China is forming a stable and transparent external economic management system and is creating a fair and foreseeable lawful environment according to the requirements of the market economy and by executing the obligations undertaken as a member of the World Trade Organization. The new revised Foreign Trade Law of the People's Republic of China was put into effect on July 1st, 2004, which is a basic law for China' foreign trade and economic co-operation, as well as a legal foundation for the establishment of China's external economies and trade management system and a basis for the establishment of a management system for China's foreign trade and economic co-operation and for the governmental administration of the economic and trade areas according to law. Added to this, a series of auxiliary measures, methods and regulations will be set up.

Among the rankings in the world trade, China has leaped from the 32nd place in 1978, the fifteenth place in 1989 and the tenth place in 1997 to the fourth place in 2003. In 2001, the total amount of China's imports and exports topped 500 billion US dollars for the first time. In 2003, China's foreign trade underwent severe test. The unfavorable news that came one after another such as the outbreak of the Iraq War, the slow recovery of the world economy and the outbreak of the SARS made any people who forecast the growth rate of China's foreign trade to make cautious remarks.

Nevertheless, the statistics at the end of 2003 showed that the total value of China's imports and exports attained 850.99 billion US dollars, increasing by 230 billion US dollars over last year, and the scales of import and export all exceeded the level of last year, fulfilling the planned targets of the tenth five-year plan ahead of time.

At present, over 220 countries and regions are making trade contacts with China and the top 10 trade partners include: Japan, the United States, the European Union, the Chinese Hong Kong Special Administrative Region, ASEAN, South Korea, the Chinese Taiwan Province, Australia, Russia and Canada.

The year of 2004 is the crucial year for China to execute the relevant commitments after its entry into WTO and most of the interim measures will expire at the end of 2004. For instance, after De cember of 2003, all foreign-invested enterprises should be given full trading right, in December of 2004 China will open and relax managerial authority for foreign trade; since December of 2003, such service departments as distribution, insurance, banking, transportation, telecommunications and adverting will not only expand their serving regions, but also the ratio for foreign investment stock will increase, with the accession requirements to reduce; in 2004, the non-tariff measures for 50 H.S. ¡ªcode products will be abolished such as product oil, natural rubber, part of the automobiles and the components and the amount of the tariff quotas for farm products and chemical fertilizer will further increase. This will make China's proper work after its entry into WTO to face more arduous tasks.

To date, China has instituted a fairly perfect foreign trade legal system with the "Foreign Trade Law as the core, involving management of foreign trade dealers and import and export commodities and technology, foreign exchange, customs control, import and export commodity inspection, animal and plant quarantine, protection of intellectual property rights, and economic and trade arbitration related to foreign interests and proceedings.

I. Foreign Trade Law
Foreign Trade Law of the People's Republic of China(short forforeign Trade Law) that came into effect on July 1st, 2004 is a basic law for China to standardize foreign trade activities. Its general provisions are:

Article One This Law is formulated in order to expand opening up to the outside world, develop foreign trade, maintain foreign trade order, protect the legitimate rights and interests of the foreign trade dealers and promote the healthy development of the socialist market economy.

Article Two This law is applicable to foreign trade and the protection of intellectual property rights relating to foreign trade.

The so-called foreign trade in this law refers to import and export of goods, import and export of technologies and international service trade.

Article Three The departments under the State Council in charge of foreign trade take control over the foreign trade work throughout the country according to the law.

Article Four The state exercises unified foreign trade system, encourages
development of foreign trade, and maintains fair and free foreign trade order.

Article Five According to the principle of equality and mutual benefit, the People's Republic of China promotes and develops trade relations with other countries and regions, concludes or participates in regional economic and trade agreements such as customs union agreement and free trade zone agreement, and joins regional economic organizations.

Article Six In terms of foreign trade, according to the concluded or joined international treaties and agreements, the People's Republic of China shall accord treatments, such as the most favored nation treatment and national treatment, to other contracting parties and participants, or, according to the principle of mutual benefit and mutual equality, accord its counterparts the most favored nation treatment and national treatment.

Article Seven The People's Republic of China, according to actual situation, may take relevant measures against any other country or region, who takes discriminatory prohibiting, restricting or other similar measures against the People's Republic of China in terms of trade.

