Problems relating to Trade and Investment on China

 
2. Grant of a preferential tariff rates based on increased home production, and/or local procurements
Issue
Issue details
Requests
Reference
(1) Requirement to meet Prescribed Local Content (LC) Requirement - Entry into the PRC market is effectively barred by the requirement for technology transfer and satisfaction of the prescribed local content requirement both of which serve as de facto expulsion of foreign funded enterprises.
- On the part of the FFEs, this requirement is the source of concern for technology drain and competition in the third market against products manufactured in PRC.		 - It is requested that GOC repeals the local contents and technology transfer requirements.
- It is requested that GOC causes the recipients of technology transfer to observe to the letter, the terms of the technology licence agreement.
(2) Exclusion of Majority Foreign Owned FFEs from LC Requirement - Products manufactured by the majority foreign owned joint venture operation, in general terms, are not regarded as if they satisfy the LC Requirement. - It is requested that GOC accepts products manufactured by joint venture or fully foreign funded enterprises as satisfying the LC requirement.
(3) Nebulous Priority Policy on Domestically Manufactured Vessels - Vessels locally manufactured in PRC enjoy the priority for transporting important (strategic) cargoes, such as natural resources imported by state enterprises. (It is especially so in a project to build ships for carrying the cargoes that involve state shipping enterprises, where the local manufacturer enjoys the top priority, regardless of the level of its ship building technology, which, in future, determines the salvage value of the ship. Informal intervention of NDRC, etc. excludes bidders (who are outsiders) from the bidders' list.) - The preferential policy being endowed upon state owned enterprises, there can be no effective solution as it stands. - No written policy is made public, the Measures being based on State Policy
(4) Nebulous Preferential Policy on State Owned Shipping Enterprises - Adding together The Preferential Policy (1)/(2) below, PRC enterprises' aggressive investment into shipbuilding will become a factor that disrupts the maritime transport market world over. For example, should a Chinese enterprise build in PRC a bulk carrier of DWT8000 with market price of USD 30Mil, by dismantling an aged bulk carrier of 7600 DWT, it should be possible to re-build it at the cost of USD 20Mil. In the common world maritime traffic market, only PRC state enterprises enjoy the benefit of the full and complete protective policy. Moreover, PRC enterprises' aggressive investment into ship-building and maritime traffic is bound to disrupt the maritime traffic market worldwide:
(1)"Guolun Guochai (State of China)": Where state maritime traffic enterprises (4-firms, "MTEs") dismantle over-age vessels and order new vessels to state shipbuilding enterprises, GOC makes subsidy payment of 750 RMB per long ton upon dismantling, and additional subsidy payment of 750 RMB to per long ton to MTEs upon placement of order for the new vessel. (However, in addition to dismantling of over-age vessels, with the view to hold down the over-tonnage, these payments do not apply, should DWT of the new vessel exceed that of the dismantled vessel. Over-age vessels may be placed in operation until the last minute of the delivery of the new vessel.)
(2)"Grant of 20% subsidy on the vessel price at the time of building the new vessel", new policy having been implemented since 2015: Where state maritime traffic enterprises (4-firms, "MTEs"), at state ship building yard, place order and build new vessels, the state grants subsidy of 20% over the price of the new vessel under fabrication.		 - The preferential policy being endowed upon state owned enterprises, there can be no effective solution as it stands. - No written policy is made public, the Measures being based on State Policy
  (Action)
- On 16 October 2015, the United State Government (GOU) charged PRC for its failure to submit subsidy measures to WTO. WTO Document of 21 October 2015, G/SCM/Q2/CHN/53 "REQUEST FROM THE UNITED STATES TO CHINA PURSUANT TO ARTICLE 25.10 OF THE AGREEMENT".

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