What’s next for the EU investigation into Chinese electric vehicles?

By Philip Blenkinsop

BRUSSELS (Reuters) – EU regulators will impose provisional tariffs on Chinese-made electric vehicles (EVs) imported into the European Union from Friday, with no retroactive effect, risking retaliation from Beijing.

The European Commission, which oversees EU trade policy, announced tariffs of between 17.4 and 37.6 percent. These are almost the same tariffs as in June. The Commission made adjustments after companies discovered minor calculation errors in the original announcement.

These duties are in addition to the EU standard tariffs of 10% for car imports.

WHAT ARE PROVISIONAL MEASURES?

Provisional duties may be imposed for a maximum period of nine months after the start of an EU anti-subsidy investigation if the Commission concludes that this is necessary to prevent injury to the EU industry.

They can be applied for up to four months, after which the Commission will decide whether to impose definitive duties. In the EV case, the deadline for this is 2 November.

Provisional duties are only imposed if definitive duties are imposed at the end of the investigation. If the definitive duties are lower or not imposed, the provisional duties are adjusted downwards accordingly. Until then, customs authorities usually only require importers to provide a bank guarantee.

WHAT HAPPENS NEXT?

The European Commission has held technical discussions with Chinese representatives and stated that any negotiation outcome must effectively address the damaging subsidies.

Following the announcement of the provisional duties in the EU Official Journal, which details the ongoing investigation and its findings, interested parties such as China and electric vehicle manufacturers have until July 18 to comment. They can also request a hearing.

The Commission has already visited more than 100 car manufacturers’ sites in China and Europe and has completed most of its investigation.

The final report generally reads like a confirmation of the preliminary findings, possibly with adjustments as a result of the comments received.

The final tariffs are often somewhat lower than the provisional rates, suggesting acceptance of some of these arguments.

The story goes on

A new element will be Tesla’s demand that the Commission calculate a separate tariff rate for this.

The largest electric car exporter from China to Europe is seeking a lower tax rate than the 20.8 percent for companies that cooperated in the investigation – a group in which it itself belongs.

As an alternative to tariffs, exporters can commit to selling their products at a minimum price or above. Chinese exporters agreed to such a commitment ten years ago in the case of solar panels. But cars are not a mass product, so it is difficult to imagine how a minimum price could be enforced.

WHO DECIDES?

During the provisional phase, the Commission has full powers to impose tariffs. However, it is consulting EU members and is expected to take their positions into account. They must submit their comments by 15 July.

EU members are wavering over whether to support additional tariffs on Chinese-made electric vehicles, underscoring Brussels’ difficulties in winning support for its biggest trade deal yet as Beijing threatens wide-ranging retaliation.

At the end of the investigation, the Commission may propose definitive duties, which normally apply for five years.

The proposal could be blocked if a qualified majority of the 27 EU members oppose it. A qualified majority means that 15 EU members represent 65% of the EU population. In most cases, there is no blocking majority.

WHAT HAPPENS AFTER THE EXAMINATION?

Any company not included in the sample of BYD, Geely and SAIC that wishes to have its own tariff may request an “accelerated review” immediately after the imposition of definitive measures. Such a review should last for a maximum of nine months.

The Commission may also carry out an ‘intermediate review’ after one year if the measures are no longer necessary or are not sufficient to counteract the subsidies.

The Commission itself often investigates whether manufacturers are circumventing tariffs by exporting parts that are assembled elsewhere. For the EU, such circumvention occurs when 60% or more of the value of the parts is imported from the country subject to tariffs and the value added during assembly does not exceed 25%.

Companies can challenge the measures before the European Court of Justice. China can sue the European Union before the World Trade Organization. Both legal processes can take well over a year.

(Reporting by Philip Blenkinsop; Editing by Jan Harvey, Anne Marie Roantree and Barbara Lewis)