II. Laws and Regulations on Managing Foreign Trade

In accordance with the stipulations of the Foreign Trade Law of the People's Republic of China, China practices a unified foreign trade system, and safeguards a fair and free foreign trade order according to law. The state permits the free import and export of goods and technology (except for those subject to laws and regulations stipulating otherwise).

The Chinese government will implement step-by-step reform of the foreign trade system in accordance with ¡°Protocol on the Accession of the People's Republic of China¡± and its Annex and ¡°Report of the Working Party on The Accession of China¡±.

I. Trading Rights
Trade right refers to the right to import and export in the trade of cargoes, excluding the right to distribution in domestic markets.

Gradually, China will lower the requirement of minimal registered capital for the Chinese enterprises to obtain trade right, enable the foreign-funded enterprises to obtain complete trade right, and cancel the system of trade-right examination and approval within 3 years upon China's entry into WTO.

II. State Trading and Designated Trading
In China, state-run trade will be enforced in the import of 8 types of staple goods essential to the national economy and the people's livelihood, including grain, cotton, vegetable oil, sugar, crude oil, finished oil, chemical fertilizer and tobacco. State-run trade control will be enforced in the ex-port of such commodities as tea, rice, maize, soybean, tungsten sand, ammonium paratungstate, tungsten-ware, coal, crude oil, finished oil, silk, unbleached silk, cotton, cotton yarn, cotton textile, antimony sand, oxidized antimony, antimony-ware, silver, etc.

The government permits the non-state-run trade enterprises to undertake the import and export of a restricted amount of the goods on which the state-run trade control is enforced.

Considering the need to maintain the import and export business order, the department of the State Council in charge of foreign trade and economy may enforce designated business management on a portion of the goods within a definite period of time, i.e., by authorizing a number of companies to act as agency of the import and export of a certain product.

At present, the products subject to designated business include natural rubber, timber, plywood, wool, acrylic fibers and steel. The products will be open to free business within 3 years upon China's entry into WTO.

Those enterprises and organizations that are not included in the list of state-run trade enterprises or in the list of designated business management are forbidden to undertake the import and export of the goods on which state-run trade control or designated business management is enforced.

III. Customs Duties and Other Duties and Charges
China had adopted the Harmonized Commodity Description and Coding System ("HS) as from 1 January 1992 and joined the International Convention on the Harmonized Commodity Description and Coding System in the same year.

According to the promise made by the Chinese government in order to enter WTO, the general level of China's tariff will decrease from 14% to 10% by 2005: that of industrial products will decrease from 13% to 9.3%, and that of farm produces from 19.9% to 15.5%. The implementation of the promise on tariff decrease in farm produces will come to an end in 2004 and that in 98% of the industrial products in 2005, but the tariff of automobile and auto parts will decrease to 25% and 10% (average level) respectively by July 1st, 2006, and the tariff decrease of some chemical products will last until 2008.

Upon accession China would participate in the Information Technology Agreement (ITA) and would eliminate tariffs on all information technology products as set out in China's schedule. Furthermore, upon accession, China would eliminate all other duties and charges for ITA products.

IV. Non-Tariff Measures and Import and Export Licensing Procedures
China will cancel the current non-tariff measures of over 400 duty paragraphs no later than January 1st, 2005, including the measures of quota, license, etc., covering such products as automobile, electromechanical products, natural rubber, color sensitive material, etc. During the period in between, the quota of relevant products will be allowed a certain increase rate.

1. Import Licensing
Goods whose import is restricted in amount will undergo quota management; other types of goods of restricted import will undergo licensing management. Those under quota control will be publicly assigned a total import quota for the next year before July 31st of each year by the import quota control department.

Considering the need to monitor the import of goods, automatic import licensing management will be enforced on some of the free-import goods. To import the goods subject to automatic import licensing management, the importer should submit an application for automatic import license to the department of the State Council in charge of foreign trade and economy or to relevant economic management departments of the State Council before going through the procedures of customs declaration.

In order to maintain the balance of international payment, when international income and expenses suffer serious imbalance or face such threats, or in order to maintain the foreign exchange reserve at a level suitable to the implementation of economic development plan, the government may take temporary restrictive measures on the value or amount of imported goods.

In 2003, eight kinds of goods have been subjected to import licensing control, totaling 143 8-digit commodity codes. The 4 types of goods subjected to import quota licensing control include finished oil, natural rubber, auto tires, automobile and key parts. The 4 types of goods subjected to import licensing control include CD production equipment, monitored chemicals, drug-producing chemicals and ozonosphere eroding material.

