32 ASIAN LEGAL BUSINESS – AUGUST 2024 WWW.LEGALBUSINESSONLINE.COM CHARGED CONFLICT China is meeting force with force after the European Union decided to press ahead with new tariffs on certain China-made EVs following the collapse of more than three weeks of negotiations. China’s Ministry of Commerce has announced the launch of a trade-andinvestment-barrier investigation to see how the EU’s Foreign Subsidy Regulation has affected Chinese companies. The investigation is set to last until Jan. 10 next year. The probe came after the EU decided to levy an additional 17.4 percent import duties on Chinese EV champion BYD, 19.9 percent on Geely, and 37.6 percent on SAIC, on top of the current 10 percent levies. Other carmakers will face extra duties of 20.8 percent or 37.6 percent, depending on whether they have cooperated with the EU investigation. The decision is provisional, meaning the duties will be paid by Chinese carmakers to the EU customs in the form of guarantees. If no definitive agreement is reached in four months, the guarantees will be collected. The EU decision to impose tariffs on China-made EVs was a result of an anti-subsidy investigation launched in October last year. The European Commission was trying to decide whether the Chinese carmakers were benefiting from unfair subsidies and flooded the single market with subsidised vehicles with low export prices, posing unfair competition for European carmakers. Over the past three years, 30 percent of Chinese-manufactured EVs were exported to the European market, with Chinese EVs occupying a 22 percent market share in Europe in 2023. Hang Guoliang, a partner at Global Law Office, tells ALB that the EU’s antisubsidy investigations typically focus on loans, raw materials, land, income tax exemptions, and government grants. These investigations would compare loan interest rates, raw material procurement prices, and land prices with benchmark prices in targeted countries to calculate the subsidy margins. “Generally, anti-subsidy investigations focus on raw material prices and loan interest rates, which usually account for over 70 percent of the subsidy margins. However, in the case of EVs, there are also various government grants to consider,” says Hang. In April this year, the European Commission released a report alleging state-led distortions in the Chinese economy, highlighting several Chinese government actions of concern, such as support for state-owned enterprises through low-interest loans provided by state-owned banks and financial support from local governments. The report also pointed out policies exempting the purchase tax for EVs, which amounted to $11.9 billion in 2022 alone. As the Chinese probe into the EU’s additional duties is underway, Hang says the final duties will be determined based on the conclusion of the investigation including questionnaires and on-site verifications. TURNING OVERSEAS Since the beginning of the EU investigation, Chinese carmakers have been seeking ways to mitigate the potential impact of the imposition of additional tariffs. SANCT IONS The electric vehicle industry is facing a high-voltage trade dispute as China and the European Union engage in a tit-for-tat battle over market dominance. With the EU imposing new tariffs on Chinese-made EVs, Beijing has swiftly retaliated by launching its own investigation into European trade practices. This escalating conflict threatens to reshape the global EV landscape and test the resilience of international trade relations. BY HU YANGXIAOXIAO, WITH ADDITIONAL REPORTING BY SARAH WONG Image: Summit Art Creations/Shutterstock.com
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