WORLD TRADE  
ORGANIZATION  WT/DS339/1 
G/L/770 
G/TRIMS/D/22 G/SCM/D67/1 
3 April 2006 
 
(06-1543) 
 Original:   English 
 
 
 
CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS 
 
Request for Consultations by the European Communities  
 
 
 The following communication, dated 30 March 2006, from the delegation of the European Communities to the delegation of China and to th e Chairman of the Dispute Settlement Body, is 
circulated in accordance with  Article 4.4 of the DSU. 
 
_______________ 
 
  The European Communities hereby requests c onsultations with the People's Republic of 
China (hereinafter "China") pursuant to Article 4 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes  (DSU), Article XXII:1 of the General Agreement on Tariffs and 
Trade 1994  (GATT 1994), Article 8 of the Agreement on Trade-Related Investment Measures  
(TRIMs Agreement) and Articles 4 and 30 of the Agreement on Subsidies and Countervailing 
Measures (SCM Agreement) regarding China's imposition of measures that adversely affect exports 
of automobile parts from the Eur opean Communities to China.   
 
 The measures in question include, but are not limited to, the following: 
 
– Policy on Development on Automotive Industry (Order No. 8 of the National Development 
and Reform Commission, 21 May 2004); 
 
– The People's Republic of China's 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; 
 – The People's Republic of China's Rules for Determining Wheth er Imported Automotive Parts 
and Components Constitute Complete Vehicles (General Administration of Customs Public 
Announcement No. 4), which entered into force on 1 April 2005. 
 For each of the measures referred to above, this re quest also covers any am endments, replacements, 
extensions, implementing measures or other related measures.    
 Under the above measures, imported automobile parts, as defined by the measures, which are 
used in the manufacture of vehicles for sale in China are considered to  fulfil the characteristics of a 
whole vehicle if they are imported in excess of ce rtain thresholds.  This is the case when specific 
combinations of parts of the later assembled vehi cle are imported or when the price of the imported 
parts attain 60% or more of the vehicle.  If th ese thresholds are met, the measures provide that 
imported parts will be subject to charges equal the tariffs for a co mplete vehicle. These charges are 
assessed after the assembly of the parts into complete vehicles.  WT/DS339/1, G/L/770,  
G/TRIMS/D/22, G/SCM/D67/1 Page 2 
 
 
   
 The European Communities considers that th ese measures are inconsistent with China's 
obligations under the GATT 1994, the TRIMs Agreemen t, the SCM Agreement and the Protocol on 
the Accession of the People's Republic of China.  In particular:   
 
– China has acted inconsistently with Article  III:2 of the GATT 1994 by subjecting the products 
of the territory of other Members imported into the territory of China, directly or indirectly, to 
internal taxes or other internal charges of an y kind in excess of those applied, directly or 
indirectly, to like domestic products.  China has al so applied internal taxes or other internal 
charges to imported or domestic products in a manner contrary to the principles set forth in 
paragraph 1 of Article III; 
 – China has acted inconsistently with Article III:4 of the GATT 1994 by imposing specified 
thresholds for imported parts in an assemble d vehicle above which an additional charge 
applies on each imported part included in the vehi cle.  Thereby, China has failed to accord, to 
products of the territory of the European Comm unities imported into the territory of China, 
treatment no less favourable than that accorded to  like products of national origin in respect of 
all laws, regulations and require ments affecting their internal sale, offering for sale, purchase, 
transportation, distribution or use;   
 
