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US And EU Take China to Task Over Auto Part Tariffs, by Leroy Baker, Tax-News.com, New York 03 April 2006
The United States and the European Union have accused China of breaching World Trade Organisation rules by charging unfair taxes on the import of auto components.
US Trade Representative Rob Portman announced last week that the United States has requested WTO dispute settlement consultations with China due to its unfair treatment of US auto parts.
The US is joined in the WTO action by the European Union, and both say that they intend to continue "close coordination" in seeking to resolve the dispute.
According to the complaint, 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, (approximately 28%) if the final assembled vehicle fails to meet certain local content requirements.
China‘s tariff applicable to the importation of just auto parts typically ranges from 10% to 15%.
"China’s regulations on imported auto parts appear to violate its WTO obligations," argued Portman.
"As a mature trading partner, China should be held accountable for its actions and be required to live up to its responsibilities. While the United States has raised this issue repeatedly and sought repeal of these measures, the problem has not yet been resolved," he added.
China’s auto market has grown rapidly in recent years, becoming the world’s second largest auto market, behind only the United States.
The US 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 US 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.
The latest dispute has arisen shortly before an upcoming meeting of the US-China Joint Commission on Commerce and Trade planned in April and an impending visit to Washington DC by the Chinese President Hu Jintao.