WORLD TRADE
ORGANIZATIONG/LIC/10
18 October 2002
(02-5675)
Committee on Import Licensing
REPORT TO THE COUNCIL FOR TRADE IN GOODS
ON CHINA'S TRANSITIONAL REVIEW
1. The Committee on Import Licensing, at its meeting on 24 September 2002, carried out the
first transitional review of China pursuant to Section 18 of the Protocol on the Accession of thePeople's Republic of China (WT/L/4 32).  Preparations in connection with Section 18 of the Protocol
had been discussed at the meeting of the Committee in May 2002 where it was agreed that the first
transitional review would be conducted at the meeting on 24 September 2002 (G/LIC/M/15,
paragraphs 3.1-3.6).
2. Pending information required for the transitional review, the European Communities, United
States and Japan submitted questions and comments in writing to China on its licensing system.
These questions and comments were circulated in documents G/LIC/Q/CHN/1, G/LIC/Q/CHN/2 and
G/LIC/Q/CHN/3.  The information and notifications  provided by China to the Committee on Import
Licensing for its meeting on 24 September 2002 were circulated in documents G/LIC/W/18,
G/LIC/N/1/C HN/1, G/LIC/N/ 1/CHN/1/Add.1 and G/LIC/N/ 3/CHN/1.
3. The statements made at the meeting of 24 September 2002, where discussions under the
transitional review took place, are reflected in the minutes of the meeting (G/LIC/M/16,
paragraphs 3.1-3.52).  The relevant paragraphs which reflect this discussion are annexed.G/LIC/10
Page 2
ANNEX
3. Transitional review under Section 18 of the Protocol of Accession of the People's
Republic of China6
3.1 The Chairman referred to paragraph 1 of Section 18 of the Protocol of Accession of China,
pursuant to which those subsidiary bodies of the WTO, including the Committee on Import Licensing,
which had a mandate covering China's commitments under the WTO Agreement or the Protocol
should, within one year after accession and in accordance with paragraph 4, review, as appropriate to
their mandate, the implementation by China of the WTO Agreement and of the related provisions of
the Protocol.  China should provide relevant information, including information specified in
Annex 1A, to each subsidiary body in advance of the review.  China could also raise issues relating to
any reservations under Section 17 or to any other specific commitments made by other Members in
the Protocol in those subsidiary bodies which had a relevant mandate.  Each subsidiary body was
required to report the results of such review to the relevant Council, in the case of this Committee to
the Council for Trade in Goods.
3.2 Under paragraph 3(a) of Annex 1A, China was required to notify the Committee on Import
Licensing of "implementation of the provisions of  the Agreement on Import Licensing Procedures and
the WTO Agreement applying the measures set out in Section 8 of the Protocol including provision of
the time taken to grant an import licence".  Paragraph 1 of Section 8 of the Protocol stipulated that inimplementing the WTO Agreement and provisions of the Agreement on Import Licensing Procedures,
China should undertake certain measures to facilitate compliance with these Agreements.  These
included publication of certain information and procedures related to the Import Licensing
Agreement, on a regular basis, in an official journal dedicated to the publication of all laws,
regulations and other measures pertaining to trade.  Copies of these publications should be forwardedto the WTO and the Committee for circulation within 75 days of each publication.  China was also
required, inter alia , to submit the notification of its import licensing procedures to the Committee;
and to report annually to the Committee on its automatic import licensing procedures, explaining the
circumstances which gave rise to these requiremen ts and justifying the need for their continuation.
This report shall also provide the information listed in Article 3 of the Licensing Agreement.  China
was required to issue import licences for a minimum duration of validity of six months, except where
exceptional circumstances made this impossible.  In such cases, China was required to promptlynotify the Committee of the exceptional circumstances requiring shorter periods of licence validity.
Paragraph 2 of Section 8 stated that "except as otherwise provided for in this Protocol, foreign
individuals and enterprises and foreign-funded enterprises shall be accorded treatment no less
favourable than that accorded to other individual s and enterprises in respect of the distribution of
import and export licences and quotas."  In addition, Section VII(a) of Annex 1A referred to responsesto specific questions in the context of the Transitional Review Mechanism (TRM), which should be
notified to the Committee.
3.3 The Chairman recalled that preparations in connection with the transitional review were
initially discussed at the meeting in May 2002, as reflected in the minutes of that meeting(G/LIC/M/15, paragraphs 3.1-3.6), when it was agreed  to conduct the first transitional review at the
current meeting.  As agreed, he had conducted info rmal consultations on this matter to best determine
how the Committee should carry out its obligations unde r the transitional review mechanism, to report
to the Council for Trade in Goods.
                                                     
6 WT/L/432.G/LIC/10
Page 3
3.4 Pending the information required from China to carry out the review, the European
Communities, the United States and Japan had submitted questions and comments to China which had
been circulated in documents G/ LIC/Q/CHN/1, 2 and 3 respectively.
3.5 Since China's communication circulated in G/LIC/W/18, the Committee had received
additional information from China which was relevant to the transitional review.  This included the
English version of the lists of products subject to import licensing, tariff rate quota administration and
import tendering as well as the English translation of rules and information related to the Agreement
on Import Licensing Procedures .  These were circulated as documents G/LIC/N/1/CHN/1 and
Addendum 1.  China had also submitted a notification under Article 7.3, replies to the Questionnaire,
which was circulated as document G/LIC/N/3/CHN/1.  The Chairman thanked the Chinese
delegation, on behalf of the Committee, for the information provided.
3.6 The Chairman suggested that the review be conducted  in two parts:  first, under IV.3(a) of
Annex 1A, and thereafter under VII(a) of Annex 1A.
