CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS
Document: Request for the Establishment of a Panel by the United States
Date: 18 September 2006
Document codes: WT/DS340/8
Complainant: U.S.
Respondent: China
Third parties: Argentina, Australia, Brazil, Japan, Mexico, Taiwan, Thailand
Dispute stage: Appellate Body
Agreements cited: Part I, para. 7.2  Protocol of AccessionArt. III:2, III:4, III:5, II:1, XI:1  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 the Establishment of a Panel by the United States

 The following communication, dated 15 September 2006, from the delegation of the United
States to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 6.2 of the
DSU.

 On 30 March 2006, the United States requested consultations 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 8 of the Agreement on Trade-Related Investment
Measures ("TRIMs Agreement") (to the extent that Article 8 incorporates Article XXII of the GATT
1994), and Articles 4 and 30 of the Agreement on Subsidies and Countervailing Measures ("SCM
Agreement") (to the extent that Article 30 incorporates Article XXII of the GATT 1994) with respect
to China's treatment of motor vehicle parts, com ponents, and accessories ("auto parts" or "parts")
imported from the United States. The United Stat es held consultations with China on 11-12 May
2006. Unfortunately, those consultations did not resolve the dispute.

 China assesses motor vehicle manufacturers a char ge on all imported auto parts incorporated
into a vehicle for sale in China unless the vehicle meets certain thresholds, i.e., unless it contains a
minimum quantity or value of domestic parts and is not assembled from an imported kit. The charge
is equal to the tariff on complete motor vehicles. (In its Schedule of Concessions and Commitments
annexed to the GATT 1994, China bound its tariffs for auto parts at rates significantly lower than its
tariff bindings for complete vehicles.) No such charge is imposed on domestic auto parts. China also
imposes additional administrative obligations such as record keeping and security requirements on
manufacturers which produce vehicles that do not meet the specified thresholds.

 The United States understands that th e relevant Chinese measures include:

• Order No. 8 of the National Development and Reform Commission (21 May 2004), Policy on
Development of Automotive Industry;

• Decree 125 (1 April 2005), Measures for the Administration of Importation of Automotive
Parts and Components for Complete Vehicles;

• Customs General Administration Public A nnouncement No. 4 (April 1, 2005), Rules for
Determining Whether Imported Automotive Pa rts and Components Constitute Complete
Vehicles; and

• any amendments or extensions to the prev ious three measures, and any related or
implementing measures.

 The United States considers that these measur es are inconsistent with China's obligations
under provisions of the GATT 1994; the TRIM s Agreement; the SCM Agreement; and the Protocol
on the Accession of the People's Republic of China (WT/L/432) ("Accession Protocol") (including
commitments referred to in paragraph 342 of the Working Party Report on the Accession of China
(WT/MIN(01)/3) ("Working Party Report")). In particular, China has acted inconsistently with:

(1) Article III:2 of the GATT 1994, by imposing a charge on imported auto parts but not on
domestic auto parts, and otherwise applying in ternal charges so as to afford protection to
domestic production;

(2) Article III:4 of the GATT 1994, by treati ng imported auto parts less favourably than like
domestic auto parts by imposing additional ad ministrative burdens and additional charges
upon manufacturers that use imported parts in excess of specified thresholds, thereby
affecting the internal sale, offering for sale, pur chase, transportation, distribution, or use of
imported auto parts;

(3) Article 2.1 and paragraphs 1(a) and 2(a) of Annex 1 of the TRIMs Agreement, by requiring
motor vehicle manufacturers in China to purchase or use domestic auto parts in order to
obtain advantages such as the avoidance of administrative burdens and the payment of
additional charges and by imposing restrictions which generally restrict the importation by a
manufacturer of auto parts used in or related to its local production;

(4) Article III:5 of the GATT 1994, by requiring that a specified amount or proportion of the auto
parts assembled into a complete motor vehicle be supplied from domestic sources, and
otherwise applying internal quantitative regulati ons so as to afford protection to domestic
production;

(5) Part I.7.2 of the Accession Protocol, by in troducing measures that cannot be justified under
the provisions of the Marrakesh Agreement Establishing the World Trade Organization
("WTO Agreement"), particularly with respect to Articles III and XI of the GATT 1994;

(6) Part I.7.3 of the Accession Protocol and paragraph 203 of the Working Party Report, by
failing to comply with the TRIMs Agreement a nd by maintaining local content requirements
made effective through the measures;

(7) Articles 3.1(b) and 3.2 of the SCM Agreem ent, by exempting domestic auto parts from
charges imposed by the measures, as well as exempting imported parts from the charges if the
motor vehicle manufacturer uses domestic over imported parts in order to meet the specified
thresholds;

to the extent that the measures impose a charge on or in connection with the importation of auto parts,

(8) Article II:1(a) and (b) of the GATT 1994, by according imported auto parts less favorable
treatment than that provided for in its Sche dule of Concessions and Commitments annexed to
the GATT 1994 and imposing charges in excess of those set forth and provided therein;

(9) paragraph 93 of the Working Party Report, by specifically identifying completely knocked
down (CKD) and semi-knocked down (SKD) kits for motor vehicles and assessing them the
tariff for complete vehicles; and

(10) Article XI:1 of the GATT 1994, by constituti ng prohibitions or restrictions on the importation
of auto parts other than in the form of duties, taxes, or other charges.

In addition, China's measures appear to nullify or impair the benefits accruing to the United States
directly or indirectly under the cited agreements.

 Accordingly, the United States respectfully re quests, pursuant to Article 6 of the DSU and
Article 4 of the SCM Agreement, that the Dispute Settlement Body establish a panel to examine this
matter, with the standard terms of reference as set out in Article 7.1 of the DSU.