Philip Blenkinsop
BRUSSELS (Reuters) – The European Commission plans to impose preliminary tariffs on electric vehicles (EVs) made in China of between 17.4% and 38.1% on top of the standard 10% tariff on car imports.
The tariffs must be implemented by July 4.
WHAT ARE TEMPORARY MEASURES?
Provisional duties could be introduced within nine months of the start of the EU’s anti-subsidy investigation if the Commission concludes that it is necessary to prevent harm to EU industry.
They can be applied for a maximum of four months, after which the Commission will decide whether to apply final duties, known as definitive duties. In the case of EV, the deadline is November 3rd.
Provisional fees are levied only if final fees are imposed at the conclusion of the investigation. If the final duties are lower or do not apply, the provisional duties are adjusted accordingly. Until then, customs authorities usually require a bank guarantee from importers.
Tariffs can also be applied retroactively for up to 90 days, i.e. in the case of EVs – from the beginning of April, and a decision on this matter will be made after the completion of the investigation.
WHAT WILL HAPPEN NEXT?
By July 4, the Commission will publish a lengthy document in the EU’s Official Journal detailing the ongoing investigation and its findings. The provisional duties will take effect the next day.
Stakeholders such as China and electric vehicle makers have until July 18 to comment on the findings. They can also request a hearing.
The commission has already visited more than 100 automaker sites in China and Europe and conducted much of the investigation.
The final report is usually perceived as a confirmation of the preliminary findings, with possible adjustments after comments are received.
Final duties are often slightly lower than provisional rates, reflecting acceptance of some of these arguments.
One of the new elements will be Tesla’s (NASDAQ:) requirement that the Commission calculate a separate duty rate for it.
The largest exporter of electric vehicles from China to Europe will want the rate to be lower than 21% for companies that cooperated with the investigation (the group he is currently in).
As an alternative to tariffs, exporters can commit to selling their products at a minimum price or higher. Chinese exporters agreed to such a commitment for solar panels a decade ago. However, cars are not a commodity, so it is difficult to see how a minimum price can be set.
WHO DECIDES?
In the preliminary stage, the Commission has full power to impose tariffs, although it consults EU members and must take their positions into account. They must submit their positions by July 15.
At the end of the investigation, the Commission may propose final duties, generally applicable for five years.
It could be blocked if a supermajority of the 27 European Union members opposes the measures. A qualified majority means the 15 EU members representing 65% of the EU population. In most cases there is no blocking majority.
WHAT HAPPENS AFTER THE INVESTIGATION?
Any company outside the select group of BYD (SZ:), Geely and SAIC that wishes to have its own individual responsibilities can request a “fast track review” immediately after the final measures are introduced. Such a review should last for a maximum of nine months.
The Commission may also carry out an “interim review” after a year if the measures are no longer necessary or if they are insufficient to counter the subsidies.
The Commission itself often checks whether manufacturers are avoiding duties by exporting parts for assembly elsewhere. For the EU, such a bypass exists if 60% or more of the value of the parts is imported from a country subject to tariffs, and if the value added during assembly is no more than 25%.
Companies can challenge these measures in the European Court. China may admit the European Union to the World Trade Organization. Both legal paths can take more than a year.