DISPUTE SETTLEMENT: DISPUTE DS340

China — Measures Affecting Imports of Automobile Parts

http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds340_e.htm

Key facts  back to top

Short title:	China — Auto Parts
Complainant:	United States
Respondent:	China
Third Parties:	Argentina; Australia; Brazil; Japan; Mexico; Chinese Taipei; Thailand
Request for Consultationsreceived:	30 March 2006
Panel Reportcirculated:	18 July 2008
Appellate Body Reportcirculated:	15 December 2008

  

Summary of the dispute to date  back to top

Summary up-to-date at 30 May 2008 

Panels established by DSB/reports not yet circulated

Complaint by the United States (WT/DS340). 

On 30 March 2006, the European Communities and the United States, and on 13 April 2006, Canada, requested consultations with China regarding China's imposition of measures that adversely affect exports of automobile parts from the European Communities, the United States and Canada to China.  The measures include the following:  (a) Policy on Development of Automotive Industry (Order No. 8 of the National Development and Reform Commission, 21 May 2004);  (b) Measures for the Administration of Importation of Automotive Parts and Components for Complete Vehicles (Decree No. 125), which entered into force on 1 April 2005);  and, (c) Rules for Determining Whether Imported Automotive Parts and Components Constitute Complete Vehicles (General Administration of Customs Public Announcement No. 4, which entered into force on 1 April 2005;  as well as any amendments, replacements, extensions, implementing measures or other measures related.

The European Communities argues that, under the measures identified, imported automobile parts that are used in the manufacture of vehicles for sale in China are subject to charges equal to the tariffs for complete vehicles, if they are imported in excess of certain thresholds.  The European Communities considers that the measures are inconsistent with:

• Articles II:1(a), II:1(b), III:2, III:4, III:5 of the GATT 1994, as well as with the principles c ontained in Article III:1. 
   
• Articles 2.1 and 2.2 of the TRIMs Agreement in conjunction with paragraphs 1(a) and 2(a) of the Illustrative List annexed to the Agreement. 
   
• Article 3 of the SCM Agreement. 
   
• China's obligations under its Access Protocol, in particular Part I, para. 7.3 of the Accession Protocol, and in para. 203 of the Working Party Report on the Accession of China (WP Report) in conjunction with Part I, para. 1.2 of the Accession Protocol, and para. 342 of the WP Report.

The European Communities also considers that China had nullified or impaired the benefits accruing to the European Communities under the Accession Protocol, in particular para. 93 of the WP Report, in conjunction with Part I, para. 1.2 of the Accession Protocol, and para. 342 of the WP Report.

The United States argues that the measures identified appear to penalize manufacturers for using imported auto parts in the manufacture of vehicles for sale in China.  In the United States' opinion, although China bound its tariffs for auto parts at rates significantly lower than its tariff bindings for complete vehicles, China would be assessing a charge on imported auto parts equal to the tariff on complete vehicles, if the imported parts are incorporated in a vehicle that contains imported parts in excess of thresholds.  The United States considers that these measures are inconsistent with the following provisions:

• Article 2 of the TRIMs Agreement.
   
• Articles II (including para. 1) and III (including paras. 2, 4 and 5) of the GATT 1994.
   
• Article 3 (including paras. 1 and 2) of the SCM Agreement.
   
• The Protocol of Accession (WT/L/432) (including Parts I.1.2 and I.7.3, and paras. 93 and 203 of the Working Party Report).

The United States also considers that China had nullified or impaired the benefits accruing to the United States, directly or indirectly, under the cited agreements. 

Canada argues that the measures identified above impose different charges on vehicles manufactured in China depending on the domestic content of the automobile parts used in the manufacture, thus providing domestic manufacturers with an advantage if they use domestic parts.  Canada also argues that the measure may also have an impact on foreign investments as they confer an advantage to enterprises, conditioned on the use in vehicle production of domestic instead of imported parts.  Canada adds that the charges that may be assessed on automobile parts once a vehicle is complete appear to constitute a charge in excess of those set forth in China's schedule of concessions.  China would also be applying the tariff for completed vehicles to completely-knocked down and semi-knocked down kits.  The measures also seem to provide subsidies contingent upon export performance and upon the use of domestic over imported goods.

Canada considers that the measures at issue are inconsistent with: 

• The Protocol of Accession (WT/L/432) (including Parts I.1.2 and I.7.3, and paras. 93 and 203 of the Working Party Report).
   
• Articles II (including para. 1) and III (including paras. 2, 4 and 5) of the GATT 1994.
   
• Article 2 of the TRIMs Agreement.
   
• Article 2 of the Agreement on Rules of Origin, specifically paras. (b), (c) and (d).
   
• Article 3 of the SCM Agreement.

Canada considers that, in addition, China's measures may nullify or impair benefits accruing to Canada under the cited agreements. 

In dispute WT/DS339, Australia, Canada, Japan, Mexico and the United States requested to join the consultations. China informed the DSB that it had accepted the requests of Australia, Canada, Japan, Mexico and the United States to join the consultations.

In dispute WT/DS340, Australia, Canada, the European Communities, Japan and Mexico requested to join the consultations.  China informed the DSB that it had accepted the requests of Australia, Canada, the European Communities, Japan and Mexico to join the consultations.

In dispute WT/DS342, Australia, the European Communities, Japan, Mexico and the United States requested to join the consultations. China informed the DSB that it had accepted the requests of Australia, the European Communities, Japan, Mexico and the United States to join the consultations.

On 15 September 2006, the European Communities, the United States and Canada each requested the establishment of a panel. At its meeting on 28 September 2006, the DSB deferred the establishments of a panel. At its meeting on 26 October 2006, the DSB established a single panel pursuant to Article 9.1 of the DSU. Argentina, Australia, Japan, Mexico and Chinese Taipei reserved their third-party rights.  Subsequently, Brazil and Thailand reserved their third-party rights. On 19 January 2007, the European Communities, the United States and Canada requested the Director-General to determine the composition of the Panel. On 29 January 2007, the Director-General composed the Panel.

On 16 July 2007, the Chairman of the Panel informed the DSB that it would not be able to complete its work within six months due to the complexity of the issues presented in this case. The Panel expects to issue its final report to the parties by January 2008. On 24 January 2008, the Chairman of the Panel informed the DSB that due to the complicated issues presented in this case, the Panel now expected to issue its final report to the parties by the end of March 2008.