudice public interest would not be entitled to patent right. While literally there was a difference between Article 5 of China's Patent Law and the TRIPS Agreement, in practice, during the review of patent applications, the interpretation of "violating laws of China" had been restricted to "if laws of China prohibit the sale of a certain patented product, or prohibit the sale of products manufactured by a patented method, the granting of patent right cannot be denied to this product invention or this invention of product manufacturing method by relying on Article 5 of the Patent Law". Hence, in essence, he concluded that there was no difference between Article 5 of the Patent Law as applied and the TRIPS Agreement. Nonetheless, China would amend the Implementing Rules of the Patent Law to ensure that this provision would be implemented in full compliance with Article 27.2 of the TRIPS Agreement, which stipulated that: "Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law". The Working Party took note of this commitment.

271. Regarding Article 28 of the TRIPS Agreement (rights conferred), the representative of China stated that China's patent law had fully complied with the requirements of the TRIPS Agreement for the following reasons. First, in the 1992 amendment to the Patent Law, Article 11 was modified as follows: "any entity or individual is, without prior licensing from the patentee, prohibited from making, using or selling patented products or patented processes, or using or selling products directly obtained by the patented processes for the purpose of production and operation". It was also prohibited for any entity or individual to import patented products or products directly obtained by patented processes for the purpose of production and operation. This modification expanded the scope of patentees' right, namely the new content of "the right to prohibit import" and "the effect of patented processes is extended to products directly obtained by patented processes". Second, in 2000, when the second amendment was made to the Patent Law, Article 11 was once again modified. A new stipulation was introduced granting patentees the right to prohibit others from offering for sale the patented products or products directly obtained by patented processes without the consent of patentees. Therefore, so far as "the right of patentees" is concerned, China's Patent Law had fully accommodated the requirements of the TRIPS Agreement.

272. Further to the 1992 amendment, the representative of China stated that China's Patent Law provided for compulsory licences based on reasonable terms, for public interest and for dependent patents. With regard to the conditions of compulsory licences for dependent patents, the Patent Law provided that the latter invention should be technically more advanced than the earlier one. The TRIPS Agreement provides that "the invention claimed in the second patent shall involve an important technical advance of considerable economic significance in relation to the invention claimed in the first patent" (Article 31(l)(i)). Since the provisions of the TRIPS Agreement were more transparent and easier to operate, the relevant expressions contained in the TRIPS Agreement were adopted in the new revision. In addition, the following restrictive conditions for granting compulsory licences contained in the Implementing Rules of the Patent Law of 1992 had been moved into the Patent Law in order to make it more authoritative: the decision of SIPO on the granting of a compulsory licence for exploitation would be limited in terms of its scope and duration; when the circumstances which led to such compulsory licence ceased to exist and were unlikely to recur, SIPO, upon the request of the patentee, could terminate the compulsory licence after examination; were incorporated into the Law (former Article 68 of the Implementing Rules of the Patent Law of 1992 had now been moved into Article 52 of the revised Patent Law).

273. The representative of China stated that following the 1992 amendment, the regulations on compulsory licensing in China's Patent Law and its implementing rules, as a whole, had fulfilled the requirements of the TRIPS Agreement. However, some wording and expressions in the Chinese regulations were still not identical to the TRIPS Agreement and these regulations still needed improvement in respect of the administrative legal proceedings concerning compulsory licensing. Therefore, in the second amendment to the Patent Law in 2000, the corresponding amendments and modifications to the stipulations on compulsory licensing were mainly made in the following two points: (1) Article 53 of the Patent Law was modified from "a patented invention or utility model is technically more advanced than the inventions or utility models which have obtained patent right earlier" into "a later invention or utility model is an important technical progress with striking economic significance as compared to the earlier invention or utility model"; and (2) having been subject to appropriate adjustments, the regulations on the time, scope and termination of compulsory licensing enforcement in Article 68 of the Implementing Rules of the Patent Law of 1992 were integrated into Article 52 of the amended Patent Law. Following the above-mentioned amendments, China's Patent Law had regulations on compulsory licensing with clearer structure and improved content. In the representative of China's view, these regulations were fully consistent with the TRIPS Agreement. He also added that up to now China had not issued any compulsory licences for patent enforcement.

274. Some members of the Working Party noted the improvements in the provisions regarding compulsory licensing for patents that the representative of China cited. Some members however, requested clarification of the subject matter that would be subject to compulsory licensing under the Patent Law.

275. In response, the representative of China agreed that still not all the requirements of Article 31 of the TRIPS Agreement had been incorporated into Chinese law, and that the Implementing Rules of the Patent Law would therefore be modified so as to ensure that: (1) use without authorization of the right-holder would only be permitted if, prior to such use, the proposed user had made efforts to obtain authorization from the right-holder on reasonable commercial terms and conditions, on the understanding that this requirement could be waived in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use and subject to the other provisions of subparagraph (b) of Article 31; (2) the right-holder would be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization (Article 31(h)); (3) any such use would be authorized predominantly for the supply of the domestic market (Article 31(f)); and (4) in the case of semi-conductor technology, the scope and duration of such use would only be for public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive (Article 31(c)). The Working Party took note of these commitments.

