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WT/TPR/M/300/Add.1 9 September 2014 PDF

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WT/TPR/M/300/Add.1 9 September 2014 (14-5091) Page: 1/456 Trade Policy Review Body Original: English/Spanish 1 and 3 July 2014 anglais/espagnol inglés/español TRADE POLICY REVIEW CHINA MINUTES OF THE MEETING Addendum Chairperson: H.E. Mrs. Mariam MD Salleh (Malaysia) This document contains the advance written questions and additional questions by WTO Members, and replies provided by China.1 Organe d'examen des politiques commerciales 1 et 3 juillet 2014 EXAMEN DES POLITIQUES COMMERCIALES CHINE COMPTE RENDU DE LA RÉUNION Addendum Présidente: S.E. Mme. Mariam MD Salleh (Malaisie) Le présent document contient les questions écrites communiquées à l'avance par les Membres de l'OMC, leurs questions additionnelles, et les réponses fournies par la Chine. Órgano de Examen de las Políticas Comerciales 1 y 3 de julio de 2014 EXAMEN DE LAS POLÍTICAS COMERCIALES CHINA ACTA DE LA REUNIÓN Addendum Presidenta: Excma. Sra. Mariam MD Salleh (Malasia) En el presente documento figuran las preguntas presentadas anticipadamente por escrito y las preguntas adicionales de los Miembros de la OMC, así como las respuestas facilitadas por China.1 1 In English and Spanish only./En anglais et espagnol seulement./En inglés y español solamente. WT/TPR/M/300/Add.1 - 2 - 1 QUESTIONS BY PAKISTAN Question Amidst a transition to the consumption based model, China has retained its competitive strength in international trade. What role does China envisage for its international trade when a successful transition to a model based on domestic consumption? Answer As an important part of China's open economic system, international trade plays a crucial role in promoting economic growth, driving industrial development and guaranteeing energy and resource supply and is also of positive significance in expanding employment, increasing people's income, promoting competition in the domestic market, enriching commodity and service supply and facilitating consumption structure upgrading. Therefore, in the process of promoting the economic transformation depending more on domestic demand, particularly consumer demand, we still have to actively develop and constantly improve the quality and level of international trade in order to expedite sustainable and sound economic development in the new context of economic globalisation. Question The present Report reveals China moving well into the direction of reducing imbalances in its economy. However, reference is made to the IMF's assessment (e.g. that additional sources of vulnerability include possible contingent liabilities related to the financial sector, state-owned enterprises (SOEs), and actuarial shortfalls in the pension system), adding that a decisive shift towards a more consumer-based economy has yet to occur. China is requested to offer its comments. Answer The Chinese Government has been committed to driving economy towards a more balanced and sustainable development model; during this process, there are some contradictions and possible risks. To this end, we are focusing on addressing systematic issues by deepening reform in an all- round way and innovating and improving relevant systems. The Chinese Government has upheld expanding domestic demand and consumer demand in particular as an ultimate objective of long- term sound economic development. Over the past three years, China's economic growth has made positive contributions to global economic growth and re-balance. With regard to consumption expansion, the Government framework has been established and improved. First, China has adopted comprehensive measures to strengthen residents' spending capacity. We have implemented proactive employment policies, including vigorously developing service industries, SMEs and private economy with high employment capacity, improving employment and entrepreneurship assistant policies, strengthening vocational skill training and increasing public- welfare service jobs. Moreover, we have deepened reform on income distribution system and promoted continuous income increase of farmers and low- and middle-income urban residents by improving agricultural subsidy policies and keeping up-regulating minimum wage standard and pension for retired workers and raising the threshold of individual income tax. We have improved social security system and accelerated the construction of basic medical and endowment systems covering both urban and rural areas as well as urban government-subsidized housing projects. Second, China has actively cultivated new consumption growth points. In Answer to the trend of resident consumption structure upgrading, we have focused on strengthening infrastructure construction, relaxed control over market access and improved fiscal, tax and financial support policies targeting at hot consumption sectors such as housing, automobile and environment- friendly products, consumption sectors such as tourism, information, culture, nursing home, health and educational training, and new type of consumption mode such as e-retailing. Third, China has focused on fostering a favourable consumption environment. We have vigorously developed urban and rural commerce and trade and logistics infrastructure networks, improved e- commerce payment and security guarantee system, accelerated the establishment of social credit system and credit rewarding and punishing mechanism, enhanced supervision on food and drug quality and