WTO Rules Against China in Auto Parts Dispute
On July 18, 2008, the World Trade Organization issued the reports of the dispute settlement panel (DSP) that had examined complaints by the U.S., the European Communities, and Canada regarding China's treatment of imported motor vehicle parts, components, and accessories (auto parts).
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(According to the U.S. Trade Representative, all vehicle manufacturers in China that use imported parts must register with China's Customs Administration and provide specific information about each vehicle they assemble, including a list of the imported and domestic parts to be used, and the value and supplier of each part.
The European Union's EC Delegation to the U.S. further explains that if imported parts for a specific model exceed a certain threshold, an additional charge of 15% is imposed on top of the normal 10% customs duty, adding that the additional charge is easily triggered, either by a specific combination of a few imported parts or if the imported parts represent 60% or more of the price of the complete vehicle.)
DSP Determines China's Auto Parts Treatment Inconsistent with GATT, Etc.
For all three complaints, the DSP determined, among other things, that with respect to imported auto parts in general, China's Policy Order 81, Decree 1252 and Announcement 43 are:
inconsistent with Article III:2 of the General Agreement on Tariffs and Trade 1994 (GATT) in that they subject imported auto parts to an internal charge in excess of that applied to like domestic auto parts;
inconsistent with Article III:4 of the GATT in that they accord imported auto parts less favorable treatment than like domestic auto parts;
not justified under Article XX(d) of the GATT as measures that are necessary to secure compliance with laws or regulations which are not inconsistent with the GATT; and
inconsistent with China's commitment under paragraph 93 of China's Working Party Report on the Accession of China to the WTO, which is an integral part of the WTO Agreement.
DSP Recommends China Bring Its Measures Into Conformity
The DSP recommends that China bring its measures into conformity with its obligations under the GATT and the WTO Agreement.
1Policy on Development of Automotive Industry (Order of the National Development and Reform Commission (No. 8) which entered into force on May 21, 2004.
2Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles (Decree of the People's Republic of China, No. 125), which entered into force on April 1, 2005.
3Rules on Verification of Imported Automobile Parts Characterized as Complete Vehicles (Public Announcement of the Customs General Administration of the People's Republic of China, No. 4 of 2005), which entered into force on April 1, 2005.
(See ITT's Online Archives or 02/26/08 news, 08022699 3, for BP summary of the WTO's preliminary ruling in this dispute.
See ITT's Online Archives or 10/13/06 news, 06101320, for BP summary the USTR seeking comment on the U.S. request for a DSP in this dispute, with links to previous summaries.)
WTO press release, with links to the DSP reports and summaries of each dispute (dated 07/18/08) available at http://www.wto.org/english/news_e/news08_e/339_340_342r_e.htm
European Union Delegation of the EC to the U.S. press release (No. 71/08, dated 07/18/08) available at http://www.eurunion.org/eu/index.php?option=com_content&task=view&id=2048&Itemid=58
USTR press release (dated 07/18/08) available at http://www.ustr.gov/assets/Document_Library/Press_Releases/2008/July/asset_upload_file206_15021.pdf
Senate Finance Committee Chairman Baucus' statement welcoming the report (dated 07/18/08) available at http://finance.senate.gov/press/Bpress/2008press/prb071808a.pdf
BP Note
According to the USTR, this is the first WTO DSP to address a dispute against China.