276. Regarding Article 32 of the TRIPS Agreement (revocation/forfeiture), the representative of China stated that in light of Articles 41 and 46 of the amended Patent Law, patent applicants or patentees of inventions, as well as applicable utility models and designs, could institute legal proceedings in the people's court if they were not satisfied with the review or nullity decisions made by the Patent Review Board. This modification enabled China's Patent Law to be fully consistent with TRIPS regarding administrative decisions which were subject to judicial review.

277. On the duration of patent right protection, the representative of China stated that as early as 1992 when China made an initial amendment to the Patent Law, Article 45 (later converted into Article 42 after the second amendment) was modified as: "the duration of inventions patent right is 20 years and the duration of patent right for applicable utility model and designs is 10 years, counted as of the date of application". Therefore, China's Patent Law had for a long time accorded with Articles 26 and 33 of the TRIPS Agreement concerning the duration of patent rights.

278. Regarding Article 34 of the TRIPS Agreement (process patents: burden of proof), the representative of China stated that China's Patent Law was modified in 1992 and 2000, and was now in full conformity with the TRIPS Agreement. The amended paragraph 2 of Article 57 reads: "when any infringement dispute relates to a process patent for the manufacture of a new product, any entity or individual manufacturing the identical product shall furnish proof to the effect that a different process is used in the manufacture of its or his product".

6. Plant variety protection 279. The representative of China confirmed that China was a party to the 1978 text of the Universal Convention on the Protection of Plant Varieties ("UPOV"). In March 1997, the State Council formulated and promulgated the Regulation on the Protection of New Plant Varieties, thus offering protection for new plant varieties in a sui generis form consistent with the requirements of the TRIPS Agreement. A unit or an individual that had accomplished the breeding enjoyed an exclusive right in their right-granted variety. No unit or individual could, without permission from the owner of the variety rights (referred to as "the variety rights owner"), produce or market for commercial purposes the propagation material of the rights-granted variety, or repeatedly use for commercial purposes the propagation material of the rights-granted variety in the production of the propagation material of another variety. The conditions of non-voluntary licensing were set out in the regulation. The period of protection of variety rights, from the date of grant of the rights, would be 20 years for vines, forest trees, fruit trees and ornamental trees and 15 years for other plants.

7. Layout designs of integrated circuits 280. The representative of China stated that China was one of the first countries to sign the Treaty on Intellectual Property in Respect of Integrated Circuits in 1989. The specific Regulation on the Protection of Layout Designs of Integrated Circuits, which would implement China's obligations under Section 6, Part II of the TRIPS Agreement, was issued in April 2001 and would be effective on 1 October 2001.

281. The representative of China stated that China was strengthening the protection of the layout designs to support the rapid development of the integrated circuit industry. The regulations provided protection to layout-designs, according to which the following acts if performed without authorization of the right-holder were unlawful: importing, selling or otherwise distributing for commercial purposes a protected layout-design, an integrated circuit in which a protected layout-design was incorporated, or an article incorporating such an integrated circuit only in so far as it continued to contain an unlawfully reproduced layout-design. The exception clause and non-voluntary licensing clause were in conformity with Article 37 of TRIPS. The term of protection was 10 years counted from the date of filing an application for registration or from the first commercial exploitation wherever in the world it occurred. In addition, the protection to the layout-design of integrated circuits was in accordance with Article 2 through 7 (other than paragraph 3 of Article 6), Article 12 and paragraph 3 of Article 16 of the Treaty on Intellectual Property in Respect of Integrated Circuits.

8. Requirements on undisclosed information, including trade secrets and test data 282. Some members of the Working Party expressed concern about China's protection against unfair commercial use and disclosure of undisclosed test and other data submitted to authorities in China to obtain marketing approval for pharmaceuticals and agricultural chemicals. They noted that China's laws appeared to prohibit the release of information by government officials but did not include provisions regarding the prevention of unfair commercial use, as required under Article 39.3 of the TRIPS Agreement. Some members requested that China specifically provide in its law and regulations that it would protect against unfair commercial use of undisclosed test or other data submitted in support of applications for marketing approval of pharmaceutical or of agricultural chemical products which utilize new chemical entities, by providing that no person other than the person that submitted such data may, without the permission of the person initially submitting the data, rely on such data in support of an application for product approval for a period of at least six years from the date on which marketing approval to the person that submitted the data had been granted.

283. The representative of China stated that Article 10 of the Anti-unfair Competition Law provided that a business operator must not infringe upon trade secrets. Under the same Article, obtaining, using or disclosing another's trade secrets by a third party who clearly knew or ought to have known that the case fell under the unlawful acts listed in the preceding paragraph was deemed infringement upon trade secrets. Trade secrets referred to any technology information or business operation information which was unknown to the public, could bring about economic benefits to the obligee, had practical utility and about which the obligee had adopted secret-keeping measures. He also stated that Article 219 of the Criminal Law had similar definitions on trade secrets.

