The policy that gave rise to the conflict is China's minimum local content requirement of 60% for cars produced domestically. If the cars don’t meet this level then they receive the same import tariffs a car built overseas would be subjected to.
This is the first WTO ruling against China since it joined the global trade body in 2001, reports the Associated Press. The trade group's ruling now requires the Chinese government to match other international trade rules.
China claimed the rules were designed to prevent tax evasion by companies that import whole cars as spare parts to avoid tariffs on individual components. Opponents argue that the rule violated an earlier agreement made by China to open up its markets.
After a 'reasonable period of time' a new WTO panel will be convened to determine if China is in compliance or if it will face sanctions for failure to abide by the WTO ruling.