Transcript Chapter 14 Foreign trade law

Chapter 14 Foreign trade law
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Sources of law
Foreign trade operator
Foreign trade in goods, technology and service
Anti-dumping
Anti-subsidy
Safeguard measures
1 Sources of law
Major sources of foreign trade law
Category
Domestic
legislation
International
treaties
Name of the laws and regulations
Issuer
Time
IECIL
SCNPC
1989
IRLSI
State Council
1984
Foreign Trade Decision
State Council
1990
FTL
SCNPC
1994
GIEAR
State Council
2001
TIEAR
State Council
2001
ADR
State Council
2001
ASR
State Council
2001
SMR
State Council
2001
UNCCISG
UN
1988
TRIPS
WTO
1994
TRIMs
WTO
1994
Anti-Dumping Agreement
WTO
1994
Anti-Subsidy Agreement
WTO
1994
Safeguards Agreement
WTO
1994
• By April 2002, former MOFTEC had abolished 381
ministerial rules and 178 internal rules.
• In collaboration with other ministries to submit to the
State Council 53 regulations marked for repeal.
• SPC has announced that 1226 judicial interpretations
inconsistent with WTO rules had been amended as of
late 2001.
2 Foreign trade operator
2.1 Qualification
• It must be the legal persons or other organizations
• 5 conditions:
(1) having its own name and organizational structure
(2) having definite scope of business in foreign trade
(3) having business place, financial resources and professional personnel essential
to the foreign trade dealings which it intends to engage in
(4) having a required record of import and export which were effected on its
behalf or having necessary sources of goods for import or export
(5) other requirements provided in relevant laws and administrative regulations
• Acts outlawed:
(1) forging, distorting or trading certificates of country of origin and import or
export licenses
(2) infringement on the IP protected by law
(3) squeezing out competitors with undue competition
(4) defrauding the State’s refund of export tax
(5) other acts violating the laws and administrative regulations
2.2 FTCs’ monopoly and agency system
2.2.1 FTCs’ monopoly
2.2.2 Agency system
FTL expressly authorizes any organization or individual without
foreign trading rights to entrust the FTCs as agent to conduct its
foreign trade business within the authorized scope
Agency contract:
(1) name, scope, content, price range, payment method and currency
used for the entrusted import or export goods or technology
(2) scope of authorization
(3) rights and obligations of the parties
(4) commission fees and sharing of other economic benefits
(5) dispute resolution
(6) duration of the contract
2.3 Widening the scope of foreign trading rights
• Moving away from traditional approval system of granting
foreign trading rights to various enterprises to automatic
registration system
• Automatic system: manufacturing enterprises in SEZs, large
manufacturing enterprises, State-owned or collectively owned
manufacturing enterprises and the State-owned or collectively
owned research institutions and hi-tech enterprises.
2.3.1 FIEs
2.3.2 Sino-Foreign trading JVs
Foreign investors’ equity shares: 25-49%
3 conditions:
(1) annual turnover prior to the application must be over USD 5 billion
(2) average annual trade volume with China in previous three years must
be over USD 30 million
(3) foreign investors must have established rep. office in China and it has
been maintained for 3 years prior to the application, or have invested
over USD 30 million in China
2.3.3 Domestic enterprises
2.3.3.1 Manufacturing enterprises
• Enterprise exporting machinery and electronic products with annual
export value of RMB 500000 for technology intensive products and
RMB 1 million for normal products are qualified to engage in foreign
trade.
• Scope of business: import of technology, equipment, component and
raw materials related to their production and export of their own
products and related technology
2.3.3.2 Commercial enterprises
State-owned large and medium-sized commercial enterprises with
sales value of more than RMB 300 million are qualified to obtain
licenses form the former MOFTEC to engage in foreign trade.
2 restrictions:
(1) import and export must be compatible with their respective registered
scope of business
(2) annual import shall not be more than their annual export value.