3.7 Taking the floor under IV.3(a) of Annex 1A, the representative of China  informed the
Committee of the implementation of China’s commitments regarding the WTO Agreement on Import
Licensing Procedures since becoming a Member of the WTO.
3.8 He stated that in the course of China’s long accession negotiations, China had made
commitments under the intrinsic demands of their economic reform and opening-up process, as wellas the requirements posed by WTO rules and other Members.  In order to fulfill these commitments,
the Chinese Government had overcome enormous difficulties to open the market, dedicated to the
establishment of a uniform, transparent, equitable, non-discriminatory environment for market access,
and had adjusted its policies governing the import of goods in a timely manner immediately after
China’s accession.
3.9 As a developing country Member, and in order to safeguard its national security and social
welfare, to protect the ecological environment for human beings, to observe the international
conventions and agreements that China had signed or participated in, and to promote economic and
trade development, his authorities had promulgated a series of regulations and administrative
measures concerning import administration of goods, including import quotas, specific tendering,
import licensing, automatic import licensing and tariff rate quotas (TRQ).  To be more specific, thesewere Regulations on the Administration of Import and Export of Goods, Measures on the
Administration of Import Licence of Goods, Me asures on the Administration of Automatic Import
Licensing of Goods, Measures on the Administration of Tariff Rate Quota of Agricultural Products,
Implementation Rules on the Administration of Auto matic Import Licensing of Important Industrial
Products  etc.  These regulations and measures, based on WTO rules and China’s commitments,
specified the list of products subject to import quotas, specific tendering, import licensing, automatic
import licensing, TRQs and import prohibition, and the list of authorized bodies in charge of
approval, relevant procedures and standards.  In order to fulfill the obligation of transparency, his
authorities required that all newly established laws, regulations and administrative measures should be
published before being implemented.  In addition, the Chinese Government had established the ChinaWTO Notification and Inquiry Center as a focal point which was responsible for notifications and for
providing WTO Members, domestic and foreign enterprises or individuals with precise and reliable
trade policy information.
3.10 Currently, the administration of import of goods in China consisted of the following
categories:
1. Tariff Rate Quota (TRQ):  Major agricultural products and chemical fertilizers were subject
to TRQ administration.  All of these products except for chemical fertilizers were subject toG/LIC/10
Page 4
TRQ administration by the State Development Planning Commission (SDPC).  Fertilizers
were subject to TRQ administration by the State Economic and Trade Commission (SETC).
2. Import Quota:  Among the products subject to import quota, natural rubber was subject to
the administration of import quota by SDPC.  Pr ocessed oil and automobile tyres were subject
to the administration of import quota by SETC.  All other products were subject to the
administration of import quota by the Ministry of Foreign Trade and Economic Cooperation
(MOFTEC).
3. Specific Tendering:  Specific machinery and electronic products were subject to import
licensing administration by MOFTEC.
4. Automatic Import Licensing:  Important industrial products and some other products
including parts of machinery and electronic products were subject to automatic import
licensing administration.  Automatic import licensing for important industrial products was
under the administration of SETC, while other products were under the administration of
MOFTEC.
5. Licensing Administration:  According to relevant international conventions and treaties that
China had signed, chemicals used for the production of narcotics, monitored chemicals and
ozone-depleting substances (OSD) were subject to licensing administration.
6. Import Prohibition:  Products in this category included rhino horns, tiger bones, urban
waste, clinic waste, used clothing, used machinery and electrical products etc.
3.11 He emphasized that the above measures for th e administration of import of goods, which were
either based on China’s commitments or for statistical purposes, were implemented in a wayconsistent with WTO rules.  The machinery and electronic products subject to the administration of
import quotas and licensing constituted only three per cent of the total imports of machinery and
electronic products. Since the beginning of its WTO Membership, China had simplified the
administrative procedures for imports of goods.  Proof of that was the introduction of online
administration (through the internet), which greatly facilitated the quota allocation process.
Furthermore, only 1.7 per cent of machinery and electronic products were under the category of
specific machinery and electronic products subject to import tendering.  The import licensingadministration was undertaken in a uniform, transparent, equitable and non-discriminatory manner,
applying equally to products made in or originating from all WTO Members.  The quota quantity,
procedures for licence application and principles for allocating quotas, which were major concerns of
WTO Members, had already been published in the publications designated by the Chinese
Government, including the MOFTEC Gazette and relevant websites.  The practices of transferring orselling import licences were severely penalized by the Chinese Government according to relevant
laws and regulations.
3.12 China’s adoption of the new regime for the administration of imports of goods provided WTO
Members with convenient, fast and more stable and predictable market access opportunities.  InJuly 2002, the value of imported products under the administration of automatic import licensing
totaled US$ 4.77 billion, up by 31.4 per cent compared with the same period in 2001, and the
cumulative value from January to July totaled US$ 28.5 billion, up by 11.6 per cent compared with
the same period in 2001.
3.13 Products subject to import licensing administration had been reduced from 35 in 2001 to 12 in
2002.  The eight-digit HS headings subject to import licensing administration had been reduced from
502 to 170.  Therefore it would be fair to say that since its accession the Chinese Government had
overcome tremendous difficulties in fulfilling its obligations.  Before this meeting, his authorities hadG/LIC/10
Page 5
provided a large amount of information to the WTO in a WTO working language, fully demonstrating
China’s sincerity and goodwill in honouring its comm itments.  China hoped that Members could fully
recognize and understand this point and that in this  review, Members could exchange ideas with each
other, clarify problems and improve the work in a more positive way.
