International Trade

The revisions to the Foreign Trade Law were passed on April 6 at the 8th meeting of the 10th National People's Congress (NPC) Standing Committee. Two years after China's accession to the World Trade Organization (WTO), the amendments to the decade-old law were essential.

Since the original Foreign Trade Law was promulgated on May 12, 1994, it has played a significant role in promoting China's foreign trade development in a healthy and orderly way. However, with time its inadequacies were exposed and the country's entry into the WTO accelerated its obsolescence.

In order to fulfill its WTO commitments and duties, and fully exercise its rights and benefits as a WTO member, China had to amend the Foreign Trade Law. On December 22, 2003, the draft amendments to the law were formally submitted to the NPC Standing Committee for consideration and ratification.

The revised Foreign Trade Law includes 11 chapters and 70 clauses, three chapters and 26 clauses more than the original.

There were three main focuses to the amendments. First, any content that was not in line with WTO rules was changed or deleted. Material concerning implementation mechanisms and procedures related to WTO was added. Finally, other changes necessary to ensure the continued healthy development of foreign trade were made.

Amendment highlights

For the first time, individuals are allowed to conduct foreign trade. Under the old law this was forbidden, but legislators recognize that it is a universal trend for individuals to conduct foreign trade during technological trade, international service and border trade activities. Furthermore, according to its WTO commitments, China is required to provide all foreign individuals and companies with treatment that is at least equal to that afforded to their Chinese counterparts.

The requirement for administrative approval of foreign trade operators engaged in goods or technology import and export has been lifted. Therefore, the revised law states that all legally registered foreign trade operators can now conduct goods and technology import and export. The register serves only as a record and listing on it does not require administrative approval.

Now, imports and exports may be restricted or prohibited under certain conditions. The original law failed to address this issue -- one that is necessary to safeguard China's economic interests and which the WTO Pact allows. The new law specifies the conditions under which such restrictions or prohibitions may be applied. The addition of this section indicates that China intends to protect national security and the public interest while simultaneously developing foreign trade.

Intellectual property is an important component of foreign trade, and protecting intellectual property rights (IPR) is a key issue. A chapter on IPR protection is one of the major additions to the Foreign Trade Law. The new section states that manufacturers or sellers who import or export goods that violate IPR may be suspended from doing business for a specified period. Overseas trading partners that fail to provide adequate and effective IPR protection may be subject to measures taken in response by the authority responsible for foreign trade under the State Council.

New sections have also been added to allow and provide guidance for conducting investigations and seeking relief. The authority responsible for foreign trade under the State Council is now permitted, for example, to conduct investigations into the impact of trade on domestic industries; trade barriers of other countries; trade relief; and matters concerning national security related to foreign trade. The law clearly defines investigative procedures, as well as those for seeking relief.

The 54th clause in the new law requires the state to establish a foreign trade public service system that will facilitate the provision of information to the public. Although China has already made significant progress in constructing a basic public databank, an accompanying service system is lacking. This is an area that is in urgent need of improvement.

Finally, the new law beefs up and clarifies enforcement procedures. It regulates the setting up of early warning and emergency systems and a foreign trade statistics system. While the revision does address the issue of monopolies, because a new law specifically on this subject is currently being drafted, the Foreign Trade Law remains deliberately vague.

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