The European Union (EU) on Thursday requested World Trade Organization (WTO) consultations on China 's auto parts tariff rules which the EU claim are not compatible with China's WTO obligations.

Under Chinese regulations the tariffs for "whole vehicles" should be applied to the import of spare parts making up 60 percent or more of the value of a completed vehicle.

To avoid the "whole car" tariff rates a car-maker has to source 40 percent or more of the spare parts by value in China, said the EU in a press release.

The Commission argues that this may contravene China's WTO obligations not to impose "local content" rules.

However, China contends that the measures are designed to avoid circumvention by some foreign car-makers who actually import whole cars as spare parts to avoid the higher tariff rates.

Under the WTO rules the consultations are a procedural step which will allow all concerned to clarify legal issues and seek a solution to the issue.

If the matter cannot be resolved in consultations over a period of 60 days those involved have the option of requesting a WTO panel to rule on the matter.

EU Trade Commissioner, Peter Mandelson said: "Consultations will allow us to clarify the legal issues and find a mutually satisfactory solution. It remains my strong preference and intention to seek an amicable solution to this issue."

The commission noted that it was committed to finding a constructive and amicable answer to the problem.

This is a routine difficulty in the EU's trade relationships with China. The EU has pursued similar 'local content' cases in India, Canada and Indonesia.

It's reported that the United States on Thursday also requested consultation with China on this subject.

The EU has about 20-25 percent of the car production market in China.

(Xinhua News Agency March 31, 2006)