Chinese Foreign Trade Law Jiaxiang Hu Professor of KoGuan Law School, SJTU.

Chinese Foreign Trade LawChinese Foreign Trade Law

Jiaxiang HuJiaxiang Hu

Professor of KoGuan Law School, Professor of KoGuan Law School, SJTUSJTU

Chapter Two General Principles of Chapter Two General Principles of Chinese Foreign Trade LawChinese Foreign Trade Law

I. The Constitutional Source for the regulation I. The Constitutional Source for the regulation of International Tradeof International Trade

In 1993, China amended its Constitution, In 1993, China amended its Constitution, changing its economic development orientation changing its economic development orientation from the from the planned economyplanned economy to the to the socialist socialist market economymarket economy..

Article 15 of Article 15 of Chinese ConstitutionChinese Constitution

The state practices The state practices socialist market economysocialist market economy..


Article 1 of Article 1 of Foreign Trade LawForeign Trade Law

The present Law is enacted for the purpose of The present Law is enacted for the purpose of broadening the opening to the outside world, broadening the opening to the outside world, developing foreign trade, maintaining the developing foreign trade, maintaining the order of foreign trade, protecting the lawful order of foreign trade, protecting the lawful rights and interests of the foreign trade rights and interests of the foreign trade business operators, and promoting the healthy business operators, and promoting the healthy development of the development of the socialist market economysocialist market economy..


1. Understanding the term “socialist market 1. Understanding the term “socialist market economy”economy”

(1)The dominant part of the national economy (1)The dominant part of the national economy should be run by the State.should be run by the State.

(2)The Communist Party should be the leading (2)The Communist Party should be the leading party in the operation of national economy.party in the operation of national economy.


2. International trade before the Foreign Trade 2. International trade before the Foreign Trade Law was made Law was made

(1)Open-Door Policy (1978)(1)Open-Door Policy (1978)

(2)Three Foreign Enterprise Laws(2)Three Foreign Enterprise Laws

* Sino-Foreign Equity Joint Venture Law* Sino-Foreign Equity Joint Venture Law

* Sino-Foreign Contractual Joint Venture Law* Sino-Foreign Contractual Joint Venture Law

* Wholly Foreign-owned Enterprise Law* Wholly Foreign-owned Enterprise Law


(3)Special Economic Zones(3)Special Economic Zones

The basic objective to delineate a special The basic objective to delineate a special economic zone (SEZ) is the provision of a economic zone (SEZ) is the provision of a “dual legal order” which separates a “dual legal order” which separates a specialized policy enclave from the rest of the specialized policy enclave from the rest of the jurisdiction in which the zone is located. jurisdiction in which the zone is located.

The first SEZs are Shenzhen, Zhuhai, Shantou The first SEZs are Shenzhen, Zhuhai, Shantou and Xiamen (Amoy) set up in 1984.and Xiamen (Amoy) set up in 1984.


The newly established Shanghai Free Trade The newly established Shanghai Free Trade Pilot Zone (SFTPZ) is built on the four Pilot Zone (SFTPZ) is built on the four existent customs supervision areas: Shanghai existent customs supervision areas: Shanghai Waigaoqiao Bonded Zone, Waigaoqiao Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Zone, Yangshan Bonded Bonded Logistics Zone, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Port and Shanghai Pudong Airport Free Trade Zone, with the area of 28 square kilometers in Zone, with the area of 28 square kilometers in total.total.


II. The Treatment Offered on International II. The Treatment Offered on International TradeTrade

1. General principles on the treatment offered by 1. General principles on the treatment offered by the government on the regulation of imports the government on the regulation of imports and exportsand exports

(1) Imports originated from(1) Imports originated from

(2) Exports destined to (2) Exports destined to



In the field of foreign trade, the People’s Republic of In the field of foreign trade, the People’s Republic of China grants, according to the international treaties China grants, according to the international treaties and agreements it concluded or acceded to, and agreements it concluded or acceded to, most-most-favored-nation treatmentfavored-nation treatment or or national treatmentnational treatment to to other contracting parties or membersother contracting parties or members, or grants , or grants most-favored-nation treatment or national treatment most-favored-nation treatment or national treatment to to its counterpartsits counterparts according to the principle of according to the principle of mutual benefit and reciprocity.mutual benefit and reciprocity.