safety, intensified effort in punishing illegal infringements upon consumers' rights and interests and endeavoured to foster an environment for secure and reassuring consumption. WT/TPR/M/300/Add.1 - 3 - Along with constant effects in consumption expansion policy, the contribution of final consumption to economic growth has been on a significant rise and has maintained above 50% over the past years. In the first quarter of 2014, final consumption drove economic growth by 5.7% or contributed to 76.7% to economic growth. Question The Secretariat Report states that China's trade and investment policy is managed and fine-tuned through a number of legal instruments, including Central Government Five-Year Plans, sectorial and provincial Five-Year Plans and different Catalogues, adding that the different layers of regulation, esp. with reference to Catalogues, add an additional level of difficulty when trying to unravel specific policy measures in China. Does China have any plans to streamline/shift away from the system of Catalogues for the sake of ease of use and greater transparency? Answer First of all, China's Five-year Plan is not a guiding catalogue but an overall blueprint for economic and social development proposed by governments at all levels. It mainly explicitly defines matters and issues within the scope of government responsibilities. The Five Plans are prepared based on full linkages and extensive opinion solicitations and are released to the public after being reviewed and deliberated by the people's congresses at all levels. There are no problems of multiple layers and non-transparency. Secondly, in regard to industrial planning, the Chinese Government has guided industrial development in the form of guiding catalogues which are equal, fair and open to various market players during implementation and are periodically amended according to implementation situations. Next, we will uphold the spirits of the 18th National Congress of the CPC and the Third Plenary Session of the 18th Central Committee of the Chinese Communist Party, let market play a decisive role in resource allocation and give a better play to government to facilitate constant reforms and innovations on planning systems and promote further improvement of our planning systems. Question According to the Secretariat, customs procedures across the country still require harmonization. In addition, none of the trade facilitation measures implemented so far apply to goods subject to licensing or other restrictions. Could China explain any measures to enhance harmonization and whether there are plans to apply trade facilitation measures to goods subject to licensing or other restrictions. Answer The statement that "customs procedures across the country still require harmonization" is ambiguous. If it refers to customs clearance process of goods, all customs in China apply H2010 customs management system which does not "require harmonization". China Customs has constantly optimised environment for port customs clearance, accelerated port customs clearance and formed a series of customs facilitation measures including declaration in advance, centralised declaration and appointment-based customs clearance, effectively promoting trade facilitation development. As a law enforcement department, Chinese Customs has always adhered to administration in strict accordance with law as well as unified and standard law enforcement to ensure the implementation of the Customs Law and other relevant laws and regulations in an all-round, accurate and harmonised way within the entire customs territory. Moreover, it has guaranteed and promoted customs procedure harmonisation in China by comprehensively advancing national campaign of customs legal construction and constantly deepening reform on customs clearance operation. We have intensified effort in legislation to constantly improve the customs law enforcement basis system and strengthened legal enforcement harmonization to guarantee harmonised implementation of the Customs Law and other relevant laws and regulations in various regions and ports. In addition, we have regulated customs discretion, strengthened the legal supervision WT/TPR/M/300/Add.1 - 4 - function of administrative review and enhanced legal awareness and legal quality of all customs staffs to do a good job in harmonisation of customs procedures. Question The Secretariat Report considers that export licences may be required for goods subject to export restrictions. These measures are in place mainly to protect the environment and to preserve natural resources. However, it would appear that, in practice, these and other measures affecting exports have been used as policy instruments to encourage or discourage exports as necessary to meet industrial development goals. Could China offer its comments on this statement? Answer China has no intention to restrict or distort the trade. Furthermore, China has no intention to protect the domestic sectors through imposing the export restriction measures as well. The purpose of export restriction on the products which are high-polluted, energy-consuming, or consuming renewal natural resource is China have to deal with the environment issues. The WTO rules attach more importance in trade liberalization, but also should allow the members to adopt the necessary measures to reserve the resources and protect the environment. China will assess the WTO DSB ruling and conduct scientific administration on the resources products. Question The determination of government