CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS
Document: Request for the Establishment of a Panel by the European Communities
Date: 18 September 2006
Document codes: WT/DS339/8
Complainant: EU
Respondent: China
Third parties: Argentina, Australia, Brazil, Japan, Mexico, Taiwan, Thailand
Dispute stage: Appellate Body
Agreements cited: Art. II:1, III:2, III:4, III:5, XI, XIII:1  GATT 1994Art. 2.1, 2.2  Trade-Related Investment Measures (TRIMs)Art. 3  Subsidies and Countervailing Measures (SCM)Part I, para. 1.2, Part I, para. 7.2, Part I, para. 7.3  Protocol of Accession

CHINA – MEASURES AFFECTING IMPORTS OF AUTOMOBILE PARTS

Request for the Establishment of a Panel by the European Communities

 The following communication, dated 15 Sept ember 2006, from the delegation of the
European Communities to the Chairman of the Dis pute Settlement Body, is circulated pursuant to
Article 6.2 of the DSU.

 The European Communities hereby requests the establishment of a panel pursuant to
Articles 4.7 and 6 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes ("DSU") and Article XXIII of the General Agreement on Tariffs and Trade 1994
("GATT 1994") 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").

 This request concerns the People's Republic of China's (hereinafter "China") imposition of
measures that adversely affect exports of autom obile parts from the European Communities to the
Chinese market. Specifically, this request concerns:

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

– 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;

– China's Rules for Determining Whether Impor ted 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.

 These measures nullify or impair the European Communities benefits in respect of the People
Republic of China's obligations under the GATT 1994, the TRIMs Agreement, the SCM Agreement
and the Protocol on the Accession of the People's Republic of China. In particular:

– China has acted inconsistently with Article II:1(a) and (b) of the GATT 1994 by failing to
accord to the commerce of another Member treat ment no less favourable than that provided
for in the appropriate Part of the Schedule annexed to the GATT 1994. China has failed to
exempt products, which are the products of territories of another Member, on their
importation into China's territory, from ordinary customs duties in excess of those set forth

and provided in China's Schedule. China has failed to exempt such products from all other
duties or charges of any kind imposed on or in connection with the importation in excess of
those imposed on the date of this Agreement or those directly and mandatorily required to be
imposed thereafter by legislation in force in the importing territory on that date.

– China has acted inconsistently with Article III:2 of the GATT 1994 by subjecting the products
of the territory of other Members imported into the territory of China, directly or indirectly, to
internal taxes or other internal charges of an y kind in excess of those applied, directly or
indirectly, to like domestic products. China has al so applied internal taxes or other internal
charges to imported or domestic products in a manner contrary to the principles set forth in
paragraph 1 of Article III;

– China has acted inconsistently with Article III:4 of the GATT 1994 by imposing specified
thresholds for imported parts in an assemble d vehicle above which an additional charge
applies on each imported part included in the ve hicle. In addition, 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. Thereby, China has failed to
accord, to products of the territory of the European Communities imported into the territory of
China, treatment no less favourable than that accord ed to like products of national origin in
respect of all laws, regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use;

– China has acted inconsistently with Ar ticle III:5 of the GATT 1994 by establishing and
maintaining internal quantitative regulations re lating to the mixture, processing or use of
products in specified amounts or proportions whic h requires, directly or indirectly, that any
specified amount or proportion of any product which is the subject of the regulation must be
supplied from domestic sources. Moreover, China has applied internal quantitative
regulations in a manner contrary to the principles set forth in paragraph 1 of Article III;

