China Challenges U.S. Over EV Rules

"China filed a complaint at the World Trade Organization over the U.S.'s Inflation Reduction Act, saying it was discriminatory and distorted fair competition.

Beijing will use the WTO's dispute-settlement mechanism to challenge electric-vehicle subsidies, China's Ministry of Commerce said on its website on Tuesday.

The rules being challenged require vehicles to use parts from specific regions to qualify for subsidies while excluding products from China, among other countries, the ministry said.

Under the Inflation Reduction Act, which President Biden signed into law in August 2022, consumers in the U.S. won't be able to claim a $7,500 clean-vehicle tax credit if they buy cars containing battery components from a "foreign entity of concern" starting in 2024.

The policy will extend to the minerals that go into battery components in 2025. The move was seen by industry players as a way to reduce China's role in the U.S. EV-industry supply chain.

The definition covers any firm based in China, including subsidiaries of U.S. companies, as well as companies elsewhere that are 25% or more owned by state-backed entities from China.

The rules also apply to Iran, North Korea and Russia.

Other arrangements that involve Chinese companies, such as licensing technology, might be permissible under the rules.

Ningde, China-based Contemporary Amperex Technology, the world's largest maker of EV batteries, is already licensing its technology to Ford Motor to help the American carmaker produce vehicle batteries at a plant in Michigan.

China's Commerce Ministry said the U.S. used the pretext of climate and environmental protection to implement measures that violate WTO rules and disrupt global supply chains.

"China is firmly opposed to it," the ministry said, adding that it respected the rights of WTO members to implement industrial subsidies within the limits of WTO rules.

Biden in February ordered the U.S. Commerce Department to open an investigation into foreign-made software in cars, citing Chinese technology as a potential national-security risk. The probe could lead to restrictions on the use of certain parts in cars in the U.S.

In December, The Wall Street Journal reported that the Biden administration was considering an increase in import taxes on Chinese EVs, which are currently at 27.5%.

In 2023, China became the world's biggest car exporter, surpassing Japan and Germany, while China's EV maker BYD overtook Tesla to become the bestselling pure EV maker in the world in the fourth quarter of 2023. In September, the European Union launched an antisubsidy investigation into Chinese EV makers, pointing to the impact of low-price Chinese products on the bloc's domestic industries." [1]

1. World News: China Challenges U.S. Over EV Rules. Sha Hua.  Wall Street Journal, Eastern edition; New York, N.Y.. 27 Mar 2024: A.7.