EU Commission finalizes import tariffs for EVs from China (update)

The EU Commission has presented the draft for the final additional tariffs on imported electric vehicles from China. The logic of the planned tariffs remains basically the same, but the respective tariff rates have been lowered slightly, and regulation is now also known for Tesla. Meanwhile, China has already reacted by opening an inquiry on EU subsidies for milk products exported to them.

The new draft is intended to reflect “the comments received from interested parties on the provisional countervailing duties published on 4 July 2024, as well as the conclusion of a number of investigative steps” that had not yet been completed at the provisional stage, according to the Commission.

Further changes are possible: “Once the Commission has analyzed all comments from interested parties and the Member States have submitted their comments, the final decision will be published in the Official Journal of the European Union.” This means that it has not yet been finally decided whether the special tariffs will actually be introduced.

Minor adjustments, a decision for Tesla

The most significant changes include a ‘slight’ adjustment of the proposed duty rates “based on substantiated comments on the provisional measures received from interested parties”, according to the EU.

“These revisions demonstrate that the Commission fully complies with all relevant rules and obligations and bases its findings strictly on facts and evidence.”

Another new feature is that Tesla will be granted an individual customs duty rate. This is a 9% special duty levied in addition to the 10% import duty that applies anyway. In the case of Tesla, this means a 19% import duty when an electric car built in China is imported into the EU. Currently, all Model 3s sold in Europe come from Giga Shanghai.

Tesla had filed a request for an individual investigation after the imposition of provisional measures. “The Commission verified the information during the verification visit to China and carried out the same checks as for the other Chinese exporting producers included in the sample,” the EU said, explaining the reason for the Tesla duty rate now imposed.

“Any differences in the duty rates reflect the different levels of subsidization in the different schemes, which were influenced by various factors such as the level of cooperation and the different organizational structures in areas such as financing.”

Importing in the future

There is also a new regulation with a view to the future: Chinese car manufacturers and joint ventures with EU manufacturers that have not yet exported to the EU at the time of the investigation period (and therefore, no individual duty rates could be determined in the investigation) are to be classified as “cooperating companies”.

This would mean that a special duty of 21.3% (or 31.3% import duty) would be payable if they wanted to expand into the EU at a later date. Incidentally, this is the only duty rate that has risen slightly compared to the July version.

Not retroactive

The special duties are not to be levied retroactively. According to the EU, the results of the ongoing investigations have shown that the legal requirements for retroactively imposing duties are not met.

“Accordingly, neither the provisional countervailing duties nor the duties on registered imports for the three months preceding the imposition of provisional duties will be collected retroactively,” reads an explanatory Q&A from the Commission.

The provisional duties already levied as of July 5th will continue, but the money will be blocked in a particular bank account and later restituted.

Still to be finally approved

The new draft allows for further comments and consultations. The EU Commission will then submit a final decision to the EU countries for approval. Definitive measures must be introduced no later than four months after the imposition of provisional duties, so the vote must also have taken place by then. If they are adopted, the special duties would apply for five years.

As already indicated earlier, there are also pros and cons inside the European Union regarding these decisions. France and Spain are the main supporters, and Germany is the most prominent critic, joined by Hungary and Sweden.

The German car industry realizes almost 40% of worldwide sales in China, and it fears the consequences of such a decision. “The negative effects of such a decision are higher than possible advantages,” said a Volkswagen Group spokesman earlier.

China has already reacted with an anti-dumping inquiry on European pork meat and European spirits, especially French cognac, a much-appreciated drink in China. It indicates that the commercial tensions between China and Europe are growing. In the windmills, solar panels, and batteries sector, China has already taken the worldwide lead.

Just yesterday, China opened an investigation into the EU’s commercial practices regarding milk products, which were considered disloyal. “The Ministry of Commerce has decided to open an anti-dumping inquiry for certain milk products imported from the European Union starting the 21st of August,” said an official source. Products involved are fresh cheese, curdled milk, blue cheese, and some other sorts of milk and cream, the statement precised.

In a reaction, the EU Commission still indicates “that it is open to all solutions proposed by the authorities in Beijing, as long as they suit the rules of the World Trade Organization (WTO). In July, the latter received a complaint from China about the increased import tariffs.

“We think that it is really up to China to find an alternative to these augmented import tariffs,” commented a spokesman of the European Commission.