– China has acted inconsistently with Article 2.1 and Article 2.2 of the TRIMs Agreement in
conjunction with paragraph 1(a) of the Illust rative List annexed to the TRIMs Agreement by
applying investment measures related to trad e in goods that are inconsistent with the
provisions of Article III or Article XI of GATT 1994 and by applyi ng investment measures
related to trade in goods, compliance with wh ich is necessary to obtain an advantage, and
which require the purchase or use by an enterpri se of products of domestic origin or from any
domestic source, whether specified in terms of particular products, in terms of volume or
value of products, or in terms of a proportion of volume or value of its local production.
Further, China has acted inconsistently with Article 2.1 and 2.2 of the TRIMs Agreement in
conjunction with paragraph 2(a) of the Illustra tive List annexed to the TRIMs Agreement, by
applying investment measures related to trad e in goods that are inconsistent with the
provisions of Article III or Article XI of GATT 1994 and by applyi ng investment measures
related to trade in goods, compliance with wh ich is necessary to obtain an advantage, and
which restricts the importation by an enterprise of products used in or related to its local
production, generally or to an amount related to the volume or value of local production that it
exports;

– China has acted inconsistently with Artic le 3 of the SCM Agreement by granting or
maintaining subsidies contingent, in law or in fact, whether solely or as one of several other
conditions, upon export performance and by gr anting or maintaining subsidies contingent,
whether solely or as one of several other c onditions, upon the use of domestic over imported
goods.

– China has acted inconsistently with its obligations under the Marrakesh Agreement
Establishing the World Trade Organization, as set out in the Protocol on the Accession of the
People's Republic of China to the WTO, in partic ular Part I paragraph 7.3 of the Protocol of
Accession of China, and in paragraph 203 of the Working Party Report on the Accession of
China in conjunction with Part I, paragraph 1. 2 of the Protocol of Accession of China, and
paragraph 342 of the Worki ng Party Report on the Accession of China by failing, upon
accession, to comply fully with the TRIMs Agreem ent, without recourse to Article 5 thereof,
and to eliminate local content requirements and to not enforce the terms of contracts
containing such requirements. Further, China has made the allocation, permission or rights
for importation and investment conditional upon performance requirements set by national or
sub-national authorities, or subject to secondary conditions covering, for example, the use of
local inputs.

– China has acted inconsistently with its obligations under the Marrakesh Agreement
Establishing the World Trade Organization, as set out in the Protocol on the Accession of the
People's Republic of China to the WTO, in partic ular Part I paragraph 7.2 of the Protocol of
Accession of China, by introducing measures that are inconsistent with the provisions of
GATT 1994, in particular Article III.

– China has nullified or impaired the benef its accruing to the European Communities under
Article XXIII:1(b) GATT 1994 in conjunction with the Protocol on the Accession of the
People's Republic of China to the WTO, in particular paragraph 93 of the Working Party
Report on the Accession of China, in conjunction wi th Part I, paragraph 1.2 of the Protocol of
Accession of China and paragraph 342 of th e Working Party Report on the Accession of
China, by applying tariffs exceeding 10% on completely knocked-down and semi knocked-
down kits for motor vehicles.

 On 30 March 2006, the European Communities re quested consultations with China with a
view to reaching a mutually satisfactory solution of the matter. The request was circulated in
document WT/DS339/1 dated 3 April 2006. The cons ultations were held on 11 and 12 May 2006 in
Geneva on the above-mentioned and other measures. Th ey have not led to a satisfactory resolution of
the matter.

 Therefore, the European Communities respectfully requests that a panel be established, with
standard terms of reference under Ar ticle 7 paragraph 1 of the DSU, to consider the above complaint
with a view to finding that China's measures nullify or impair the EC's benefits in respect of China's
obligations under Articles II:1(a) and (b), III:2, III:4, III:5 GATT 1994, Articles 2.1 and 2.2 in
conjunction with paragraphs 1(a) and 2(a) of the Il lustrative List of the TRIMs Agreement, Article 3
of the SCM Agreement, Part I, paragraph 7.3 of the Protocol on the Accession of the People's
Republic of China to the WTO and paragraph 20 3 and 93 of the Working Party Report on the
Accession of China in conjunction with Part I, para graph 1.2 of the Protocol of Accession of China,
and paragraph 342 of the Working Party Report on th e Accession of China and Part I, paragraph 7.2
of the Protocol on the Accession of the People's Republic of China to the WTO.

 The European Communities asks that this request be placed on the agenda for the meeting of
the Dispute Settlement Body to be held on 28 September 2006.