284. The representative of China further confirmed that China would, in compliance with Article 39.3 of the TRIPS Agreement, provide effective protection against unfair commercial use of undisclosed test or other data submitted to authorities in China as required in support of applications for marketing approval of pharmaceutical or of agricultural chemical products which utilized new chemical entities, except where the disclosure of such data was necessary to protect the public, or where steps were taken to ensure that the data are protected against unfair commercial use. This protection would include introduction and enactment of laws and regulations to make sure that no person, other than the person who submitted such data, could, without the permission of the person who submitted the data, rely on such data in support of an application for product approval for a period of at least six years from the date on which China granted marketing approval to the person submitting the data. During this period, any second applicant for market authorization would only be granted market authorization if he submits his own data. This protection of data would be available to all pharmaceutical and agricultural products which utilize new chemical entities, irrespective of whether they were patent-protected or not. The Working Party took note of these commitments.

C. MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROPERTY RIGHTS 285. The representative of China stated that there were provisions relating to compulsory licences in the Patent Law to prevent abuse of patent right. He also stated that the Trademark Law provided that the trademark registrant may, by concluding a trademark licensing contract, authorize another person to use its registered trademark. The licensor would supervise the quality of the goods on which the licensee used the licensor's registered trademark and the licensee would guarantee the quality of the goods on which the registered trademark was to be used.

286. Some members of the Working Party expressed some concerns as to the compatibility of China's rules on control of anti-competitive licensing practices or conditions with the corresponding obligations under Article 40 of the TRIPS Agreement. The representative of China stated in response that China's legislation would comply with these obligations, notably as to the request for consultations with other Members. He stated that these rules would apply across the board to all intellectual property rights. The Working Party took note of this commitment.

D. ENFORCEMENT 1. General 287. Some members of the Working Party expressed concern that there was a continued need for additional enforcement efforts by the Government of China. They also said that China should strengthen the legislative framework for the enforcement of intellectual property rights for all right-holders. The representative of China stated that where an infringement of intellectual property rights was found in China, the person concerned could bring a lawsuit to a court. Since 1992, special IPR courts have been set up in major cities such as Beijing and Shanghai on the basis of their specialized collegial panels. According to China's legislation, individuals and enterprises would be held responsible for all their IPR infringing activities and subject to civil and/or criminal liabilities. Where any person violated the IPR of another person and the circumstances were serious, the person directly responsible would be prosecuted for his criminal liability by applying relevant provisions of the Criminal Law. If found guilty, the person directly responsible could be sentenced to a fixed-term imprisonment of no more than seven years or be subject to detention or a fine.

288. Some members of the Working Party further urged China to ensure the vigorous application by Chinese authorities of the enforcement legislation in order to considerably reduce the existing high levels of copyright piracy and trademark counterfeiting. Action should include the closure of manufacturing facilities as well as markets and retail shops that had been the object of administrative convictions for infringing activities. The representative of China stated that the measures for cracking down on intellectual property piracy were always severe in China. In judicial aspects, courts at all levels were continuously paying attention to the trial of IPR cases. As for administration aspects, the administrative authorities at all levels were putting emphasis on strengthening anti-piracy work. In addition, the administrative authorities were also enhancing the legal publication and education of the general public in a bid to ensure that the legal environment of China would be able to meet the requirements for enforcing the TRIPS Agreement. The Working Party took note of these commitments.

2. Civil judicial procedures and remedies 289. Some members of the Working Party expressed concern about certain practices relating to the filing of civil judicial actions that made it difficult for intellectual property right-holders to pursue their rights in China's courts. China's system of basing filing fees on the amount of damages requested makes large-scale infringement actions unnecessarily costly. Those members also expressed concern regarding the calculation of damages based on the infringer's profits. This, combined with China's rules on establishing the level of profits which require evidence of actual sale and which disregard inventory and past activity, often resulted in damage amounts inadequate to compensate for the injury that the right-holder has suffered.

290. The representative of China stated that Article 118 of the General Principles of the Civil Law provided that if the rights of authorship (copyrights), patent rights, rights of exclusive use of trademarks, rights of discovery, rights of invention or rights for scientific and technological research achievements of citizens or juridical persons were infringed upon by such means as plagiarism, alteration or imitation, they had the right to demand that the infringement be stopped, its ill effects be eliminated and the damages be compensated for. He further stated that the Trademark Law, the Patent Law and the Copyright Law had similar provisions.

291. The representative of China further confirmed that, Articles 42 and 43 of the TRIPS Agreement would be effectively implemented under the judicial rules of civil procedure. The Working Party took note of this commitment.

292. The representative of China confirmed that the relevant implementing rules would be amended to ensure full compliance with Articles 45 and 46 of the TRIPS Agreement, to the effect that damages paid by the infringer to the right-holder would be adequate to compensate for the injury suffered because of an infringement of that person's intellectual property right by an infringer who knowingly, or with reasonable grounds to know, engaged in infringing activity. The Working Party took note of this commitment.

3. Provisional measures 293. Members of the Working Party noted that the TRIPS Agreement required that judicial authorities have the authority to order prompt and effective provisional measures to (1) prevent an infringement of intellectual property from occurring, in particular to prevent the distribution or sale of infringing goods, and (2) to preserve the evidence of alleged infringement.

