USTR Requests Comments on the U.S.' Request for WTO Consultations Regarding China's Value-Added Tax on Integrated Circuits
The Office of the U.S. Trade Representative (USTR) has issued a notice requesting comments by May 17, 2004 concerning the issues raised by the U.S.' March 18, 2004 request for World Trade Organization (WTO) consultations with China regarding its value-added tax (VAT) on integrated circuits (ICs).
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
USTR Alleges China's Tax Policy for Integrated Circuits is WTO Inconsistent
The USTR states that China provides for a 17% VAT on ICs. However, the USTR understands that enterprises in China are entitled to a partial refund of the VAT on ICs that they have produced, resulting in a lower VAT rate on their products. China therefore appears to be subjecting imported ICs to higher taxes than applied to domestic ICs and to be according less favorable treatment to imported ICs.
In addition, the USTR understands that China allows for a partial refund of VAT for domestically-designed ICs that, because of technological limitations, are manufactured outside of China. Thus, China appears to be providing for more favorable treatment of imports from one WTO member than another, and discriminating against services and service suppliers of other WTO members.
The USTR further understands that China implements its preferential tax for domestically-produced or designed ICs through certain measures (See notice for list of specific measures.).
Therefore, the USTR believes that these measures are inconsistent with China's obligations under Articles I and III of the General Agreement on Tariffs and Trade 1994 (GATT 1994), the Protocol on the Accession of the People's Republic of China to the WTO, and Article XVII of the General Agreement on Trade in Services (GATS).
If Consultations Fail, Dispute Settlement Panel May Be Established
According to the USTR, if such consultations should fail to resolve the matter and a dispute settlement panel (DSP) is established pursuant to the WTO Dispute Settlement Understanding (DSU), such panel, which would hold its meetings in Geneva, Switzerland, would be expected to issue a report on its findings and recommendations within six to nine months after it is established.
(See ITT's Online Archives or 03/23/04 news, 04032325, for BP summary of the USTR's press release announcing the U.S. filing of this WTO case.)
- submit comments on or before May 17, 2004 to be assured of timely consideration.
USTR contact - David Weller (202) 395-3582
USTR notice (D/N WTO/DS-309, FR Pub 04/21/04) available at http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2004/pdf/04-9035.pdf