– China has acted inconsistently with Ar ticle III:5 of the GATT 1994 by establishing and 
maintaining internal quantitative regulations re lating to the mixture, processing or use of 
products in specified amounts or proportions whic h requires, directly or indirectly, that any 
specified amount or proportion of any product which is the subject of the regulation must be supplied from domestic sources.  Moreover,  China has applied internal quantitative 
regulations in a manner contrary to the princi ples set forth in paragraph 1 of Article III; 
 – China has acted inconsistently with Article 2.1 and Article 2.2 of the TRIMs Agreement in 
conjunction with paragraph 1(a) of the Illust rative List annexed to the TRIMs Agreement by 
applying investment measures related to trad e in goods that are inconsistent with the 
provisions of Article III or Article XI of GATT 1994 and by applyi ng investment measures 
related to trade in goods, compliance with wh ich is necessary to obtain an advantage, and 
which require the purchase or use by an enterpri se of products of domestic origin or from any 
domestic source, whether specified in terms of  particular products, in terms of volume or 
value of products, or in terms of a proportion of volume or value of its local production.  
Further, China has acted inconsistently with Article 2.1 and 2.2 of the TRIMs Agreement in 
conjunction with paragraph 2(a) of the Illustra tive List annexed to the TRIMs Agreement, by 
applying investment measures related to trad e in goods that are inconsistent with the 
provisions of Article III or Article XI of GATT 1994 and by applyi ng investment measures 
related to trade in goods, compliance with wh ich is necessary to obtain an advantage, and 
which restricts the importation by an enterprise of  products used in or related to its local 
production, generally or to an amount related to the volume or value of local production that it 
exports;  
 – China has acted inconsistently with Artic le 3 of the SCM Agreement by granting or 
maintaining subsidies contingent, in law or in fact, whether solely or as one of several other 
conditions, upon export performance and by gr anting or maintaining subsidies contingent, 
whether solely or as one of several other c onditions, upon the use of domestic over imported 
goods.  A list of available evidence in  this connection is annexed.   
 – China has acted inconsistently with its  obligations under the Marrakesh Agreement 
Establishing the World Trade Organization, as set  out in the Protocol on the Accession of the  WT/DS339/1, G/L/770,  
 G/TRIMS/D/22, G/SCM/D67/1  Page 3 
 
 
  People's Republic of China to the WTO, in partic ular Part I paragraph 7.3 of the Protocol of 
Accession of China, and in paragraph 203 of the Working Party Report on the Accession of 
China in conjunction with Part I, paragraph 1. 2 of the Protocol of Accession of China, and 
paragraph 342 of the Worki ng Party Report on the Accession of China by failing, upon 
accession, to comply fully with the TRIMs Agreem ent, without recourse to Article 5 thereof, 
and to eliminate local content requirements and to not enforce the terms of contracts containing such requirements.  Further, China has made the allocation, permission or rights 
for importation and investment conditional upon performance requirements set by national or 
sub-national authorities, or subject to secondary  conditions covering, for example, the use of 
local inputs.   
 – China has nullified or impaired the benefits  accruing to the European Communities under the 
Protocol on the Accession of the People's Re public of China to the WTO, in particular 
paragraph 93 of the Working Party Report on the Accession of China, in conjunction with 
Part I, paragraph 1.2 of the Protocol of Acce ssion of China and paragraph 342 of the Working 
Party Report on the Accession of China, by imposing tariffs exceeding 10% on completely 
knocked-down and semi knocked-down kits for motor vehicles.   
 – China has acted inconsistently with Article  II:1(a) and (b) of the GATT 1994 by failing to 
accord to the commerce of another Member treat ment no less favourable than that provided 
for in the appropriate Part of the Schedule annexed to the GATT 1994.  China has failed to 
exempt products, which are the products of  territories of another Member, on their 
importation into China's territory, from ordinary  customs duties in excess of those set forth 
and provided in China's Schedule.  China has failed to exempt such products from all other 
duties or charges of any kind imposed on or in  connection with the importation in excess of 
those imposed on the date of this Agreement or those directly and mandatorily required to be 
imposed thereafter by legislation in force in the importing territory on that date. 
  The European Communities reserves the right  to address additional measures and claims 
under other provisions of the WTO Agreement regard ing the above matters during the course of the 
consultations.   
 
 The European Communities looks forward to receiving in due course a reply from China to this request.  The European Comm unities is ready to consider with China mutually convenient dates 
to hold consultations in Geneva.  WT/DS339/1, G/L/770,  
G/TRIMS/D/22, G/SCM/D67/1 Page 4 
 
 
  ANNEX
 
  – Policy on Development on Automotive Industry (Order No. 8 of the National Development 
and Reform Commission, 21 May 2004); 
 – The People's Republic of China's 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; 
 
– The People's Republic of China's Rules for Determining Wheth er Imported Automotive Parts 
and Components Constitute Complete Vehicles (General Administration of Customs Public 
Announcement No. 4), which entered into force on 1 April 2005. 
 
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