3.14 He further said that the questions China had received from certain Members prior to this
review had helped his authorities in preparing releva nt information for the WTO.  He believed that the
information submitted by China had already appropriately addressed the concerns raised by these
Members and that, should there be additional questions from Members which were beyond the
coverage of the information submitted, he would provide the necessary answers to them during the
course of this review.
3.15 The Committee took note of the statements made.
3.16 The Chairman, moving on to the discussion under VII(a) of Annex 1A  of the Protocol of
Accession, reminded Members of the specific questions to China posed by the European
Communities, the United States and Japan in the context of the Transitional Review Mechanism,which had been circulated in documents G/LIC/ Q/CHN/1, 2 and 3  respectively.
3.17 The representative of the European Communities welcomed China to this meeting and said
that he fully recognized the efforts made to turn th is exercise into a meaningful one.  This being the
first time that this item had appeared on the agenda of this Committee, he said that he was aware that
the first review might pose particular difficulties which he hoped would not be encountered in the
future.  He was heartened by the statement made by China that it had taken note of the questions
which had been put forward in advance of the meeting, which had led to the submission of the
documentation that the Committee had before it.  Referring to document G/LIC/Q/CHN/1, he said
that it contained general questions about forthcoming notifications.  Although the Committee hadreceived that documentation in the meantime it had not been possible for the EC experts to study them
in detail and to see whether any additional information was required.  His delegation had found the
Chinese statement useful and applauded the fact that the Committee would have an opportunity to
study the detailed Chinese intervention.  In order to carry out a meaningful review in the Committee,
more time was needed in order to address the specific questions posed to China.  His delegation was
not in a position to do so at this meeting because it had not had time for an in-depth examination of
the information submitted.  He was sure that the Committee would do that in due course, hence for thetime being his delegation thanked China for the information provided.  His delegation looked forward
to a discussion on how they could obtain answers to the questions already submitted and pose more
questions based on the information and notifications received, as soon as his authorities had had the
time to study the information in more depth.  He was aware that some ways of doing that had already
been explored in a similar situation in another Committee and his delegation wanted to urgedelegations to make an effort to allow such a process to develop.  The important cut-off date would be
the General Council in December 2002 where WTO Members could give their overall assessment of
the review.  Regarding the import licensing area, for the time being this could not really be judged.
His delegation very much deplored this situation but understood that this was due to the difficulties in
providing timely information as required in Section 18 of the Protocol of Accession.
3.18 The representative of China appreciated the European Communities' positive, cooperative and
practical approach to dealing with this transitional review.  He promised that China would address the
concerns raised by the EC through their questions, and that they would carefully study the issues
raised and deal with these issues through other channels.G/LIC/10
Page 6
3.19 The representative of the United States7 thanked China for its notifications and submissions
contained in G/LIC/W/18, G/LI C/N/1/CHN/1 a nd Add.1 and G/LIC/N/3/ CHN/1 which had been
forwarded to capital for review.  He would submit to China as soon as possible any additional
questions or requests for clarification that his authorities might have based on those notifications and
other information.  He requested that China provide written responses to these questions in time forthem to be included in the Committee's report to the Council for Trade in Goods on the transitional
review.  These questions and China’s responses should be considered an integral part of this
Committee’s review of China’s implementation.
3.20 He said that his authorities were disappointed that China had not provided written responses
in advance of this meeting to the questions submitted by the US and other Members.  The information
requested in those questions was precisely the type of information relevant to China’s implementationof the WTO Agreement and China's Protocol of Accession that was required by the TRM established
in Section 18 of China’s Protocol.  This review was an essential element of China’s accession
package, and China’s agreement to provide information under this review was a part of that
commitment.  He requested that China provide written responses to the questions that Members had
already submitted, in time for the responses to be included in the report to the CTG.  While the US
welcomed the additional information provided by China, this information had been received only
three working days prior to the review.   If info rmation was to be considered part of the review,
Members should at least have the opportunity to re ad and review it.  China’s failure to provide
information on time did not mean that the obligation had disappeared.  As this was a multilateral
review of China’s implementation of the Agreement on Import Licensing Procedures and not abilateral review, the US noted that China’s responses must be made to the Committee as a whole.
While the US would welcome the opportunity to discuss these important issues bilaterally, it was their
strong view that both the questions and answers s ubmitted in the context of the TRM should be made
available multilaterally and should be reflected in the permanent record of this discussion.  They
believed that other Members might have an interest in knowing China’s responses to the questionsposed by the US;  his authorities certainly had an  interest in knowing China’s responses to the
questions posed by other Members.
3.21 As concerned the administration of agricultural TRQs, his delegation thanked China for
meeting with them bilaterally on 11 and 12 September 2002 for consultations on its administration of
agricultural and fertilizer TRQs, as provided for in its schedule of concessions.  The consultations
were useful in that they had allowed them to exchange views on some of the more difficult issuessurrounding TRQ administration that had arisen since the TRQs were allocated in April 2002.  The
US recognized the difficulties that Members could encounter when implementing new regulations,
and for China this issue was compounded given the number of regulations that were promulgated or
revised during the first year of WTO implementation.  While China had succeeded in making
enormous, and generally useful, changes to its TRQ administration system in a relatively short periodof time, a few important wrinkles remained to be ironed out in order for the system to function as
smoothly as envisioned in China’s WTO accession agreement.  The US sought to assist China in
identifying those wrinkles so that the regulations and actual practice were consistent with China’s
market access obligations for commodities under TRQs.  To that end, the US requested that the
Chinese delegation respond in writing to the whole Committee to each of the questions raised in theAugust 2002 submission by the US (G/LIC/Q/CHN/2).  His authorities took this opportunity to make
some observations and pose additional questions based on the bilateral consultations.