294. The representative of China stated that in China's Civil Procedure Law there were provisions on property preservation, but as yet no explicit stipulations had been provided to authorize the people's court to take measures for the prevention of infringements prior to formal institution of a lawsuit by a party involved. In order to enhance the deterrent power of law against infringements and to guarantee that the legitimate rights and interests of patentees would not suffer from irreparable harm as well as to comply with the TRIPS Agreement, China, when amending the Patent Law for the second time in 2000, introduced Article 61 to regulate provisional measures, which provided as follows: "where a patentee or any interested party who can provide any reasonable evidence that his right is being infringed or that such infringement is imminent, and any delay in stopping the acts is likely to cause irreparable harm to his or its legitimate rights and interests, he or it may, before instituting legal proceedings, request the people's court to order the suspension of related acts and to provide property preservation".

295. Some Members of the Working Party expressed concern that Article 61 of the Patent Law did not fully incorporate all requirements of Article 44 of the TRIPS Agreement, and that it was still unclear whether holders of intellectual property rights other than patents could rely on a similar procedure.

296. The representative of China stated that Article 61 of the Patent Law would be implemented in a way fully consistent with Article 50.1-4 of the TRIPS Agreement. He also stated that "reasonable evidence" in Article 61 of the Patent Law would be, through implementing rules, clarified to mean "any reasonably available evidence in order to satisfy with sufficient degree of certainty that the applicant is the right-holder and that the applicant's right is being infringed or that such infringement is imminent, and to order the applicant to provide a security or equivalent assurance sufficient to protect the defendant and to prevent abuse". The Working Party took note of this commitment.

4. Administrative procedures and remedies 297. Members of the Working Party noted that most IPR enforcement in China was done through administrative actions. In this connection, some members expressed concern about the inadequate levels of administrative sanctions in China which, when coupled with the high threshold for initiating criminal prosecutions, made IPR enforcement in China difficult. Administrative sanctions generally amounted to small fines and the loss of infringing inventory. Members also stressed the need for administrative authorities to refer more cases, including those involving repeat offenders and willful piracy and counterfeiting, to the appropriate authorities for initiation of criminal actions.

298. The representative of China said that the Trademark Law provided that in the event of any infringement of the right to the exclusive use of a registered trademark, the infringed right-holder could request the administrative department for industry and commerce at or above the county level for disposition. The relevant administrative department for industry and commerce had the power to order the infringer to stop the infringing act immediately and to compensate the infringed right-holder for its or his losses. SAIC and its local agencies above the county level could also impose a fine upon the infringer. The Patent Law provided that the patentee and interested party could request the administrative authority for patent affairs to handle the infringing act. The administrative authority could order the infringer to stop the infringing act immediately and mediate on damages at the request of the parties concerned. The Copyright Law provided that the copyright administration department could subject anyone who committed acts of infringement to such administrative penalties as confiscation of unlawful income from the act or imposition of a fine.

299. The representative of China stated that most IPR enforcement actions in China resulted in administrative measures to address the infringement. He noted ongoing efforts to strengthen the sanctions that were available to administrative authorities and the increased attention given to enforcement of IPRs. The representative of China confirmed that the government would continue to enhance its enforcement efforts, including through the application of more effective administrative sanctions. Relevant agencies, including the State Administration for Industry and Commerce, the State General Administration of the People's Republic of China for Quality Supervision and Inspection and Quarantine and the Copyright Office, now had the authority to confiscate equipment used for making counterfeit and pirated products and other evidence of infringement. These relevant agencies would be encouraged to exercise their authority to seize and preserve evidence of infringement such as inventory and documents. Administrative authorities would have the authority to impose sufficient sanctions to prevent or deter further infringement and would be encouraged to exercise that authority. Appropriate cases, including those involving repeat offenders and willful piracy and counterfeiting, would be referred to relevant authorities for prosecution under the criminal law provisions. The Working Party took note of these commitments.

5. Special border measures 300. The representative of China stated that on 5 July 1995 the State Council of the People's Republic of China had issued special legislation in respect of border measures for enforcement of intellectual property rights - the Regulations of the People's Republic of China Governing Customs Protection of Intellectual Property Rights - which came into effect on 1 October of the same year. According to this legislation, China's Customs offices must take measures to intercept importation or exportation of goods that were proved to be infringing the rights of trademarks, patents or copyrights legally protected in China. China's Customs offices were granted authority to investigate any suspected shipment and confiscate the goods in case infringement was proved.

301. Some members of the Working Party expressed concerns as to the compatibility of existing border measures with obligations under Articles 51 to 60 of the TRIPS Agreement; particularly the provisions on suspension of release into free circulation by customs authorities (Article 51), rules on evidence for initiating this procedure (Article 52), requirements on the security needed to protect the defendant (Article 53), rules on notice of the suspension (Article 54) and its duration (Article 55), rules on indemnification of the importer in case of wrongful detention (Article 56) and opportunity for the right-holder to have the goods detained inspected (Article 57). Moreover some expressed their concern as to compatibility of rules on actions ex-officio by competent authorities and the conditions attached (Article 58), as well as to the remedies provided against infringing goods (Article 59) and the quantities subject to the de minimis rules (Article 60).

302. In response, the representative of China stated that China would provide holders of intellectual property rights with procedures related to border measures that complied fully with the relevant provisions of the TRIPS Agreement (Articles 51 to 60). The Working Party took note of this commitment.

