China's Ministry of Commerce defended its duties on imported auto parts on Friday and expressed "regret" over the World Trade Organization's decision to launch a panel to oversee the issue.

The World Trade Organization (WTO) on Thursday announced the establishment of a panel to examine whether China's tariffs on imported auto parts violate WTO trade rules, following a joint complaint made by the United States, the European Union and Canada.

Ministry spokesman Chong Quan said on Friday that the country's import rules were "in line with the commitment China made on joining the WTO and WTO rules."

He said the rules are aimed at preventing tariff evasion by taking advantage of the gap between tariffs on complete vehicles and auto parts.

China considers car parts as a whole vehicle if they account for 60 per cent or more of the value of a final vehicle, meaning that imports will be charged the same tariff as a complete vehicle.

China's average import duties on whole vehicles have fallen from 80 per cent before it joined the WTO to the current 25 per cent, while duties on auto parts have been cut from 25 per cent to 10 per cent.

In a complaint filed at the WTO at the end of March, the European Union and the United States claimed that China was imposing a discriminatory tariff regime on foreign car parts. Canada joined them several days later.

The two sides held negotiations on this issue, but the three powers requested that the WTO to establish the panel after the talks failed to make any progress.

"These measures discourage auto manufacturers in China from using imported parts in the assembly of new vehicles," US trade negotiator David Shark told the WTO's dispute settlement body, claiming that the practice could not be justified under the global trade body's rules.

But commerce ministry spokesman Chong said China had showed great sincerity in seeking to resolve the issue through negotiations with the three economies.

This is China's first WTO dispute to reach the panel stage. A case brought by the United States against China's duties on semi-conductors was solved through consultations. Such a WTO investigation could last for years before a final judgment is reached.

Several countries, such as Australia, Japan, Mexico and Argentina, have signed up to the auto parts panel as interested third parties.

Overseas automakers have invested heavily in China to set up vehicle parts joint ventures.

China imported vehicles and spare parts worth US$13.6 billion last year.

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