The World Trade Organization on Tuesday established a panel of experts to investigate a complaint by the United States over Chinese duties on auto imports.
In the dispute, one of many involving the world's two biggest economies, the US described China's actions as having "profound procedural and substantive deficiencies," a source close to the organisation said.
The duties were also in breach of international trade rules, the US delegation said.
China responded by saying that it regretted the US request for the WTO dispute-settlement panel since Beijing had followed the organisation's guidelines and had hoped to solve the matter bilaterally.
The vehicles at issue were "dumped on the Chinese market and were subsidised by the US, causing injury to the domestic industry of China," a Chinese statement said.
In December 2011, China announced it would impose anti-dumping duties on US-imported vehicles with engines of 2.5 litres or larger, which it put at the time at around 50,000 vehicles a year.
The latest dispute dates back to July when the US asked for WTO intervention after calling China's actions "unjust."
According to Washington, the Chinese duties affected more than 80 percent of US auto exports to China.
US Trade Representative Ron Kirk welcomed the WTO action.
"We will not stand idly by while China misuses trade remedy procedures and puts American jobs at risk," Kirk said in a statement.
"As we have demonstrated in numerous cases, we are serious about holding China accountable to its WTO commitments and ensuring that there is a level playing field for American workers and businesses."
In another ongoing dispute, the US has also accused China of providing at least $1 billion (767 million euros) in illegal subsidies to Chinese auto and auto parts exporters over 2009-2011, helping them beat US manufacturers in the $350 billion US market.
Washington now has 10 cases against China at the WTO, most of them lodged in the past two years, part of an effort by President Barack Obama's administration to use trade rules to beat down Beijing's huge bilateral trade surplus with the US.
In the first seven months of this year China sold $174 billion more in goods to the US than it bought from the US -- on pace to slightly surpass the 2011 full-year bilateral trade gap of $295 billion.
Answering the US complaint with one of its own, China approached the WTO in September and said Washington had unfairly applied anti-dumping and countervailing duties to two dozen Chinese products.
The newest China complaint challenged US duties on paper, steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers.