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WTO TRADE POLICY REVIEW OF US
COMMENTS AND QUESTIONS FROM CHINA
January 2004


Secretariat Report WT/TPR/S/126
Summary Observations
General Questions

(p.viii, paras.7 and 9, p.x, para.19) According to the Report, the Trade Promotion Authority (TPA) Act of 2002 states that “the expansion of international trade is vital to the national security of the United States”. However, it is well known that the means of national security protection provided in the Public Health Security and Bio Terrorism Preparedness and Response Act promulgated by the U.S. in June 2003 were challenged by Members and their trade-restrictive effect raised serious concerns among Members.

1. Could the U.S. delegation explain how the U.S. will ensure that legislations with respect to national security are consistent with the principle of minimizing the effects on trade and safeguard the normal operation of international trade and investment to the greatest possible extent?

I. Recent Economic Developments

General Questions

(p.1, para. 2) The Report notes that the counter-cyclical fiscal and monetary policies of the U.S. Government “were buttressed by imports which helped to keep U.S. prices down even as public expenditure and private consumption have risen”.

2. Could the U.S. please provide detailed statistics and information on imports that assist to control its domestic prices and to achieve the objectives of its macroeconomic policy?

(p.1, paras. 1 and 3, p. 14, paras. 42-43) The Report states that the "twin deficits", i.e. the fiscal deficits and the current account deficits, are of some concern. According to the forecasts made by the U.S. Government, IMF and OECD, the status of "twin deficits" in the U.S. will continue. Whereas the Report also points out that “… equally, it is as important for the United States as for other Members that trade not be unduly hindered by administrative and other barriers”.

3. How will the U.S. authorities ensure that trade will not be unduly hindered by administrative and other barriers when dealing with the “twin deficits” issue in the future?

Merchandise Trade

(p.10, paras. 27-29)The Report points out that, after the previous review, the U.S. merchandise imports and exports declined by varied margins. In contrast to the U.S. declining exports to its other major partners, including the NAFTA partners during the 2001-02 period, U.S. exports to China increased.

4. How does the U.S. comment on the fact that Sino-U.S. imports and exports simultaneously increased in recent years against the adverse trend suffered by U.S. merchandise trade with other major partners?

II. Developments in Trade and Investment Policy

Impacts of FTAs

(p.15, para. 4, p.32, para.5 of Chapter III.) As one of the most important countries in trade, the U.S. is also one of the most active members in signing free-trade agreements (FTAs) in recent years.

5. What is the opinion of the United States about the impact of FTA arrangements on the multilateral trading system regarding the negotiating and administrative resources and the possible impacts incurred on trade by the multi-structure on implementation, inter alia the rules of origin, of various FTAs?

The implementation of Notification Obligation
(p.19, para. 20 of the Report by the Secretariat and p.6, para. 7 of the Report by the U.S. government).

The Report by the U.S. government indicates that “the United States will continue to press for increased transparency in … members’ trade policies”. Meanwhile, the Secretariat Report points out that the U.S. did not accomplish its notification obligations on domestic support to agriculture, special safeguards in agriculture, and import licensing over July 2001 to June 2003.
6. Could the U.S. Delegation please explain the reason why the notification obligations were not implemented? Please inform us of the plan on the earliest implementation of these obligations.

Generalized System of Preferences (GSP)
(p.25, paras. 58-59) With the only exception of the United States, 28 out of the total of 29 major developed countries with GSP schemes to developing countries have granted GSP to China since 1980. With its accession to the WTO on 11 December 2001, China has met all the legal terms to be granted GSP by the U.S. However, China’s application for GSP of the year 2002 was rejected by the U.S.
7. Could the U.S. delegation explain the required qualifications of the applicants and the review procedures of the U.S. on granting GSP?

8. Please clarify the reason why China’s 2002 application was rejected.

9. Is it that the applicant country must have no current account surplus to the U.S. constitutes an extra restriction in considering granting the GSP?
The Resumption of OPIC’s business activity in China
(p.30, para78)The Chinese and the U.S. government have signed the bilateral Agreement on Insurance and Guarantees for Investments in 1980. As the investment interests of U.S. private capital in China have increased drastically in the past years, the earliest resumption of the U.S. Overseas Private Investment Corporations’ (OPIC) business activity in China will benefit both China and the U.S.
10. When will the U.S. resume the OPIC’s cooperation with China, which will comprehensively enforce the Sino-U.S. Agreement on Insurance and Guarantees for Investments?

III. Trade Policies and Practices by Measures

The Prohibited Export Subsidies
(p.33, paras. 10, p.71, paras.176-179) The Report states that the WTO DSB has found that the U.S. tax exemption of certain "foreign trade" income of foreign sales corporations (FSCs) constituted a prohibited export subsidy under the Agreements on Subsidies and Countervailing Measures (SCM) and on Agriculture and later recommended that the United States withdrew the export subsidies. In January 2002, the Appellate Body issued its conclusions that the new Legislation, i.e. Foreign Sales Corporation Repeal and Extraterritorial Income Exclusion Act of 2000, was inconsistent with the GATT 1994 and the Agreements on Subsidies and Countervailing Measures and on Agriculture.
11. Would the U.S. Government expect that other Members will follow the practice of the U.S. thus harming the world environment of fair trade and the implementations of WTO Agreements?

