CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS
Document: Request for Consultations by Canada
Date: 19 April 2006
Document codes: WT/DS342/1; G/L/774; G/TRIMS/D/24; G/RO/D/5; G/SCM/D70/1
Complainant: Canada
Respondent: China
Third parties: Argentina, Australia, Brazil, Japan, Mexico, Taiwan, Thailand
Dispute stage: Appellate Body
Agreements cited: Part I, para. 1.2, Part I, para. 7.2, Part I, para. 7.3  Protocol of AccessionArt. III:2, III:4, III:5, III:1, II:1, X:1, X:3  GATT 1994Art. 2.1  Trade-Related Investment Measures (TRIMs)Art. 3.1(b), 3.2  Subsidies and Countervailing Measures (SCM)

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,

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 several other conditions, upon export 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 agreements 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 consultations may take place.
WT/DS342/1, G/L/774,
G/TRIMS/D/24, G/RO/D/5,

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.