3.22 As concerned licensing, paragraph 138 of the Report of the Working Party on the Accession
of China
8 stated that China did not require a separate import licence approval for goods subject to a
TRQ allocation requirement, but would provide any necessary import licence in the procedure that
                                                     
7 The statement by the United States was circulated as document G/LIC/8 following the meeting.
8 WT/ACC/CHN/49.G/LIC/10
Page 7
granted a quota allocation.  Yet China required that end-users apply to the State Development and
Planning Commission (SDPC) twice for a single allocation – once for the initial allocation and a
second time for  SDPC’s approval to use that allocation once the importer had a signed contract.
Quota-holders were then required to apply for and obtain, at both the local and national level, an
additional import licence from the State General Administration for Quality Supervision andInspection and Quarantine (AQSIQ) before the product could be imported.  There appeared to be no
legitimate quarantine objectives for these additional licensing requirements that could not easily be
achieved through other less burdensome means.  For entities that wished to import under TRQs
reserved for processing, there was yet another licence required.  End-users were required to obtain a
separate processing trade business licence in order to obtain a TRQ allocation.  These separate and
multiple licensing requirements, and the additional time and effort that it took importers to fulfill
them, were an undue burden on trade and appeared to be in conflict with China’s commitments forTRQ commodities.  It was also important that China not unduly restrict end-users' ability to adjust to
market conditions and to operate based on commercial considerations.  Paragraph 6.A of the TRQ
headnote required China to “establish a tariff-quota system that was open, transparent, fair, responsive
to market conditions, timely, minimally burdensome to trade, and reflects end-user preferences.”
However, China required quota-holders to prov ide detailed, time-sensitive commercial information,
such as price and origin, prior to obtaining an im port licence, and it restricted the commercial terms
that could be changed thereafter.  This requirement unduly restricted an end-user’s ability to adjust to
market conditions and operate based on commercial co nsiderations.  He called China’s attention to its
commitment in the TRQ  headnotes stipulating that all commercial terms of trade would be at the sole
determination of the importer and exporter, taking into full account the demands of the end-user.  Hisauthorities requested that China explain why it was necessary for an end-user to have a signed
contract before it could apply for an Agricultural Product Tariff Quota Certificate, and what purpose
this additional step served.  China was also requested to explain the steps China would take to
eliminate the additional licensing requirements for TRQ commodities or how it would bring these
requirements into accordance with its WTO commitments.
3.23 China prohibited the sale of products imported under “processing” TRQ from being sold on
the domestic market.  End-users who sold these commodities or their products on the domestic market
were subject to penalties and to out-of-quota tariffs.  This restriction on utilisation would appear not to
accord with Article 3 of the Agreement on Import Licensing Procedures, which prohibited such
restrictions.  The US requested that China explain how this restriction was consistent with its
obligations under the Agreement on Import Licensing Pr ocedures, or explain what steps it would take
to remove this restriction.
3.24 As concerned AQSIQ licensing requirements, the import licensing regulation implemented by
AQSIQ pursuant to AQSIQ Ordinance 7 (effective 20 March 2002) did not appear to serve a
legitimate SPS concern and did not appear to be consistent with the terms of the Agreement on ImportLicensing Procedures on automatic licensing.  In stead, it was an unduly burdensome, non-automatic
licensing requirement that appeared to be an additional quantitative restriction.  The AQSIQ licence
did not replace inspection at port, but was a separate licence that must be obtained in advance of
importation.  It applied only to imported goods.  The AQSIQ licensing process required multiple
approvals at several different levels of government.  Applications at each level of government couldtake up to 30 days and those applications that were finally approved took 30 days after issuance to
become effective.  In addition, these licences were only valid for 90 days from the date of issue.  The
short period of validity for these licences placed unjustified constraints on importers and exporters.  In
practice, the period of validity was much shorter, according to reports from US industry.  Applicants
for an AQSIQ import licence must state commodity weight (in advance of shipment), country oforigin, and port of destination.  Requiring such info rmation in advance of a contract being signed was
unrealistic, burdensome to trade, and interfered with a quota-holder’s right to determine the
commercial terms of trade.  If it was necessary to give quarantine officials advance notice of
shipments, there were less trade-restrictive ways to  gather this information that were consistent withG/LIC/10
Page 8
China’s WTO obligations.  His authorities requested that China explain what objective it was trying to
achieve with this additional AQSIQ licensing requirement and how this requirement was in
accordance with China’s commitments.  China was also requested to describe the steps it would take
to eliminate or bring its licensing requirements into accordance with China’s obligations.
3.25 As concerned the administration of auto quotas, according to paragraph 4 of "Implementation
Rules on the Quota Administration on Imports of Machinery and Electrical Products," the Ministry of
Foreign Trade and Economic Cooperation was responsible for examining and supervising the status of
allocation of import licences.  The US requested China to provide relevant information on the current
status of import quota allocation distributed by the following entities:  all provinces, autonomous
regions, municipalities directly under the central government and those with independent budgetary
status, coastal open cities, and by external economic trading management departments of specialeconomic zones and State Council-related machinery/electrical products import/export administrative
offices.
3.26 He further stated that he agreed with the comment of the representative of Japan.
Paragraph 129 of the Working Party Report provided that import licences could be extended once,upon request, for up to three months, if the request was made before 15 December.  The US requested
that China ensure that for 2002, the effective period for all quotas and related import licences be
extended by the period for which the quota allocation was delayed.
3.27 Furthermore, China had only very recently given to the Committee its list of licensing
requirements that remained in effect;  information on its import licensing procedures in the form of
responses to the annual Questionnaire required by Article 7.3 of the Agreement, including information
on the purposes, criteria, and other administrative requirements of the licensing system;  an
explanation of the circumstances which gave rise to  the licensing requirement and a justification for
its continuation.  This information should have been  provided along with the appropriate tariff rates
and quantities associated with the import restriction sufficiently in advance of this meeting to permit
review and comment.