2. Types of most-favoured-nation treatment2. Types of most-favoured-nation treatment

(1)Unconditional MFN(1)Unconditional MFN

MFN offered without any conditions on the MFN offered without any conditions on the offered and scopeoffered and scope

(2)Conditional MFN(2)Conditional MFN

MFN offered based on the equal conditions of MFN offered based on the equal conditions of mutual benefit and reciprocitymutual benefit and reciprocity


(3)Code MFN(3)Code MFN

MEN offered among a specific group of MEN offered among a specific group of members united by an agreementmembers united by an agreement

(4) MFN exceptions---regional trade agreements (4) MFN exceptions---regional trade agreements between China and other WTO Membersbetween China and other WTO Members


* * China---ASEANChina---ASEAN

* China---Pakistan* China---Pakistan

* China---Chile* China---Chile

* China---New Zealand* China---New Zealand

* China---Singapore* China---Singapore

* China---Peru* China---Peru


* * Mainland China---Hong KongMainland China---Hong Kong

* Mainland China---Macao* Mainland China---Macao

* China---Costa Rica* China---Costa Rica

* China---Iceland* China---Iceland

* China---Switzerland* China---Switzerland

* * China---KoreaChina---Korea

* China---Australia* China---Australia


(5)MFN in trade of goods(5)MFN in trade of goods

Treatment offered in different stages of Treatment offered in different stages of regulationregulation

Paragraph 1 of Article I of the Paragraph 1 of Article I of the GATTGATT

With respect to With respect to customs dutiescustoms duties and and chargescharges of of any kind imposed on or in connection with any kind imposed on or in connection with importationimportation or or exportationexportation or imposed on the or imposed on the international international transfer of paymentstransfer of payments for for importsimports


or or exportsexports, and with respect to , and with respect to the method of the method of levying such duties and chargeslevying such duties and charges, and with , and with respect to respect to all rules and formalitiesall rules and formalities in in connection with importation and exportation, connection with importation and exportation, and with respect to all matters referred to in and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any paragraphs 2 and 4 of Article III, any advantageadvantage, , favourfavour, , privilegeprivilege or or immunityimmunity granted by any contracting party to anygranted by any contracting party to any


product originating in or destined for any other product originating in or destined for any other country shall be accorded country shall be accorded immediatelyimmediately and and unconditionallyunconditionally to the to the like productlike product originating originating inin or or destined fordestined for the territories of all other the territories of all other contracting parties.contracting parties.


(6)MFN in trade of services(6)MFN in trade of services

Uniform treatment among WTO Members on Uniform treatment among WTO Members on the market access of trade of servicesthe market access of trade of services

Paragraph One of Article II of the Paragraph One of Article II of the GATSGATS

With respect to any measure covered by this With respect to any measure covered by this Agreement, each Member shall accord Agreement, each Member shall accord immediatelyimmediately and and unconditionallyunconditionally to to servicesservices


and and service suppliersservice suppliers of any other Member of any other Member treatment treatment no less favourableno less favourable than that it than that it accords to like services and service suppliers accords to like services and service suppliers of any other country.of any other country.


(7)MFN in the protection of intellectual property(7)MFN in the protection of intellectual property

Uniform treatment among WTO Members in Uniform treatment among WTO Members in the protection of intellectual propertythe protection of intellectual property

Paragraph One of Article 4 of the Paragraph One of Article 4 of the TRIPSTRIPS

With regard to the protection of intellectual With regard to the protection of intellectual property, any property, any advantageadvantage, , favourfavour, , privilegeprivilege or or immunityimmunity granted by a Member to the granted by a Member to the


nationals of any other country shall be nationals of any other country shall be accorded accorded immediatelyimmediately and and unconditionallyunconditionally to to the nationals of all other Members.the nationals of all other Members.