12. Does the U.S. have any plan on repealing or amending the relevant legislation in consistence with the WTO Agreements?

Tariff
(p.41, paras. 47-49) There are 1309 non-ad valorem (NAV) tariff items in the United States, accounting for 12.47% of the total of 10493 items. The existence of large amount of NAV duties may incur the non-transparent tariff policies, and weaken the predictability of international trade. The actual NAV duties on certain products well exceeds the ad valorem duties of similar products and engenders a covert high tariff barrier, which greatly hinders the related Members’ export interests to the U.S. Meanwhile, the existence of large amount of NAV duties is also one of the focuses of the on-going negotiations aiming to further cut down tariff among WTO Members. China urges the U.S. authorities to transform these NAV duties to the ad valorem duties as soon as possible.
13. When will the United States take specific steps and measures in this respect?

Tariff Peaks
(p.41, para. 50) The wide existence of tariff peaks is quite obvious in U.S. tariff schedule, with high level of dispersion. The evident tariff peaks can be found in the following areas:
According to the definition of National Peaks (Number of HS 6-digit duties at least three times higher than the Member’s overall simple average, divided by the respective total number of HS subheadings), 323 U.S. tariff items of the agriculture products (excluding Fish) are national peaks, which occupy 30.82% of the total ad valorem tariff items. According to the definition of the International Peaks (Number of HS 6-digit duties higher than 15 per cent, divided by the respective total number of HS subheadings), 110 tariff items of the agriculture products (excluding Fish) are international peaks, which occupy 10.50% of the total ad valorem tariff items.

For Textiles and Clothing products, 408 tariff items are national peaks, which occupy 29.21% of the total ad valorem tariff items. And 259 tariff items are international peaks, which occupy 18.54% of the total ad valorem tariff items.

For Leather, Rubber, Footwear and Travel Goods, 62 tariff items are national peaks, which occupy 14.59% of the total ad valorem tariff items. And 43 tariff items are international peaks, which occupy 10.12% of the total ad valorem tariff items.

All the above, mentioned products are of important export interests to the developing members. On the one hand, the U.S. government claims its support for the special and differential treatment for the developing members, on the other hand, these tariff peaks have seriously curtailed exports from the developing members to the U.S.

14. When will the U.S. take efficient measures to reduce tariff peaks and promote international trade effectively?

Tariff Escalation
(p.41, para. 50) According to the analyses of 2002 USA tariff schedule, the existence of tariff escalation, which arises when tariffs increase with the degree of processing, is beyond any doubt. The Simple Average tariff rate for primary mineral products, precious stones and precious metals is 0.43%, the SA tariff rate for their semi-products is 1.17%, and the SA tariff rate for the finished products is 6.12%.
For the products of Textiles and Clothing, the SA tariff rate for primary products is 7.17%, the SA tariff rate for their semi-products is 9.21%, and the SA tariff rate for the finished products is10.16%.
The tariff rate of HS heading No.54074100 (Woven fabrics of synthetic filament yarn, unbleached or bleached, containing 85% or more by weight of filaments of nylon or other polyamides) is 13.6%. And the tariff rate of HS heading No.61099010 (T-shirts, singlet and other vests, knitted or crocheted, of silk or silk waste) is 32%.

The U.S. Government’s protection of its domestic industries with these tariff escalations, have negatively affected the export of finished products from the developing members to the U.S.

15. Is there any plan or timetable for the U.S. Government to eliminate the tariff escalations?

Quantitative Restrictions and Controls

(p.41, para 50) Importers and foreign exporters are not aware of the import volume of peanuts into U.S. each year, which is determined by the U.S. Government based on domestic output of peanuts of the year. On April 1 each year, the U.S. Government announces the volume of peanut import quotas and requires all importers store the peanuts that they have imported in its bonded warehouse. Only those that part subject to the quotas are permitted to be formally imported into the U.S., and the importer has to otherwise dispose of the rest. As a result, a large quantity of peanuts have to be shipped to third countries.

16. Could the U.S. explain the consistency of this measure with WTO principle of national treatment?

17. Does the U.S. intend to modify the regime for peanut imports and enhance its transparency in accordance with the WTO rules?

Customs Fees and Other Charges Affecting Imports

(p.46, para. 70)
18. What is the legal basis for the U.S. to levy merchandise processing fees upon importers?

19. Could the U.S. Delegation explain the practice’s consistency with Article 8 of GATT 1994?

Byrd Amendment
(p.48, paras. 77 and 79) The Report indicates that the Byrd Amendment was found by the WTO Appellate Body to be inconsistent with provisions of the AD Agreement, the SCM Agreement, the GATT 1994, and the WTO Agreement.
20. As the "reasonable period of time" for implementation has expired, what detailed measures will the United States adopt to implement the WTO recommendation?
21. Is the U.S. prepared to notify the detailed programme and timetable to comprehensively repeal the Byrd Amendment?

Anti-dumping

Status of the “Non-Market Economy”

22. Could the U.S. please elaborate whether there are relevant provisions on the procedures for an industry or sector to apply for the market economy conditions pursuant to the criteria provided in the national anti-dumping legislations of the U.S. If not, please inform us of the plan and timetable to provide such procedures.

