Recruiting in China

US joined by EU and Canada on WTO dispute settlement action

WASHINGTON, DC – 09./16/06 – The US has joined with Canada and the European Union to request that the World Trade Organization (WTO) establish a dispute settlement panel regarding China’s overall treatment of US-made auto parts.

According to the Office of the US Trade Representative, Beijing is imposing charges that “unfairly discriminate” against imported auto parts and discourage automobile manufacturers in China from using imported auto parts in the assembly of vehicles.

Under China’s current regulations governing the importation of auto parts, all vehicle manufacturers in China that use imported parts must register with China’s Customs Administration 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 rate of around 25% on complete automobiles, rather than the 10% tariff applicable to auto parts.

The regulations encourage auto manufacturers in China to use Chinese parts in the assembly process – at the expense of parts from the US and elsewhere.

The regulations also provide an incentive for auto parts producers to relocate manufacturing facilities to China.

China “appears to be acting inconsistently with several WTO provisions including Article 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 agreement,” the statement said.

The US originally initiated the case on March 30, when it requested formal WTO consultations. The US, Canada, and the EU held joint consultations with China on the issue in Geneva in May.

Australia, Japan, and Mexico, which also export auto parts to China, participated in the consultations as third parties.

"While we remain open to settling this dispute, China’s current stance leaves us no choice but to proceed with our WTO case,” the statement said.

The US, it added, “is committed to providing a level playing field for US exporters to China and, as we have made clear, we will not hesitate to pursue dispute settlement if necessary."

The US exported $681 million in auto parts to China in 2005, an increase of 6.5% over exports in 2004.

Over this same period, the market for automotive components in China increased by 16.8%, and the number of passenger vehicles sold in China increased by 27%.

US exports of auto parts to China accounted for 1.4% of total US auto parts exports in 2005, representing approximately 10% of China’s auto parts imports.