prices or government-guided prices varies in accordance with the type of products or services, based on criteria such as market situation, average social costs, the effect on the standard of living of the population, as well as on economic, regional and seasonal factors. What is the relative weight of each of the stated criteria while using the methodology for setting prices? Answer Please refer to the Article 21 of the Price Law. In practice, the factors affecting the price are various depending on different type of goods and services, therefore, considerable factors shall be taken into consideration when setting the prices. Question 47 tariff lines are subject to tariff rate quotas (section 4.1), including in HS Chapters 10 (wheat and maslin, maize, rice), 11 (cereal flours other than of wheat and maslin, cereal groats), 17 (cane or beet sugar), 31 (mineral or chemical fertilizers), 51 (wool, carded or combed), and 52 (cotton). The Secretariat Report explains that historically, the fill rate of TRQs has been low. In such case, what is the rationale for maintaining these quotas? Answer The basic consideration for China to maintain these quotas is to keep up with its commitments during the WTO accession. After tariff rate quotas of Chinese agricultural products are distributed to enterprises, enterprises may freely import agricultural products without intervention by the Chinese Government. The fulfil rate of TRQs for cotton was 100%. China has always adhered to basic food self-support and has witnessed continuous food production increase and sufficient food supply over the past decade. Question China continues to use a broad range of measures including tariff protection, import and export licensing, state trading for certain products, export and import quotas, export tax rebates, minimum support prices for basic crops, support to promote the use of inputs, direct payments, and buffer stock for food security. However, labour productivity in agriculture continues to be lower than in the rest of the economy; this can be attributed to the small scale of production, structure imbalance and a lack of skilled farmers and modernization. The Secretariat Report also notes that there have been no major changes in the policy instruments that China uses to attain its policy goals. What are China's views? WT/TPR/M/300/Add.1 - 5 - Answer China has taken measures to administrate its domestic economy that are consistent with WTO rules. Labour productivity in agriculture is low because China is still a developing country. China plans to continue to deepen its reform and opening-up and promote the development of various industries while maintain stable macroeconomic policies. Question How many anti-trust actions under the competition law have involved SOEs? Answer To date, many monopoly cases under investigation by industry and commerce authorities have involved SOEs and relevant cases are being investigated. We will publish these cases on the website of the State Administration of Industry and Commerce after the investigation. Please check the information provided on the relevant websites. WT/TPR/M/300/Add.1 - 6 - 2 QUESTIONS BY SINGAPORE PART I: QUESTIONS REGARDING THE SECRETARIAT REPORT 2. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES Reciprocal Agreements Page 40 (Para 2.36) Question 1 We understand that in some of China's FTA agreements, China requested for a Certificate of Non- Manipulation to be issued for the originating goods transiting through a non- party/third country if the goods are intended for export to China under preferential rates. We would like to know whether China will be reviewing these requirements with the aim of facilitating trade by accepting other supporting shipping documents (such as a through bill of lading issued in the exporting Party, which will already validate that the goods are a direct consignment from the exporting Party to the importing Party, without any consigning to an intermediate party which may manipulate the item in any way) in lieu of this Certificate of Non-Manipulation issued by the authorities in the country of transit. Answer To date, China has requested for customs certificates issued by country of transit for imported goods under FTA agreements in a bid to ensure relevant goods conform to direct shipment clauses provided in FTA agreements. China has no plan to adjust this policy. Examination and Approval Procedures Pages 45-46 (Para 2.56) Question 2 Singapore appreciates China's effort in opening up market access to encourage FDI in China. Regarding verification of investment projects, the Secretariat reported that "in general foreign- invested projects are subject to the same requirements as domestic investment projects". We wish to seek greater clarity on the requirements where foreign invested projects are different from domestic investment projects. Answer The Chinese Government has requested to implement unified market access system as well as laws and regulations on foreign-invested projects and domestic investment projects. In December 2013, the State Council issued the Circular of the State Council on Releasing the Catalogue of Investment Projects Subject to Approval by the Government (2013) to stipulate the scope of foreign-invested projects to be approved. In May 2014, the National Development and Reform Commission (NDRC) issued the Administrative Measures for Approval and Registration of Foreign- invested Projects to further enhance the linkage with the amendment to the Interim Measures for Approval of