On August 26, 2024, the Canadian government announced a series of new measures to support Canadian workers in an effort to enhance the country’s  electrical vehicle (“EV”) industry in domestic, North American, and global markets. 

This follows a 30 day consultation period in July addressing allegedly unfair Chinese EV trade practices, as we previously reported here, and the imposition of similar trade remedies by the EU and the US.

New measures on importations of Chinese goods

The new measures will introduce a 100% surtax on all Chinese-made EVs per section 53 of the Customs Tariff, effective October 1, 2024.  This surtax will apply to a list of goods (identified by specified tariff items), including electric and certain hybrid passenger automobiles, trucks, buses, and delivery vans, in addition to the existing 6.1% Most-Favoured Nation import tariff that currently applies to EVs produced in China and imported into Canada.

Additionally, a 25% surtax on imports of steel and aluminum products from China will take effect starting October 15, 2024.  An initial list of affected goods has been released for public comment, with the finalized list set to be announced on October 1, 2024.  Notably, the government has indicated “The surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into effect.”

The Canadian government also plans to restrict eligibility 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”) to products made in countries with free trade agreements with Canada.

Background Information

This announcement comes amid rising concerns about China’s rapid ascent to dominance in the global EV market.  Driven by extensive state subsidies and non-market practices, Chinese producers benefit from policies that promote overcapacity and lax labour and environmental standards, creating an uneven playing field for Canadian manufacturers.

This unfair competition jeopardizes over 125,000 jobs in Canada’s auto manufacturing industry, and more than 130,000 jobs in the steel and aluminum sectors. 

The introduction of these new measures demonstrates Canada’s commitment to protecting its domestic industries and fostering fair competition.  Moreover, they aim to prevent trade diversion from recent measures taken by Canadian trading partners, such as the United States and the European Union.

Canada plans to review these measures within a year of their implementation, with the possibility of extending and supplementing them as needed.

Takeaways

Given the Canadian government’s strong dedication to enhancing trade protections and staying ahead of its Chinese competition in the EV sector, importers should take note of upcoming surtax implementations and prepare for policy changes on Chinese EVs that will soon take effect.

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