2.3.3.3 Research institutions
2.3.3.4 Enterprises within SEZs
Manufacturing enterprises in the SEZs with a registered capital
of RMB 2 million or more are qualified to engage in foreign
trade
3 Foreign trade in
goods, technology and service
Control of import and export of goods and technology
Control measures
Category
Prohibition
Prohibited
Restricted
Automatic
licensing
Registration
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Rest
Unrestricted
Licensing
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Quantity
restriction
Goods
Quota
Automatic
licensing
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Rest
Prohibited
Techn
ology
Restricted
Unrestricted
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3.1 Import and export of goods
3.1.1 Import
3.1.1.1 Prohibited goods
(1) goods endanger the State security or public interest
(2) import or export of such goods must be prohibited in order to
protect human life or health
(3) goods disrupt the ecological environment
(4) import or export of such goods is prohibited in accordance
with the provisions of international treaties or agreements to
which the China is a contracting party or a participating party
• Other laws and administrative regulations may also impose
prohibition on certain goods
3.1.1.2 Restricted goods
(1) import shall be restricted in order to safeguard the State
security or public interest
(2) import shall be restricted in order to establish or accelerate
the establishment of a particular domestic industry
(3) restriction on import of agricultural, animal husbandry or
fishery products in any form is necessary
(5) import shall be restricted in order to maintain the State's
international financial status and the balance of
international payments
(6) as per international treaties or agreements to which the
China is a contracting party or a participating party require,
the import shall be restricted
• Other laws and administrative regulations may also impose
restriction on certain goods
3.1.1.3 Goods restricted by customs duty quota
Goods within customs duty quota only pay the normal duty, while
those exceeding the customs duty quota shall pay extra duty
3.1.1.4 Unrestricted goods
• Unrestricted goods enjoy entire freedom of import
• In order to inspect situation of goods competent
government departments may impose automatic license on
certain unrestricted goods
3.1.2 Export
3.1.2.1 Prohibited goods
Any goods falling into ambit of Art.17 of the FTL mentioned
earlier belong to prohibited goods
3.1.2.2 Restricted goods
(1) export shall be restricted in order to safeguard the State
security or public interest
(2) export shall be restricted on account of domestic shortage in
supply or effective protection of exhaustible domestic resources
(3) the export shall be restricted due to the limited market capacity
of the importing country or region
(4) as per international treaties or agreements to which the China
is a contracting party or a participating party require, the
export shall be restricted
•
Other laws and administrative regulations may also impose
restriction on certain goods.
3.2 Import and export of technology
3.2.1 Import
3.2.1.1 Approval/registration procedures
• TIEAR substantially streamlines the regulatory procedures
for technology import.
• 3 general categories: unrestricted, restricted, and prohibited
• Import of unrestricted technologies: no longer subject to prior
government approval, but only a subsequent registration
3.2.1.2 Contractual terms
• No longer subject to a maximum contract term of 10 years
• Transferor’s warranty obligations:
(1) he is lawful owner of technology provided, or has right to assign or
license such technology
(2) supplied technology is complete, accurate and effective, capable of
reaching the technical goals agreed upon between the parties
• Unreasonable restrictive clauses outlawed:
(1) requiring transferee to accept tying conditions unrelated to technology
import including purchase of any unnecessary technology, raw
materials, products, equipment or services
(2) requiring the transferee to pay compensation for, or bear obligations
with respect to expired or nullified patents
(3) restricting the transferee's improvement of the imported technology or
restricting the use of the improvement by the transferee
(4) restricting the transferee's acquisition from other sources of
technology similar to, or competitive with the transferor’s technology
(5) unreasonably restricting the transferee's channels or sources for
purchase of raw materials, parts and components, products or
equipment
(6) unreasonably restricting the quantity, variety or sale price of the
products produced by the transferee
(7) unreasonably restricting the export channels for products produced by
transferee's using the technology imported
3.2.2 Export
• State encourages export of mature industrialized
technology
• 3 general categories: unrestricted, restricted, and
prohibited
• Export of restricted technology: licensing control
• Export of unrestricted technology: registration
3.3 International service trade
• China promotes progressive development of international
trade in services
• Prohibit certain international service trade:
(1) endangering China’s State security or public interests
(2) violating international obligations undertaken by China
(3) other prohibitions imposed by relevant laws and administrative
regulations.