3. Types of national treatment3. Types of national treatment

(1)NT without limitations(1)NT without limitations

NT offered without any conditions on the NT offered without any conditions on the offered and scopeoffered and scope

(2)NT with limitations(2)NT with limitations

NT offered based on the equal conditions NT offered based on the equal conditions negotiated beforehandnegotiated beforehand


(3)NT in trade of goods(3)NT in trade of goods

Treatment offered in different stages of Treatment offered in different stages of regulationregulation

Article III of the Article III of the GATTGATT

1. The contracting parties recognize that 1. The contracting parties recognize that internal internal taxestaxes and other and other internal chargesinternal charges, and laws, , and laws, regulations and requirements affecting theregulations and requirements affecting the


internal saleinternal sale, , offering for saleoffering for sale, , purchasepurchase, , transportationtransportation, , distributiondistribution or or use of productsuse of products, , and internal quantitative regulations requiring and internal quantitative regulations requiring the the mixturemixture, , processingprocessing or or use of productsuse of products in in specified amounts or proportions, should not specified amounts or proportions, should not be applied to imported or domestic products so be applied to imported or domestic products so as to afford protection to domestic production.as to afford protection to domestic production.


2. The products of the territory of any 2. The products of the territory of any contracting party imported into the territory of contracting party imported into the territory of any other contracting party shall not be any other contracting party shall not be subject, directly or indirectly, to subject, directly or indirectly, to internal taxesinternal taxes or other or other internal chargesinternal charges of any kind in excess of any kind in excess of those applied, directly or indirectly, to of those applied, directly or indirectly, to like like domestic productsdomestic products. Moreover, no contracting . Moreover, no contracting party shall otherwise apply internal taxes or party shall otherwise apply internal taxes or


other internal charges to imported or domestic other internal charges to imported or domestic products in a manner contrary to the principles products in a manner contrary to the principles set forth in paragraph 1.set forth in paragraph 1.

4.The products of the territory of any contracting 4.The products of the territory of any contracting party imported into the territory of any other party imported into the territory of any other contracting party shall be accorded contracting party shall be accorded treatment treatment no less favourableno less favourable than that accorded to than that accorded to like like productsproducts of national origin in respect of all of national origin in respect of all


laws, regulations and requirements affecting laws, regulations and requirements affecting their their internal saleinternal sale, , offering for saleoffering for sale, , purchasepurchase, , transportationtransportation, , distributiondistribution or or useuse. The . The provisions of this paragraph shall not prevent the provisions of this paragraph shall not prevent the application of differential internal transportation application of differential internal transportation charges which are based exclusively on the charges which are based exclusively on the economic operation of the means of transport economic operation of the means of transport and not on the nationality of the product.and not on the nationality of the product.


(4)NT in trade of services(4)NT in trade of services

NT offered only in the sectors committed by NT offered only in the sectors committed by WTO MembersWTO Members

Paragraph One of Article XVII of the Paragraph One of Article XVII of the GATSGATS

1. In the 1. In the sectors inscribedsectors inscribed in its Schedule, and in its Schedule, and subject to any subject to any conditionsconditions and and qualificationsqualifications set set out therein, each Member shall accord to out therein, each Member shall accord to servicesservices and and service suppliersservice suppliers of any other of any other


Member, in respect of all measures affecting Member, in respect of all measures affecting the supply of services, the supply of services, treatment no less treatment no less favourable thanfavourable than that it accords to that it accords to its own likeits own like services and service suppliers.services and service suppliers.


(5)NT in the protection of intellectual property(5)NT in the protection of intellectual property

Due to the minimum level stipulated by the Due to the minimum level stipulated by the TRIPSTRIPS, intellectual properties of other , intellectual properties of other Members may enjoy supra-national treatment Members may enjoy supra-national treatment in certain WTO Members when their level of in certain WTO Members when their level of protection is lower than that stipulated in the protection is lower than that stipulated in the TRIPS.TRIPS.


