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January 25, 2010 - The World Trade Organization (WTO) agreed to establish a dispute panel to rule on the issue of whether the U.S. is in violation of global trade rules by imposing additional duties on the importation of Chinese tires. The decision was made by WTO's Dispute Settlement Body (DSB) following China's second request for the establishment of the panel. By rule, a second request can only be blocked by unanimous agreement of all attending members. China's first request was blocked at a Dec. 21 meeting. Typically, a panel must issue a ruling within nine months. 

China's request came after President Obama elected to impose a 35 percent duty increase, on top of the normal 4 percent duty, on all imports of passenger vehicle and light truck tires from China for a period of three years. The duty took effect on Sept. 26 and will drop by 5 percent in both the second and third years of the increase. The decision to increase the duty came following a three-fold increase in Chinese tire imports over a four-year period while U.S. production of competing tires shrank by 25 percent over the same period.

China argues that the section of the 1974 Trade Act, under which the increase was issued (Section 421), violates WTO rules by imposing a narrower definition of cause of injury than is set forth by China's accession agreement and that the three-year increase is longer than needed to remedy the situation.