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China’s appeal against WTO auto parts ruling rejected

China’s appeal in mid-September last year on auto parts dispute was finally rejected on December 15, 2008 by the Geneva WTO court panel, which largely upheld the original ruling in July 2008 on complaints jointly filed by the United States, Canada and European Union, according to reports from Xinhua and other media sources.

The panel announced that China’s tariffs on imported vehicle parts have broken WTO rules. China has been recommended to change the “protectionist” act and bring its duties on auto part imports into conformity with WTO obligations, said the reports.

However, the top court overthrew one aspect of the July ruling, which said China’s treatment of knock-down car kits contravenes the country’s WTO accession commitments.

Earlier the three complainants said that the Chinese tax measure deters automakers from using imported parts to build vehicles in the country, thus in violation of WTO rules. A WTO panel decided in July that the Chinese measure was contrary to WTO rules and China’s WTO commitments. Then China appealed the panel’s conclusion before the WTO Appellate Body in September.

China argued and reiterated its clear stand in the appeal, saying that “China has to consider auto parts as a complete vehicle if they account for 60 percent or more of the value of a final vehicle. This measure aims at preventing tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates.”

China now has a reasonable period of time to bring its measure into compliance with WTO rules. This period of time will be negotiated or determined by arbitration, according to Xinhua.

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