3.28 The US commended China’s effort to revise its import licensing regulations to comply with
WTO requirements.  However Articles 1.4(a)/8.2(b) of the Agreement stated that all rules and
information concerning import licensing procedures should be published and the information notified
and made available to the Committee on Import Licensing.  This had been done too late to permitreview.
3.29 Furthermore, in accordance with Section 8.1(a ) of China’s Protocol of Accession, China was
required to publish on a regular basis in the MOFTEC Gazette a list of all entities responsible for the
authorization or approval of imports, and notify th is list to the WTO.  Although various regulations
governing import licensing had appeared on the MOFTEC website, it was not clear if MOFTEC’s
“Import Licensing Affairs Bureau” was the only agency responsible for the authorization or approval
of imports.  China should notify this list to the Committee.
3.30 Lastly, paragraph 334 of the Report of the Working Party on the Accession of China required
China to provide translations into one or more of the official WTO languages of all measures
pertaining to or affecting trade in goods, in no case later than 90 days after they were implemented or
enforced.   With regard to import licensing, while the Committee had received a number of China’s
regulations to review shortly before the meeting, China had clearly failed to fully comply with this
aspect of its accession commitments.  The US requested that China confirm that products listed inAnnex 3 of China’s Protocol of Accession that were subject to import quotas (e.g., fertilizer,
agriculture and autos) received automatic import licences as part of the application process for quota
allocation.  China should affirm its intention to comply with the scheduled phase-out of licensing
requirements in Annex 3 of China’s Protocol of Accession.G/LIC/10
Page 9
3.31 The representative of Djibouti appreciated the questions and answers given and believed that
China had well demonstrated its will to help others to understand how it was satisfying the WTO
rules.  He hoped that the answers to be given by China would satisfy the Committee.  While he
understood the concerns of certain delegations, he believed that China, as a new Member of the WTO,as well as other countries which had recently acceded to the WTO, required more time to understand
the WTO rules and to implement the WTO system.  He requested delegations who wished to pose
questions to China to be modest in doing so, bearing in mind the situation of future acceding
countries.
3.32 The representative of China expressed his appreciation to the representative of Djibouti for
his positive interpretation of the TRM.  On the general comment raised by the United States on the
issue of written replies to the questions raised by Members, he said that his delegation had already
rejected a similar request in another body because those requests had no legal basis in China's
Accession Protocol, and that he again rejected this request in this Committee.  Concerning the specific
questions raised by the US on the TRQ administration under licensing, he provided the following
information:  on the administration of TRQs, Ch ina had exchanged views with the US through
bilateral channels.  If the US believed that this kind of forum was useful China could continue to have
this dialogue in this forum, but if the US insisted that China should provide written replies to the
questions on administration of agricultural TRQs, he had already expressed China's position.
Regarding the concerns of the US over the so-called separate licensing requirement, he stated that
China did not apply any separate import licensing requirement.  With regard to agricultural TRQadministration, the quota holder only needed to show the customs the TRQ certification.  This was the
only import licensing requirement applied.  As concerned the so-called AQSIQ licence, this
concerned a quarantine matter which should not be discussed in this forum, and which he suggested
should be discussed in the TBT or SPS Committee.  He confirmed to the US that China did not
believe that the administration of TRQs in China was in conflict with China's commitments for TRQcommodities.  During the US-China bilateral discussions China had elaborated its views on that issue.
The administration for processing reflected the result of long-term negotiations and reflected the
nature of processing trade.  With regard to the question that China required quota holders to provide
several kinds of information, he pointed out that the intention was to guarantee the full utilisation of
the quota.  The US had also raised a question as to why China deemed it necessary for the end-user to
have signed a contract before they could apply for an agricultural product TRQ.  China did not
consider this to be an additional requirement.  If a quota-holder wanted to import products they had tosign a contract.  He thought it was natural for the Chinese authorities to ask the end-user to sign a
contract before applying for a TRQ certificate.  With respect to the US question concerning
prohibition of some products imported under the "processing" TRQ from being sold on the domestic
market, he believed it was legitimate for China to have this kind of administration, because processing
trade enjoyed tariff exemptions, and selling products on the domestic market could not be consideredas processing trade.  "Processing trade" meant the processing and re-export of the imported raw
materials, hence these legitimate regulations, which China did not consider to be in conflict with
Article 3 of the Licensing Agreement.
3.33 The Chairman noted that both the European Communities and the United States had requested
some additional time to study the contents of the notifications submitted by China and hoped that this
issue would be solved by the end of this meeting.
3.34 The representative of China said that he held a different view on this point.  The only possible
solution in his view was for the minutes of this m eeting to reflect the different opinions.  Responding
to the questions raised by the US on the requirement of AQSIQ, he did not believe that this was an
issue which should be addressed in this forum, and suggested that it be discussed in the TBT and SPS
Committees.  With regard to the second question on th e information provided by China, he said that
his authorities had made the maximum efforts to translate all the relevant laws, regulations andG/LIC/10
Page 10
administrative procedures into a WTO working language, which had already been submitted to the
relevant Committees.  China would continue its efforts to guarantee that all laws, regulations and
procedures concerning import licensing were notified in a timely manner.  He added that his
authorities had already published the list of entities responsible for the authorization or approval of
imports and had notified this to the WTO.  This list of entities was an integral part of the regulations.For example, for internal administration of import quotas of natural rubber, at the end of the relevant
regulation there was a list of agencies authorized by the SDPC.  For other regulations too a list of
entities responsible for the authorization or approval of imports was attached.  He further clarified that
MOFTEC's Import Licensing Affairs Bureau wa s not the only agency responsible for the
authorization or approval of imports, and that according to different laws and regulations, there were
different authorized agencies in charge of  the authorization or approval of imports.