1916 Anti-dumping Act

(p.49, para. 80)

23. Could the U.S. Delegation provide some information about the progress of repealing 1916 Anti-dumping Act in the Congress?

(p.50, para. 86) China has noted that in relevant legislations of the U.S. there exist provisions of discriminations against China, and that many unfair practices are maintained in the relevant investigations conducted by the U.S. in terms of procedures and determinations. These problems mainly relate to:

(1) Surrogate Countries

According to Part 773, Chapter 7 of the amended Tariff Act of 1930 and Part 351 (B) of Antidumping and Countervailing Duties, DOC should select a market economy as the surrogate country which has a development level comparable to the non-market economy country. However, in the administrative review case with respect to crawfish tail meat in April 2002, DOC chose Australia as the surrogate country. The level of development of China is apparently incomparable to that of Australia. Moreover, the cultivated crawfish of Australia and Chinese wild crawfish are of two different types of products. Therefore, the final anti-dumping duty rate determined for the Chinese product on the basis of Australian figures is extremely unreasonable.

24. In the context of this case, could the U.S. elaborate how it will deal, in a fairer manner with the difference of the levels of development of two countries and between the relevant products?

25. Could the U.S. please explain its criteria for selecting a surrogate country in this case?

26. While selecting surrogate countries, how does the U.S. avoid and rectify the problem with respect to insufficient relevance of surrogate countries?

(2) Calculation of Normal Value

In the anti-dumping investigations, the U.S. has always regarded China as a “non-market economy country” on a discriminatory basis. The prices of third countries used to determine the normal value of the Chinese commodities are randomly selected, and the calculating methodologies and data used by the U.S. are arbitrary and unpredictable, especially in terms of:

(a) Profit Margin of Producers

In the event that the surrogate country method is being applied and there exist several producers (including profitable producers and those at a loss) of the same kind of product, DOC will add up profit margins of all producers (for those at a loss, the profit margin is take as “0”) and then divide the sum by the number of all producers, the resulting value will be regarded as the profit margin of the surrogate country.

However, in the recent case with respect to the Chinese products (such as color TV), DOC abruptly changed the above method, omitting producers at a loss when calculating the profit margin of the surrogate country, which led to a prima facie increase of the profit margin of the surrogate country. Nevertheless, the data of the producers running at a loss was taken into account when computing indirect overhead cost as well as selling, administrative and other expenses of the producers in the surrogate country.

27. Could U.S. explain why it discarded the original method in calculating the profit margin of the surrogate country?

28. Please provide the justification for the inconsistency regarding to the data of the producers at a loss between the methods in calculating profit margin of the surrogate country and in calculating the cost and expenses of the producers in the surrogate country.

(b) Determination of the cost of the Chinese producers

Determination of the cost of the Chinese producers is crucial in determining the existence of dumping and anti-dumping duty rate. However, in many U.S. anti-dumping cases, the method for calculating the cost of Chinese producers is arbitrary, and the choice of data often depends on subjective judgment. For instance, in the anti-dumping investigation on aspirin produced by China, DOC determined that due to the high level of integration in production, indirect overhead cost of the Chinese producers should be lower than that of the producers of the surrogate country. Consequently, DOC multiplied the actual indirect overhead cost of Chinese producers by several times, thus having enhanced the production cost of the Chinese producers.

29. Could the U.S. elaborate on the criteria for determining the high level of production integration of the Chinese producers?

30. Please provide the legal basis for the U.S. to multiply the indirect overhead cost of the Chinese producers by several times.

31. If the U.S. considers this practice to be consistent with WTO Agreements, please clarify the consistency.

(3) Determination of Anti-dumping Duty Rate

Due to inaccurate data input and flawed calculating methodologies, the anti-dumping duty rate on Chinese products determined by the U.S. authorities often exceeds their normal values. Take the concentrated apple juice case as an example, DOC imposed “0” anti-dumping rate on five enterprises in the re-determination. However, while calculating the duty rate on the Chinese enterprises subject to voluntary verification to which weighted-average duty rate should have been applied, DOC considered that “0”duty rate should not be included in the weighted average calculating. Given that all the six enterprises under mandatory verification were subject to “0” duty rate, DOC considered there was no basis for weighted-average duty rate, so it determined the average anti-dumping rate of enterprises other than those subject to mandatory verification as 28.33%. Upon a later appeal by the Chinese enterprises, the U.S. Court of International Trade held that the determination of DOC was not justifiable, therefore DOC readjusted its determination to an average anti-dumping rate as 3.83% after re-calculation.

32. Could the U.S. provide the legal basis for excluding “0” duty rate from weighted-average anti-dumping rate?

33. Please clarify the method adopted by the U.S. for calculating the average anti-dumping rate of enterprises subject to voluntary verification and the legal basis thereof.

In fact, in the previous U.S. anti-dumping investigations against Chinese products, DOC had more than once determined an average anti-dumping duty rate far beyond the normal values, just like the practice as in the above-mentioned case.