6. Criminal procedures 303. The representative of China stated that Articles 213 to 220 of the Criminal Law (Crimes of Infringing on Intellectual Property Rights) provided that whoever seriously infringes the right-holders' rights of registered trademarks, patents, copyrights or trade secrets would be sentenced to fixed-term imprisonment and would also be fined.

304. Some members of the Working Party expressed concerns that criminal procedures could not be used effectively to address piracy and counterfeiting. In particular, the monetary thresholds for bringing a criminal action, as currently applied, were very high and seldom met. Those thresholds should be lowered so as to permit effective action that would deter future piracy and counterfeiting. In response, the representative of China stated that China's administrative authority would recommend that the judicial authority make necessary adjustments to lower the thresholds so as to address these concerns. The Working Party took note of this commitment.

305. Noting the advanced state of protection for intellectual property rights in China, the representative of China confirmed that upon accession China would fully apply the provisions of the TRIPS Agreement. The Working Party took note of this commitment.

VI. POLICIES AFFECTING TRADE IN SERVICES 1. Licensing 306. Some members of the Working Party welcomed the broad-ranging and comprehensive commitments that China was undertaking to increase transparency and to provide information to governments and service providers on any matter relating to the GATS including China's Schedule of Specific Commitments. These members nonetheless expressed concerns regarding the lack of transparency in China's current services regime, in particular with respect to obtaining, extending, renewing, denying and terminating licences and other approvals required to provide services in China's market and appeals of such actions (hereafter referred to as "China's licensing procedures and conditions"). To be consistent with the provisions of the WTO Agreement, including the Protocol and China's Schedule of Specific Commitments, members of the Working Party noted that China's licensing procedures and conditions should not in themselves act as a barrier to market access and should not be more trade restrictive than necessary. Those members also expressed the view that upon its accession, China should publish (1) a list of authorities responsible for authorizing, approving or regulating those service sectors in which China made specific commitments and (2) China's licensing procedures and conditions.

307. The representative of China confirmed that paragraph 332 regarding publication of a list of all organizations that were responsible for authorizing, approving or regulating service activities for each service sector, including those organizations delegated such authority from the central government authorities, would apply. The representative of China also confirmed that China would publish in the official journal all of China's licensing procedures and conditions upon accession. The Working Party took note of these commitments.

308. The representative of China also confirmed that upon accession China would ensure that China's licensing procedures and conditions would not act as barriers to market access and would not be more trade restrictive than necessary. In accordance with China's commitments under the WTO Agreement, the Protocol and its Schedule of Specific Commitments, the representative of China confirmed that for those services included in China's Schedule of Specific Commitments, China would ensure that: (a) China's licensing procedures and conditions were published prior to becoming effective; (b) In that publication, China would specify reasonable time frames for review and decision by all relevant authorities in China's licensing procedures and conditions; (c) Applicants would be able to request licensing without individual invitation; (d) Any fees charged, which were not deemed to include fees determined through auction or a tendering process, would be commensurate with the administrative cost of processing an application; (e) The competent authorities of China would, after receipt of an application, inform the applicant whether the application was considered complete under China's domestic laws and regulations and in the case of incomplete applications, identify the additional information that was required to complete the application and provide the opportunity to cure deficiencies; (f) Decisions would be taken promptly on all applications; (g) If an application was terminated or denied, the applicant would be informed in writing and without delay the reasons for such action. The applicant would have the possibility of resubmitting, at its discretion, a new application that addressed the reasons for termination or denial; (h) If an application was approved, the applicant would be informed in writing and without delay. The licence or approval would enable the applicant to start the commercial operations upon registration of the company with SAIC for fiscal and other similar administrative purposes. This registration would be completed within 2 months of the submission of a complete file, as required by public SAIC regulations, and in accordance with China's Schedule of Specific Commitments; (i) Where China required an examination to licence professionals, such examinations would be scheduled at reasonable intervals.

The Working Party took note of these commitments.

309. Some members of the Working Party also expressed concern about maintaining the independence of regulators from those they regulated. The representative of China confirmed that for the services included in China's Schedule of Specific Commitments, relevant regulatory authorities would be separate from, and not accountable to, any service suppliers they regulated, except for courier and railway transportation services. For these excepted sectors, China would comply with other relevant provisions of the WTO Agreement and the Protocol. The Working Party took note of these commitments.

310. The representative of China stated that China would consult with WTO Members and develop regulations, consistent with China's Schedule of Specific Commitments and its obligations under GATS, on sales away from a fixed location. The Working Party took note of this commitment.

311. Some members of the Working Party noted that the World Code of Conduct provided a strong ethical basis for regulating sales away from a fixed location.

312. In response to questions from members of the Working Party regarding certain terms in China's Schedule of Specific Commitments, the representative of China confirmed the following: (a) A "master policy" was a policy that provided blanket coverage for the same legal person's property and liabilities located in different places. A master policy could only be issued by the business department of an insurer's head office or that of its authorized province-level branch offices. Other branches were not allowed to issue master policies.

(i) For master policy business with the state key construction projects as its subject-matter insured.