3.35 The representative of Japan thanked China for its statement and the documentation supplied
for the meeting, based on which he wished to make this opportunity as meaningful and fruitful as
possible.  Therefore, in addition to the written questions that had been circulated beforehand in
document G/LIC/Q/CHN/ 3, Japan had prepared additional questions.  Japan welcomed China's efforts
to meet its obligations under the WTO Agreement and its Protocol of Accession and understood thatChina had made changes in a number of trade-related laws and regulations to implement its
obligations since becoming a WTO Member.  Such efforts undoubtedly required a significant amount
of time and human resources.  Japan welcomed China's efforts so far to examine the wide range of
commitments under the WTO and thought that the TR M would contribute to China's implementation
of WTO rules if carried out in a meaningful and productive manner.  When submitting its comments,one month before the meeting, Japan had requested China to respond in written form in advance of
the meeting.  Japan had intended to make the TRM as meaningful as possible by clarifying facts and
China's views on some import licensing issues befo rehand.  Japan already knew China's position on
this issue from the discussions in the Market Ac cess Committee, but still wished to remind China of
Japan's position.  Japan again requested a prompt wr itten response from China to the questions posed.
His delegation wished to make comments and ask additional questions based on the questions
submitted a month previously and to pose additional questions at this meeting.
3.36 First, as concerned import quotas on motor vehicles, while his delegation had had some
exchanges of views in the Committee on Market Access on 23 September, Japan was still concerned
whether allocation of import quotas for automobiles and key parts was being implemented
appropriately.  They wished to review whether or  not China conformed to the provisions of the WTO
Agreement and its Protocol of Accession after receiving replies to the following questions.  Japan
requested China to provide the necessary information as required under Articles 1.4 and 3.5(a) of the
Agreement on Import Licensing Procedures.  While he did not intend to repeat the questions
contained in document G/LIC/Q/CHN/3, his authorities wished to have information on the eligibility
of the applicant, the value of the import quota and import quota distributed by different entities.
(a) China had explained in the meeting of the Committee on Market Access held on
23 September 2002 that US$ 7.9 billion was allocated to the 2002 quota for automobiles and
key parts.  According to Table Two of Annex 3 of the Protocol, the key parts covered by the
import quota system were only engines (serial Nos. 104, 105 and 106 of Annex 3) and bodiesfor vehicles (serial No. 318 of Annex 3).  China' s customs statistics showed that the value for
automobiles, engines and bodies for vehicles imported from April to July was US$ 1.2 billion,
US$ 0.06 billion and US$ 0.1 billion respectively.  Therefore, the total volume of imports for
automobiles and key parts covered by the quota system from April to July was approximately
US$ 1.3 billion, while China had explained that US$ 7.9 billion of the quota was completelyallocated.  How would China explain the gap between the value of actual imports and
allocated quotas, and address Japan's concern about whether the allocation  of quotas for
automobiles and key parts was implemented in an appropriate manner?  What was China'sG/LIC/10
Page 11
view on the need for reallocation based on the gap between the value of actual imports and
allocated quota?
(b) Japan requested China to provide the foll owing information to promote understanding of
China's implementation of quota allocation and import licensing for automobiles and keyparts:
- total value/quantity of quota applied for automobiles and key parts;
- value/quantity of quota applied and allocated for automobiles;
- value/quantity of quota applied and allocated for CKD/SKD for automobiles;  and
- value/quantity of quota applied and allocated for engines and bodies for vehicles.
Japan understood that the actual volume of imports compared to the quota to be allocated was
quite limited and was still concerned about the issue of reallocation.  At this stage he
requested that the unused quota for 2002 be returned and reallocated as specified in the report
of the Working Party.
(c) China had explained in the TRM meeting of the Committee on Market Access held on 23
September 2002 that ten per cent of the total quota was reserved for new entrants for
application.  China had also said that US$ 7.9 billion was allocated to the 2002 quota for
automobiles and key parts.   Japan requested that China provide the actual value allocated to
new entrants in 2002.
(d) Finally, regarding the comments in G/LIC/ Q/CHN/3, his authorities required that China
specify the five points laid out in the Japanese comment on the implementation rules relating
to the administration of import of specific machinery and electronic products, although Japan
did not necessarily request the same language as written in the Working Party Report.  Japan
did not see any related articles in the regulation.  Therefore Japan requested that Chinaexplain which article of the regulation specified the five points referred to in the comment.
The five points were as follows:
(i) Priority consideration to be given to new entrants, enterprises with foreign ownership
equal to or less than 50 per cent, and enterprises with foreign ownership greater than
50 per cent in allocating the quota.
(ii) An import licence to be issued in mo st cases within three working days, and in
exceptional cases, within a maximum of ten working days, after a request for a
licence.
(iii) An import licence to be extended once, upon request, for up to three months, if the
request was made before 15 December of the current quota year.
(iv) The procedures for requests for extension mentioned in (iii) above.(v) Methodology of quota reduction for holders failing to return unused quota, and the
date and time-frame of reduction.
3.37 As concerned the question of the extension period for quota allocation, Japan requested that
China ensure that for the year 2002 the effective period for all quotas and related import licensing beextended by three months, since the allocation of the quota had been delayed by three months.