Enterprise Investment Projects which applies to domestic enterprises invested projects, with basically same requirements on advance documents, conditions and procedures of project approval. Meanwhile, to embody specific requirements on approval and registration of foreign-invested projects, approval conditions for foreign-invested projects are defined, including compliance with relevant national laws and regulations, foreign investment access policy and capital account management. Incentives to Foreign Investment Page 50 (Para 2.74) Question 3 On incentives to foreign investments in the central-western region of China, we would appreciate clarification on the following: (a) What are the tax incentives that are unique to this region? WT/TPR/M/300/Add.1 - 7 - Answer During 2001-2010, China levied enterprise income tax by a reduced rate of 15% on domestic- funded and foreign-invested enterprises in the industries encouraged by the State in the western region. All enterprises meeting tax conditions enjoyed this incentive policy. See Item 14 of G/SCM/N/155/CHN and G/SCM/N/186/CHN for details. In 2011, to further support the development of western regions, China extended the policy to the end of 2020. In other words, China levies enterprise income tax by a rate of 15% on enterprises in industries encouraged in the western region from 1 January 2011 to 31 December 2020. China will update corresponding information in next Subsidy Notification. (b) What is the operating mechanism for and benefits of the "special customs supervision zones or bonded supervision areas" in region? Answer Bonded areas, export processing zones and comprehensive bonded zones are special customs supervision zones and are set up subject to the approval of the State Council under the administration of the General Administration of Customs (GAC). Pursuant to the Guiding Opinions of the State Council on Promoting the Scientific Development of Special Customs Supervision Zones (Guo Fa [2012] No.58), special customs supervision zones shall be set up by following the principles of contributing to the implementation of the national strategic plan or regional development, undertaking of industry transfer in the western region, integration and optimisation of special customs supervision zones and the establishment of imperative export-oriented large- scale projects pursuant to the provisions and requirements set forth in the Measures for the Establishment and Approval of Special Customs Supervision Zones. Special customs supervision zones have played a positive role in undertaking international industry transfer, facilitating processing trade transformation and upgrading, expanding foreign trade and promoting employment. In particular, regarding processing trade transformation and upgrading, China can give a full play to regional influence function of special customs supervision zones, develop outside-region industrial support capacity, drive eligible enterprise to enter the industry chain and supply chain of processing trade, facilitate in-depth integration of production processing, logistics and service industries inside and outside the region and form a pattern characterised by high-end zone access, supporting neighbouring facilities, regional influence and aggregation development. All bonded supervision zones are under management subject to unified national laws, regulations and rules. To date, there are establishment and approval policies biased at central-western region where establishment conditions are less rigorous than those in the eastern region. Pursuant to the Measures of the General Administration of Customs, Ministry of Finance, State Administration of Taxation and State Administration of Foreign Exchange for the Examination and Approval of Bonded Logistics Centres (Shu Jia Fa Zi [2013] No.124), bonded logistics centres shall be set up by following the principles of contributing to the implementation of national strategic plan for regional development, acceleration of processing trade transformation and upgrading and facilitation of industry transfer in the central-western region. (c) How are these incentives structured such that they are consistent with the WTO Subsidies and Countervailing Measures (SCM) agreement? Answer China has been working hard on preparing the next subsidy notification since the last trade policy review, will analyzing the consistency with the WTO Subsidies rules in the regards in the next subsidy notification. China (Shanghai) Pilot Free Trade Zone Page 51 (Para 2.81) Question 4 4. We understand that pre-establishment MFN treatment to FIEs in the CSPFTZ is only granted on a trial basis. Can China elaborate on the criteria and duration of the pre-establishment MFN treatment trial? Will China consider implementing National Treatment in CSPFTZ in the future? WT/TPR/M/300/Add.1 - 8 - Answer Pursuant to the Overall Scheme of the China (Shanghai) Pilot Free Trade Zone, the CSPFTZ will explore and establish negative list management mode, draw ideas from international prevailing rules, grant pre-establishment MFN treatment trial to foreign investors, and study and develop the negative list for differences in foreign investment and national treatment outside the CSPFTZ. Regarding zones outside the negative list, the approval system of foreign-invested projects will be changed into registration system by following the principle of no difference between domestic and foreign investments and contract constitution approval for foreign-invested enterprises will be changed into