If investors on the state key construction projects (i.e., projects that were so listed and annually announced by the State Development and Planning Commission) met either of the following requirements, they could purchase a master policy from insurers that were located in the same place as the investors' legal persons were located.

1. The investment on the subject-matter insured were all from China (including the reinvestment from the foreign-invested enterprises in China) and the sum of investment of the investor accounted for over 15 per cent of the total investment.

2. The investment was partially from abroad, and partially from China (including the reinvestment from the foreign-invested enterprises in China) and the sum of investment of the Chinese investor accounted for over 15 per cent of the total domestic investment.

For those projects that drew all investment from abroad, every insurer could provide coverage in the form of a master policy.

(ii) A Master policy covering different subject-matters insured of the same legal person.

For those subject-matters insured located in different places and owned by the same legal person (excluding financial, railway, and post and telecommunications industries and enterprises), a master policy could be issued on the basis of either of the following conditions.

1. For the sake of payment of the premium tax, insurance companies incorporated where the legal person or accounting unit of the insurance applicant was located, were allowed to issue a master policy.

2. If over 50 per cent of the insurance amount of the subject-matter insured was from a larger or medium sized city, then insurers in that city were allowed to issue a master policy, no matter whether the insurance applicant's legal person or accounting unit was located in the city.

(b) Large scale commercial risk meant an insurance risk written on any large scale commercial enterprise if, upon accession, the aggregate annual premium exceeded 800 thousand CNY and the investment was more than 200 million CNY; one year after accession, if the aggregate annual premium exceeded 600 thousand CNY and the investment was more than 180 million CNY; two years after accession, if the aggregate annual premium exceeded 400 thousand CNY and the investment was more than 150 million CNY.

(c) Statutory insurance in China's Schedule of Specific Commitments were limited to the following specific categories, and no additional lines or products would be added: third party auto liability insurance, and driver and operator liability for buses and other commercial vehicles.

(d) The representative of China confirmed that any changes to the definition of master policy and large scale commercial risk would be consistent with China's Specific Schedule of Commitments and obligations under GATS so as to progressively liberalize access to this services sector.

The Working Party took note of these commitments.

313. Members of the Working Party welcomed China's commitment to permit internal branching for insurance firms consistent with the phase-out of geographic restrictions. Some members noted that China had scheduled certain qualifications as limitations under GATS Articles XVI and XVII that foreign insurers had to meet to apply for a licence to provide services in China. These qualifications related to a minimum period of establishment in a WTO member, total assets and maintenance of a representative office in China. These qualifications should not apply to those foreign insurance companies established in China seeking authorisation to establish a branch or sub-branch. The representative of China confirmed that the qualifications for foreign insurers applying for a licence to enter China's market would not apply to foreign insurers already established in China that were seeking authorization to establish branches or sub-branches. He also confirmed that a branch and a sub-branch were an extension of the parent enterprise and not a separate legal entity and that China would permit internal branching accordingly on that basis, and in compliance with China's Schedule of Specific Commitments, including provisions on MFN treatment. The Working Party took note of these commitments.

2. Choice of Partner 314. Some members of the Working Party expressed concern regarding the existing practice of imposing conditions on the Chinese companies that were allowed to partner with foreign service suppliers. These members indicated that this could amount to de facto quotas, as the number of potential partners meeting those conditions might be limited. The representative of China confirmed that a foreign service supplier would be able to partner with any Chinese entity of its choice, including outside the sector of operation of the joint venture, as long as the Chinese partner was legally established in China. The joint venture as such should meet the prudential and specific sectoral requirements, on the same basis as those for domestic enterprises and which must be publicly available. The Working Party took note of these commitments.

3. Modification of the Equity Interest 315. The representative of China confirmed that the Chinese and foreign partners in an established joint venture would be able to discuss the modification of their respective equity participation levels in the joint venture and implement such modification if agreement was reached by both sides and also approved by the authorities. The representative of China confirmed that such an agreement would be approved if consistent with the relevant equity commitments in China's Schedule of Specific Commitments. The Working Party took note of this commitment.

4. Prior Experience Requirement for Establishment in Insurance Sector 316. The representative of China confirmed that the merging, division, restructuring or other change of legal form of an insurance company would not impact the prior experience requirements included in China's Schedule of Specific Commitments if the new entity continued to supply insurance services. The Working Party took note of this commitment.

5. Inspection Services 317. In response to questions from members of the Working Party, the representative of China confirmed that China would not maintain requirements which had the effect of acting as barriers to the operation of foreign and joint-venture commodity inspection agencies, unless otherwise specified in China's Schedule of Specific Commitments. The Working Party took note of this commitment.

6. Market Research 318. Some members of the Working Party expressed concern regarding market research activities. In response to questions from members in this respect, the representative of China confirmed that, upon accession, China would remove the prior approval requirement for market research services, defined as investigation services designed to secure information on the prospects and performance of an organization's products in the market, including market analysis (of the size and other characteristics of a market) and analysis of consumer attitudes and preferences. Market research firms registered in China, which were engaged in such services, would only be required to file the survey plan and the questionnaire form on record in the statistical agencies of government at or above the provincial level. The Working Party took note of these commitments.