3.38 Japan requested that China address these issues at this meeting and wished to have additional
opportunities to further clarify the issues and for an exchange of views based on the oral responses at
this meeting as well as written replies to questions to be supplied later.  He concluded by saying thatJapan would like these discussions and documents, as well as those relating to any additional
opportunities, to be included in the Committee's report to be submitted to the Council for Trade in
Goods on the transitional review.G/LIC/10
Page 12
3.39 The representative of China, responding to the question raised by Japan about the difference
between the value of actual imports and allocated quotas, said that although he believed this was an
issue under the Committee on Market Access, he would reply for the sake of transparency.  At the
beginning of the Chinese accession negotiations 15 years previously, China had been told that the
quota was a market access opportunity and was not an  importation obligation, therefore actual imports
had no direct relationship with the quota allocated.  The volume of imports depended on the supply
and demand of the market.  The Chinese Government encouraged the full utilization of quotas but
could not guarantee whether the quotas allocated would be fully utilized.  With regard to the request
for information on the total value or quantity of the quota applied for automobiles and key parts and
CKD/SKD automobiles, according to the commitment made by China in its Accession Protocol and
the Working Party Report, China had an integrated quota for automobiles and key parts, but no split
quota to be allocated.  Therefore it was the responsibility of the applicants to apply for the value andquantity of automobiles and key parts to be imported.  He had no further information on this point.
On the question raised of the proportion for new entr ants of the total quota allocated for automobiles
and key parts, he replied that ten per cent of the total quota of US$ 7.9 billion in 2002 was reserved
for new entrants, i.e. about US$ 800 million.  On the last question, on the five points of paragraph 130
of China's Working Party Report, he said that there was some misunderstanding by Japan on thisparagraph.  He recalled that during the final stage of the accession negotiations he had clarified
several times to the Japanese delegation the contents of this paragraph.  Japan at that time had raised
the question as to why China did not reflect the criteri a listed in paragraph 130(b)(ii).  Actually, China
applied the criteria listed in paragraph 130(b)(i).  According to this paragraph, in cases in which
average imports over the three-year period immediately prior to the year of China's accession forwhich data was available exceeded 75 per cent of the relevant quota, applicants that had not
previously been allocated quota would be allocated ten per cent of the total quota in the first year, and
the majority of any quota growth in any subsequent year.  According to China's regulations on
administration of import and export of machinery and electronic products, China fulfilled this
requirement of paragraph 130(b)(i).  The application of paragraph 130(b)(ii) was conditioned upon theoccurrence of "other cases".  As no other cases within the meaning of this paragraph had occurred, the
measures contained in paragraph 130(b)(ii) would, therefore, not apply.  He made this clarification
again to Japan.
3.40 The representative of Japan thanked the delegate of China for his responses.  As concerned
the response to the second additional question posed by Japan, there was no breakdown of data for the
quota applied and allocated for automobiles, CKDs and engines and bodies.  Japan wished to knowthe total value/quantity of quota applied for automobiles and key parts, which would clarify the
comments of the Chinese delegation on the issue of breakdown of quota.  Japan understood that China
collected those data and breakdown of those data for the quota applied and allocated in order to get
information for statistical purposes.
3.41 The representative of China replied that the allocation for automobiles and key parts in 2002
was around US$ 12 billion.  According to the commitments China had made under Annex 3 of the
Protocol of Accession, China had a single quota value for automobiles and key parts.  Therefore
China had no breakdown statistics for this quota allocation.
3.42 The Chairman said that according to the interventions made by Members, two issues
remained to be resolved and that he would like to  hear from Members as to how to deal with those
issues.  The first issue was whether China had an obligation to reply in writing to the questions posed
by Members in writing.  The second concerned Members' requests to have another opportunity to
proceed with this review because they had not had sufficient time to study the documents submittedby China.
3.43 The representative of the European Communities said that although his delegation had not
actively taken part in the more specific discussion at this meeting due to reasons which he hadG/LIC/10
Page 13
explained earlier, he had found that discussion fruitful.  This showed the value of addressing as many
issues as possible in an interactive debate in a meeting with a record of the discussions.  If done
thoroughly this would alleviate some of the problems.  He hoped that in future meetings of this kind
Members could have a full interactive debate on the basis of thoroughly studied information and
well-formulated questions – the kind of debate which the Committee had had on a number of issues atthis meeting.  While he was not judging whether this was an exhaustive debate, he thought it had
brought the discussion forward.  His delegation noted the willingness expressed by China to furnish
further information concerning possible follow-up questions.  Referring to the term "other channels"
mentioned by the representative of China, he said that like others his delegation believed that the
process followed in the WTO of questions a nd answers being documented and made available
multilaterally for full transparency, was certainly the best way to proceed.  His delegation had taken
note of China's position.  Members could go on arguing what exactly Section 18 of the Protocol andthe Annex meant, but in his view this would not l ead to any agreement.  An agreement on that point
had not been reached in the Committee on Market Access, and was unlikely to be reached at this
meeting or in the very short time available before the meeting of the CTG.  Nor were Members asked
to give up their formal position on this point.  The most important question was how much real,
pragmatic progress could be made which would allow a full evaluation of the China's TRM in theDecember 2002 General Council.  Any way forward to allow Members to have a better view on how
China had implemented its WTO obligations was welcomed by his delegation, including any further
use of the knowledge and expertise which the Chinese delegation had brought to this meeting.  It
might be possible to discuss this issue further in  any forum without giving up the positions Members
held on the question of whether that was appropriate.  Nothing precluded any delegation, includingChina, based on better knowledge and understanding of the various interests and concerns, from
notifying at some stage more information on import licensing to the Committee.  He would be happy
to have such information, be it as an answer to a question or as an indirect response to the comments
and questions that various delegations had put forward, for an improved understanding of the
concerns and how the various mechanisms in China operated.  Members should explore all theavenues which had been or could be opened.  Thus the final evaluation of the TRM at the end of this
year would not be based on the discussion in one particular Committee but on the overall picture.  For
the time being the transitional review had only started off with the discussion at this meeting, with
more information needing to be provided.  The discussion in this Committee would be useful when
reviewing the results of the discussions in all su bsidiary bodies and in fine-tuning the TRM process.