registration management. To this end, the Standing Committee of the National People's Congress has authorized the State Council to temporarily adjust relevant administrative examinations and approvals provided in the Law of the People's Republic of China on Foreign- capital Enterprises and the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures within three years on a trial basis. Question 5 We would like to seek clarity on whether there will be further clearance of goods when they enter or exit the CSPFTZ after the first tier opening, as well as what further trade facilitation measures are envisaged to be implemented in the second tier opening. Answer According to the requirements to advance the implementation of first tier opening and resolutely implement second tier safe and high-efficiency administration provided in the Overall Scheme of the China (Shanghai) Pilot Free Trade Zone, Customs, inspection and quarantine and other regulators successively promulgated many trade facilitation measures: Facilitation measures promulgated by Customs: First tier opening policies: 1. Innovative development of "zone access first and then customs declaration" system. Original customs clearance operation process of "customs declaration first and then zone access" for first tier imported goods is adjusted, and enterprises are allowed to pick up the goods and enter the zone by goods manifest information and then go through customs declaration formalities within a given time limit to reduce customs clearance time and cost. 2. Simplifying documents attached to customs clearance operation. Shanghai Customs and Shanghai Entry-Exit Inspection and Quarantine Bureau decided to cancel check on customs clearance form in the first tier importing. Attached documents are cancelled for first tier entry and exit customs files and second tier tax-free import and export customs declarations and enterprises will be required to provide relevant attached documents and files when necessary. 3. Unified registration list. Two different registration list formats for different special customs supervision zones in the CSPFTZ are translated into 30 declaration elements to realize standard and simple declaration, reduce burdens on enterprises and promote integrated operation in the CSPFTZ. Second tier opening policies: 1. Batch entry and exit and centralised declaration system. Traditional "one declaration for one bill" is changed into "one declaration for multiple bills" and enterprises are allowed to import and export goods by batch and intensively go through customs declaration formalities within a given time limit to expand enterprises' decision-making power in declaration, lower customs clearance cost and improve customs clearance efficiency. 2. Selective taxation system for domestic sale. Enterprises may choose to pay import tariffs for goods that are produced, processed and sold to the domestic market via the second tier in the CSPFTZ, which will attract more enterprises to enter the CSPFTZ and helps enterprises expand domestic sale. 3. Intensive summary tax payment system. Traditional customs-dominated tax collection and administration model is changed into enterprise initiative tax collection and administration model. With valid guarantee, enterprises are allowed to pay taxes of several batches of goods released to customers within a given tax cycle and customs changes its real-time check into follow-up check and tax audit to simply tax collection and administration formalities, improve customs clearance efficiency and lower enterprise costs. Other facilitation measures: 1. Self-transportation system in the CSPFTZ. Qualified enterprises in the CSPFTZ are allowed not to use customs supervision vehicles and implement self-transportation in the four special customs supervision zones in the CSPFTZ by comparing information system data to lower logistics costs. WT/TPR/M/300/Add.1 - 9 - 2. Processing trade order write-off system. The networked management implemented for processing and manufacturing enterprises using ERP is leveraged to cancel unit-consumption audit and registration and write off based on daily work order data automatically sent by enterprises. As a result, customs supervision model will fully respect production law of enterprises to raise enthusiasm among enterprises for optimising production process and provide references and samples for supervision on new business forms including R&D and maintenance. 3. Bonded exhibition transaction system. Qualified enterprises in the CSPFTZ are allowed to make bonded exhibition transactions in and outside the CSPFTZ after providing to customs sufficient tax payment guarantee (cash deposit or bank guarantee) and implement sale first and then tax payment and intensive declaration for goods sold in the domestic market during exhibition. This has been implemented in the CSPFTZ. 4. Domestic and overseas maintenance system. Qualified enterprises in the CSPFTZ are allowed to launch high-tech, high value-added and pollution-free domestic and overseas maintenance business. Customs refers to bonded processing supervision model to implement management based on IT system to drive extensions to both sides of high value-added production chain of R&D, test and maintenance and promote processing trade transformation and upgrading. 5. Futures bonded delivery system. Enterprises in the CSPFTZ are allowed to make physical futures delivery targeting at goods under bonded supervision in the CSPFTZ. The implementation area is expanded from Yangshan Boded Port to entire CSPFTZ, and delivery of goods is expanded from copper and aluminium to all commodity varieties listed on the Shanghai Futures Exchange. 