Paragraph One of Article 3 of the Paragraph One of Article 3 of the TRIPSTRIPS

1. Each Member shall accord to the nationals of 1. Each Member shall accord to the nationals of other Members other Members treatment no less favourabletreatment no less favourable than that it accords to its own nationals with than that it accords to its own nationals with regard to the protection of intellectual regard to the protection of intellectual property, subject to the exceptions already property, subject to the exceptions already provided in, respectively, the provided in, respectively, the Paris Convention Paris Convention (1967), the (1967), the Berne Convention Berne Convention (1971), the(1971), the


Rome Convention Rome Convention or the or the Treaty on Intellectual Treaty on Intellectual Property in Respect of Integrated CircuitsProperty in Respect of Integrated Circuits . In . In respect of performers, producers of respect of performers, producers of phonograms and broadcasting organizations, phonograms and broadcasting organizations, this obligation only applies in respect of the this obligation only applies in respect of the rights provided under this Agreement. Any rights provided under this Agreement. Any Member availing itself of the possibilities Member availing itself of the possibilities provided in Article 6 of the provided in Article 6 of the Berne ConventionBerne Convention


(1971) or paragraph 1(b) of Article 16 of the (1971) or paragraph 1(b) of Article 16 of the Rome Convention Rome Convention shall make a notification as shall make a notification as foreseen in those provisions to the Council for foreseen in those provisions to the Council for TRIPSTRIPS..


Paragraph Two of Article 2 of the Paragraph Two of Article 2 of the TRIPSTRIPS

2. Nothing in Parts I to IV of this Agreement 2. Nothing in Parts I to IV of this Agreement shall derogate from existing obligations that shall derogate from existing obligations that Members may have to each other under the Members may have to each other under the Paris ConventionParis Convention, the , the Berne ConventionBerne Convention, the , the Rome Convention Rome Convention and the and the Treaty on Treaty on Intellectual Property in Respect of Integrated Intellectual Property in Respect of Integrated CircuitsCircuits..


III. Areas Regulated by III. Areas Regulated by Foreign Trade LawForeign Trade Law


The present Law applies to foreign trade and the The present Law applies to foreign trade and the protection of foreign-trade-related intellectual protection of foreign-trade-related intellectual property.property.

The term “foreign trade” as mentioned in the present The term “foreign trade” as mentioned in the present law refers to the law refers to the import and export of goodsimport and export of goods, , technologytechnology, and , and the international trade of servicesthe international trade of services. .


Paragraph Five of Article VIII of the WTO Paragraph Five of Article VIII of the WTO Agreement Agreement

5. There shall be a Council for Trade in Goods, a 5. There shall be a Council for Trade in Goods, a Council for Trade in Services and a Council Council for Trade in Services and a Council for Trade-Related Aspects of Intellectual for Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the Property Rights (hereinafter referred to as the “Council for TRIPS”), which shall operate “Council for TRIPS”), which shall operate under the general guidance of the Generalunder the general guidance of the General


Council. The Council for Trade in Goods shall Council. The Council for Trade in Goods shall oversee the functioning of the Multilateral oversee the functioning of the Multilateral Trade Agreements in Annex 1A. The Council Trade Agreements in Annex 1A. The Council for Trade in Services shall oversee the for Trade in Services shall oversee the functioning of the General Agreement on functioning of the General Agreement on Trade in Services (hereinafter referred to as Trade in Services (hereinafter referred to as “GATS”). The Council for TRIPS shall “GATS”). The Council for TRIPS shall oversee the functioning of the Agreement on oversee the functioning of the Agreement on


Trade-Related Aspects of Intellectual Property Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the Rights (hereinafter referred to as the “Agreement on TRIPS”). These Councils “Agreement on TRIPS”). These Councils shall carry out the functions assigned to them shall carry out the functions assigned to them by their respective agreements and by the by their respective agreements and by the General Council. They shall establish their General Council. They shall establish their respective rules of procedure subject to the respective rules of procedure subject to the approval of the General Council. Membershipapproval of the General Council. Membership


in these Councils shall be open to in these Councils shall be open to representatives of all Members. These representatives of all Members. These Councils shall meet as necessary to carry out Councils shall meet as necessary to carry out their functions.their functions.


