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TWN
Info Service on WTO and Trade Issues (Mar25/12) Geneva, 20 Mar (D. Ravi Kanth) — China has requested the establishment of a dispute panel against the European Union at the World Trade Organization to rule on countervailing duties imposed by the EU on new battery electric vehicles (BEVs) originating in China. In its communication (WT/DS630/2) to the WTO’s Dispute Settlement Body (DSB) on 14 March, China said that its consultations with the EU that took place on 5 December 2024, “failed to resolve the dispute.” Hence, pursuant to Articles 4.7 and 6 of the Dispute Settlement Understanding (DSU), Article 30 of the SCM (Subsidies and Countervailing Measures) Agreement, and Article XXIII of the GATT 1994, China requested the DSB to establish a panel to examine the matter, with the standard terms of reference as set out in Article 7.1 of the DSU. In its communication, China argued that “the measures at issue are the definitive countervailing duties on BEVs from China, as well as the underlying investigation that led to the imposition of these measures (hereafter “countervailing measures”), which include, inter alia, the actions taken or omitted by the EU during the course of – or in relation to – the investigation.” China said the “request also covers any future action or measures that the EU may take in connection with these measures.” It said the countervailing measures imposed by the EU include, but are not limited to, and are evidenced by the following instruments and/or documents: “1. Commission Implementing Regulation (EU) 2024/2754 of 29 October 2024 imposing a definitive countervailing duty on imports of new battery electric vehicles designed for the transport of persons originating in the People’s Republic of China (“Definitive Countervailing Duty Regulation”); 2. Commission Implementing Regulation (EU) 2024/1866 of 3 July 2024 imposing a provisional countervailing duty on imports of new battery electric vehicles designed for the transport of persons originating in the People’s Republic of China (“Provisional Countervailing Duty Regulation”); and 3. Notice of initiation of 4 October 2023 of an anti-subsidy proceeding concerning imports of new battery electric vehicles designed for the transport of persons originating in the People’s Republic of China.” With respect to the EU’s countervailing measures, China considers that “the following elements of the Definitive Countervailing Duty Regulation, the Provisional Countervailing Duty Regulation, the Notice of initiation and the investigation leading to the imposition of these measures are inconsistent with the following obligations under the SCM Agreement and the GATT 1994.” According to the Chinese communication, these include: * Pre-initiation consultations: The EU’s failure to hold good faith consultations with the Government of China prior to the initiation of the investigation, and to provide access to non-confidential evidence, including the non-confidential summary of confidential data used for initiating the investigation, is inconsistent with Articles 13.1 and 13.4 of the SCM Agreement. * Initiation of the investigation: The EU’s failure to demonstrate the existence of special circumstances, and sufficient evidence of the existence of subsidies, material injury and/or threat thereof and causal link to justify the ex officio initiation of the investigation, is contrary to Articles 11.2, 11.3 and 11.6 of the SCM Agreement. * Incorrect application of facts available concerning the alleged subsidization: The EU’s failure to give notice to all interested parties, including financial institutions, industry associations and input suppliers, of the information required from them, and to collect this information from such parties – and the EU’s decision to require the Government of China (the “interested Member”) to perform these acts – are contrary to Articles 10, 12.1 and 12.9 of the SCM Agreement. * The EU’s decision to resort to facts available with respect to the Government of China violates Article 12.7 of the SCM Agreement. * The EU’s selection and assessment of replacement facts with respect to the Government of China violates Article 12.7 of the SCM Agreement because the EU, inter alia, did not reasonably replace the allegedly missing information with the most appropriate replacement facts; based determinations on inferences and/or assumptions; drew adverse inferences; used facts available in a punitive manner rather than make an accurate determination; and thereby did not act as an objective and unbiased investigating authority. * The EU’s decision to resort to facts available with respect to the SAIC, Geely and BYD groups violates Article 12.7 of the SCM Agreement because the EU, inter alia, issued requests for information and gave instructions that were vague and/or unclear, among others. * The EU’s selection and assessment of replacement facts with respect to the SAIC, Geely and