BRUSSELS, Aug 10 (Reuters) - The World Trade Organization
has condemned the way the European Union assesses duties on
unfairly priced imports in a complaint brought by China over
sales of screws and bolts, a person familiar with the case said
on Tuesday.

The ruling, if confirmed, demolishes a key approach by
Brussels in dealing with imports from countries it deems not to
be market economies, such as China, Vietnam and Cuba.

And it marks a victory for China -- the main target of
anti-dumping measures, or duties on imports judged to be sold
for less than they cost at home -- in its first trade dispute
against the European Union since joining the WTO in 2001.

"The panel has found that the EU discriminates against
Chinese exporters compared to exporters from other countries,"
said the person familiar with the case.

"It's a big victory for China as it takes out one of the
pillars of EU anti-dumping activity against China," he said.

He was speaking after studying a confidential interim report
by a panel of WTO experts on the complaint, raised by China in
July last year, over anti-dumping duties on fasteners.

A spokeswoman for the European Commission in Brussels
declined to comment as the ruling is still confidential.

MIXED RULING

The case involves duties of up to 85 percent, targeting
hundreds of Chinese companies selling components widely used for
cars, white goods and machinery worth some 575 million euros
($755 million) a year.

The WTO issued the report to Brussels and Beijing on
Tuesday. Its final reports rarely differ from the interim
versions.

The WTO panel ruled that that EU anti-dumping regulations
break international trading law and are discriminatory.

In particular it rejected the EU's approach to non-market
economies, which effectively applies a single anti-dumping duty
to the whole country rather than for individual firms, unless
they can prove that they are independent of the state.

It means that the EU must now set individual duties on
companies that want them, without unnecessary obstacles, instead
of imposing a blanket duty for the whole country.

But the mixed ruling did not back all of China's claims, for
example dismissing Beijing's argument that Brussels made unfair
comparisons between high-end EU fasteners used in the car and
aviation industries with low-grade Chinese screws and bolts sold
in hardware shops.

The dispute emerged last year as China overtook Germany to
become the world's biggest exporter. Its export prowess has
prompted a series of complaints and trade measures just when
political leaders have been warning of the dangers of
protectionism.

But for the entire history of the WTO since 1995, China has
been by far the biggest target of anti-dumping investigations,
even before it joined the global trade body.

In 2009 China was the target of 77 anti-dumping
investigations out of a total of 201, and in the first four
months of this year it was targeted in 12 out of 39 cases, WTO
figures show.

Brussels argued it had followed all the rules on
anti-dumping when it imposed the duties in January 2009.

The EU duties exempted subsidiaries of two European
companies -- Spain's Celo and Italy's Agrati -- leading China to
argue that they were discriminatory.

Several Chinese producers and European importers have
challenged the duties in EU courts, including Ningbo Yonghong
Fasteners, Gem-Year Industrial, Shanghai Prime Machinery and
Germany's Adolf Wuerth.

Beijing subsequently slapped its own anti-dumping duties of
up to 24.6 percent on European fasteners in December after
Chinese manufacturers complained that EU-made screws were
undercutting them unfairly.

Brussels launched a formal complaint about that move at the
WTO in May.

The final report is expected to be issued to the parties
next month and published in November, after which each side will
have 60 days to appeal.
(Reporting by Juliane von Reppert-Bismarck; Writing by Jonathan
Lynn; Editing by Jon Boyle)