34. Could the U.S. please elaborate how it will avoid such practices in future anti-dumping investigations?

(4) Determination of Injuries to Domestic Industries

According to Article 4 of WTO Agreement on Anti-dumping Measures, petitioners of anti-dumping investigations must be able to represent the entire industry; accusation against imported products and determination of injuries to the domestic industry should not be based on the situation of one or two companies only. However, in the recent anti-dumping investigation against color TV sets imported from China, DOC initiated the case only in response to complaints from one enterprise and 2 trade unions. But this one enterprise is as a matter of fact not a real color TV sets producer. Without supports from real producers, the petition itself lacked justification.

35. Please explain the consistency of the qualification of petitioners in this case with Article 4 of WTO Agreement on Anti-dumping Measures.

According to Article 3 and 4 of WTO Agreement on Anti-dumping Measures, a determination of injury to U.S. domestic industries shall be based on “positive evidence” and “objective examination”, and also take into account of “domestic producers as a whole”. Nevertheless, USITC failed to abide by the above rules in making the preliminary determination in the color TV case. Sound profit level and performance of the U.S. color TV sector during the investigation period seemed to be contrary to the conclusion of being “injured” made by USITC in the determination. Furthermore, USITC failed to take into full account the detailed data submitted by the Chinese enterprises and a great deal of objective facts.

36. Please explain the consistency of the affirmative determination made by DOC of an injury to the U.S. domestic industry by the color TV sets imported from China with Article 3 of WTO Agreement on Anti-dumping.

(5) New Shipper Review

Participating in the new shipper review is a basic right provided by the Agreement on Anti-dumping Measures and other relevant WTO rules. The U.S. have an obligation to interpret and apply these provisions strictly in accordance with the WTO rules and its domestic legislations.

However, three out of the five Chinese enterprises requesting for new shipper review in 2003 were denied by the DOC of the new shipper qualifications based on unjustified causes, including:

(a) Refusing the petition based on erroneous customs record

Based on a false record of the U.S. Customs, DOC refused to grant one Chinese enterprise with qualification of the “new shipper of honey”. Upon the investigation by the attorney at law, the U.S. Customs admitted its mistake and made written clarification on the matter to DOC, but DOC refused to change its decision.

37. Please provide justifications for DOC’s refusal to change its wrong decision.

(b) Cause for refusal conflicts with laws and precedent cases

With regard to the application of another Chinese enterprise to be a new shipper, ITA noted that although the supplier of the enterprise had not exported products to the U.S. during the period of investigation, it had supplied goods to an exporter which had exported goods to the U.S. in such period, so ITA denied the enterprise’s application.

38. Please provide the legal justification for denying this application.

39. Please explain the reason for the inconsistency of this practice with 19 USC § 1675(a)(2)(B)(i) and 19 C.F.R. § 351.214(b)(2)(ii)(A), § 351.214(b)(2)(ii)(B), § 351.214(b)(2)(iii)(A), and § 351.214(b)(2)(iii)(B), as well as precedents made by U.S. DOC in the case of Glycine from China and in the case of Crawfish from China.

(c) Restrictive requirements on “sales to the U.S.”

Yet another Chinese enterprise’s application for new shipper review was refused under the excuse that its contractor located in Europe rather than in the U.S., therefore their exports were not regarded as “eligible sales to U.S.”. However, as a matter of fact, documents submitted by this enterprise could prove that its products were shipped directly from China to the U.S., with a destination port of the U.S.

40. From the practice of the U.S. in the above case, it seems that the definition of “sales to the U.S.” consists of an extra restriction that the contractor of the product should also be within the territory of the U.S. If this understanding is correct, please provide the legal basis for such restriction on “sales to the U.S.” defined in the U.S. anti-dumping legislation.

Countervailing Measures

(p.52, para. 90) In light of a consensus reached between the U.S. and the EU pursuant to the decision and recommendation of the DSB, the calculating methodology of “changing ownership” used in countervailing measure investigations and determinations by the U.S. is inconsistent with the WTO Agreement on Subsidies and Countervailing Measures.

41. Prior to November 8, 2003, had the U.S. DOC already rectified the calculating methodology? If not, please explain why.

Technical Regulations and Inspection and Quarantine Measures

(p.60, para. 122) The burdensome SPS requirements of the U.S. have always been a focus of complaints and concerns of Members. During previous review, the U.S. Government indicated that the Federal Register was in the process of soliciting public comments and seeking measures to improve the SPS requirements that had impeded normal trade.

42. Please provide information on what measures the U.S. has taken in this respect since then.

(p.63, para. 134 and p.64, para. 139) 92.7% of the 117 routine notifications under SPS made by U.S. in 2002 provided a comment period of less than 60 days, China feels disappointed for the inconsistency of the general comment period provided by U.S. with the recommendations of TBT and SPS Committees—no less than 60 days.

In order to promote WTO Members implement action of the 60-day comment period recommendation, China proposed that the “60-day comment period” for SPS notifications should be calculated from the date of the WTO Secretariat distribution (G/SPS/W/131). This was opposed by the U.S. Delegation on the excuse of not complying with the American domestic legislation.

43. What domestic legislation prevents the U.S. from doing so? We would appreciate it if the U.S. could provide us the full text of the relevant legislation.

44. How would the U.S. justify the situation of a high percentage of inconsistency in terms of comment period provided by the U.S. for the SPS notifications, for example 57.3% of the U.S. SPS notifications were less than or equal to 30 days, 92.3% less than 60 days for the year 2002?

