New duties on Chinese e-cars enter into force with no mitigating solution

No negotiated solution was reached between Brussels and Beijing regarding unfairly subsidized electric vehicles imported from China. Definitive countervailing duties entered into force on Wednesday, 30 October, after publication in the EU Official Journal.

In its findings, the European Commission proves that the number of registered imported vehicles from China increased from 3,5% in 2020 to 22,8% in the third quarter of 2024.

Based on the calculation of a subsidy rate, which considers the subsidy amount as a percentage of the company’s total turnover and the exports of the brands concerned to the Union during the investigation period, the EU Commission established that BYD will be subject to an additional 17.0% on the top of the 10% duties that the EU already applied before the investigation to all imports from China. These extra duties soar to 18.8% for Geely and 35.3% for SAIC. Other cooperating companies will be subject to a duty of 20.7%. Following a substantiated request for an individual examination, Tesla will be assigned a duty of 7.8%. All other non-cooperating companies will have a duty of 35.3%.

Definitive EU countervailing duties on imported Chinese electric cars will last five years. Brussels also indicates that “in parallel, the EU and China continue to work to find alternative World Trade Organisation-compatible solutions that would effectively address the problems identified by the investigation”. The Commission also remains open to negotiating price undertakings with individual exporters, as permitted under EU and WTO rules.

Trade Commissioner Valdis Dombrovskis underlined that the EU “remains the world champion of open, fair and rules-based trade.” Once the measures were announced, Dombrovskis said, “The EU is in favor of competition, including in the electric vehicle sector, but this must be underpinned by fairness and a level playing field.”

An EU official revealed that in China, subsidies for electric car production are available along “the entire value chain” at all levels (national, provincial, and local). According to the Commission’s investigation, subsidies take many forms, such as preferential financing for producers, provision of land at below-market prices, and direct transfers.

The Commission also received “many comments” from Chinese and EU interested parties. Still, almost all of them were rejected as often being “factually incorrect, legally wrong or unfounded,” the source further specifies. The EU executive, therefore, confirmed that “subsidized imports from China” of electric vehicles are causing a “threat of substantial injury” to the EU industry, while “other factors have not mitigated this casual link, either individually or collectively.”

The official also explained that discussions have started with the Chinese government on a possible commitment in terms of sales prices. He clarified that an agreed solution with the Chinese government in the form of a price undertaking “can be identified and implemented even after the final imposition of the Duties.”

The provisional duties imposed on imports of electric cars from China on 4 July 2024 will not be levied. In the future, the Commission will monitor the effectiveness of the measures in place to ensure they are not circumvented.

Any cooperating exporting producer subject to the sample’s average duty or a new exporter has the right to request an accelerated review to establish an individual duty rate.

Importers may request a refund if they consider that their exporting producer is not subsidized or if the subsidy margin is lower than the duties paid by the importers. Such a claim must be duly substantiated and supported by the respective evidence.

The formal entry into force was not devoid of critics. The president of the German Automotive Industry Association (VDA), Hildegard Müller, said that imposing EU duties on Chinese electric vehicles is “a setback for global free trade and therefore for prosperity, job preservation and growth in Europe”. Müller said the move increases the risk of a far-reaching trade conflict. “Industry is not naive in dealing with China, but challenges must be solved through dialogue,” she further stated.

The Chinese government announced that it will seek help from the World Trade Organization. A spokesperson said, “China neither agrees nor accepts the regulation and has filed a complaint with the World Trade Organization’s dispute settlement mechanism.”