The United States on Friday welcomed Beijing's decision to eliminate additional charges on imported auto parts in a landmark case that ended a grace period for China after it joined the World Trade Organization.
We are pleased that China has informed us that it is eliminating the additional charges on imported auto parts in response to the WTO ruling. We look forward to carefully reviewing the changes announced by China, U.S. Trade Representative Ron Kirk said in a statement.
Ending these charges will help ensure a level playing field for the high quality auto parts made in America, and is an important example of the importance of enforcing our international trade agreement rights, Kirk said.
China has overtaken the United States as the world's largest auto market, but U.S. exports of auto parts to China remain relatively small at less than $900 million last year.
That compares with more than $26 billion in U.S. exports to Canada and more than $13 billion to Mexico in 2008.
China's move to comply with the WTO ruling in the auto parts case came weeks before President Barack Obama is required to decide by September 17 whether to restrict imports of Chinese-made tires in a case brought by union workers.
If Obama imposes restrictions, that could set the stage for China to bring its own complaint at the WTO.
PRESSURE FROM DEMOCRATS
The auto parts case dates back to March 2006, when the administration of former President George W. Bush was under pressure from Democrats in Congress to show it was serious about making sure Beijing was living up to the promises it made when it became a member of the WTO in December 2001.
The European Union and Canada joined the United States in bringing the auto parts case. All three requested a dispute settlement panel to hear their complaint in September 2006 after talks with China failed to resolve the spat.
It was the first time the WTO established a panel to review whether China was honoring its commitments. Beijing lost an initial ruling and then an appeal in December 2008.
Countries avoided bringing complaints against China during the first five years of its membership in the WTO to give it time to adjust to world trade rules.
The United States did challenge Chinese tax policies regarding imported semi-conductors in 2004, but China agreed to change its practices without a panel being formed.
As part of its accession, China agreed to lower trade barriers affecting the imports of autos and auto parts.
However, it subsequently adopted regulations that levied an additional charge on imported auto parts when the imported parts were incorporated into a final assembled vehicle that failed to meet certain local content requirements, USTR said.
All vehicle manufacturers in China that used imported parts also had to register with China's Customs Administration and provide specific information about each vehicle they assembled, including a list of the imported and domestic parts to be used, and the value and supplier of each part.
If the number or value of imported parts in the assembled vehicle exceeded specified thresholds, the Chinese authorities assessed a 25 percent tax on each of the imported parts.
The charges discriminated against imported auto parts and put pressure on auto parts producers to move their manufacturing facilities to China, USTR said.
(Reporting by Doug Palmer; Editing by Xavier Briand)