WT/DS363/AB/R

195 Pages·2009·1.05 MB·English

W T
ORLD RADE
WT/DS363/AB/R
21 December 2009
O
RGANIZATION
(09-6642)
Original: English

CHINA – MEASURES AFFECTING TRADING RIGHTS AND
DISTRIBUTION SERVICES FOR CERTAIN PUBLICATIONS AND
AUDIOVISUAL ENTERTAINMENT PRODUCTS

AB-2009-3

Report of the Appellate Body

WT/DS363/AB/R
Page i

I. Introduction.................................................................................................................................1
II. Arguments of the Participants and the Third Participants..........................................................8
A. Claims of Error by China – Appellant...........................................................................8
1. The Applicability of China's Trading Rights Commitments to
Measures Pertaining to Films for Theatrical Release and Unfinished
Audiovisual Products........................................................................................8
(a) Article 30 of the Film Regulation and Article 16 of the Film
Enterprise Rule....................................................................................8
(b) Article 5 of the 2001 Audiovisual Products Regulation and
Article 7 of the Audiovisual Products Importation Rule...................12
2. The "Necessity" Test under Article XX(a) of the GATT 1994......................12
(a) The State-Ownership Requirement....................................................13
(b) The Exclusion of Foreign-Invested Enterprises.................................14
(c) The Restrictive Effect of the Measures..............................................15
(d) Reasonably Available Alternative Measures.....................................15
(e) Completion of the Analysis...............................................................17
3. The Scope of China's GATS Schedule Entry on "Sound Recording
Distribution Services".....................................................................................17
(a) Article 31 of the Vienna Convention.................................................18
(b) Article 32 of the Vienna Convention.................................................23
(c) In Dubio Mitius..................................................................................24
B. Arguments of the United States – Appellee..................................................................24
1. The Applicability of China's Trading Rights Commitments to
Measures Pertaining to Films for Theatrical Release and Unfinished
Audiovisual Products......................................................................................24
(a) Article 30 of the Film Regulation and Article 16 of the Film
Enterprise Rule..................................................................................24
(b) Article 5 of the 2001 Audiovisual Products Regulation and
Article 7 of the Audiovisual Products Importation Rule...................27
2. The "Necessity" Test under Article XX(a) of the GATT 1994......................28
(a) The State-Ownership Requirement....................................................28
(b) The Exclusion of Foreign-Invested Enterprises.................................30
(c) The Restrictive Effect of the Measures..............................................30
(d) Reasonably Available Alternative Measures.....................................31
(e) Completion of the Analysis...............................................................33
3. The Scope of China's GATS Schedule Entry on "Sound Recording
Distribution Services".....................................................................................34
(a) Article 31 of the Vienna Convention.................................................34
(b) Article 32 of the Vienna Convention.................................................37
(c) In Dubio Mitius..................................................................................38
C. Claims of Error by the United States – Other Appellant.............................................39
1. The Necessity of the State Plan Requirement within the Meaning of
Article XX(a) of the GATT 1994...................................................................39
D. Arguments of China – Appellee...................................................................................42
1. The Necessity of the State Plan Requirement within the Meaning of
Article XX(a) of the GATT 1994...................................................................42
WT/DS363/AB/R
Page ii

E. Arguments of the Third Participants............................................................................45
1. Australia..........................................................................................................45
2. European Communities...................................................................................46
3. Japan...............................................................................................................49
4. Korea...............................................................................................................50
III. Issues Raised in This Appeal....................................................................................................52
IV. Overview of the Measures at Issue and the Panel's Findings...................................................54
A. Introduction.................................................................................................................54
B. China's Trading Rights Commitments.........................................................................58
C. Aspects of China's Regulatory Regime for the Relevant Products..............................62
D. Measures Pertaining to All Goods and Services in This Dispute................................63
E. Measures Pertaining to Reading Materials.................................................................64
1. Measures Challenged as Inconsistent with China's Trading Rights
Commitments..................................................................................................65
2. Measures Challenged under the GATS and the GATT 1994.........................68
F. Measures Pertaining to Audiovisual Products............................................................69
1. Measures Challenged as Inconsistent with China's Trading Rights
Commitments..................................................................................................69
2. Measures Challenged under the GATS...........................................................71
G. Measures Pertaining to Films for Theatrical Release.................................................71
H. Measures Pertaining to the Electronic Distribution of Sound Recordings..................73
I. Matters on Appeal........................................................................................................73
V. The Applicability of China's Trading Rights Commitments to Measures Pertaining to
Films for Theatrical Release and Unfinished Audiovisual Products........................................74
A. The Applicability of China's Trading Rights Commitments to Article 30 of the
Film Regulation and Article 16 of the Film Enterprise Rule.......................................74
1. The Panel's Acceptance of the Alleged "Shift" in the United States'
Claim...............................................................................................................76
2. The Panel's Assessment of China's Measures Pertaining to Films for
Theatrical Release...........................................................................................79
(a) The Panel's Findings on Article 30 of the Film Regulation...............80
(b) The Meaning of the Chinese Term "Dian Ying" in Article 30 of
the Film Regulation...........................................................................82
(c) The Alleged "Incidental and Practical" Effects on Goods of
Article 30 of the Film Regulation and Their Relevance to the
Applicability of China's Trading Rights Commitments.....................85
(d) Conclusion.........................................................................................89
B. The Applicability of China's Trading Rights Commitments to Article 5 of the
2001 Audiovisual Products Regulation and Article 7 of the Audiovisual
Products Importation Rule...........................................................................................90
WT/DS363/AB/R
Page iii

