Ministry of Commerce Promulgates Auto Trade Policy

September 29, 2005

The Ministry of Commerce (MOFCOM) promulgated a policy (in Chinese) governing trade in autos and automobile-related products on August 10. The policy contains provisions governing both trade within China and the import and export of autos and auto-related products, but no specific provisions that would advance Chinese government efforts to create an export-oriented auto industry. The policy confirms that foreign investors may enter the domestic distribution market for autos; such rights are part of China's WTO accession commitment to open the distribution sector. The policy prohibits imports of used cars, used car parts, and right-side drive autos.

The Ministry of Commerce (MOFCOM) promulgated a policy (in Chinese) governing trade in autos and automobile-related products on August 10. The policy contains provisions governing both trade within China and the import and export of autos and auto-related products, but no specific provisions that would advance Chinese government efforts to create an export-oriented auto industry. The policy confirms that foreign investors may enter the domestic distribution market for autos; such rights are part of China's WTO accession commitment to open the distribution sector. The policy prohibits imports of used cars, used car parts, and right-side drive autos.

A Ministry of Commerce official explained (in English and Chinese) that the government issued the new policy to develop a competitive domestic industry in all aspects of auto distribution. MOFCOM evidently made no changes to the draft version that it released for comment in October 2004.

U.S. industry spokesmen told a major U.S. trade publication (subscription required) that the prohibition of used auto imports would not affect U.S. auto manufacturers.

The National Development and Reform Commission (NDRC), issued a more general Auto Industry Development Policy (in Chinese) in 2004. The policy seeks to create a consolidated domestic auto manufacturing industry. An August 23 Xinhua article reports that the general provisions will form the basis for more detailed measures in the future to advance the policy's goals.

The auto industry regime in place before the new auto trade policy was announced in August has caused some problems for U.S. and other foreign companies. For example, in April, the NDRC issued the Management Measures for Imports of Auto Parts Having the Characteristics of a Complete Automobile (in Chinese), which significantly increased the rate of duty on "knock-down kits" (kits of unassembled auto components requiring only assembly in China) to equal the rate on imported autos that are completely assembled. Some U.S. manufacturers export knock-down kits to China.