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

By Philip Blenkinsop

BRUSSELS (Reuters) – China and the European Commission have agreed to start talks on the planned imposition of tariffs on Chinese-made electric vehicles (EVs) imported into the European Union, opening the door for a possible de-escalation.

The European Commission plans to impose provisional tariffs of between 17.4 and 38.1 percent on electric vehicles produced in China, in addition to the standard tariffs of 10 percent on car imports.

The tariffs are expected to come into effect on July 4.

WHAT ARE PROVISIONAL MEASURES?

Provisional duties can be imposed within nine months of the initiation 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 a maximum of four months. After that, the Commission will decide whether to impose definitive duties. In the EV case, the deadline for this is 3 November.

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

The tariffs can also be introduced retroactively for up to 90 days, in the case of EV from the beginning of April. A decision on this will be made at the end of the investigation.

WHAT HAPPENS NEXT?

On June 22, German Economics Minister Robert Habeck said he had been informed by EU Commissioner Valdis Dombrovskis that there would be concrete negotiations on tariffs with China.

“I suggested to my Chinese partners today that the doors are open for talks and I hope that this message was heard,” Habeck said in Shanghai after meetings with Chinese officials in Beijing.

The Commission must publish a detailed document in the EU Official Journal detailing the ongoing investigation and its findings by 4 July. The provisional duties will then enter into force the following day.

Interested parties such as China and electric vehicle manufacturers have until July 18 to comment on the findings. They can also request a hearing.

The Commission has already visited more than 100 car manufacturers’ sites in China and Europe and carried out the bulk 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.

What is new, for example, is 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 21 percent for companies that cooperated in the investigation – a group it currently belongs to.

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.

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

The law can be blocked if a qualified majority of the 27 EU members oppose measures. 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 and Anne Marie Roantree)