• Restrict certain international service trade:
(1) safeguard China’s State security or public interest
(2) protect ecological environment
(3) establish or accelerate the establishment of a particular domestic
service industry
(4) maintain the State’s balance of international payments
(5) other restrictions provided in relevant laws and administrative
regulations
4 Anti-dumping
4.1 Overview
• hinese exporters: involved in at least 340 foreign antidumping investigations, and 73% happened in 1990’s
• In 1996, 30 reported anti-dumping investigations
• By 1 January 2002 China had initiated 12 investigations:
final determinations had been rendered in 6 cases, preliminary
determination had been rendered in seventh case, and the remaining
5 cases were at preliminary stages
8 investigations involved chemical imports, 2 involved steel imports,
1 newsprint and 1 polyester
• Each investigation was typically addressed to imports from
more than one country
• 9 of 12 involved imports from Korea, 4 imports from Japan
or US
• Anti-dumping duties: on foreign importers in 5 of 6 decide
cases
4.2 Dumping and injury
4.2.1 Dumping
• Export price below the normal value
• Gap between export price and normal value is dumping
margin
• Normal value:
(1) if products identical with or similar to the imported product have comparable
prices in the exporting countries' marketplace, such comparable prices are the
normal value
(2) if products identical with or similar to the imported product do not have
comparable prices in the exporting country's marketplace, or their price and
sales volume do not permit a proper comparison, the normal value is either the
comparable price of identical or similar products exported to the third country,
or the production cost of identical or similar products plus reasonable expenses
and profit
(3) if they are not imported directly from the country of origin the comparable
prices at which the products are sold from the country of export are the normal
value
• Export price:
(1) price actually paid or should have been paid for the imported product is the
export price
(2) if no price is actually paid for the imported product, or its price is unreliable,
the export price is either the price for which the imported product is resold for
the first time to an independent buyer, or the price reconstructed according to a
reasonable basis by former MOFTEC.
4.2.2 Injury
Occurrence of material injury or the threat of material injury to
already established corresponding domestic industry or the creation
of obstacles to the establishment of corresponding domestic industry
by dumping
(1) quantity of product dumped, including the total quantity of
product dumped or the incremental increase in its total quantity
relative to identical or similar domestic products and the
possibility of large increases
(2) prices of goods dumped including reductions in the prices of
goods dumped or the price depression or prevention of price
increases upon identical or similar domestic products
(3) effect of the dumped product on all relevant economic factors and
indices of domestic industries
(4) the production capacity, export capacity and inventory of the
dumping products in the exporting country or country of origin
(5) other factors causing injures to domestic industry
4.3 Investigation
(1) MOFTEC is empowered to investigate and ascertain the issue of
dumping
(2) SETC is empowered to investigate and ascertain the issue of
injury on domestic industry
• Initiation by (1) domestic industry, or (2) natural persons, legal
persons or other relevant entities representing domestic industry
• In special circumstances, MOFTEC may after consulting SETC
decide to initiate such investigation at its own initiative when it
has sufficient evidence of dumping, injury and causal link between
them
• Investigations shall be concluded within 1 year, and in no case
more than 18 months
• Any party disagreeing with such final ruling may apply for
administrative reconsideration or file administrative litigation to
court
4.4 Anti-dumping measures
4.4.1 Provisional measures
(1) provisional anti-dumping duty
(2) provision of cash deposit, bond or other forms of security
• It cannot be applied sooner than 60 days from the date of
initiating investigation.
• Length: not exceeding 4 months, with a cap of 9 months
4.4.2 Price undertakings
• In the course of anti-dumping investigation exporters may
voluntarily undertake to revise its prices or to cease exports at
dumped prices
• MOFTEC may also suggest such price undertakings to the
exporters
• If satisfactory, MOFTEC may decide to suspend or terminate
without the imposition of provisional measures or anti-dumping
duties
• Even after acceptance the investigation of dumping and injury may
be completed if the exporter so desires or investigatory authorities
so decide.
• In case negative determination of dumping or injury, undertakings
automatically lapse
• In case of affirmative determination of dumping and injury,
undertakings continue
• Length for price undertakings: 5 years time limit, may be extended
depending on the decision of price undertaking review.
4.4.3 Anti-dumping duties
• It applies if final ruling establishes existence of dumping
and of resultant injury to domestic industry.