7. Legal Services 319. In response to questions from members of the Working Party, the representative of China clarified that "Chinese national registered lawyers", as indicated in China's Schedule of Specific Commitments, were those Chinese nationals who had obtained a lawyer's certificate and were holding a Chinese practising permit and were registered to practice in a Chinese law firm.

8. Minority Shareholder Rights 320. With respect to its Schedule of Specific Commitments, the representative of China confirmed that, while China had limited its market access commitments in some sectors to permit foreigners to hold only a minority equity interest, a minority shareholder could enforce rights in the investment under China's laws, regulations and measures. Moreover, WTO Members would have recourse to WTO dispute settlement to ensure implementation of all commitments in China's GATS schedule. The Working Party took note of these commitments.

9. Schedule of Specific Commitments 321. China's Schedule of Specific Commitments, reproduced in Annex 9 to the Protocol, contained the market access commitments of China in respect of Services.

VII. OTHER ISSUES 1. Notifications 322. Members of the Working Party requested that China submit the notifications required in the Protocol and Report to the WTO body with a mandate covering the subject of the notification. The representative of China confirmed that China would submit its notifications to these bodies, consistent with Section 18.1 and Annex 1A of the Protocol. The Working Party took note of this commitment.

2. Special Trade Arrangements 323. Some members of the Working Party raised specific concerns in relation to some of China's special trade arrangements, including barter trade arrangements, with third countries and separate customs territories, which those members considered not to be in conformity with WTO requirements. In response, the representative of China recalled the commitment undertaken by China in Section 4 of the Protocol.

3. Transparency 324. Some members of the Working Party expressed concern about the lack of transparency regarding the laws, regulations and other measures that applied to matters covered in the WTO Agreement and the Protocol. In particular, some members noted the difficulty in finding and obtaining copies of regulations and other measures undertaken by various ministries as well as those taken by provincial and other local authorities. Transparency of regulations and other measures, particularly of sub-national authorities, was essential since these authorities often provided the details on how the more general laws, regulations and other measures of the central government would be implemented and often differed among various jurisdictions. Those members emphasized the need to receive such information in a timely fashion so that governments and traders could be prepared to comply with such provisions and could exercise their rights in respect of implementation and enforcement of such measures. The same members emphasized the importance of such pre-publication to enhancing secure, predictable trading relations. Those members noted the development of the Internet and other means to ensure that information from all government bodies at all levels could be assembled in one place and made readily available. The creation and maintenance of a single, authoritative journal and enquiry point would greatly facilitate dissemination of information and help promote compliance.

325. In response, the representative of China noted that the Government of China regularly issued publications providing information on China's foreign trade system, such as the: "Almanac of Foreign Economic Relations and Trade" and "The Bulletin of MOFTEC" published by MOFTEC; "Statistical Yearbook of China", published by the State Statistical Bureau; "China's Customs Statistics (Quarterly)", edited and published by the Customs. China's laws and regulations of the State Council relating to foreign trade were all published, as were rules issued by departments. Such laws, regulations and rules were available in the "Gazette of the State Council", the "Collection of the Laws and Regulations of the People's Republic of China" and the "MOFTEC Gazette". The administrative regulations and directives relating to foreign trade were also published on MOFTEC's official website (http://www.moftec.gov.cn) and in periodicals.

326. He further noted that there were no forex restrictions affecting import or export. Information on forex measures was published by the SAFE and was available on SAFE's website (http://www.safe.gov.cn) and via the news media.

327. The representative of China noted that information concerning the administration of imports and exports would be published in the "International Business" newspaper and the "MOFTEC Gazette".

328. He also noted that information on China's customs laws and regulations, import and export duty rates, and customs procedures was published in the "Gazette of the State Council" and in the press media, and was available upon request. The procedures concerning application of duty rates, customs value and duty determination, drawback and duty recovery, as well as the procedures concerning duty exemptions and reduction, were also published. Customs also published monthly customs statistics, calculated according to country of origin and final destination, on the basis of eight-digit HS levels.

329. The representative of China noted that any bilateral trade agreements concluded between China and its trading partners, and protocols on the exchange of goods negotiated under them were published in "The Treaty Series of the PRC". He also noted that the "Directory of China's Foreign Economic Relations and Trade Enterprises" and "China's Foreign Trade Corporations and Organizations" were two publications which identified foreign trade corporations and other enterprises in China engaged in foreign trade.

330. The representative of China stated that the full listing of official journals was as follows: Gazette of the Standing Committee of the National People's Congress of the People's Republic of China; Gazette of the State Council of the People's Republic of China; Collection of the Laws of the People's Republic of China; Collection of the Laws and Regulations of the People's Republic of China; Gazette of MOFTEC of the People's Republic of China; Proclamation of the People's Bank of the People's Republic of China; and Proclamation of the Ministry of Finance of the People's Republic of China.

331. The representative of China confirmed that publication of all laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex would include the effective date of these measures. It would also include the products and services affected by a particular measure, identified by appropriate tariff line and CPC classification. The Working Party took note of these commitments.

332. The representative of China confirmed that China would publish in the official journal, by appropriate classification and by service where relevant, a list of all organizations, including those organizations delegated such authority from the national authorities, that were responsible for authorizing, approving or regulating services activities whether through grant of licence or other approval. Procedures and the conditions for obtaining such licences or approval would also be published. The Working Party took note of these commitments.

