WASHINGTON – U.S.
Trade Representative Rob Portman announced that the United States requested WTO
dispute settlement consultations with China today due to its unfair treatment of
U.S. auto parts.
"As a mature trading partner, China should be held accountable for its
actions and be required to live up to its responsibilities," Portman said.
"China’s regulations on imported auto parts appear to violate its WTO
obligations. While the United States has raised this issue repeatedly and sought
repeal of these measures, the problem has not yet been resolved," Portman added.
"We hope the filing of our request for consultations will lead to a speedy
resolution of this issue."
The U.S. is joined in this WTO action by the European Union. The United
States and the EU will continue their close coordination in seeking to resolve
this dispute with China.
"As noted in our top-to-bottom review of U.S.-China trade policy, we will not
hesitate to pursue our legal options when negotiations are not productive. As
also indicated in the review, we seek to enhance cooperation with our trading
partners in promoting China’s accountability and reform. Today’s actions are
consistent with these commitments," Portman added.
China’s taxes on imported auto parts discourage automobile manufacturers in
China from using imported auto parts in the assembly of vehicles. China’s WTO
commitments limit its tariffs on imported auto parts to rates that are
significantly below China’s tariffs on finished vehicles. However, China
recently implemented regulations that impose a tax on imported auto parts equal
to the tariff on complete automobiles, if the final assembled vehicle fails to
meet certain local content requirements. Effectively, China’s regulations
discriminate against U.S. and third country auto parts in favor of
Increasing access to China’s auto market was a key issue in China’s accession
to the WTO. In its WTO accession agreement, China expressly committed to
eliminate all local content requirements and to lower and bind its tariffs on
auto parts. China’s new regulations, however, appear to contradict these
China’s auto market has grown rapidly in recent years, becoming the world’s
second largest auto market, behind only the United States.
Under China’s regulations governing the importation of auto parts, all
vehicle manufacturers in China that use imported parts must register with China
customs and provide specific information about each vehicle it assembles,
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 exceed specified thresholds, the regulations assess each of
the imported parts a charge equal to the tariff on complete automobiles
(typically 28%) rather than the tariff applicable to auto parts (typically
The regulations appear designed to encourage manufacturers in China to
increase the amount and value of Chinese parts they use in the assembly process
– at the expense of
parts from the United States and elsewhere. The regulations also provide an
incentive for auto parts producers to relocate manufacturing facilities to
The United States maintains these regulations impose a tax on U.S. auto parts
beyond that allowed by WTO rules, and result in discrimination against U.S. auto
parts. As such, China appears to be acting inconsistently with several WTO
provisions including Articles II and III of the General Agreement on Tariffs and
Trade 1994 and Article 2 of the Agreement on Trade-Related Investment Measures,
as well as specific commitments made by China in its WTO accession
The United States brought the only previous WTO case against China. That
dispute, involving China’s tax rebate on semiconductors, was resolved during the
consultation phase. A second dispute, involving China’s antidumping duties on
kraft linerboard, was resolved on the day the United States was to initiate the
dispute, following notice to China that the dispute would be filed.
Consultations are the first step in a WTO dispute. Under WTO rules, parties
that do not resolve an issue through consultations may refer the matter to a WTO
dispute settlement panel.
USTR issued its top-to-bottom review of U.S.-China trade policy on February
14, 2006 in a report entitled, "U.S. - China Trade Relations: Entering a New
Phase of Greater Accountability and Enforcement." The report can be found at
www.ustr.gov <http://www.ustr.gov/> .