CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS
Document: Request for Consultations by the United States
Date: 3 April 2006
Document codes: WT/DS340/1; G/L/771; G/TRIMS/D/23; G/SCM/D68/1
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 Consultations by the United States

 The following communication, dated 30 Marc h 2006, from the delegation of the United States
to the delegation of China and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

 My authorities have instructed me to request 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 , 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, components, and accessories ("auto parts") imported from the
United States.

 China's regulations governing the importation of auto parts appear to penalize manufacturers
for using imported auto parts in the manufacture of vehicles for sale in China. Although China bound
its tariffs for auto parts at rates significantly lowe r than its tariff bindings for complete vehicles, we
understand that China assesses a charge on imported auto parts equal to the tariff on complete
vehicles, if the imported parts are incorporated in a vehicle that contains imported parts in excess of
specified thresholds. To the extent that the charge is applied when a vehicle is manufactured within
China, it would appear to constitute a tax on impor ted auto parts not imposed on like domestic auto
parts. The tax also appears to be applied in a manner so as to afford protection to domestic products.

 To the extent that the charge is imposed upon the importation of the auto parts, it appears to
constitute a charge in excess of those set forth in China's Schedule of Concessions and Commitments.
Further, to the extent China may be viewed as imposing a lesser tariff on imported auto parts if the
final assembled vehicle contains specified amounts of local content, it would be forgoing revenue
otherwise due, and China would appear to be providing a subsidy contingent upon the use of domestic
rather than imported goods. A statement of available evidence with regard to the existence and nature
of the subsidy is attached.

 Further, China's regulations specifically identify completely knocked down (CKD) and
semi-knocked down (SKD) kits and appear to assess them the tariff for complete vehicles.
WT/DS340/1, G/L/771,
G/TRIMS/D/23, G/SCM/D68/1

 The measures through which China h as provided such treatment 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 (1 April 2005), Rules for
Determining Whether Imported Automotive Parts and Components Constitute CBU Vehicles;

as well as any amendments, related measures, or implementing measures.

 These measures appear to be inconsis tent with the following provisions:

• Article 2 of the TRIMs Agreement;

• Articles II (including paragraph 1) and III (inc luding paragraphs 2, 4, and 5) of the
GATT 1994;

• Article 3 (including paragraphs 1 and 2) of the SCM Agreement; and

• 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 Working Party Report
(WT/MIN(01)/3)), which is an integral part of the Marrakesh Agreement Establishing the
World Trade Organization.

China's measures also appear to nullify or impa ir the benefits accruing to the United States
directly or indirectly under the cited agreements.

 We look forward to receiving your reply to th e present request and to fixing a mutually
convenient date for consultations.
WT/DS340/1, G/L/771,
 G/TRIMS/D/23, G/SCM/D68/1

Statement of Available Evidence

• 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 (1 April 2005), Rules for
Determining Whether Imported Automotive Parts and Components Constitute CBU Vehicles.