The WTO's dispute settlement panel urged China to bring what it termed "inconsistent measures ... into conformity with its obligations."

Beijing has a minimum local content requirement of 60 percent for home produced cars. If this level is exceeded, it then levies the same tariff on the vehicle as it would if it were imported completely built.

China has said the rules aim to prevent tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates.

But the United States, as well as co-complainants Canada and the European Union, argued that the measure violated China's WTO accession agreement, which pledged a progressive opening up of Chinese markets.

The measure puts pressure on foreign auto parts producers to re-locate their manufacturing facilities to China and discourages car manufacturers in China from using foreign auto parts in the assembly of the vehicles, the United States argued.

In February, sources close to the case said that China had lost, but an official judgement was issued only on Friday.

Reacting to the judgement, US Trade Representative Susan Schwab said she was "extremely pleased" with the "very strong report" by the panel.

"The panel report leaves no doubt that China's discriminatory treatment of US auto parts has no place in the WTO system," she said.

Highlighting the importance of the auto industry to the US economy, she said that the administration would "not stand idly by" when US goods and services were not given fair treatment.

European Union trade spokesman Peter Power also said the bloc hoped China would "act swiftly to remove any discrimination and create a level playing field in the automotive sector in China."

In 2007, EU exports of car parts to China exceeded 3.0 billion euros (4.75 billion dollars), or about one percent of the more than 300 billion euros in total trade between the two parties.

related report
US 'extremely pleased' with WTO decision on China auto parts
The United States hailed Friday's World Trade Organization decision on Chinese import tariffs on car parts as a key to helping improve the trade imbalance with China.

"I am extremely pleased with the issuance of a very strong report by the WTO panel," US Trade Representative Susan Schwab said after the decision was released in Geneva.

"Enforcing trade agreements so that problems are solved -- whether through dialogue or, if need be, litigation -- is a critical part of the US trade agenda. The panel report leaves no doubt that China's discriminatory treatment of US auto parts has no place in the WTO system."

The WTO's dispute settlement panel urged China to bring what it termed "inconsistent measures ... into conformity with its obligations."

Beijing has a minimum local content requirement of 60 percent for home-produced cars. If this level is exceeded, it then levies the same tariff on the vehicle as it would if it were imported completely built.

China has said the rules aim to prevent tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates.

But the United States, as well as co-complainants Canada and the European Union, argued that the measure violated China's WTO accession agreement, which pledged a progressive opening up of Chinese markets.

"The auto industry is an important part of the US economy, and we will continue our efforts to ensure that US manufacturers and workers in this and other industries enjoy the benefits of open markets and a level playing field," Schwab said.

"Our pursuit of this case makes clear that we will not stand idly by when China or any other country adopts regulations or industrial policies that tilt the playing field against American goods or services."

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