China Postpones Higher Import Tariffs On Auto Parts

by Mary Swire, Tax-News.com, Hong Kong

07 August 2006

The Chinese government has announced the postponement of higher import tariffs on certain components used in the manufacture of automobiles for two years.

According to a statement posted on the website of the General Administration of Customs, the new tariffs, which were due to come into effect on July 1, 2006, will now go into force in July 2008.

The statement did not explain the government's reasoning for the change, but the proposal to charge higher tariffs on imported auto parts which make up more than 60% of the value of the finished vehicle provoked complaints of discrimination from the United States and the European Union, and the matter was referred to the World Trade Organisation.

Under the proposal, such imports would be subject to the same 28% tariff as that imposed on imports of finished vehicles. Other imported auto parts are subject to tariffs of between 10% and 14%.

China has claimed that the additional tariffs are aimed at curbing tax evasion by some foreign auto makers who allegedly avoid paying customs duties on whole cars by disassembling them before import and then reassembling them after they enter the country.

However, the US argues that the extra taxes discourage automobile manufacturers in China from using imported auto parts in the assembly of vehicles and violate China's WTO accession agreement, which commits China to eliminating all local content requirements and to lowering and binding its tariffs on auto parts.

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