VI. China's Defence under Article XX(a) of the GATT 1994........................................................91
A. The Availability of a Defence under Article XX(a) of the GATT 1994........................91
B. The "Necessity" Test under Article XX(a) of the GATT 1994....................................104
1. The Panel's Analytical Approach to the "Necessity" Test under
Article XX(a)................................................................................................105
2. The Contribution of China's Measures to the Protection of Public
Morals in China............................................................................................111
(a) The State-Ownership Requirement..................................................112
(b) The Exclusion of Foreign-Invested Enterprises..............................117
(c) The State Plan Requirement............................................................120
3. The Restrictive Effect of the Measures.........................................................127
4. Reasonably Available Alternative Measure..................................................133
C. Summary and Conclusion on Article XX(a) of the GATT 1994.................................141
VII. Scope of China's GATS Schedule Entry "Sound Recording Distribution Services"..............142
A. Introduction...............................................................................................................142
B. Article 31 of the Vienna Convention..........................................................................145
1. Ordinary Meaning and the Panel's Use of Dictionary Definitions................145
2. Context..........................................................................................................149
(a) China's GATS Schedule..................................................................150
(b) Provisions of the GATS...................................................................154
(c) GATS Schedules of Other Members...............................................157
(d) Summary..........................................................................................158
3. Object and Purpose.......................................................................................159
4. Summary under Article 31 of the Vienna Convention..................................162
C. Article 32 of the Vienna Convention..........................................................................163
D. Conclusions................................................................................................................166
VIII. Findings and Conclusions.......................................................................................................167

ANNEX I Notification of an Appeal by China, WT/DS363/10

ANNEX II Notification of an Other Appeal by the United States, WT/DS363/11

ANNEX III Relevant Excerpts from China's Accession Protocol and Working Party Report,
China's GATS Schedule, and the Chinese Measures at Issue in This Appeal
WT/DS363/AB/R
Page iv

CASES CITED IN THIS REPORT

Short title Full case title and citation
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded
Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, 1527
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry,
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate
Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043
Canada – FIRA GATT Panel Report, Canada – Administration of the Foreign Investment
Review Act, L/5504, adopted 7 February 1984, BISD 30S/140
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, 449
Canada – Periodicals Panel Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/R and Corr.1, adopted 30 July 1997, as modified by Appellate Body
Report WT/DS31/AB/R, DSR 1997:I, 481
Canada – Provincial Liquor GATT Panel Report, Canada – Import, Distribution and Sale of Alcoholic
Boards (EEC) Drinks by Canadian Provincial Marketing Agencies, L/6304, adopted
22 March 1988, BISD 35S/37
Chile – Price Band System Appellate Body Report, Chile – Price Band System and Safeguard Measures
(Article 21.5 – Argentina) Relating to Certain Agricultural Products – Recourse to Article 21.5 of the
DSU by Argentina, WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II,
513
China – Auto Parts Appellate Body Reports, China – Measures Affecting Imports of Automobile
Parts, WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R, adopted
12 January 2009
China – Publications and Panel Report, China – Measures Affecting Trading Rights and Distribution
Audiovisual Products Services for Certain Publications and Audiovisual Entertainment Products,
WT/DS363/R and Corr.1, circulated to WTO Members 12 August 2009
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of
Entry, WT/DS366/R and Corr.1, adopted 20 May 2009
Dominican Republic – Import Appellate Body Report, Dominican Republic – Measures Affecting the
and Sale of Cigarettes Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted
19 May 2005, DSR 2005:XV, 7367
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos
and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001,
DSR 2001:VII, 3243
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September
1997, DSR 1997:II, 591
EC – Chicken Cuts Appellate Body Report, European Communities – Customs Classification of
Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R,
adopted 27 September 2005, and Corr.1, DSR 2005:XIX, 9157
EC – Computer Equipment Appellate Body Report, European Communities – Customs Classification of
Certain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, adopted 22 June 1998, DSR 1998:V, 1851
WT/DS363/AB/R
Page v