6. Financing lease system. Customs levy tariffs and added-value tax on financing lease goods based on rent installment determined in examination. Meanwhile, qualified enterprises are allowed to provide guarantee in the form of warranty to lower enterprise costs and further attract financing enterprises to the CSPFTZ. The implementation area is expanded from Pudong Airport Comprehensive Bonded Zone to entire CSPFTZ. 7. Bonded logistics networked supervision system. Traditional existing models such as warehousing registration, stocktaking and writing-off are reformed to implement the management model of "system networking + warehouse location management + real-time writing-off" for enterprises adopting WMS and make real-time and dynamic management of goods entry, exit, transfer and inventory to improve logistics operation efficiency. 8. Intelligent customs pass management system. Pass facilities in the CSPFTZ are upgraded and transformed and pass operations are simplified to realize automatic comparison, automatic identification and automatic passage, shorten vehicle pass time, improve customs clearance efficiency and satisfy safety and high efficiency requirements. Page 52 (Para 2.84) Question 6 It was mentioned that the Negative List would be adjusted when deemed appropriate, and the revised version was expected to be released in the first half of 2014. We would like to enquire about the progress of the revised list. Answer Shanghai is revising the Special Management Measures for Foreign Investments in the China (Shanghai) Pilot Free Trade Zone (Negative List) (2003) following the principles of raising openness, improving transparency and further gearing to international general rules. Customs Procedures and Requirements Page 55 (Para 3.2) Question 7 We note from the footnote that the paperless customs clearance pilot project was introduced in August 2012. We would like to enquire on the progress of the pilot project and when it would be fully implemented. WT/TPR/M/300/Add.1 - 10 - Answer Paperless customs clearance requires enterprises to submit electronic data of relevant bills to the customs when going through import and export customs clearance formalities instead of handing in paper bills on the site. Since 1 August 2012, some customs have launched the paperless customs clearance pilot project. Based on pilot experience in the early stage, the GAC decided to expand paperless customs clearance reform measures and scope of the pilot project to all business sites and business fields nationwide as of 1 April 2014 to gradually realize nationwide coverage of the paperless customs clearance reform. Page 57 (Para 3.6) Question 8 We would like to enquire on the number of "approved piloted enterprises graded B or higher" and on the number of these that choose to do paperless customs declarations. Answer As of 31 May 2014, 623,189 enterprises were registered at Chinese customs, including 3,041 enterprises Grade AA, 34,573 Grade A and 583,939 Grade B. There were 621,553 approved piloted enterprises graded B or higher. Pursuant to the Announcement of the General Administration of Customs on Deepening the Paperless Customs Clearance Reform (Announcement [2014] No.25), Chinese customs have expanded the paperless customs clearance to all enterprises at all ports without restrictions on management category. According to statistics, 230,000 enterprises participated in paperless customs clearance in the first quarter of 2014. Standards and Other Technical Requirements Page 74 (Para 3.69) Question 9 We note that China uses four kinds of standards – national, industry/sectoral, local and enterprise to address various needs where relevant. At each of these levels, there are substantial numbers of separate mandatory standards. In this regard, we wish to seek greater clarity on China's current and future efforts to streamline and review the domestic standards framework, and look into replacing local standards with national standards where relevant. Answer China's mandatory national, industrial and local standards are developed and released by competent national, industry and local standardization authorities. To promote the establishment of uniform market, we are actively facilitating integration and optimization of mandatory national, industrial and local standards to reduce the number of the standards. Page 75 (Para 3.75) Question 10 We note that there are general steps in the China's Compulsory Certificates (CCC) certification application process. (a) For step (ii), type-testing by a CNCA-designated testing laboratory is required. Is there a list of such CNCA-designated testing laboratories? Answer Please refer to the Announcement of the Certification and Accreditation Administration of the People's Republic of China on the List and Business Scope of CNCA-designated Testing Agencies and Laboratories for CCC Certification for the list of testing laboratories on the http://www.cnca.gov.cn/tzgg/ggxx/ggxx2013/201306/t20130604_5889.shtml.

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notes that there have been no major changes in the policy instruments that China uses to attain its policy . processing and manufacturing enterprises using ERP is leveraged to cancel .. custom declaration and release formalities subject to Chinese customs provisions or national import tally report
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