45. What measures will the U.S. take in order to abide by the recommendations of the SPS Committee and the TBT Committee on the no less than 60 day comment period?

(p.63, para. 135) Products such as beef are required to be labeled with the country of origin.

46. Is it the consideration of the U.S. behind this legislation that consumers would more likely choose products originating in the U.S. when they are labeled with the country of origin? If not, what is the consideration behind the measure?

47. Since imported meat products have already undergone relevant inspection and quarantine, how does the U.S. consider the impact of this practice on equitable competition between foreign and U.S. products?

(p.64, para. 139) Some Chinese fruits are competitive in the U.S market. However, the U.S. Government has held off the market access of Chinese fruits, such as Asian Pears and apples, on the basis of causes in relation to inspection and quarantine of plants, keeping them out of the U.S. market to date. However, the prohibition of our Asian Pears and apples from entering the U.S. market for the reason of plant inspection and quarantine is unjustified, given that Asian Pears and apples produced in China are in full conformity with international quarantine standards. With regard to bergamot pears, China raised the application for bergamot pear export to the U.S. in 1992, but the U.S. refused to conduct the pest risk analysis on account of 9 epidemic diseases contained in the pears. As a matter of fact, the alleged diseases have never occurred in Xinjiang region of China when the bergamot pears are produced.

48. What are the inspection and quarantine standards adopted by the U.S. for Asian Pears and apples from China? Are such standards different from international quarantine standards?

49. Is there a time limit for inspection and quarantine of imported goods in the U.S.? Has such time limit been respected in the inspections of Asian Pears and apples from China?

50. Could the U.S. please clarify the scientific justification in terms of SPS for refusing the importation of Chinese bergamot pears?

51. Why did the U.S. refuse to conduct the pest risk analysis?

(p.64, para. 142) The U.S. denies any inspection results provided by exporters of peanuts, including the inspection conducted by international commodity inspection organs (such as SGS), which was counter to the WTO Agreement on Preshipment Inspection. While conducting inspection on imported peanuts, the U.S. has expanded the scope of inspection, protracted the inspection time, increased inspection charges thus creating difficulties of the inspection at its own discretion. For example, while asserting samples from one container among eight, the U.S. authorities actually require every container to be opened.

52. Could the U.S. explain the necessity of these practices and their consistency with the rule of harmonization and the principle of least trade restrictiveness contained in WTO Agreements on TBT and SPS?

(p.65, para. 145) According to the understanding of China, Chinese herbal medicines are sold in the U.S. as “an supplement to diet”. The U.S. Federal laws require the content of heavy metals such as arsenic, Hg and lead to be measured, which can not exceed the standards adopted by FDA. However, California applies the standards for drinking water to herbal medicines, which is an unreasonable practice. No.65 Bill of California requires the herbal medicines be labeled, which would have unfavorable effect on the choice of consumers.
53. Could the U.S. provide the applicable scope of California No. 65 Bill and indicate whether there are measures in place to prevent unnecessary and unreasonable impact on normal trade?

“Public Health Security and Bioterrorism Preparedness and Response Act of 2002” and its correlative system rules.

(p.65, para. 146) On June 12 ,2002, the U.S. released “Public Health Security and Bioterrorism Preparedness and Response Act of 2002”. According to chapter 3 of the Act, FDA worked out and notified successively to WTO in 2003: “Registration of Food Facilities Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002” (G/SPS/N/USA/691),“Prior Notice of Imported Food Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002”(G/SPS/N/USA/690),“Establishment and Maintenance of Records Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002”(G/SPS/N/USA/703) and “Administrative Detention of Food for Human or Animal Consumption Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Draft)” (G/SPS/N/USA/704). On October 10, 2003, “Registration of Food Facilities Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002” and “Prior Notice of Imported Food Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002” were formally released as temporary final rules，and entered into force on December 12, 2003.

With regard to the Registration of Food Facilities, the U.S. officials clearly expressed that they would not extend the comments period，and all comments should be proposed before April 4, 2003. The provision of article 26 of para. E on Handling of Comments on Notifications of the “Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7)” (G/SPS/7/Rev.2) of WTO/SPS committee provides “Members should grant requests for extension of the comment period wherever practicable, in particular with regard to notifications relating to products of particular interest to developing country Members, where there have been delays in receiving and translating the relevant documents or where there is a need for further clarification of the measure notified. A 30-day extension should normally be provided”.

54. Please elaborate how the U.S. implements this provision.

There are only less than 2 months between the formal adoption of the temporary final rules of Registration of Food Facility on October 10 , 2003 by FDA and its entry into force(Dec. 12, 2003). Para. 2 of Annex B of the SPS Agreement and the decision made at the Fourth Ministerial Conference, provides that “a reasonable interval between the publication of a SPS regulation and its entry into force in order to allow time for producers in exporting Members … to adapt their products and methods of production to the requirements of the importing Member.”

55. Please elaborate how the U.S. implements this requirement?

Both Article 2.12 of TBT Agreement and article 10.2 of SPS Agreement provided that the developing country member should be given “longer time-frames” from the adoption and entry into force of a regulation.

56. Have the specific interests and difficulties of the developing country members been seriously considered by the U.S. in this regard and what specific measures have been taken to fulfill these obligations?