Short title Full case title and citation
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products
(Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,
DSR 1998:I, 135
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the
Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July
1998, DSR 1998:V, 2031
India – Autos Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R,
WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and
Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998,
DSR 1998:I, 9
Japan – Alcoholic Beverages II Appellate Body Report, Japan – Taxes on Alcoholic Beverages,
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November
1996, DSR 1996:I, 97
Korea – Various Measures on Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
Beef and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January
2001, DSR 2001:I, 5
Turkey – Rice Panel Report, Turkey – Measures Affecting the Importation of Rice,
WT/DS334/R, adopted 22 October 2007, DSR 2007:VI, 2151
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain
Corrosion-Resistant Carbon Steel Flat Products from Germany,
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 3779
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application
of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009
US – Corrosion-Resistant Steel Appellate Body Report, United States – Sunset Review of Anti-Dumping
Sunset Review Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan,
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales
(Article 21.5 – EC) Corporations" – Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted
20 April 2005, DSR 2005:XII, 5663 (Corr.1, DSR 2006:XII, 5475)
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as
modified by Appellate Body Report, WT/DS285/AB/R, DSR 2005:XII, 5797
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3
US – Malt Beverages GATT Panel Report, United States – Measures Affecting Alcoholic and Malt
Beverages, DS23/R, adopted 19 June 1992, BISD 39S/206
US – Offset Act Appellate Body Report, United States – Continued Dumping and Subsidy
(Byrd Amendment ) Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January
2003, DSR 2003:I, 375
US – Section 211 Appellate Body Report, United States – Section 211 Omnibus Appropriations
Appropriations Act Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589
US – Section 301 Trade Act Panel Report, United States – Sections 301-310 of the Trade Act of 1974,
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815
WT/DS363/AB/R
Page vi

Short title Full case title and citation
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998,
DSR 1998:VII, 2755
US – Shrimp (Thailand) / Appellate Body Report, United States – Measures Relating to Shrimp from
US – Customs Bond Directive Thailand / United States – Customs Bond Directive for Merchandise Subject
to Anti-Dumping/Countervailing Duties, WT/DS343/AB/R,
WT/DS345/AB/R, adopted 1 August 2008
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty
Determination with Respect to Certain Softwood Lumber from Canada,
WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, 571
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R,
WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R,
WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003,
DSR 2003:VII, 3117
US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R,
adopted 19 January 2001, DSR 2001:II, 717
WT/DS363/AB/R
Page vii

ABBREVIATIONS OF CHINA'S MEASURES USED IN THIS REPORT

Short Title Full Title in United States Exhibit Full Title in Chinese Exhibit
1997 Electronic People's Republic of China, General Order of the General Administration of
Publications Administration of Press and Publication, Press and Publication of the People's
Regulation Order, No. 11 (1997) – Regulations on the Republic of China (No. 11) (1997)
Management of Electronic Publications – Provisions on the Administration of
(Panel Exhibit US-15) Electronic Publications
(Panel Exhibit CN-39)
2001 Audiovisual People's Republic of China State Council, Order of the State Council of the People's
Products Order No. 341 (2001) – Regulations on the Republic of China (No. 341) (2001)
Regulation Management of Audiovisual Products – Regulations on the Administration of
(Panel Exhibit US-16) Audiovisual Products (Panel Exhibit CN-2)
Audiovisual Order of the People's Republic of China Ministry of Culture and Ministry of
(Sub-)Distribution Ministry of Culture, Ministry of Commerce, Commerce, Order No. 28 (2004)
Rule No. 28 (2004) – Rules for the Management – Measures for Administration of Sino-
of Chinese-Foreign Contractual Joint Foreign Distribution Contractual Joint
Ventures for the Sub-Distribution of Ventures of Audiovisual Products
Audiovisual Products (Panel Exhibit US-18) (Panel Exhibit CN-54)
Audiovisual Order of The People's Republic of China Order of the Ministry of Culture and the
Products Ministry of Culture and The People's General Administration of Customs (No.23)
Importation Rule Republic of China General Administration (2002) – Measures on the Administration of
of Customs, No. 23 (2002) – Rules for the Importation of Audiovisual Products
Management of the Import of Audiovisual (Panel Exhibit CN-15)
Products (Panel Exhibit US-17)
Catalogue Order of the National Development and Order of National Development and Reform
Reform Commission and the Ministry of Commission and the Ministry of Commerce
(includes the List Commerce of the People's Republic of (No. 57) (2007) – Catalogue of Industries for
of Restricted China, No. 57 (2007) – Catalogue of Guiding Foreign Investment
Foreign Industries for Guiding Foreign Investment (Panel Exhibit CN-41)
Investment (Panel Exhibit US-5)
(includes the Catalog of Restricted Foreign
Industries and the
(includes the Catalogue of Industries With Investment Industries and the Catalog of
List of Prohibited
Restricted Foreign Investment and the Prohibited Foreign Investment Industries)
Foreign
Catalogue of Prohibited Foreign Investment
Investment
Industries)
Industries)
Circular on Notice of the Ministry of Culture on Some Circular of the Ministry of Culture (No.27)
Internet Culture Issues Relating to Implementation of the (2003) – Relevant Issues of Implementation
"Interim Rules on the Management of of the "Interim Provisions on the
Internet Culture" (2003); and Order of the Administration of Internet Culture"
Ministry of Culture of the People's Republic (Panel Exhibit CN-67)
of China, No. 27 (2003) Interim Rules on
the Management of Internet Culture
(Panel Exhibit US-33)
Film Distribution State Administration of Radio, Film and State Administration of Radio, Film and
and Exhibition Television and the Ministry of Culture, Television and Ministry of Culture
Rule No. 1519 (2001) – Implementing Rules for (No. 1519) (2001) – Interim Implementing
the Reform of the Film Distribution And Rules for Reforming Film Distribution and
Projection Mechanisms (Trial Exhibition (Panel Exhibit CN-12)
Implementation) (Panel Exhibit US-21)
WT/DS363/AB/R
Page viii

