The Appellate Body of the World Trade Organization has published a report on the settlement of the automotive component disputes between China and the three parties of the United States, the European Union, and Canada.
The report supports the WTO expert team's judgment in July and states that China violates the WTO rulings with its existing auto component import management rule. However, the report denies the WTO expert team's claim that China infringes its commitment to the WTO by levying tax on whole-set components and parts.
According to WTO procedures, the settlement report is subject to approval by the WTO Dispute Settlement Body before it takes effect within 30 days. Then China must amend the rule concerned within a given period to be set by the WTO or the parties involved after the report takes effect.
China's dispute with the United States, EU and Canada over auto components has lasted for more than two years. Failing to reach an agreement in October 2006, the parties handed the case over to the WTO Dispute Settlement Body for a settlement. In July, the WTO's expert team released a settlement report, but China did not accept the report and then made an appeal to the Appellate Body of WTO in September.
Officials from the Chinese Ministry of Commerce say that the reason that China drafted the auto component import management rule was to prevent individuals illegally evading supervision by taking advantage of the tax differences between components and complete vehicles.