57. Could the U.S. indicate whether the above-mentioned WTO rules and provisions have been followed when the Establishment and Maintenance of Records Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 is implemented?

58. Has the U.S. conducted the risk assessments before the adoption of the above-mentioned legislation and regulations, according to Article 5.1 of the SPS agreement? If so, could the U.S. provide the details of the assessments?

59. What measures has the U.S. taken to ensure that the enforcement of the legislation will not increase the cost of food export and prolong the time of the exportation?

60. How will Article 5.4 of the SPS agreement be followed by the U.S. to ensure that the efforts in anti-terrorism will not constitute new trade barriers and restrict normal trade?

(p.65, paras. 146-149) Registration of Food Facilities and Prior Notice of Imported Food under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 has taken effect. Up to now there have been uncertainties which will influence the transportation of these cargoes.

61. As to the food that is imported or offered for import into the U.S., after the facilities are registered and prior notice on the importation is given to the FDA, what kind of documentation should accompany with the carrier when the vessel arrives at a U.S. port?

62. The food is subject to refusal and detention for lack of registration or without prior notice. If all the food in one container is refused, how will the container be treated?

63. The Public Health Security and Bioterrorism Preparedness and Response Act (for short as the Bioterrorism Act below)is not clear under what circumstances the carrier shall provide the prior notice to the FDA. What information must be included in a prior notice?

64. Most of the food and drug that are imported or offered for importing into the U.S. by water are carried in containers. Under what circumstances are the containers subject to registration?

If an ocean carrier cancels the Canadian port by reason of weather or other reasons and arrives at a U.S. port directly and if the prior notice submitter or transmitter does not know the temporary change and miss the proper time to provide the prior notice, the Bioterrorism Act does not provide what to do with this case, which will bring inconvenience to the food, drug exporters and the carrier.

65. Is there any regulation in the U.S. to deal with such circumstances? If not, does the U.S. intend to make any arrangement in this regard?

66. How would the U.S. deal with the food which should arrive at Canada but for some reasons finally arrives at a U.S. port and needs to be transported to Canada from the U.S. by rail or by road? Does the carrier need to give prior notice to the FDA?

(p.65, para. 147) According to the Registration of Food Facilities, foreign establishments should apply for registration through U.S. agencies, and have to pay thousands of U.S. dollars to the U.S. agencies. In the mean time, in order to meet the requirements set in the Establishment and Maintenance of Records, foreign food and feedstuff processing establishments and transportation and trade-related establishments should establish and maintain relevant records. Some of the small and medium enterprises are considering to abandon the U.S. market due to these requirements. Hence, FDA’s requirements are do not comply with the WTO Principle of least trade restriction and create trade barriers to the exportation of Chinese products.

67. Is FDA seeking other alternative measures which will minimize the impact on trade while preventing bioterrorism and tracing terrorists?

68. What kind of measures will the U.S. take to ensure that the implementation of Bioterrorism Act will not increase the export cost of food trade and prolong the time of exportation?

(p.65, para. 149) The Chinese government made comments in a serious manner on the “Registration of Food Facilities” (G/SPS/N/USA/691), “Prior Notice of Imported Food”(G/SPS/N/USA/690), the “Establishment and Maintenance of Records”(G/SPS/N/USA/703) and the “Administrative Detention of Food for Human or Animal Consumption Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Draft)” (G/SPS/N/USA/704) notified by FDA, provided with the U.S. the comments before the final date and requested the U.S. to provide answers in written form and clarify some related questions. However, so far China has not received any formal reply, clarification and explanation from the U.S.

69. Does the U.S. plan to respond to the comments made by China? If so, when?

70. How will the U.S. implement the provisions contained in Article 25 of para. E on Handling of Comments on Notifications of the “Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement(Article 7)”(G/SPS/7/Rev.2)?

(p.65, para. 149) For food and feedstuff establishments, the relevant record is made based on the General Food Sanitation of 1997 and HACCP system and Application Rules of 1997 developed by CAC, a standardization body which is recognized by TBT/SPS Agreement, and the food establishments which have exported food to the U.S. have also met the requirements set out in FDA 21 CFR PART 110, FDA 21 CFR PART 120. These records should have met the requirements set out in the Establishment and maintenance of Records, and there is no need to repeat them anyway.

71. Please explain whether the requirements set out in the “Establishment and Maintenance of Records Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002” are based on “CAC General requirements for Food Sanitation” of 1997, “CAC HACCP System and Application Rules” of 1997, and its relationship with the requirements set out in FDA 21 CFR PART 110, FDA 21 CFR PART 120.

(p. 80, paras. 211-221)

72. Will the U.S. kindly indicate how much subsidies and assistance in average terms it grants annually to its services and service providers?

Trade Adjustment and Aid Programs

(p.82, para. 222)

73. Please list actual outlays to date, including actual payments obtained by various sectors, such as agriculture, textiles and apparels.

(p.86, para. 242)

74. Please indicate the specific legislations applicable to government procurement in services sector.

Intellectual Property Rights

(p.92, para. 270) The U.S. is the only country in the world that adopts the “first invent” system in judging the novelty of patents. The “first invent” system prima facie conforms to National Treatment and MFN rule, however it has caused many inconveniences to nationals of WTO Members. For example, Article 102 of the Patent Act of the U.S. states that criteria of novelty for inventions created in the U.S. are different from those for inventions completed out of the U.S. Comparing with the U.S. applicants, the above provision is obviously unfavorable to foreign applicants filing applications for patents in the U.S.

