¡¡¡¡IV. POLICIES AFFECTING TRADE IN GOODS

¡¡¡¡A. TRADING RIGHTS

¡¡¡¡1. General

¡¡¡¡80. Some members of the Working Party noted that China was in the process of liberalizing the availability of the right to import and export goods from China, but that such rights were now only available to some Chinese enterprises (totalling 35,000). In addition, foreign-invested enterprises had the right to trade, although this was restricted to the importation for production purposes and exportation, according to the enterprises' scope of business. Those members stated their view that such restrictions were inconsistent with WTO requirements, including Articles XI and III of GATT 1994, and welcomed China's commitment to progressively liberalize the availability and scope of the right to trade so that within three years after accession all enterprises would have the right to import and export all goods (except for the share of products listed in Annex 2A to the Draft Protocol reserved for importation and exportation by state trading enterprises) throughout the customs territory of China. Those members requested that China provide detailed information on the process and criteria that it would use to increase the number of enterprises with trading rights and the scope of products that enterprises could import and export during the transition period.

¡¡¡¡81. Some members of the Working Party also noted China's commitment to accord foreign enterprises and individuals, including those not invested or registered as enterprises in China, no less favorable treatment than that accorded enterprises in China with respect to the right to trade except as otherwise provided for in the Draft Protocol. Members of the Working Party requested that China provide detailed information regarding the process for such enterprises and individuals to obtain the right to import and export goods.

¡¡¡¡82. Some members of the Working Party expressed concerns that after the transition period any linkage between an enterprise's scope of business or business licence and the right to trade would constitute a restriction on the right to import and export. Those members noted that within three years after accession, China would have to permit all enterprises in China to trade in all goods throughout the customs territory of China (except as otherwise provided in the Draft Protocol).

¡¡¡¡83. The representative of China confirmed that during the three years of transition, China would progressively liberalize the scope and availability of trading rights.

¡¡¡¡(a) The representative of China confirmed that, upon accession, China would eliminate for both Chinese and foreign-invested enterprises any export performance, trade balancing, foreign exchange balancing and prior experience requirements, such as in importing and exporting, as criteria for obtaining or maintaining the right to import and export.

¡¡¡¡(b) With respect to wholly Chinese-invested enterprises, the representative of China stated that although foreign-invested enterprises obtained limited trading rights based on their approved scope of business, wholly Chinese-invested enterprises were now required to apply for such rights and the relevant authorities applied a threshold in approving such applications. In order to accelerate this approval process and increase the availability of trading rights, the representative of China confirmed that China would reduce the minimum registered capital requirement (which applied only to wholly Chinese-invested enterprises) to obtain trading rights to RMB 5,000,000 for year one, RMB 3,000,000 for year two, RMB 1,000,000 for year three and would eliminate the examination and approval system at the end of the phase-in period for trading rights.

¡¡¡¡(c) The representative of China also confirmed that during the phase-in period, China would progressively liberalize the scope and availability of trading rights for foreign-invested enterprises. Such enterprises would be granted new or additional trading rights based on the following schedule. Beginning one year after accession, joint-venture enterprises with minority share foreign-investment would be granted full rights to trade and beginning two years after accession majority share foreign-invested joint-ventures would be granted full rights to trade.

¡¡¡¡(d) The representative of China also confirmed that within three years after accession, all enterprises in China would be granted the right to trade. Foreign-invested enterprises would not be required to establish in a particular form or as a separate entity to engage in importing and exporting nor would new business licence encompassing distribution be required to engage in importing and exporting.

¡¡¡¡The Working Party took note of these commitments.

¡¡¡¡84. (a) The representative of China reconfirmed that China would eliminate its system of examination and approval of trading rights within three years after accession. At that time, China would permit all enterprises in China and foreign enterprises and individuals, including sole proprietorships of other WTO Members, to export and import all goods (except for the share of products listed in Annex 2A to the Draft Protocol reserved for importation and exportation by state trading enterprises) throughout the customs territory of China. Such right, however, did not permit importers to distribute goods within China. Providing distribution services would be done in accordance with China's Schedule of Specific Commitments under the GATS.

¡¡¡¡(b) With respect to the grant of trading rights to foreign enterprises and individuals, including sole proprietorships of other WTO members, the representative of China confirmed that such rights would be granted in a non-discriminatory and non-discretionary way. He further confirmed that any requirements for obtaining trading rights would be for customs and fiscal purposes only and would not constitute a barrier to trade. The representative of China emphasized that foreign enterprises and individuals with trading rights had to comply with all WTO-consistent requirements related to importing and exporting, such as those concerning import licensing, TBT and SPS, but confirmed that requirements relating to minimum capital and prior experience would not apply.

¡¡¡¡The Working Party took note of these commitments.

¡¡¡¡2. Designated Trading

¡¡¡¡85. The representative of China stated that China would adjust and expand its list of enterprises under its designated trading regime annually during the transition period, leading up to full implementation of the commitment contained in Annex 2B. The current criteria for enterprises under the designated trading regime included registered capital, import and export volume and the import volume of products subject to designated trading in the previous year, bank credit rating and profits and losses.

¡¡¡¡86. Members of the Working Party noted China's commitment that it would phase out the limitation on the grant of trading rights for goods specified in Annex 2B of its Draft Protocol within three years after accession. In responding to questions raised by some members of the Working Party, the representative of China confirmed that China would progressively liberalize the right to trade in such goods by increasing the number of designated entities permitted to import goods in each of the three years of the transition period specified in Annex 2B. The representative of China added that China would eliminate import and export volume as a criterion for obtaining the right to trade these products, reduce minimum capitalization requirements and extend the right to register as designated importing and exporting enterprises to enterprises that used such goods in the production of finished goods and enterprises that distributed such goods in China. At the end of three years, all enterprises in China and all foreign enterprises and individuals would be permitted to import and export such goods throughout the customs territory of China. During the transition period, none of the criteria applicable under the designated trading regime would constitute a quantitative restriction on imports or exports. The Working Party took note of these commitments.