WORLD TRADE  
ORGANIZATION  WT/DS342/8 
18 September 2006 
 
 (06-4465) 
 Original:   English 
  
 
CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS 
 
Request for the Establishment of a Panel by Canada
 
  
 The following communication, dated 15 Septem ber 2006, from the delega tion of Canada to 
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU. 
 
_______________ 
  
 On 13 April 2006, the Government of Canada ("Canada") requested c onsultations with the 
Government of China ("China") pursuant to Articles 1 and 4 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes  ("DSU"), Article XXII of the General Agreement 
on Tariffs and Trade 1994  ("GATT 1994"), Article 7 of the Agreement on Rules of Origin , 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"), with respect to 
China's treatment of automobile parts from Canada.    
 
 Consultations were held on 11 and 12 May 2006 with a view to reaching a mutually 
satisfactory solution.  Unfortunately, the c onsultations failed to resolve the dispute. 
 
 As a result, Canada respectfully requests that  a panel be established to examine this matter, 
with standard terms of reference as set out in Artic le 7.1 of the DSU, and pursuant to Articles 4.7 and 
6 of the DSU, Article XXIII of the GATT 1994, Article 8 of the TRIMs Agreement, and Articles 4 and 30 of the SCM Agreement. 
 
 China has adopted measures that impose differe nt charges on automobile parts incorporated 
into vehicles manufactured in China.  The measur es result in charges to a domestic manufacturer 
using imported parts that are equal to the tariff on a complete motor vehicle, where the complete 
motor vehicle does not contain minimum thresholds of domestic parts.  No such charge is imposed on 
domestic parts.  As part of the measures, China also imposes additional administrative requirements 
on importers and manufacturers that  may not meet the required threshold for domestic content.   
 
 The measures covered in this panel request are the following: 
 
• Policy on Development of 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 Co mplete Vehicles (Decree No. 125), which 
entered into force on 1 April 2005; 
 WT/DS342/8 
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  • The People's Republic of China's Rules for Determining Whether Imported 
Automotive Parts and Components C onstitute Complete Vehicles (General 
Administration of Customs Public Announcement No.4), which entered into force on 1 April 2005; and 
 
• Any amendments or extensions to the above, or implementing measures on which 
China may rely in imposing charges or requirements on imported automobile parts 
that differ from treatment of domestic automobile parts. 
  These measures are inconsistent with Chin a's obligations under GATT 1994; the TRIMs 
Agreement; the SCM Agreement; the Marrakesh Agreement Establishing the World Trade 
Organization  ("WTO Agreement"); and the Protocol of Accession of the People's Republic of China 
(WT/L/342) ("Protocol").  In particular, China has acted inconsistently with the following provisions: 
  1. Article III:2 of the GATT 1994 because the measures result in charges on imported 
parts related to their use in manufacturi ng in China, while such charges are not 
imposed on domestically-produced parts.  Ch ina also imposes internal taxes or other 
charges to imported products in a manner contrary to Article III:1. 
  2. Article III:4 of the GATT 1994 because the measures result in less-favourable 
treatment for imported parts than for domes tic parts.  The less-favourable treatment 
includes the effect of additional charges on, more burdensome regulation of, and specified thresholds for the use of imported parts. 
 
 3. Article III:5 (and also Article III:1) of the GATT 1994 because the measures 
constitute an internal quantitative regula tion which requires minimum proportions of 
domestic content. 
 
 4. Article 2.1 of the TRIMs Agreement, in  conjunction with paragraph 1(a) of the 
Agreement's Illustrative List, because the measures constitute measures requiring the 
purchase or use by domestic enterprises of products of domestic origin. 
  5. Part I, paragraph 7.2 of the Protoc ol, through measures inconsistent with the 
provisions of the GATT 1994, in particular Article III. 
  6. Part I, paragraphs 1.2 and 7.3 of the Protocol, and paragraphs 203 and 342 of the 
Working Party Report on the Accession of China (WT/MIN(01)/3) ("Report"), through measures that establish and maintain local content requirements. 
 
 7. Article 3.1(b) and 3.2 of the SCM Ag reement, by excluding domestic automobile 
parts, and those imported parts used be low specified thresholds, from charges 
imposed under the measures. 
  In respect of measures imposed on (or in c onnection with) the importation of automobile 
parts, China has acted inconsistently with the following provisions: 
  8. Article II:1(a) and (b) of the GATT 1994, because the charges imposed on imported 
parts, if they are properly characterized as tariffs, are higher than those set out in China's Schedule of Concessions and Commitmen ts, and therefore contrary to China's 
commitments on joining the WTO.  In addition, China imposes supplementary 
conditions on the importation of  parts that are less favourable than those contained in 
China's negotiated tariff bindings.  WT/DS342/8 
 Page 3 
 
 
   
 9. Articles X:1 and X:3(a) of the GATT 1994, due to the manner in which the measures 
have been published and applied to importers and manufacturers. 
  Further, Canada considers that China's measure s nullify or impair bene fits accruing to Canada 
directly or indirectly under the cited agreements in the manner described in Article XXIII:1(b) of 
GATT 1994.  In particular, China has nullified or impa ired benefits related to  paragraphs 93 and 342 
of the Report, in conjunction with part I, paragr aph 1.2 of the Protocol, through applying tariffs 
exceeding 10% on imports of completely knocke d-down and semi knocked-down kits for motor 
vehicles.  
 
 Canada asks that this request be placed on the agenda for the meeting of the Dispute 
Settlement Body scheduled for 28 September 2006.  
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