75. Please elaborate what actions the U.S. intends to take to make foreign applicants in an equal position with the U.S. applicants.

(p.94, para. 277) Section 1498 of the U.S. Code states that when products manufactured and used by the U.S. Government or manufactured or used upon a request by the U.S. Government involve a patent, the patentee has no right to prevent the manufacturing and use of the products by the U.S. Government. This situation is akin to compulsory licensing system without the permission of the patentees as stipulated in Article 31 of TRIPS, but protections to the patentees provided in relevant act of the U.S. is much weaker than those provided in Article 31 of TRIPS.

76. Please explain the consistency of this act with Article 31 of TRIPS.

(p.95, para. 281)

77. Please provide information on the implementation of the obligation to protect well-known trademark under the TRIPS Agreement in the U.S. domestic legislation and judicial practices.

(p.97, para. 293) The exceptions to copyright protection (Limitations on exclusive rights: Exemption of certain performances and displays) as specified in Article 110.5 of U.S. Copyright Act is inconsistent with Article 13 of TRIPS.

78. Is the U.S. going to make any amendment to such provision so as to make it consistent with the TRIPS Agreement?

79. Does the U.S. Government have any plan for such amendment? If yes, please provide the detailed information.

IV. Trade Policies by Sector

Agriculture

(p. 102, para. 12) On May 13, 2002, the U.S. President formally signed 2002 Farm Bill, according to which the subsidies provided to agriculture in the U.S. will reach USD190 billion in the following ten years. The feature of the new Farm Bill is that the support to agriculture is to a large extent and has a large coverage of products, which is seldom seen in the U.S. history. Except for the increase of subsidies provided to wheat, soybean and cotton which have received subsidies from the Government all the time, the new Farm Bill also provides subsidies by specific agricultural products including vegetables and fruits.

The U.S. new Farm Bill mainly focuses on and enhances “Amber Box” subsidies, which was counter to the requirement of “substantial reduction of trade-distorted domestic support” raised in the Doha Ministerial Declaration, and further harms the confidence of most WTO Members, especially the developing countries.

80. Why has the U.S. not yet notified WTO of this 2002 Farm Bill?

81. What is the annual average amount of direct payment and counter-cyclical payment provided according to the new Farm Bill?

82. Please clarify the impact of such Bill on the prospect of the on-going multilateral agricultural trade negotiation.

83. Is such a bill contradictory to the stated attitude of the U.S. on the agricultural negotiations in the “Doha Round” as appeared in the Report by the U.S. Government?

84. The increase of subsidies to agriculture by the U.S. is contrary to the negotiation objective of “reductions of, with a view to phasing out, all forms of export subsidies” as set out in Para. 13 of the Doha Ministerial Declaration. What is the U.S. opinion on this issue?

85. Does the U.S. plan to make an amendment to this Bill so as to reduce the subsidies to agriculture substantially?

(p. 106, para. 21) Domestic support to agricultural products, 2002 Farm Bill.

86. When will the U.S. notify its domestic support data since 2000, including data of “Amber Box” and the de minimis?

(p.108, Para. 26)

87. What is the U.S. intention to expand offset loan price for its agricultural products and include more products under its loan coverage? Is the increase of loan by U.S. contrary to its initiative of reducing trade-distorting domestic support to agricultural products at the multilateral level, since such loan falls into the Amber Box?

(p. 109, para. 31)

88. How does the U.S. determine the target price of counter-cyclical subsidy?

Textile

(p. 121, para. 77) According to the statistics, the average tariff for textiles and clothing in 2002 in the U.S. is 10.36%, which is 6.3 times as much as the average applied tariff rate of the U.S. (information from USITC).

89. Does the U.S. have any schedule to lower its tariff on textiles and clothing?

(p.125, para. 97) In April 2003 having given thorough consideration to the reasons presented by the U.S. for its inability to conform with the TMB’s recommendation contained in G/TMB/R/95 to apply the 25% growth factor in full to China and make the necessary adjustments to its methodology accordingly, the TMB concluded that these reasons did not lead it to change its previous recommendation and therefore recommended again that the United States implement its minimum obligations under the ATC with respect to China (see G/TMB/R/98).

So far the United States has not yet made such adjustments in compliance with TMB’s recommendation. Such a failure on the U.S. side has adversely affected the market access available to China and upset the balance of rights and obligations between China and the United States under the ATC.

90. China would like to know what steps the U.S. will take to comply with the TMB recommendation.

Safeguard Measures against Textiles

(p. 122, para. 83) Given its importance in creating jobs and poverty alleviation, not only the Chinese textile industry, but the whole nation is seriously concerned with the recent the U.S. decision to restrict the import of on some Chinese textile. The Chinese textile industry has expressed, among others, the following concern and we would appreciate it if the United States could explain:

91. How does ensure that interested parties will be informed of the petition promptly?

92. How does it ensure that interested parties will get sufficient information?

93. How does it ensure that interested parties will have enough time to defend themselves?

Trade in Services
General Questions

We note that in the Article II (MFN) Exemptions list of the U.S. services schedule, treatment of foreign services or service providers in many sectors is based on reciprocity.

