WORLD TRADE  
ORGANIZATION  WT/DS342/1 
G/L/774 
G/TRIMS/D/24 G/RO/D/5 G/SCM/D70/1 
19 April 2006 
 
(06-1796) 
 Original:   English 
 
  
CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS 
 
Request for Consultations by Canada
 
 
 
 The following communication, dated 13 April 2006, from the delegation of Canada to the delegation of China and to the Chairman of the Dis pute Settlement Body, is ci rculated in accordance 
with Article 4.4 of the DSU. 
 
_______________ 
 
  My authorities have asked me to request cons ultations with the Government of the People's 
Republic of 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 (ARO), 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. 
 
 The measures at issue include, but are not limited to, 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 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 request also covers any amendments, replacements, extensions, implementing measures or other related measures.   
 
 Under the above measures, China imposes diffe rent charges on vehicles manufactured in 
China depending on the domestic content of the auto mobile parts used in manufacture.  The measures 
result in additional charges on imported parts that  a domestic manufacturer will incur, where the 
volume or value of imported parts in a final assembled vehicle exceeds specified thresholds.  These additional charges, which are assessed after the vehicle is manufactured, provide domestic 
manufacturers an advantage if they use domestic pa rts.  This would appear to constitute a tax on WT/DS342/1, G/L/774, 
G/TRIMS/D/24, G/RO/D/5, G/SCM/D70/1 
Page 2 
  
  imported parts not otherwise imposed on the like do mestic product, and affords protection to the 
domestic industry.  The measures may also have an impact on foreign investment as they confer an 
advantage to enterprises, conditioned on the use in  vehicle production of domestic instead of imported 
parts. 
  In addition, 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 and 
Commitments.  Further, China's regulations sp ecifically identify completely-knocked down (CKD) 
and semi-knocked down (SKD) kits in order to asse ss them the tariff for completed vehicles, which 
appears to be inconsistent with China's commitme nts made in Working Party Report WT/MIN(01)/3.  
The Chinese measures also serve to protect the dom estic industry by applying more stringent rules to 
imported than to domestic automobile parts.  
 The measures, in particular the Policy Statemen t, appear to provide subsidies contingent in 
law or in fact, whether solely or as one of sever al other conditions, upon e xport performance and upon 
the use of domestic over imported goods.  A statem ent of available evidence with regard to the 
existence and nature of the subsidy is attached.   Canada considers that the measures at issue are inconsistent with the Protocol on the 
Accession of the People's Republic of China (WT/L/432) (including Parts I.1.2 and I.7.3, and 
paragraphs 93 and 203 of the Worki ng Party Report (WT/MIN(01)/3), which is an integral part of the 
Marrakesh Agreement Establishing  the World Grade Organization ) and China's obligations under the 
following provisions:  
– Article II (including paragraph 1)  and Article III (including pa ragraphs 2, 4 and 5) of the 
GATT 1994; 
 – Article 2 of the TRIMs Agreement, in conjunc tion with paragraphs 1(a) and 2(a) of the 
Agreement's Illustrative List; 
 
– Article 2 of the ARO, specifically paragraphs (b), (c) and (d);  and 
 – Article 3 of the SCM Agreement. 
  In addition, Canada considers that China's measures may nullify or impair benefits accruing 
to Canada under the cited agre ements in the manner described in Article XXIII:1(b) of GATT. 
  Canada reserves the right to raise additional claims and legal matters regarding the measures 
at issue during the course of consultations.   I look forward to receiving your reply to this request and to selecting a mutually acceptable 
date on which consulta tions may take place.       WT/DS342/1, G/L/774, 
G/TRIMS/D/24, G/RO/D/5, 
G/SCM/D70/1 
 Page 3 
  
   
Statement of Available Evidence
 
 
 
– 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 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. 
 
__________