Anti-subsidy Investigation: EU Examines Possible Countervailing Duties for Chinese Electric Vehicles

In recent years, imports and the share of electric vehicles from Chinese manufacturers have been increasing in the EU. In the Commission's view, there is evidence that Chinese car manufacturers benefit from subsidies from the Chinese government and that this has a negative impact on European economic operators, i.e. leads to a distortion of competition. The European Union had therefore already initiated an anti-subsidy investigation in October 2023 concerning imports of new battery electric vehicles originating in the People's Republic of China on the basis of Regulation (EU) 2016/1037 on protection against subsidized imports from countries not members of the European Union (see Notice of 4 October 2023).

The investigation is reportedly due to be completed this month and any compensatory measures announced. Since 6 March 2024, all imports of Chinese electric vehicles of a certain CN code have been subject to customs registration. Customs registration ends on 6 December 2024. If the Commission concludes that countervailing duties are necessary, there is a threat of retroactive collection of duties for all imported goods since the beginning of March.

At a glance:

The procedure

• As part of the anti-subsidy investigation launched in October 2023, the EU is conducting a survey (by means of random sampling) of both Chinese car manufacturers on the existence of countervailable subsidies and car manufacturers in the EU on any distortive effects on competition.
• Since the Commission has evidence that there are distortive subsidies from the Chinese government, all imports of electric vehicles of CN code 87038010 originating in China have been subject to customs registration for a period of nine months since 6 March 2024 (see Implementing Regulation (EU) 2024/785 on customs registration of imports of new battery electric vehicles for passenger transport originating in the People's Republic of China).
• If, at the end of the investigation, the Commission concludes that countervailing measures are necessary, countervailing duties may be imposed, i.e. the duty rate currently applicable to imports of the goods concerned of Chinese origin may be increased.
• It should be noted that the countervailing duty may apply retroactively to all imports registered for customs purposes (imports from 6 March 2024).
• The Commission can also extend the measures (in the first step, ordering customs registration and then introducing countervailing measures) in accordance with Art. 23 of Regulation (EU) 2016/1037 to goods of other CN codes if there are indications of circumvention constellations.
• The possibility of converting the supply and production chains should therefore be examined in detail.
  
  

Outlook

Even if there is (so far) no consensus within the EU on the necessity and appropriateness of countervailing duties, it can be assumed that the EU will levy a countervailing duty on Chinese electric vehicles in the future. Observers believe, for example, that an increase in the current duty rate from 10 to 15 up to 30 percent is realistic.

Headwinds are coming from the German Association of the Automotive Industry (Verband der Automobilindustrie, VDA): "Countervailing duties for e-cars imported from China are not suitable for strengthening the competitiveness of the European automotive industry," explained a VDA spokesperson.

Not only Chinese car manufacturers, but also those with production facilities in China have to fear repercussions. Affected car manufacturers should keep an eye on developments and take any necessary measures.

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