China implements classified management of finished electromechanical products, i.e., import ban, restricted import and automatic import licensing.

About the finished electromechanical products of restricted import, where there is a restriction in amount, quota control will be implemented; where there is none, it is a specified finished electromechanical product that is subject to licensing control. The import of specified products mainly takes the form of worldwide bidding.

To import electromechanical products subjected to automatic licensing control, the importing unit should apply for a automatic import license before going through the customs declaration procedures.

China prohibited or restricted the importation of certain commodities, including weapons, ammunition and explosives, narcotic drugs, poisons, obscene materials and those foodstuffs, medicines, animals and plants which were inconsistent with China's technical regulations on food, medicines, animals and plants.

2. Export Licensing
China applied its export license system to certain agricultural products, resource products and chemicals. China's export licensing system was administered in accordance with the "Interim Procedures for the Export Licensing System.

Global export licensing control applies to all the listed goods that are subject to export licensing control, except where special rules dominate.

In 2003, export licensing control is implemented on 52 types of goods (338 8-digit commodity codes) (excluding textile commodities of passive quota), including export licensing, export quota bidding, compensable use of export quota, free bidding of export quota and export licensing control respectively.

Textiles of restricted export by the country are subjected to quota and export credentials managements, monitored by the customs and inspected by the entry-exit inspection and quarantine department in accordance to relevant rules and regulations.
China prohibited export of narcotic drugs, poisons, materials containing State secrets, precious and rare animals and plants.

V. Tariff Rate Quotas
Upon entry into WTO, China will implement tariff rate quota control on such farm produces as wheat, maize, rice, cotton, sugar, soybean oil, palm oil, wool, etc., chemical fertilizer, and such industrial products as wool top. The calculation of the quota of farm produces will take the period between 1995 and 1997 as base period.

While the tariff rate quota products are subjected to state-run trade management, some of the tariff quota is reserved for import by non-state-run trade enterprises.

About goods imported within tariff rate quota, tariff is to be submitted according to the tariff rate within quota; as for goods imported outside the tariff rate quota, tariff is to be submitted according to the tariff rate outside quota. The department of import quota control will announce the total tariff rate quota of the following year between September 15th and October 14th each year.

The Chinese government maintains the right to inspect the imported and exported goods.
In accordance with the principles of citizen treatment, China promises that within 18 months upon its entry into WTO all the qualified evaluation organization will be able to provide evaluation service to domestic products as well as to imported products.

VII. Sanitary and Phytosanitary Measures
China applied sanitary and phytosanitary£¨SPS£© measures only to the extent necessary to protect the life and health of human beings, animals and plants.

Within 30 days upon China's entry into WTO, the Chinese government will inform WTO of all the laws, regulations and other measures concerning sanitary and phytosanitary£¨SPS£© measures, including the scope of finished products and relevant international standards, guidances and suggestions.

VIII. Customs Valuation
The overwhelming majority of China's customs duties were ad valorem duties. The customs value of imported goods was assessed according to the c.i.f. price based on the transaction value, as defined in the Customs Valuation Agreement. If the transaction value of imported goods could not be determined, the customs value was determined based on other means provided for in the Customs Valuation Agreement.

IX. Rules of Origin
China's rules of origin for import and export were non-preferential rules of origin. Once the international harmonization of non-preferential rules of origin was concluded, China would fully adopt and apply the internationally harmonized non-preferential rules of origin.

From the date of accession, China would ensure that its laws, regulations and other measures relating to rules of origin would be in full conformity with the WTO Agreement on Rules of Origin and that it would implement such laws, regulations and other measures in full conformity with that Agreement.

X. Export Tax
China collects export tax on such products as eel fry, lead, zinc, tin, antimony, ferromanganese iron, chromium iron, copper, nickel, aluminum, etctotaling 84 duty paragraphs.

I. Processing Trade
Processing trade (including processing with purchased materials and processing with imported materials) is subject to the examination and approval of foreign trade responsible department of the provincial level or below the provincial level, but the processing of sugar, vegetable oil, wool, natural rubber and crude oil which are managed by the state for the total balance must get the approval of the provincial level foreign trade responsible department in the place where the processing trade enterprises registered.

