If you still suspect a bug, I can offer a new test site on which you can upload your theme, create a post and taxonomies, and try to recreate the issue.
Would you like me to send you a link to a test site?
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... If you would like to have a translation service to translate all the categories, you would need to create one post, add all untranslated taxonomies to it, and then send the post to translation. If the taxonomy was not yet translated, it will be translated together with the post. ......
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I tried this above recommendation by creating a post here - hidden link and assigned to convert the source language terms to "ES" via our translation service.
Please see the job here (Batch name : WPML|en|06-03) : hidden link
All the terms came back successfully, but none of them are retaining the origin term's parent relationship.
Please kindly check the attached screenshot below. I have tried to explain the problem to my best.
My question is, do I need to manually select the parent of this translated taxonomy term or is there an issue with WPML?
This actually might be the reason for the issue that you are experiencing.
I have created a new test site and can confirm the issue when translating the categories assigned to a post the taxonomy hierarchy is not respected.
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WORKAROUND:
To solve this issue, please go to WPML > Taxonomy Translation, select "Categories" from the dropdown, and go to the tab "Hierarchy synchronization".
Run the dialog and this will fix the issue.
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I will follow up with the Second Tier Support about this issue, as at the moment I am unaware if this behavior is currently expected or not.