• Decision: by Customs Tariff Policy Commission of the
State Council upon the suggestion by MOFTEC
• Importer of the dumped product is antidumping taxpayer
• Length: 5 years time limit which may be extended
depending on the review decision
Illustration: Anti-dumping duty on Korean fiber
On 9 February 2003 the former MOFTEC took formal anti-dumping measures against
imports of polyester stable fiber produced in the Republic of Korea (ROK) by
imposing anti-dumping duties on the product. Upon application by the domestic
industry, the former MOFTEC launched its anti-dumping investigation on 3 August
2001, and decided to take temporary measures on 22 October 2002. The investigation
found that dumping did take place, and the former SETC held that the imports did
cause substantial damage to China’s domestic industry. The former MOFTEC and
SETC also held that there was direct causal relationship between the dumping and
damage. The importers of ROK-made polyester stable fibers should start paying antidumping taxes to Chinese customs for a period of five years. The anti-dumping tax rate
ranges from 2 percent to 48 percent, and those cash deposits provided by importers in
response to the preliminary ruling may be transformed into the definitive taxes.
Illustration: Anti-dumping duty on esters of acrylic acid
On 10 April 2003 the MOC announced the final ruling on anti-dumping investigation
against imports of esters of acrylic acid from the ROK, Malaysia, Singapore and
Indonesia. The MOC held that dumping existed in the investigated products and that
such dumping had caused material injury to China’s domestic industry. Thus it
decided to impose anti-dumping duties ranging from 2 percent to 49 percent on
imports of esters of acrylic acid from the ROK, Malaysia, Singapore and Indonesia.
The anti-dumping measure would be in place for 5 years from announcement.
5 Anti-subsidy
5.1 Subsidy and injury
5.1.1 Subsidy
Financial support by government includes:
(1) government practice involves a direct transfer of funds e.g.
grants, loans, and equity infusion, or potential direct transfers
of funds or liabilities e.g. loan guarantees
(2) government revenue that is otherwise due is foregone or not
collected
(3) government provides goods or services other than general
infrastructure, or purchases goods
(4) government makes payments to a funding mechanism, or
entrusts or directs a private body to carry out the foregoing
functions
It must possess specificity: whether it is specific to an
enterprise or industry or group of enterprises or industries
(1) government explicitly limits access to a subsidy to certain
industries or enterprises
(2) law or regulations clearly specify a subsidy to certain
industries or enterprises
(3) subsidy limited to certain industries or enterprises located
within a designated geographical region
(4) subsidies contingent upon export performance including
those illustrated in Annex
(5) subsidies contingent upon the use of domestic over
imported goods
5.1.2 Injury
The material injury causing or threatening to cause on
corresponding established domestic industries or creating material
obstacles to the establishment of corresponding domestic industries.
(1) effect of the subsidized imports on trade
(2) quantity of the subsidized product including the total quantity of
product or the incremental increase in its total quantity relative to
identical or similar domestic products and the possibility of large
increases
(3) prices of the subsidized product including reductions in the prices
of the subsidized product or the price depression or prevention of
price increases upon identical or similar domestic products
(4) effect of the subsidized product on all relevant economic factors
and indices of domestic industries
(5) production capacity, export capacity and inventory of the
subsidized product in the exporting country or country of origin
(6) other factors causing injures to domestic industry
5.2 Investigation and anti-subsidy measures
Anti-dumping and anti-subsidy investigation
Initiation
Anti-dumping
Anti-subsidy
Private parties’ application
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MOFTEC’s own initiative
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60-day waiting period
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MOFTEC ruling on dumping/
subsidy
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Conclusion in 12-month period
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Maximum extension of 6-month
period
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Division of
SETC ruling on injury
responsibility
MOFTEC make public
announcement
Time limit
5.2.1 Investigation
• Anti-subsidy investigation procedures are identical that of the
anti-dumping
• MOFTEC investigates and ascertains the issue of subsidy, and the
SETC investigates and ascertains the issue of injury on domestic
industry
• Initiation by (1) domestic industry, or (2) natural persons, legal
persons or other relevant entities representing domestic industry
• MOFTEC may after consulting the former SETC decide to
initiate such investigation at its own initiative when it has
sufficient evidence of subsidy, injury and causal link between
them
• Length: 1 year time limit with a cap of 18 months
• Any party disagreeing with such final ruling may apply for
administrative reconsideration or file administrative litigation to
the court
5.2.2 Anti-subsidy measures
Anti-dumping and anti-subsidy measures
Provisional
Anti-dumping
Anti-subsidy
4-month time limit
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Not applicable within 60 days from
acceptance
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9-month maximum time limit
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Proposal by exporter