BYD groups violates Article 12.7 of the SCM Agreement because the EU, inter alia, did not reasonably replace the allegedly missing information with the most appropriate replacement facts, among others. * The EU’s unjustified resort to facts available and/or selection of inappropriate replacement facts, with respect to the Government of China and the SAIC, Geely and BYD groups in a manner contrary to Article 12.7 of the SCM Agreement, vitiated key determinations made by the EU including, inter alia, the existence of alleged financial contributions (including determinations regarding the existence of public bodies or private bodies allegedly entrusted or directed by the Government of China), benefit and specificity, leading to violations of, inter alia, Articles 1.1(a)(1), 1.1(b), 1.2, 2.1, 2.2, 2.4, 10, 14, 19.1, 19.3, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. * On alleged preferential financing, the EU’s determination that financial institutions in China – including banks – and their subsidiaries are/acted as public bodies is inconsistent with Articles 1.1(a)(1) and 12.7 of the SCM Agreement because the EU, inter alia, failed to properly establish the facts relating to financial institutions in China and, among others, their relationship to the Government of China; disregarded and failed to take into account all information on the record; and failed to undertake an objective and unbiased assessment of positive and sufficient evidence, and instead based its determination on unsupported inferences and/or assumptions as well as misinterpretation of evidence. * The EU’s determination that the Government of China allegedly entrusts or directs financial institutions in China – including banks – to provide preferential financing is inconsistent with Articles 1.1(a)(1)(iv) and 12.7 of the SCM Agreement because the EU, inter alia, failed to properly apply the established legal standard under Article 1.1(a)(1)(iv); failed to properly establish the facts relating to the conduct of financial institutions in China; disregarded and failed to take into account all information on the record; and failed to undertake an objective and unbiased assessment of positive and sufficient evidence, and instead based its determination on unsupported inferences and/or assumptions as well as misinterpretation of evidence. * The EU’s determination of the existence of a financial contribution, allegedly provided through loans, credit lines, bank acceptance drafts, discounted bills, debt-to-equity swaps, capital injections and bonds, is inconsistent with Article 1.1(a)(1) of the SCM Agreement. * The EU’s determination that the alleged preferential financing, allegedly provided through loans, credit lines, bank acceptance drafts, discounted bills, debt-to-equity swaps, capital injections and bonds, is specific is inconsistent with Articles 1.2, 2.1, 2.2 and 2.4 of the SCM Agreement because the EU, inter alia, failed to establish that the alleged preferential financing was specific to an enterprise or industry or group of enterprises or industries and to substantiate its specificity determination on the basis of positive evidence. * On the alleged provision of goods at less than adequate remuneration (LTAR), the EU’s determination that the alleged provision of goods (batteries, lithium iron phosphate (“LFP”) and land use rights (“LURs”)) at LTAR constituted a countervailable subsidy. * On fiscal subsidy policy, the EU’s determination that the Fiscal Subsidy Policy – which had expired at the start of the investigation period (“IP”) – resulted in a countervailable subsidy, in particular, but not limited to: (a) The EU’s determination of the existence of a financial contribution in the form of a direct transfer of funds is inconsistent with Article 1.1(a)(1) of the SCM Agreement; (b) The EU’s determination that the Fiscal Subsidy Policy conferred a benefit to the Chinese BEV producers and the EU’s calculation and allocation of the amount of the alleged benefit are contrary to Article 1.1(b) of the SCM Agreement as well as Articles 10, 14, 19.1, 19.3, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994, since, inter alia, the actual beneficiary under this Policy was the Chinese BEV consumer/purchaser; the alleged benefit was based on the amounts received before tax; the alleged benefit was only conferred on domestic sales of BEVs; and the EU countervailed payments for sales of BEVs made prior to the IP; (c) The EU’s decision to countervail an alleged subsidy supposedly resulting from the Fiscal Subsidy Policy is contrary to Articles 19.1, 19.3, 19.4 and 21.1 of the SCM Agreement and Article VI:3 of the GATT 1994 since the alleged subsidy had ceased to exist at the start of the IP. As a result of the above inconsistencies, China considers that “the EU’s measures nullify or impair the benefits accruing to China, directly or indirectly, under the covered agreements.” +
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