1. Goods1. Goods

(1)Except a limited number of goods which are (1)Except a limited number of goods which are restricted by quotas or licenses for imports or restricted by quotas or licenses for imports or exports, most goods are imported or exported exports, most goods are imported or exported based on the fixed tariffs without limitations based on the fixed tariffs without limitations on numbers.on numbers.


2. Technology2. Technology

(1)China encourages the imports of advanced (1)China encourages the imports of advanced technology.technology.

(2)China regulates the exports of technology (2)China regulates the exports of technology according to the according to the Regulations on Technology Regulations on Technology Import and Export Administration.Import and Export Administration.


3. Service3. Service

(1)Since 2001, China spent 5 years as the (1)Since 2001, China spent 5 years as the transitional period to meet its commitments on transitional period to meet its commitments on market access for trade of services.market access for trade of services.

(2)Most sectors of services have been open to (2)Most sectors of services have been open to foreign services and suppliers of service with a foreign services and suppliers of service with a few limitations on the national treatment.few limitations on the national treatment.


IV. The Participants of International TradeIV. The Participants of International Trade

1. Transactions between traders are regulated by 1. Transactions between traders are regulated by relevant laws chosen by the contractors.relevant laws chosen by the contractors.

(1)Applicable laws include the laws of either (1)Applicable laws include the laws of either country of the contractors or even the third country of the contractors or even the third country.country.


2. States2. States

(1)The role of the States is to maintain the (1)The role of the States is to maintain the market order by setting the tariffs for imports market order by setting the tariffs for imports and exports of goods, inscribing the and exports of goods, inscribing the commitments of market access for trade of commitments of market access for trade of services, and listing the items for imports and services, and listing the items for imports and exports of technology.exports of technology.


3. Separate customs territories 3. Separate customs territories

(1)A separate customs territory is referred to a (1)A separate customs territory is referred to a territory which has no sovereignty, but enjoys territory which has no sovereignty, but enjoys the high state of autonomy in commerce. A the high state of autonomy in commerce. A separate customs territory in the WTO enjoys separate customs territory in the WTO enjoys equal rights and obligations as those sovereign equal rights and obligations as those sovereign State Members. State Members.


Hong Kong, Macao and Taiwan are current Hong Kong, Macao and Taiwan are current WTO Members as the separate customs WTO Members as the separate customs territories.territories.

Paragraph One of Article XII of the Paragraph One of Article XII of the WTO WTO AgreementAgreement

1. Any 1. Any StateState or or separate customs territoryseparate customs territory possessing full autonomy in the conduct of its possessing full autonomy in the conduct of its external commercial relations and of the otherexternal commercial relations and of the other


matters provided for in this Agreement and matters provided for in this Agreement and the Multilateral Trade Agreements may accede the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed to this Agreement, on terms to be agreed between it and the WTO. Such accession shall between it and the WTO. Such accession shall apply to this Agreement and the Multilateral apply to this Agreement and the Multilateral Trade Agreements annexed thereto.Trade Agreements annexed thereto.


4. Free trade areas and customs unions4. Free trade areas and customs unions

(1)The main target to form a free trade area or (1)The main target to form a free trade area or customs union is to further liberalize the customs union is to further liberalize the market by reducing tariffs and removing non-market by reducing tariffs and removing non-tariff barriers.tariff barriers.



The People’s Republic of China promotes and The People’s Republic of China promotes and develops foreign trade relations with other develops foreign trade relations with other countries and regions, concludes or accedes to countries and regions, concludes or accedes to regional economic and trade agreements such as regional economic and trade agreements such as customs or tariff unioncustoms or tariff union agreements, agreements, free trade areafree trade area agreements, etc., and joins agreements, etc., and joins regional economic regional economic organizationsorganizations according to according to the principle of equality the principle of equality and reciprocityand reciprocity..