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Proposal by exporting government
Undertaking
Definitive
duty
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MOFTEC suggestion
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Expeditious actions against for
violation
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Importer of the product in question as
taxpayer
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5-year time limit
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Reviewable
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Administrative reconsideration &
litigation
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5.2.2.1 Provisional measures
• Applicable when initial ruling establishes the existence of
subsidy and resultant injuries to correspondent domestic
industries
• Form: provisional countervailing duties guaranteed by
cash deposits or bonds
• Cannot be applied sooner than 60 days from the date of
initiation of the investigation
• Length: 4 months time limit
5.2.2.2 Undertakings
In the course of anti-subsidy investigation exporting
government may voluntarily undertake to eliminate or limit
the subsidy or take other measures on its effects, or the
exporter undertakes to revise its prices, and MOFTEC
should fully consider such undertakings
• MOFTEC may also suggest such undertakings to the
exporting government or exporters, but cannot force the
exporters to accept such undertakings
• If satisfactory, MOFTEC may decide to suspend or terminate
without the imposing provisional measures or countervailing
duties
• Even after acceptance, investigation of subsidy and injury may
be completed if the exporting government so desires or
investigatory authorities so decide
• In case of negative determination of subsidy or injury,
undertakings automatically lapse
• In case of affirmative determination of subsidy and injury,
undertakings continue
• Length: 5 years time limit, which may be extended depending
on the decision of undertaking review
5.2.2.3 Countervailing duties
• It applies if the final ruling establishes the existence of
subsidy and of the resultant injury to domestic industry,
after the failure of consultations though reasonable
efforts have been made.
• Decision: Customs Tariff Policy Commission of the
State Council upon the suggestion by MOFTEC.
• Importer of the subsidized product is the
countervailing taxpayer
• Length: 5 years time limit which may be extended
depending on decision of review
6 Safeguard measures
6.1 Investigation
• MOFTEC investigates and ascertains the issue of
increased import, and the SETC investigates and
ascertains the issue of injury on domestic industry
• Agricultural products: SETC shall do so along with the
MOA
• Initiation by relevant natural persons, legal persons or
other entities in domestic industry
• MOFTEC may initiate such investigation at its own
initiative when it has sufficient evidence of increased
import, injury and causal link between them
• Effect of increase of import on the domestic industry:
(1) rate and amount of the increase in imports of the product
concerned in absolute and relative terms
(2) share of the domestic market taken by increased imports
(3) effects on domestic industry including changes in the level
of sales, production, productivity, capacity utilization,
profits and losses, and employment
(4) other factors causing injury on domestic industry
• In the course of investigation MOFTEC shall promptly
publish a detailed analysis of the case under investigation as
well as a demonstration of the relevance of the factors
examined.
• They shall offer opportunities for importers, exporters and
other interested parties to present evidence and their views,
including the opportunity to respond to the presentations of
other parties and to submit their views.
• They shall separately make their final rulings based upon
the results of their investigations, which shall also be publicly
announced by MOFTEC.
6.2 Safeguard measures
6.2.1 Types of safeguard measures
• 2 types of safeguard measures: provisional safeguard
measure and safeguard measures
• Provisional safeguard measure: only applicable in
critical circumstances where delay would cause damage
difficult to repair and there is clear evidence that
increased imports have caused or are threatening to
cause serious injury.
• Form: tariff increases
• Length: 200 days from its effective date
• Safeguard measures: apply when final ruling
establishes that the increased imports causes injury on
correspondent domestic industry.
• Form: tariff increases and quantitative restriction
• No safeguard measure can be applied again to import
of a product subject to such measure, unless a period of
time equal to that during which such measure had been
previously applied has elapsed and the period of
non-application is at least 2 years
6.2.2 Review
• Length of safeguard measures: 4 years time limit, may be extended
when specified conditions and procedures are met, but the total
period of its application including the period of application of any
provisional measure, the period of initial application and any
extension cannot exceed 8 years
• Measure so extended cannot be more restrictive than it was at the
end of the initial period.
• If its application is over 3 years, MOFTEC and SETC must review
the situation not later than the mid-term of the measure
• Based on the findings of the review MOFTEC may submit
proposal on maintaining, eliminating or accelerating the
liberalization of the tariff increase measure to the Customs Tariff
Policy Commission of the State Council for approval, or directly
make decisions on maintaining, eliminating or accelerating the
liberalization of the quantitative restriction measures