EU Approves Tariffs on Chinese Electric Vehicles Following Investigation
The European Union has officially decided to impose customs duties on Chinese-made electric vehicles (EVs) following an investigation that led to divisions within the bloc and prompted retaliatory actions from Beijing. The European Commission has set customs duties ranging from 7.8% for Tesla to up to 35.3% for SAIC and other manufacturers who did not cooperate with the EU's anti-subsidy investigation. These duties will be applied in addition to the standard 10% automobile import tariff in the EU.
The EU regulation implementing the customs duties is expected to be published today or early Wednesday, with the final or "definitive" customs duties anticipated to take effect the following day and remain in place for five years. The Commission also decided not to collect the temporary duties that have been in place since July. Companies had the option to meet these duties with a bank guarantee.
The decision to implement these customs duties was made following a vote on October 4, where 10 of the EU's 27 member states voted in favor, 5 against, and 12 abstained. Despite the imposition of customs duties, the Commission remains open to negotiating an alternative solution with China. Both parties have come to an agreement in the ninth round of technical negotiations, though the EU indicated significant differences persist.
After previously rejecting offers made by Chinese companies, the Commission has considered revisiting price commitments that generally include minimum import prices and volume restrictions. The EU has traditionally applied such price agreements to homogeneous commodities rather than complex products like vehicles, stating that a single minimum price would not sufficiently counteract the damage caused by subsidies.
In what appears to be a retaliatory move, China has initiated anti-dumping investigations into EU pork and brandy, as well as an anti-subsidy investigation into EU dairy products. Although no measures have been taken yet, China has also discussed increasing import tariffs on large gasoline vehicles, which would predominantly affect German car manufacturers. In 2023, exports of German vehicles with engines of 2.5 liters or larger to China amounted to $1.2 billion.
After the investigation, companies outside the sample group consisting of BYD, Geely, and SAIC that request their individual tax rates can seek "accelerated reviews" immediately after definitive measures are imposed. This review process should not exceed nine months. Additionally, the Commission may conduct a "mid-term review" one year after measures are imposed to determine whether they are still necessary or sufficient to counteract subsidies.
The Commission is also monitoring for tax evasion through the export of parts for assembly elsewhere, defining avoidance cases where 60% or more of the value of the parts comes from the taxed country, and the added value in assembly does not exceed 25%.
Companies affected by the customs duties have the right to appeal the measures at the European Court of Justice. China has already lodged an appeal with the World Trade Organization. The resolution of both legal routes could take more than a year. The Commission has expressed confidence that its investigation and the resulting measures comply with World Trade Organization rules.