WTO upholds ruling on Chinese auto parts

The top court of the World Trade Organization (WTO) confirmed on Monday that a Chinese measure on auto parts imports has violated WTO rules.

In a report, the WTO Appellate Body largely upheld a panel ruling in July, which backed complaints made by the United States, the European Union and Canada.

But it overthrew one aspect of the July ruling, which said China's treatment of knock-down car kits contravenes the country's WTO accession commitments.

China considers auto parts as a complete vehicle if they account for 60 percent or more of the value of a final vehicle, and charges a 15 percent higher tariff on them.

The measure aims at preventing tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates.

However, the three complainants argued that the Chinese tax measure deters automakers from using imported parts to build cars 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. China appealed the panel's conclusion before the WTO Appellate Body in September.

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.