Short Title Full Title in United States Exhibit Full Title in Chinese Exhibit
Film Enterprise Order of the State Administration of Radio, State Administration of Radio, Film and
Rule Film and Television and the Ministry of Television and the Ministry of Commerce,
Commerce, No. 43 (2004) – Provisional Order No. 43 (2004) – Interim Provisions
Rules on Entry Criteria For Operating Film on the Qualification Access for Operating
Enterprises (Panel Exhibit US-22) Film Enterprises (Panel Exhibit CN-13)
Film Regulation State Council of the People's Republic of Order of the State Council of the People's
China, Order No. 342 (2001) – Regulations Republic of China (No. 342) (2001)
on the Management of Films – Regulations on the Administration of Film
(Panel Exhibit US-20) (Panel Exhibit CN-11)
Foreign Order of the State Council of The People's No exhibit
Investment Republic of China, No. 346 (2002)
Regulation – Regulations Guiding the Orientation of
Foreign Investment (Exhibit US-9)
Imported General Administration of Press and Order of the General Administration of
Publications Publication, Order 27 (2004) – Rules for the Press and Publication (No. 27) (2004)
Subscription Rule Management of Subscribers Placing – Measures for Administration of
Subscriptions for Imported Publications Subscription of Imported Publications by
(Panel Exhibit US-30) Subscribers (Panel Exhibit CN-99)
Internet Culture Ministry of Culture, Order No. 32 (2003) Ministry of Culture, Order No. 27 (2003)
Rule – Interim Rules on the Management of (revised by Order No. 32 (2004)) – Interim
Internet Culture (Panel Exhibit US-32) Provisions on the Administration of Internet
Culture (Panel Exhibit CN-55)
Network Music Several Opinions of the Ministry of Culture Several Opinions of the Ministry of Culture
Opinions on the Development and Management of on Development and Administration of
Network Music (2006) Network Music (No.32) (2006)
(Panel Exhibit US-34) (Panel Exhibit CN-68)
Publications General Administration for Press and Order of the General Administration of
(Sub-)Distribution Publication and the Ministry of Foreign Press and Publication and the Ministry of
Rule Trade and Economic Cooperation, Order Foreign Trade and Economic Cooperation
No. 18 (2003) – Rules for the Management (No.18) (2003) – Measures for
of Foreign Invested Enterprises Administration of Foreign-Invested Book,
Sub-Distributing Books, Newspapers and Periodical and Newspaper Distribution
Periodicals (Panel Exhibit US-28) Enterprises (Panel Exhibit CN-47)
Publications General Administration of Press and General Administration of Press and
Market Rule Publication (2004) – Administrative Rules Publication (2004) – Provisions on the
for the Publications Market Administration of the Publications Market
(Panel Exhibit US-27) (Panel Exhibit CN-38)
Publications State Council of The People's Republic of Order of the State Council of the People's
Regulation China, Order No. 343 (2001) – Regulations Republic of China (No. 343) (2001)
on the Management of Publications – Regulations on the Administration of
(Panel Exhibit US-7) Publishing (Panel Exhibit CN-14)
Several Opinions Notice Issued by the Ministry of Culture, No exhibit
State Administration of Radio, Film, and
Television, General Administration of Press
and Publication, National Development and
Reform Commission, and Ministry of
Commerce and Printing and Issuing, No. 19
(2005) – "Several Opinions on the
Introduction of Foreign Capital into the
Cultural Sector" (Panel Exhibit US-6)