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Ambassador Kirk Comments Regarding China and Auto Parts

Washington, D.C. - United States Trade Representative Ron Kirk commented today on China's reports to U.S. officials that it is eliminating, effective September 1, the discriminatory charges it has been imposing on imported auto parts. The necessary amendments to China's laws are expected to be published shortly. China's announcement comes after the World Trade Organization (WTO) agreed with the United States that these charges were contrary to WTO rules.

"We are pleased that China has informed us that it is eliminating the additional charges on imported auto parts in response to the WTO ruling. We look forward to carefully reviewing the changes announced by China," Ambassador Kirk said. "Ending these charges will help ensure a level playing field for the high quality auto parts made in America, and is an important example of the importance of enforcing our international trade agreement rights."

BACKGROUND

Increasing access to China's auto market was a key issue in China's accession to the WTO, and China agreed to lower its trade barriers affecting the importation of autos and auto parts. After accession, however, China adopted regulations that imposed an additional charge on imported auto parts whenever the imported parts were incorporated into a final assembled vehicle that failed to meet certain local content requirements. In particular, all vehicle manufacturers in China that used imported parts had to register with China's Customs Administration and provide specific information about each vehicle they assembled, including a list of the imported and domestic parts to be used, and the value and supplier of each part. If the number or value of imported parts in the assembled vehicle exceeded specified thresholds, the Chinese authorities assessed a 25 percent tax on each of the imported parts. These charges unfairly discriminated against the use of imported parts in the assembly process and discouraged automobile manufacturers in China from using imported auto parts in the assembly of vehicles. The charges also put significant pressure on foreign auto parts producers to relocate manufacturing facilities to China.

On March 30, 2006, the United States requested formal WTO consultations with China regarding these measures. The consultations failed to resolve the dispute, and, at the request of the United States, on October 26, 2006, the WTO established a dispute settlement panel. This was the first time that the WTO had established a panel to review the WTO-consistency of a Chinese measure.

On July 18, 2008, the WTO dispute settlement panel found that China's additional charge on imported auto parts unlawfully discriminate against U.S. auto parts under WTO rules. China appealed, and on December 15, 2008 the Appellate Body confirmed the findings of the WTO Panel.