European Union members will vote on Friday on a European Commission proposal to impose tariffs on Chinese-made electric vehicles (EVs).
The Commission last revised the tariff rates in September, imposing levels from 7.8% for Tesla to 35.3% for SAIC and other producers deemed not to have cooperated with the EU's anti-subsidy investigation. These would be come on top of the EU's standard 10% car import duty.
EU VOTE
The proposed final or "definitive" duties will be subject to a vote by the EU's 27 states. The Commission's proposal can be implemented unless a qualified majority of 15 EU members, representing 65% of the EU population vote against. It is a very high hurdle.
Reuters reported on Wednesday that France, Greece, Italy and Poland will vote in favour, which would be enough to push through the EU's highest profile trade measures.
The Commission can still submit an amended proposal at a later stage, which it might do to secure greater backing.
In any case, a decision on tariffs has to be made by Oct. 30, with their imposition the following day. Definitive tariffs typically apply for five years.
If imposed, definitive tariffs would mean provisional duties dating back to July would also have to be paid. Until the end of the EU investigation, companies can cover these with a bank guarantee.
CONTINUED TALKS WITH BEIJING
The European Commission has said it is willing to continue negotiating an alternative to tariffs with China even after tariffs are imposed.
The EU executive said last month it could re-examine a price undertaking - involving minimum import prices and typically volume caps - having previously rejected those Chinese companies have offered.
One option under negotiation is a matrix of minimum import prices calculated using criteria such as the range, battery performance and length of the electric vehicle, along with whether it is two- or four-wheel drive, a source familiar with the matter said.
The Commission has said any alternative must be in line with World Trade Organization (WTO) rules, adequate to remove the injury due to subsidies and enforceable.
CHINESE RETALIATION
In moves seen as retaliation, China has launched anti-dumping investigations into EU exports of pork and brandy and an anti-subsidy probe into EU dairy products, but it has yet to impose any measures.
The EU launched a challenge at the WTO last week into the dairy probe.
China's Commerce Ministry has also met with automakers and industry associations to discuss raising import duties on large-engined gasoline vehicles, which would hit German producers hardest.
Germany's exports of vehicles with engines of 2.5 litres or larger to China were worth $1.2 billion last year, Chinese customs data shows.
WHAT HAPPENS AFTER THE INVESTIGATION?
Any company not in the sample group of BYD (002594.SZ), Geely (GEELY.UL) and SAIC (600104.SS) that wishes to have its own individual duty can ask for an "accelerated review" just after the imposition of definitive measures. Such a review should last a maximum of nine months.
The Commission can also carry out an "interim review" after a year has elapsed if the measures are no longer necessary or if they are not sufficient to counteract subsidies.
The Commission often looks into whether producers are evading duties via exports of parts for assembly elsewhere. For the EU, such circumvention exists if 60% or more of the value of parts are imported from the country subject to duties and if the value added in the assembly is no more than 25%.
Companies can dispute the measures at the European Court of Justice. China has already launched a challenge at the WTO. Both legal paths can take well over a year.
The Commission has said it is confident its investigation and measures are compatible with WTO rules.