94. We wonder if such large scale reciprocity treatment contributes to the multilateral trading system which is based on the MFN Principle.

We welcome that the U.S. has deleted the MFN exemption based on reciprocity in the telecommunication sector in its initial services offer.

95. China would like to know if there will be any further such undertakings by the U.S. in line with the principle of MFN.

96. How does the United States ensure that licensing requirements and procedures, qualification requirements and procedures and standards do not become unnecessary barriers to trade in services?

Despite its relatively small share in international trade in services, mode 4 is considered to be of great importance for China and many other developing Members. The United States is one of the major markets for mode 4 services. However, lack of regulatory transparency, in particular with respect to obtaining, extending, renewing and denying visas and work permits, has created significant obstacles to the development of mode 4.

97. Will the United States kindly indicate whether and how it plans to improve transparency in this area to facilitate services trade under mode 4?

98. What concrete measures has the U.S. taken to implement Article 4 of GATS to increase the participation of developing countries in world trade in financial services?

Sector-Specific Questions

Maritime Transport

(p.128, para. 107) Para 30 of the Summary observation states that “Domestic cargo restrictions under the Jones Act remain in place but a legislation to facilitate the granting of waivers to the Act was passed in 2002”.

99. Please explain to what extent it facilitates the granting of waivers to the Jones Act as well as its impact on foreign services providers.

(p.131, para. 125)

100. Will the United States kindly explain how the measures it has taken could effectively serve the objectives of its waiver under paragraph 3 of the GATT 1994?

(p.127, para. 102; p.128, para.108)

101. The U.S. has not made any commitment in the maritime transport sector. Please explain the reasons for not undertaking commitments in this sector, since this sector plays a significant role in facilitating and expanding international trade among WTO Members.

(p.127, para. 103) As demonstrated at the CTS special session by the joint statement from over 50 members of this organization, liberalization of maritime transport services has been given considerable attention in the current round of GATS negotiations.

102. Does the United States have any plan to undertake commitments in this sector during the current round of negotiations?

(p.130, paras. 120 and 121) According to the Shipping Act of 1984, the Federal Maritime Commission established a category of so-called “controlled carriers” which was defined as “an ocean common carrier that is, or whose operating assets are, directly or indirectly owned or controlled by a government”. Compared with other carriers, these carriers are not granted fair treatment, e.g. their freight rates only take effect 30 days after being submitted to the FMC.

103. Please specify the criteria and procedures for the determination of “controlled carriers”?

104. Do carriers which are determined as controlled carriers have the opportunity to appeal?

Telecommunication Services

(p.138, para 160) In the Reference Paper attached to the U.S. Services Schedule, note 29 to Article 2.2 provided that “Rural local exchange carriers may be exempted by a state regulatory authority for a limited period of time from the obligations of section 2.2. with regard to interconnection with competing local exchange carriers. Rural telephone companies do not have to provide interconnection to competing local exchange carriers in the manner specified in Section 2.2 until ordered to do so by a state regulatory authority.”

105. What is the reason for retaining this kind of measures and how does it fulfill its purpose and objective?

106. Under which circumstances will the state regulatory authority order interconnection to be provided by rural telephone companies?

107. Has the U.S. considered alternative approaches to address its policy concerns?

Financial Services

(p.145, para.190; p. 146, para.193)

108. How many licensing applications have been approved to foreign bankers and insurers since the previous U.S. trade policy review?

109. Have there been any applications rejected by the licensing authorities in the United States during the same period? If so, how many and why? How many licensing applications are pending for approval?

110. Please provide the number and total turnover of foreign insurers in operation in the U.S. and their respective share in relation to the whole insurance sector in the U.S.?

(p.154, para.225)

111. Will the United States kindly confirm whether a foreign insurance company’s branch present in one of the U.S. cities (say Los Angeles) can set up a sub-branch in another U.S. city (say New York)?

(p.149, paras. 203, 204 and 205) Various market access restrictions exist in the U.S. banking sector, in particular on the establishment of branches by foreign commercial banks. Complicated approval procedures and prolonged pending period are two common concerns of foreign banks. Up till now, all the applications by Chinese banks to establish branches or representative offices have been pending for a long time with the only exception of Bank of China’s New York branch. For example, the application by Bank of China to set up a branch in San Francisco was filed 10 years ago but the approval is still pending by now. The reasons given by the U.S. competent authorities are not convincing since Bank of China has been approved to set up branches in several other countries in addition to the branch already existed in New York City of the U.S.

112. Please specify the criteria for approving the establishment of branches of foreign banks.

U.S. government report (WT/TPR/G/126)

(paras. 1 and 2 in the Report by the U.S. Government): The Report indicates the role of leadership of the U.S. in the Doha Round negotiations.

1. How does the U.S. Delegation explain the difference of its positions with regard to the negotiations on agriculture as reflected in the EU-U.S. joint proposal, which is considered by most WTO Members as a big step backward and discontinuation of leadership in comparison with its original position as contained in its own proposal submitted in the middle of 2002?

(para. 116 in the Report by the U.S. Government)

2. Does the United States provide prior public commenting period in drafting all legislation and regulations affecting trade in services, including those affecting mode 4?