E6-6222. WTO Dispute Settlement Proceeding Regarding China-Measures Affecting Imports of Automobile Parts

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice; request for comments.

SUMMARY:

The Office of the United States Trade Representative (USTR) is providing notice that on March 30, 2006, in accordance with the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement), the United States requested consultations regarding China's treatment of imported motor vehicle parts, components, and accessories (“auto parts”). That request may be found at http://www.wto.org contained in a document designated as WT/DS340/1. USTR invites written comments from the public concerning the issues raised in this dispute.

DATES:

Although USTR will accept any comments received during the course of the consultations, comments should be submitted on or before May 8, 2006 to be assured of timely consideration by USTR.

ADDRESSES:

Comments should be submitted (i) electronically, to [e-mail], with China Auto Parts (DS340) in the subject line, or (ii) by fax, to Sandy McKinzy at [phone], with a confirmation copy sent electronically to the electronic mail address above, in accordance with the requirements for submission set out below.

FOR FURTHER INFORMATION CONTACT:

Jim Kelleher, Associate General Counsel, Office of the United States Trade Representative, 600 17th Street, NW., Washington, DC 20508, [phone].

SUPPLEMENTARY INFORMATION:

Section 127(b) of the Uruguay Round Agreements Act (URAA) (19 U.S.C. 3537(b)(1)) requires that notice and opportunity for comment be provided after the United States submits or receives a request for the establishment of a WTO dispute settlement panel. In an effort to provide additional opportunity for comment, USTR is providing notice that consultations have been requested pursuant to the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). If such consultations should fail to resolve the matter and a dispute settlement panel is established pursuant to the DSU, such panel, which would hold its meetings in Geneva, Switzerland, would be expected to issue a report on its findings and recommendations within nine months after it is established.

Major Issues Raised by the United States

On March 30, 2006, the United States requested consultations regarding China's treatment of imported auto parts. The measures through which China has provided such treatment include:

• Order No. 8 of the National Development and Reform Commission (May 21, 2004), Policy on Development of Automotive Industry;
• Decree 125 (April 1, 2005), Measures for the Administration of Importation of Automotive Parts and Components for Complete Vehicles;
• Customs General Administration Public Announcement No. 4 (April 1, 2005), Rules for Determining Whether Imported Automotive Parts and Components Constitute CBU Vehicles; and
• Any amendments, related measures, or implementing measures.

China's regulations appear to penalize manufacturers for using imported auto parts in the manufacture of vehicles for sale in China. Although China bound its tariffs for auto parts at rates significantly lower than its tariff bindings for complete vehicles, China appears to assess a charge on imported auto parts equal to the tariff on complete vehicles, if the imported parts are incorporated in a vehicle that contains imported parts in excess of specified thresholds. To the extent that the charge is applied when a vehicle is manufactured within China, it would appear to constitute a tax on imported auto parts not imposed on like domestic auto parts. The charge also appears to be applied in a manner so as to afford protection to domestic products.

To the extent that the charge is imposed upon the importation of the auto parts, it appears to constitute a charge in excess of those set forth in China's Schedule of Concessions and Commitments. Further, to the extent China may be viewed as imposing a lesser tariff on imported auto parts if the final assembled vehicle contains specified amounts of local content, it would be forgoing revenue otherwise due, and China would appear to be providing a subsidy contingent upon the use of domestic rather than imported goods. Finally, China's regulations specifically identify completely knocked down (CKD) and semi-knocked down (SKD) kits and appear to assess them the tariff for complete vehicles.

USTR believes these measures are inconsistent with China's obligations under Article 2 of the Agreement on Trade-Related Investment Measures, Articles II and III of the General Agreement on Tariffs and Trade 1994, Article 3 of the Agreement on Subsidies and Countervailing Measures, and Parts I.1.2 and I.1.7 of the Protocol on the Accession of the People's Republic of China, including paragraphs 93 and 203 of the Working Party Report.

Public Comment: Requirements for Submissions

Interested persons are invited to submit written comments concerning the issues raised in the dispute. Comments should be submitted (i) electronically, to [e-mail], with “China Auto Parts (DS340)” in the subject line, or (ii) by fax, to Sandy McKinzy at [phone], with a confirmation copy sent electronically to the electronic mail address above.

USTR encourages the submission of documents in Adobe PDF format as attachments to an electronic mail. Interested persons who make submissions by electronic mail should not provide separate cover letters; information that might appear in a cover letter should be included in the submission itself. Similarly, to the extent possible, any attachments to the submission should be included in the same file as the submission itself, and not as separate files.

Comments must be in English. A person requesting that information contained in a comment submitted by that person be treated as confidential business information must certify that such information is business confidential and would not customarily be released to the public by the commenter. Confidential business information must be clearly designated as such and “BUSINESS CONFIDENTIAL” must be marked at the top and bottom of the cover page and each succeeding page. Persons who submit confidential business information are encouraged to also provide a non-confidential summary of the information.

Information or advice contained in a comment submitted, other than business confidential information, may be determined by USTR to be confidential in accordance with section 135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information or advice may qualify as such, the submitter—

(1) Must clearly so designate the information or advice;

(2) Must clearly mark the material as “SUBMITTED IN CONFIDENCE” at the top and bottom of the cover page and each succeeding page; and

(3) Is encouraged to provide a non-confidential summary of the information or advice.

Pursuant to section 127(e) of the URAA (19 U.S.C. 3537(e)), USTR will maintain a file on this dispute settlement proceeding, accessible to the public, in the USTR Reading Room, which is located at 1724 F Street, NW., Washington, DC 20508. The public file will include non-confidential comments received by USTR from the public with respect to the dispute; if a dispute settlement panel is convened or in the event of an appeal from such a panel, the U.S. submissions, the submissions, or non-confidential summaries of submissions, received from other participants in the dispute; the report of the panel and, if applicable, the report of the Appellate Body. The USTR Reading Room is open to the public, by appointment only, from 10 a.m. to noon and 1 p.m. to 4 p.m., Monday through Friday. An appointment to review the public file (Docket WTO/DS-340, China Auto Parts Dispute) may be made by calling the USTR Reading Room at [phone].

Daniel Brinza,

Assistant United States Trade Representative for Monitoring and Enforcement.