For any For any countrycountry or or regionregion that takes that takes discriminatory banning, restriction or other discriminatory banning, restriction or other acts against the People’s Republic of China in acts against the People’s Republic of China in terms of trade, the People’s Republic of China terms of trade, the People’s Republic of China shall be entitled to adopt, in accordance with shall be entitled to adopt, in accordance with the actual circumstances, corresponding the actual circumstances, corresponding measures against them.measures against them.


Paragraph Eight of Article XXIV of the Paragraph Eight of Article XXIV of the GATTGATT

8. For the purposes of this Agreement:8. For the purposes of this Agreement:

(a)(a) A A customs unioncustoms union shall be understood to shall be understood to mean the substitution of a single customs mean the substitution of a single customs territory for two or more customs territories, so territory for two or more customs territories, so thatthat


(i) duties and other restrictive regulations of (i) duties and other restrictive regulations of commerce (except, where necessary, those commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to XV and XX) are eliminated with respect to substantially all the trade between the substantially all the trade between the constituent territories of the union or at least constituent territories of the union or at least with respect to substantially all the trade in with respect to substantially all the trade in products originating in such territories, and,products originating in such territories, and,


(ii) subject to the provisions of paragraph 9, (ii) subject to the provisions of paragraph 9, substantially the same duties and other substantially the same duties and other regulations of commerce are applied by each regulations of commerce are applied by each of the members of the union to the trade of of the members of the union to the trade of territories not included in the union;territories not included in the union;


Footnote 2 to Paragraph One of Article IX of Footnote 2 to Paragraph One of Article IX of the WTO Agreement:the WTO Agreement:

The number of votes of the European The number of votes of the European Communities and their member States shall in Communities and their member States shall in no case exceed the number of the member no case exceed the number of the member States of the European Communities.States of the European Communities.


(b) A (b) A free-trade areafree-trade area shall be understood to mean a shall be understood to mean a group of two or more customs territories in group of two or more customs territories in which the duties and other restrictive regulations which the duties and other restrictive regulations of commerce (except, where necessary, those of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the and XX) are eliminated on substantially all the trade between the constituent territories in trade between the constituent territories in products originating in such territories.products originating in such territories.


• Questions for Discussion:Questions for Discussion:• Question OneQuestion One• How do you understand the terms of “planned How do you understand the terms of “planned

economy” and “socialist market economy”?economy” and “socialist market economy”?• Question TwoQuestion Two• What is the difference between a “equity joint What is the difference between a “equity joint

venture” and a “contractual joint venture”?venture” and a “contractual joint venture”?


• Question ThreeQuestion Three

• What is the difference between the former What is the difference between the former “special economic zones” and the current “special economic zones” and the current “Shanghai Free Trade Pilot Zone”?“Shanghai Free Trade Pilot Zone”?

• Question FourQuestion Four

• How do you understand the unconditional How do you understand the unconditional MFN, conditional MFN and code MFN?MFN, conditional MFN and code MFN?


• Question FiveQuestion Five

• Why, in some cases, can intellectual properties Why, in some cases, can intellectual properties of other WTO Members enjoy supra-national of other WTO Members enjoy supra-national treatment in some WTO Members? treatment in some WTO Members?

• Question SixQuestion Six

• What is a separate customs territory?What is a separate customs territory?


• Question SevenQuestion Seven

• What is the difference between the “Shanghai What is the difference between the “Shanghai Free Trade Pilot Zone” and a free trade area?Free Trade Pilot Zone” and a free trade area?

• Question EightQuestion Eight

• What is the difference between a customs What is the difference between a customs union and a free trade area?union and a free trade area?

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Chinese Foreign Trade Law Jiaxiang Hu Professor of KoGuan Law School, SJTU.

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