China breached the rules of international commerce by slapping anti-dumping duties on x-ray scanners imported from the European Union, the World Trade Organisation ruled Tuesday.
The WTO's dispute settlement body said that Beijing had hampered EU manufacturers' access to its market and should fall into line.
The WTO aims to ensure a level playing field in commerce among the 158 nations which make up its membership.
"Todays WTO ruling clearly confirms that countries using trade defence measures have to play by the rules," the EU's trade commissioner, Karel De Gucht, said in a statement.
"I will not accept tit-for-tat retaliation against European companies through the misuse of trade defence instruments. The panel report is very clear, so I expect China to remove the measures immediately."
Countries are allowed to impose special import duties on goods that fellow WTO members dump on their market at below cost, but must be able to show that the goods harm domestic producers.
The EU turned to the global body in 2011, saying China had failed to show how European-made x-ray security scanners were being dumped.
Under WTO rules, members who fail to fall into line can face retaliatory measures from their wronged trade partners.
China has 60 days to lodge an appeal against the ruling.
Explore further: EU joins US, Japan in 'rare earth' trade case against China