3.44 The representative of the United States said that in his delegation's view the Committee had
not conducted a review in conformity with the re quirements of Section 18 of China's Protocol of
Accession.  The Committee should have received the Annex 1A information sooner as well as China's
responses to the questions, in order for the Committee to be able to evaluate that material and respond.
As a consequence, the path the US was going to take was two-fold.  First, as concerned the other
channels that had been mentioned by China, the US  would fully participate in any effort to develop
information and he encouraged the Chinese delegation to pursue that option as well, while
recognizing that it was outside this TRM process and therefore did not change the US' view towards
the adequacy of this first review.  Secondly, the US intended to table questions based on the material
that China had presented so far.  These questions would be presented in writing through the Chair to
the Chinese delegation with the intention that it be circulated to other Members.  It was hoped that atthe next meeting of the Committee China might be in a position to provide further information.
3.45 The representative of Japan thanked the delegation of China for the exchanges of views at the
meeting, which he found meaningful, and welcomed any other processes or opportunities for further
exchanges of views.  After reviewing information provided at the meeting and the documentssupplied, he stated that his authorities might raise further questions or comments in the framework of
the TRM this year.G/LIC/10
Page 14
3.46 The representative of China said that he did not agree with the judgement of some Members
on the TRM.  While Members were free to make any kind of judgement they wanted, he believed that
China had faithfully fulfilled its obligations under Section 18 of the Protocol of Accession, and that
the transitional review, in his view, had been conducted in a fruitful and constructive way.  With
regard to the pending issue on the requirement for Ch ina to provide written replies, his authorities had
a different view.  He believed that this Committee had no mandate to interpret Section 18 of the
Protocol, hence it was not necessary to continue the debate.  The only way to address this issue was to
reflect the different views of Members in the minutes of the meeting.  With regard to further questions
from Members and additional information required by Members, he said that China welcomed
questions from any Member concerning China's trade policies and would provide due responses,
although not in the context of this TRM.  He info rmed the Committee that, during the meeting of the
Committee on Market Access on 23 September, his delegation had offered to have an informalmeeting between the Chinese experts and interest ed parties, outside the forum of this TRM.
3.47 The Chairman said that there seemed to be  no windows open for the future process, i.e.
whether information should be provided in written fo rm or orally, or whether the future process would
be within the framework of the TRM.  He suggested that a factual report on China's TRM besubmitted to the CTG for consideration at its meeting on 8 November 2002.  This factual report would
refer to the relevant paragraphs of the minutes of this meeting as well as written comments and
questions submitted to China and the information and notifications received from China.  This in his
view would allow Members to make further cons ideration within the CTG or the General Council.
3.48 The representative of the European Communities said that as he had not participated in the
meeting of the Committee on Market Access on 23 September, he did not know what had taken place
during the discussion on the TRM.  However, since this discussion was being held in a different
Committee, he requested that China provide more information about the possibility of making use in a
pragmatic way of the expertise which the delegation of China had brought to this meeting.  TheChairman might, after the meeting, explore whether there was willingness on all sides to continue an
informal process outside the TRM to enlighten Members further on some of the specific questions.
3.49 The representative of the United States agreed to the Chairman's proposal to submit a concise
and factual report to the CTG.  He suggested that as part of the official report a detailed version of the
discussion that had taken place at this meeting should be appended.  This was because the minutes
themselves were restricted documents and would not necessarily be a part of a report.  In addition, aspart of the report to the CTG on the TRM, he suggested that the written questions from Members
submitted to China, the submission that his delegation had put forward orally at this meeting in which
further questions were posed as well as the answers that China had provided should be included.
3.50 The representative of China expressed his delegation's appreciation to the Chairman for his
excellent leadership of this meeting, and to Me mbers for their cooperation and active participation.
His delegation agreed with the closing remarks made by the European Communities that the review
exercise had been fruitful.  He also noted the remarks made by Japan that they had appreciated the
opportunity of an oral exchange of views which they had found meaningful.  His delegation expressed
their agreement with the judgement and comments of this kind made by delegations.  He appreciatedthe constructive and positive attitude as demonstrated by Members including the US, Japan and the
EC in this exercise, all of which had been achieved with the excellent leadership of the Chairman.
With regard to the intervention made by the EC concerning the request for opportunities for other
channels for exchange of views and for discussions on issues of multilateral or bilateral concern, he
assured the EC that the door of communication and consultation was always open, and that there wereplenty of other channels and opportunities to exchange views outside this TRM.  He assured other
delegations as well that the door of dialogue and consultations on issues of any nature in connection
with bilateral or multilateral trade were always open, and that his delegation was willing and ready to
continue this useful exercise.G/LIC/10
Page 15
3.51 The Chairman, responding to the proposal by the US regarding the format of the report to the
CTG on the TRM, said that the oral questions and an swers would be reflected in the factual report and
the minutes.  The minutes would fully reflect all the interests, concerns, comments or statements of
various Members.  Therefore in his view it would be appropriate to attach the relevant paragraphs ofthe minutes to the report.  As concerned the request made by the EC, he said that China had fully
responded to the request.  He concluded by thanking Members for the detailed and fruitful discussion
under this agenda item.
3.52 The Committee took note of the statements made.  The report to the Council for Trade in
Goods on China's transitional review wa s circulated in document G/LIC/10.
__________