The Chinese Customs manages the processing trade separately according to the categories of commodities: The prohibited category refer to com modities which are banned to import under the ¡°Foreign Trade Law of the People's Republic of China,¡± and commodities the Customs cannot make bonded supervision; restricted category refers to sensitive commodities that with a big gapbetween China and foreign countries in price and cannot be supervised; permitted category include other commodities other than the two categories mentioned above.

The Chinese Customs makes a separate management on processing enterprises, and manages the list according to existing situation.

China supports and encourages the development of border trade. Currently, it manages the border trade in the following two types.

1. Border people mutual trade. This refers to border people trade with people of neighboring countries at government approved areas or appointed fairs within 20 kms along the borderline and exchange commodities within a fixed amount and quality. At present, border people are exempted from import tax and import link value-added tax for exchanging commodities (articles for daily use only) under 3,000 renminbi in a day, and the part exceeding 3,000 yuan will be taxed by law.

2. Small amount border trade. This refers to approved small amount trade enterprises along the borderland trade with border enterprises or other trade institutions of neighboring countries at the state-appointed border ports.

Section IV: China's Anti-Dumping
Policy and Procedures

In case an imported product, by means of dumping or subsidies, has caused substantial damages or has constituted the threat of substantial damages to related industries that have been established in China, or has caused substantial barriers to the establishment of related industries in China, the relevant departments of the Chinese Government will adopt anti-dumping or anti-subsidy measure in accordance with the ¡°Anti-Dumping and Anti-Subsidy Regulations of the People's Republic of China.¡±

I. Anti-dumping procedures and the competent authorities
1.The Ministry of Commerce is in charge of handling the application for anti-dumping;

2.The Ministry of Commerce is responsible for anti-dumping investigation and, according to the results from the investigation, will make preliminary judgment on whether the dumping and damage and the causal relationship between the two stand or not and will make it public; if the preliminary judgment determines that the dumping and damage and the causal relationship between the two stand, the Ministry of Commerce shall then make continual investigation of the dumping, the dumping level, the damage and the damage level, and will make final judgment according to the results of the investigation and make it public.

3. In accordance with the investigations on the dumping and damages and the ruling, the Ministry of Commerce puts forward the proposal on whether to levy and collect the anti-dumping tax;

4. In accordance with the proposal of the Ministry of Commerce, the State Council Tariff and Tax Regulations Commission decides on whether to levy and collect the anti-dumping tax, and sets the tax rate and the collection duration;

5. The General Administration of Customs is in charge of implementing anti-dumping measures.

II. Anti-Dumping Applications and Acceptance
A domestic producer of the same products as or the similar products to imported products or a related organization both can file a written application for anti-dumping investigations to the Ministry of Commerce. The Ministry of Commerce is a competent department that accepts applications for anti-dumping investigations, and decides whether to place a case on record and notifies related parties of interests.

III. Duration of Anti-Dumping Investigation
The duration of anti-dumping investigations is 12 months from the date when the announcement on placing the case on record is made to the date when the announcement on the final ruling is made. It may be extended to 18 months under special circumstances.

IV. Forms for Anti-Dumping Investigations
While making anti-dumping investigations, relevant departments in charge of anti-dumping investigations may issue questionnaires to all parties of interests and conduct a sample survey. At the request of a party of interests, they should provide the opportunities for all parties of interests to state their views.

While accepting anti-dumping investigations, all parties of interests should earnestly state circumstances and provide related data. Otherwise, the competent department may issue a ruling according to the materials it has acquired.

V. Anti-Dumping Measures
Once the initial ruling states that dumping does exist and has caused damages to a domestic industry, the following temporary anti-dumping measures may be taken:

1. Levying and collecting the temporary anti-dumping tax in accordance with prescribed procedures; the duration of the temporary anti-dumping tax is four months from the date when the announcement on the decision concerning the temporary anti-dumping measures is made, and may be extended to nine months under special circum- stances.

2. Demanding that guarantee fund in cash or other forms of guarantees be provided.
A dealer in the export of dumping products or the government of the exporting country may file an application for the price commitment to the Chinese Ministry of Commerce. The Ministry of Commerce can decide to accept the price commitment through negotiation, thus halting anti-dumping investigations. But should the price commitment fail to be executed, anti-dumping investigations may be resumed.

Should the final ruling state that dumping does exist and has caused damages to a domestic industry, the anti-dumping tax may be levied and collected. The duration of levying and collecting such a tax and the price commitment is five years.