Brussels green light

Cars, EU duties triggered against Chinese electric car imports

EU decision after discussions with Beijing authorities failed to resolve the issue of unfair state subsidies

4 July 2024

3' min read

From Friday, 5 July, the European import duties on Chinese electric cars will be triggered. This was decided by the EU Commission after discussions with the Beijing authorities failed to solve the problem of unfair state subsidies that "are threatening EU electric car manufacturers". Individual duties will apply to three 'sample' manufacturers: Byd to the extent of 17.4%; Geely to the extent of 19.9%; Saic to the extent of 37.6%. Other producers in China, who cooperated with the European investigation but are not part of the selected samples will be subject to an average duty of 20.8%, while those who did not cooperate with Brussels the average duty will be 37.6%.

European duties on Chinese electric car imports are triggered

These are provisional duties decided nine months after the start of an anti-subsidy investigation initiated by an autonomous decision of the European Commission (without appeal). Provisional countervailing duties are secured by a guarantee (in the form decided by the customs of each Member State) and can only be levied in certain circumstances when the decision to impose definitive duties has been taken.

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Brussels concluded that unfair Chinese subsidies affect European producers. Although there have been 'exchanges of views' between Brussels and Beijing in recent weeks, the consultations have not led to a settlement. The Commission is keen to point out that 'contacts are continuing at the technical level with a view to reaching a World Trade Organisation-compatible solution that adequately addresses the concerns raised by the European Union', but stresses that 'any outcome of the negotiations must be effective in addressing the injurious forms of subsidy identified'. This is a polite way of saying that there is no deal in sight.

Compared to the duty rates disclosed in advance less than a month ago, the provisional duties were decreased slightly on the basis of comments on the accuracy of the calculations submitted by interested parties.

Provisional duties are secured by a guarantee

The provisional duties in force from Friday 5 July will last for a maximum of four months. Within that time, Brussels explains, a decision on definitive duties will have to be taken, through a vote of the EU Member States Once adopted, this decision would make the duties definitive for a period of five years. It is well known that there are governments concerned about the fallout from the EU decision for fear of a trade war on electric cars that could be to the detriment of interests, especially German interests, in car production in China and eventually also in relations with a country, China, on whose production of raw materials needed to make electric batteries the EU is substantially dependent.

After the ordinary trade defence procedure, the Member States will now vote on the provisional measures, by written procedure and by simple majority, within 14 days after publication of the provisional measures in the Official Journal. This vote will follow the so-called advisory procedure, according to 'comitology' rules (no legally binding effect). Interested parties now also have the opportunity to request hearings with the Commission services within 5 days of the entry into force of the provisional measures and to provide comments within 15 days of the entry into force. Thereafter, after taking into account the comments of interested parties, the Commission will publish its proposal for definitive measures, if any, and allow interested parties an appropriate time (10 days) to comment.

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Final decision of the Commission will follow

The Commission will then present the final decision to the Member States, which will vote according to the examination procedure under the comitology rules (Commission proposal adopted unless there is a qualified majority against). This vote will have binding effect. Any measures will have a duration of 5 years, extendable upon reasoned request and subsequent review.

The reference to this tortuous procedure is not irrelevant since, precisely, European governments are divided in their assessment of the trade risks that the introduction of definitive duties might entail.

Brussels goes on to indicate that following a substantiated request, a producer in China, namely Tesla, may have an individually calculated duty rate allocated to it at the definitive stage. The Commission adds that "any other company producing in China not selected in the final sample and wishing to have its particular situation investigated may request an accelerated review, in line with the basic anti-subsidy Regulation, immediately after the imposition of definitive measures. The time limit for concluding such a review is 9 months after its request'. This is also a track to follow for European producers in China.