China Resists Western Attack Over Auto Part Imports

by Mary Swire, for LawAndTax-News.com, Hong Kong

06 October 2006

At a meeting of the WTO's Dispute Settlement Body last week, China opposed the first-time requests by the EC, US and Canada for the establishment of panels to examine China's measures on imports of auto parts.

The EC, US and Canada stated that, although China had committed itself in its Accession Protocol to impose a duty of 10% on most automobile parts, it had, however, reneged on this commitment by imposing a duty of 25%.

The complainants claimed that China imposed a charge on imported auto parts that was equal to the higher tariff on completed motor vehicles. This charge was imposed whenever a complete vehicle did not contain an arbitrarily-set minimum quantity or value of Chinese auto parts, thus discouraging auto manufacturers in China from using parts imported from abroad.

The complainants also said that China imposed additional administrative obligations on manufacturers which produced vehicles that did not meet local content requirements. According to the complainants, these measures breached a number of WTO provisions, including Articles II and III of the GATT 1994, Article 2 of the TRIMS Agreement and several provisions of China 's Protocol of Accession. They said that consultations had failed to resolve the dispute leaving them with no option other than to request the establishment of panels. The US requested a single panel to adjudicate on the claims raised by the three Members.

China expressed regret over the decision by the EC, US and Canada to request a panel. China said that, since its accession, it had progressively reduced its tariffs on automobiles and auto parts from 80% and 30%, respectively in 2001 to 25% and 10%.

China said that, contrary to the claims of the complainants, it was convinced that its measures were in conformity with its WTO obligations and was confident that a panel would come to the same conclusion. The objective of the Chinese measures was not to discriminate against imported auto parts, but to prevent tariff evasion and circumvention by auto companies. For the foregoing reasons, China could not agree to the establishment of a panel at the present DSB meeting.

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