On October 4, 2024, the European Commission proposal to impose definitive countervailing duties of up to 35.3% on imports of battery electric vehicles (BEVs) from China was adopted by the Council. The duties are imposed on top of the 10% EU import duty for cars.
An Implementing Regulation setting out the definitive findings and countervailing duties must be published in the Official Journal by 30 October 2024. Definitive duties should enter into force on October 31. 10 EU Member States backed the Commission’s proposal, while 12 abstained and 5 voted against, including Germany and Hungary.[1] The Council can only block the imposition of definitive duties if it achieves a qualified majority of votes against the proposal.
The Commission stated: “In parallel, the EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission’s investigation, monitorable and enforceable.”[2] Chinese producers have been (inconclusively) negotiating with the Commission on price and volumes conditions to exports in the EU.[3] China initiated anti-subsidy and anti-dumping investigations targeting pork, and dairy products. On October 8, China imposed temporary anti-dumping duties on imports of brandy, effective as of October 11. On September 23, the Commission launched the first consultation request challenging the initiation of an anti-dumping investigation at the World Trade Organization. While the consultation concerns China’s investigation into European dairy products, the Commission is concerned by “an emerging pattern of China initiating trade defence measures, based on questionable allegations and insufficient evidence, within a short period of time.”[4] Additionally, China has threatened to reduce its foreign direct investment in electric vehicle (EV) manufacturing within the European Union.
Under its traditional trade defense rules (Basic Regulation (EU) 2016/1037) the EU can impose duties to counteract subsidies that cause or threaten to cause injury to the European industry. After an eight-month investigation, the Commission identified various forms of subsidization to Chinese BEV producers, including preferential financing, grant programs, the provision of goods and services for less than adequate remuneration, and tax exemptions. The Commission found there was an imminent threat of material injury to the Union BEV industry, based on a projected surge of low-priced BEV imports that would likely capture significant market share and impede the heavy and sustained rate of investment required for the Union industry to transition to full BEV production.
While the Commission’s Implementing Regulation has not been published yet, according to press reports the Commission has proposed the following duties to the Council.[5]
- SAIC: 35.3%
- Geely: 18.8%
- BYD: 17.0%
- Tesla was granted an individual rate of 7.8%.
- BEV producers that cooperated in the investigation are subject to a weighted average duty of 20.3%.
Provisional duties ranging from 17.4% to 37.6% took effect on July 5 and will last for a maximum duration of four months.[6] On 20 August, the Commission slightly reduced the duties (from 17.0% to 36.3%) following revisions to margin calculations when it disclosed the draft definitive findings of its investigation to interested parties.[7] The definitive measures will not be imposed retroactively.
It remains to be seen how the Commission’s findings in this trade defense investigation may influence enforcement under the EU’s Foreign Subsidies Regulation (FSR). The two regimes are designed to address different concerns: trade defense covers imported goods, while the FSR targets EU investments and services affected by non-EU subsidies, with Article 44(9) FSR precluding its use where trade defense instruments are available. However, it remains unclear if the same subsidies targeted by the Commission’s trade defense investigation may also be found to give rise to competitive distortions that can be addressed under the FSR.
[1] EU Member States that (1) voted for: Italy, France, Poland, the Netherlands, Estonia, Lithuania, Latvia, Denmark, Bulgaria and Ireland; (2) abstained: Belgium, Cyprus, Spain, Czechia, Greece, Croatia, Luxembourg, Austria, Portugal, Romania, Sweden and Finland; (3) voted against: Germany, Hungary, Malta, Slovakia and Slovenia See: “EU governments take no position on planned Chinese EV duties, paving the way for their imposition”, Mlex (4 October 2024), available at: https://mlexmarketinsight.com/news/insight/eu-governments-take-no-position-on-planned-chinese-ev-duties-paving-the-way-for-their-imposition
[2] Commission proposal to impose tariffs on imports of battery electric vehicles from China obtains necessary support from EU Member States (4 October 2024), available at: https://ec.europa.eu/commission/presscorner/detail/en/statement_24_5041
[3] “Minimum price offers by Chinese EVs get rejected by EU ahead of crunch talks next week”, Mlex (12 September 2024), available at: https://content.mlex.com/#/content/1594910/minimum-price-offers-by-chinese-evs-get-rejected-by-eu-ahead-of-crunch-talks-next-week?referrer=portfolio_openrelatedcontent
[4] European Commission, Press Release, “Commission launches WTO consultations challenging China’s anti-subsidy investigation into EU dairy” (23 September 2024), available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4821
[5] “EU countervailing duties on Chinese EV imports marginally reduced ahead of crunch talks”, Lex (9 September 2024)
[6] Three Chinese producers whose data were specifically analyzed (i.e., “sampled”) received individual duties: BYD: 17.4%,; Geely: 19.9%; SAIC: 37.6%. Other BEV producers that cooperated in the investigation but were not sampled are subject to a weighted average duty of 20.8%. The duty for non-cooperating BEV producers is 37.6%.
[7] BYD: 17.0%,; Geely: 19.3%; SAIC: 36.3%. Other BEV producers that cooperated in the investigation but were not sampled are subject to a weighted average duty of 21.3%. Tesla was granted an individual duty rate of 9.0%, as an exporter from China. The duty for non-cooperating BEV producers is 36.3%. See Commission discloses to interested parties draft definitive findings of anti-subsidy investigation into imports of battery electric vehicles from China (20 August 2024), available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4301