On July 4, 2024, the European Commission imposed provisional countervailing duties on imports of battery electric vehicles (BEVs) from China.
Under its traditional trade defense rules (Basic Regulation (EU) 2016/1037) the EU can impose duties to counteract subsidies that cause or threaten to cause injury to the European industry. After an eight-month investigation, the Commission identified various forms of subsidization to Chinese BEV producers, including preferential financing, grant programs, the provision of goods and services for less than adequate remuneration, and tax exemptions. The Commission found there was an imminent threat of material injury to the Union BEV industry, based on a projected surge of low-priced BEV imports that would likely capture significant market share and impede the heavy and sustained rate of investment required for the Union industry to transition to full BEV production.
The provisional duties took effect on July 5 and will last for a maximum duration of four months:
- Three Chinese producers whose data were specifically analyzed (i.e., “sampled”) received individual duties:
- BYD: 17.4%;
- Geely: 19.9%;
- SAIC: 37.6%.
- Other BEV producers that cooperated in the investigation but were not sampled are subject to a weighted average duty of 20.8%.
- The duty for non-cooperating BEV producers is 37.6%.
If negotiations between the EU and China to find an alternative solution to the application of duties are unsuccessful, the Commission will submit a proposal for definitive duties, applicable for five years, to the Council of the European Union. The Council can only block the imposition of definitive duties if it achieves a qualified majority of votes against the proposal. In the meantime, national customs authorities will seek bank guarantees from EU importers of Chinese BEVs. The amounts will only be due if the definitive duties are confirmed.
Any company exporting to the EU BEVs produced in China that was not selected in the final sample but wishes to obtain a specific rate can request an accelerated review after the imposition of definitive measures.
It remains to be seen how the Commission’s findings in this trade defense investigation may influence enforcement under the EU’s Foreign Subsidies Regulation (FSR). The two regimes are designed to address different concerns: trade defense covers imported goods, while the FSR targets EU investments and services affected by non-EU subsidies, with Article 44(9) FSR precluding its use where trade defense instruments are available. However, it remains unclear if the same subsidies targeted by the Commission’s trade defense investigation may also be found to give rise to competitive distortions that can be addressed under the FSR.