Canada to impose surtax on Chinese-made electric vehicles
Date of publication: September 5, 2024
Overview
On August 26, 2024, the Department of Finance Canada announced that the Government of Canada plans to implement a 100% surtax on all Chinese-made electric vehicles (EVs) effective October 1, 2024. This surtax will apply to various types of vehicles, including electric and certain hybrid passenger automobiles, trucks, buses, and delivery vans. The surtax will apply in addition to the Most-Favoured Nation import tariff of 6.1 per cent that currently applies to EVs produced in China and imported into Canada.
Canada intends to review these measures announced today within a period of one year from their entry into force. These actions may be extended for a further period of time and supplemented by additional measures, as appropriate.
These measures aim to protect Canadian industries from what the government has identified as “unfair Chinese trade practices”, particularly in sectors deemed critical to Canada’s future prosperity and economic security interests.
Data from Statistics Canada shows that the value of Chinese EVs imported from China to Canada rose to C$2.2 billion (€1.97 billion) last year, up from C$100 million (€90 million) in 2022. According to data from Vancouver, Canada’s largest port, imports from China increased by 460% in 2023 when Tesla began selling Shanghai-made EVs in Canada.
Canada’s imposition of these tariffs represents a significant departure from its traditional multilateral approach to international trade. This shift aligns Canada with the United States, which recently imposed similar 100% duties on Chinese EVs. The EU has also announced (June 12th) that it will begin to apply provisional countervailing (anti-subsidy) duties on Chinese-made EVs on July 4, following a preliminary trade remedy investigation, with final duty rates expected to be finalized in the fall.
These tariffs will place a significant economic burden on importers seeking to purchase Chinese-origin EVs. They will also make it more difficult for Chinese producers of these products to establish or maintain a presence in the Canadian market.
These measures may also be challenged under international trade law. Following the government’s announcement, China quickly advised Canada to “correct its wrong actions”, citing violations of World Trade Organization (“WTO”) rules.
In addition to initiating a WTO challenge, China may seek to impose retaliatory tariffs or other trade measures. Canadian businesses that export to China should consider the potential impact of such retaliation and monitor actions of this nature. China has previously imposed retaliatory trade measures against its trading partners on agricultural products such as canola, barley and wine, as well as other commodities.
Products in scope
The following is a summary of the affected products, organised by type and capacity:
Hybrid buses
- For 16 or more persons:
- Compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor (Tariff Item 8702.20.10)
- Spark-ignition internal combustion piston engine and electric motor (Tariff Item 8702.30.10)
- For 10-15 persons:
- Compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor (Tariff Item 8702.20.20)
- Spark-ignition internal combustion piston engine and electric motor (Tariff Item 8702.30.20)
Electric buses
- For 16 or more persons: Only electric motor (Tariff Item 8702.40.10)
- For 10-15 persons: Only electric motor (Tariff Item 8702.40.20)
Other buses
- For 16 or more persons: Powered by fuel cells (Tariff Item 8702.90.10)
- For 10-15 persons: Powered by fuel cells (Tariff Item 8702.90.20)
Hybrid passenger automobiles
- Non-plug-in:
- Spark-ignition internal combustion piston engine and electric motor, cylinder capacity not ex-ceeding 1,000 cc (Tariff Item 8703.40.10)
- Spark-ignition internal combustion piston engine and electric motor, cylinder capacity of 1,000 cc or more (Tariff Item 8703.40.90)
- Compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor (Tariff Item 8703.50.00)
- Plug-in:
- Spark-ignition internal combustion piston engine and electric motor, cylinder capacity not ex-ceeding 1,000 cc (Tariff Item 8703.60.10)
- Spark-ignition internal combustion piston engine and electric motor, cylinder capacity of 1,000 cc or more (Tariff Item 8703.60.90)
- Compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor (Tariff Item 8703.70.00)
Electric passenger automobiles
- Only electric motor (Tariff Item 8703.80.00)
Passenger automobiles powered by fuel cells
- Tariff Item 8703.90.00
Hybrid trucks
- Compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor:
- Pick-up trucks, g.v.w. not exceeding 5 tonnes (Tariff Item 8704.41.90)
- Pick-up trucks, cube vans, g.v.w. exceeding 5 tonnes but not exceeding 20 tonnes (Tariff Item 8704.42.00)
- Transport trucks, g.v.w. exceeding 20 tonnes (Tariff Item 8704.43.00)
- Spark-ignition internal combustion piston engine and electric motor:
- Pick-up trucks, g.v.w. not exceeding 5 tonnes (Tariff Item 8704.51.00)
- Transport trucks, g.v.w. exceeding 5 tonnes (Tariff Item 8704.52.00)
Electric trucks
- Only electric motor, any g.v.w. (Tariff Item 8704.60.00)
Trucks powered by fuel cells
- Tariff Item 8704.90.00
This surtax aims to affect a wide range of electric and hybrid vehicles imported from China, covering various types and capacities of passenger automobiles, buses, and trucks.
For more information on how ONESOURCE Global Trade Solutions can assist you in adopting our Global Trade Content and managing compliance with these regulatory changes, please contact your Account Manager or Client Services Manager.