Introduction
Increased electric vehicle (“EV”) production is a key global strategy for addressing climate change. However, Canada’s auto manufacturing industry faces what the Government of Canada has described as an “extraordinary threat” from Chinese-produced EVs. In 2020, China emerged as the largest manufacturer and exporter of EVs in the world. In response, Canada announced its intention to impose a 100% surtax on Chinese-origin EVs (and lower surtaxes on other goods), which are said to be necessary to curb China’s overcapacity and unfair trade practices. Canada has opened a window of opportunity for consultations by interested parties on certain issues related to the surtaxes. A brief summary is set out below.
Surtax and Consultations
On June 24, 2024, Canada announced the launch of a 30-day consultation on potential policy responses to protect its growing EV industry from China’s unfair trade policies and practices.[1] Following this first consultation period, the Government of Canada made an announcement on August 26, 2024, stating that in order to protect Canadian workers and address unfair Chinese trade practices:
- Canada will implement a 100% surtax on all Chinese-made EVs, effective October 1, 2024, and a 25% surtax on imports of steel and aluminum products from China, effective October 15, 2024.
- Potential surtaxes will be applied under the authority of section 53 of the Customs Tariff, which provides for the application of trade measures (i.e., surtaxes) in response to acts, policies, or practices of other countries that adversely impact Canada’s trade interests.
- The list of items impacted by the surtax on imports of steel and aluminum products from China is provided in the CBSA’s Surtax on imports of steel and aluminum products from Canada.
- The 100% surtax will be applied in addition to the current ad-valorem customs Most Favoured Nation (MFN) duty rate of 6.1% for EVs manufactured in China.
- Canada will launch a second 30-day consultation on related critical manufacturing sectors (i.e., batteries and battery parts, semiconductors, solar products, and critical minerals).
- The second 30-day consultation, running from September 10, 2024, to October 10, 2024, is in response to unfair Chinese trade practices. It will focus on the application of a surtax on critical mineral products, batteries and parts, solar products, and semiconductors, including the timing for implementing any potential measures.
- Canada intends to limit products eligible for the Incentives for Zero-Emission Vehicles (iZEV), the Incentives for Medium and Heavy Duty Zero Emission Vehicles (iMHZEV), and the Zero Emission Vehicle Infrastructure Program (ZEVIP).
During the second consultation period, the Government of Canada is seeking perspectives on the potential application of a surtax on other sectors integral to Canada’s economic prosperity. The potential surtax would apply to mineral products, batteries and parts, solar products, semiconductors, and critical minerals. The Government of Canada is also seeking stakeholder comments on the timing for implementing any potential policies. The Government of Canada wants input from the following stakeholders:
- the Canadian public;
- Indigenous organizations;
- provincial and territorial governments;
- labour unions;
- small, medium, and large Canadian enterprises, including but not limited to the automotive, battery, semiconductor, solar, critical minerals, and clean technology sectors;
- industry associations;
- academics and experts; and
- any other interested stakeholders.
This second consultation expands on the first 30-day consultation period. It will inform Canada’s future policy responses to Chinese EV producers and address global overcapacity challenges.
For more information on the ongoing consultation or assistance with making submissions during this consultation period, please contact Miller Thomson’s Global Trade and Customs Group. Our range of experience, skills, and perspectives equip us to serve you with tailored advice and strategic guidance.
[1] Government of Canada, “Consultations on potential policy responses to unfair Chinese trade practices in electric vehicles” modified: 2024-08-02.
