Tariff Details
On July 4th, the European Union will start imposing provisional tariffs on electric vehicles produced in China. These tariffs will range from 17.4% to 38.1%, on top of the standard 10% import tariff for cars. This measure by the European Commission is part of an investigation into alleged subsidies provided by the Chinese government, enabling Chinese manufacturers to sell vehicles at lower prices in Europe.
Breakdown of Tariffs:
- Provisional Tariffs: 17.4% – 38.1%
- Standard Import Tariff: 10%
These tariffs will remain in place while the investigation is ongoing, with a final decision on definitive tariffs expected by November 3rd. The provisional tariffs aim to safeguard the European market against potentially unfair pricing practices.
What are provisional tariffs?
Provisional tariffs are temporary measures that can be imposed within nine months of the start of an EU anti-subsidy investigation, lasting for up to four months. During this period, the Commission will determine whether to implement definitive tariffs, with a decision expected by November 3rd for electric vehicles.
These tariffs are enforced if the investigation concludes that subsidies were provided. If definitive tariffs are lower or not applied, provisional tariffs will be adjusted accordingly. Until then, customs authorities typically require importers to provide a bank guarantee.
Tariffs can also be applied retroactively for up to 90 days, meaning that in the case of electric vehicles, they could be backdated to early April, pending the investigation’s outcome.
When will definitive tariffs be enforced?
By July 4th, the European Commission will publish the results of its investigation in the Official Journal of the EU. Provisional tariffs will take effect the following day, allowing China and electric vehicle manufacturers to comment and request hearings until July 18th.
According to Reuters, the final report usually confirms the provisional findings, with possible adjustments based on received feedback. Definitive tariffs are often slightly lower than provisional rates, reflecting some of the accepted arguments.
Who makes the tariff decisions?
During the provisional phase, the European Commission has the authority to impose tariffs, consulting with EU members and considering their positions by July 15th. At the investigation’s conclusion, the Commission can propose definitive tariffs, typically lasting five years.
The tariffs can be blocked if a qualified majority of the 27 EU members oppose them. A qualified majority requires 15 EU members representing 65% of the population, but such a majority rarely forms.
How is the tariff review process managed?
Following the implementation of definitive measures, companies not included in the sample group (such as BYD, Geely, and SAIC) can request an “accelerated review” to determine their individual tariff rates, a process expected to take up to nine months.
The Commission can also conduct a “mid-term review” after one year to assess if the measures remain necessary or if they need adjustment to counter subsidies effectively.
The Commission regularly monitors for potential circumvention of tariffs, such as exporting parts for assembly elsewhere. Circumvention is defined if 60% or more of the parts’ value is imported from the tariffed country, and the added value in assembly does not exceed 25%.
Additionally, companies can pursue other legal avenues, which may take over a year:
- Companies can challenge the measures in the European Court of Justice.
- China can take the European Union to the World Trade Organization.
These new tariffs could significantly impact the global automotive market, and consumers and businesses worldwide should stay informed about the developments and potential repercussions.