333. The representative of China confirmed that none of the information required by the WTO Agreement or the Protocol to be disclosed would be withheld as confidential information except for those reasons identified in Section 2(C) of the Protocol or unless it would demonstrably prejudice the legitimate commercial interests of particular enterprises, public or private. The Working Party took note of this commitment.

334. The representative of China confirmed that China would make available to WTO Members translations into one or more of the official languages of the WTO all laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex, and to the maximum extent possible would make these laws, regulations and other measures available before they were implemented or enforced, but in no case later than 90 days after they were implemented or enforced. The Working Party took note of these commitments.

335. Members of the Working Party also requested that China set up an enquiry point where information relating to all laws, regulations, judicial decisions and administrative rulings of general application and other measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex could be obtained.

336. The representative of China confirmed that China would establish or designate one or more enquiry points where all information relating to the laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex, as well as the published texts, could be obtained and would notify the WTO of any enquiry point and its responsibility. The information would include the names of national or sub-national authorities (including contact points) responsible for implementing a particular measure. The Working Party took note of these commitments.

4. Government Procurement 337. The representative of China stated that in order to promote China's government procurement regime, the Ministry of Finance promulgated the Interim Regulations on Government Procurement in April 1998. The Interim Regulations were stipulated in line with the spirit of the WTO Agreement on Government Procurement ("GPA") and on the basis of the relevant provisions of the United Nations Model Law on Procurement of Goods, Construction and Services while making reference to the laws and regulations of some WTO Members on government procurement. The policy and procedures regarding government procurement provided for therein were consistent with international practice. China stuck to the fundamental principles of being open, fair, equitable, efficient and in the public interest when carrying out government procurement. At present, China was formulating its Government Procurement Law.

338. Some members of the Working Party stated that China should become a Party to the GPA and that prior to its accession to the GPA, China should conduct all government procurement in a transparent and non-discriminatory manner. Those members noted that China's public entities engaged exclusively in commercial activities would not be conducting government procurement and thus laws, regulations and other measures regulating these entities' procurement practices would be fully subject to WTO requirements.

339. The representative of China stated that China intended to become a Party to the GPA and that until such time, all government entities at the central and sub-national level, as well as any of its public entities other than those engaged in exclusively commercial activities, would conduct their procurement in a transparent manner, and provide all foreign suppliers with equal opportunity to participate in that procurement pursuant to the principle of MFN treatment, i.e., if a procurement was opened to foreign suppliers, all foreign suppliers would be provided with equal opportunity to participate in that procurement (e.g., through the bidding process). Such entities' procurements would be subject only to laws, regulations, judicial decisions, administrative rulings of general application, and procedures (including standard contract clauses) which had been published and made available to the public. The Working Party took note of these commitments.

340. Noting China's intention to become a Party to the GPA, some members of the Working Party stated that China should, upon accession, become an observer to the GPA, and should initiate negotiations for membership in the Agreement by tabling an Appendix 1 offer within two years of accession.

341. The representative of China responded that China would become an observer to the GPA upon accession to the WTO Agreement and initiate negotiations for membership in the GPA by tabling an Appendix 1 offer as soon as possible. The Working Party took note of these commitments.

VIII. CONCLUSIONS 342. The Working Party took note of the explanations and statements of China concerning its foreign trade regime, as reflected in this Report. The Working Party took note of the commitments given by China in relation to certain specific matters which are reproduced in paragraphs 18-19, 22-23, 35-36, 40, 42, 46-47, 49, 60, 62, 64, 68, 70, 73, 75, 78-79, 83-84, 86, 91-93, 96, 100-103, 107, 111, 115-117, 119-120, 122-123, 126-132, 136, 138, 140, 143, 145, 146, 148, 152, 154, 157, 162, 165, 167-168, 170-174, 177-178, 180, 182, 184-185, 187, 190-197, 199-200, 203-207, 210, 212-213, 215, 217, 222-223, 225, 227-228, 231-235, 238, 240-242, 252, 256, 259, 263, 265, 270, 275, 284, 286, 288, 291, 292, 296, 299, 302, 304-305, 307-310, 312-318, 320, 322, 331-334, 336, 339 and 341 of this Report and noted that these commitments are incorporated in paragraph 1.2 of the Protocol.

343. Having carried out the examination of the foreign trade regime of China and in the light of the explanations, commitments and concessions made by China, the Working Party reached the conclusion that China should be invited to accede to the Marrakesh Agreement Establishing the WTO under the provisions of Article XII. For this purpose, the Working Party prepared the Draft Decision and Protocol reproduced in the Appendix to this Report, and took note of China's Schedule of Concessions and Commitments on Goods (document WT/ACC/CHN49/Add.1) and China's Schedule of Specific Commitments on Services (document WT/ACC/CHN/49/Add.2) that were annexed to the Protocol. It was proposed that these texts be adopted by the General Council when it adopted the Report. When the Draft Decision was adopted, the Protocol would be open for acceptance by China which would become a WTO Member 30 days after it accepted the said Protocol. The Working Party agreed, therefore, that it had completed its work concerning the negotiations for the accession of China to the WTO Agreement.
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