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At tariff hearing, ASE's Cunnane proposes a solution to unfair trade with China

Published August 20, 2018

WASHINGTON (BRAIN) — The subject was supposed to be the 25 percent tariffs the Trump administration wants to impose on virtually all bicycle products coming out of China.

But at a hearing in Washington Monday before the Section 301 Committee, Patrick Cunnane went in a slightly different direction and proposed a solution to unfair competition from China: lowering the minimum value of imports that triggers U.S. Customs to impose duties.

Cunnane is CEO of Advanced Sports Enterprises, the parent company of the Performance Bicycle retail chain and e-commerce business and owner the Fuji, Kestrel, Breezer and SE bike brands.

Cunnane told the multiagency committee that the current $800 minimum, commonly called the de minimus, allows offshore sellers to ship many bike products into the States without the collection of duties. Even before the new duties that the Trump administration has enacted or proposed, many bike products are subject to duties of 11 percent or more. In addition, Cunnane pointed out, the overseas sellers don't collect state taxes.

Cunnane proposed lowering the minimum to $50. "The minimum tariff could be $50 for orders between $50 and $200, and 20 percent for sales between $200 and $1,000, and normal duty above $1,000," he told the committee, according to his prepared notes he shared with BRAIN on Monday.

"This action would eliminate the unfair advantage that non-U.S. retailers have," he said.

"Under the current de minimus of $800, businesses like mine lose business to foreign retailers. The current de minimus is death by a thousand cuts."

The Section 301 Committee is a multiagency group that is hearing public and industry comments regarding the latest round of tariffs proposed by the U.S. Trade Representative. The USTR will decide in the coming weeks whether to impose some or all of them. The bike industry has already been affected this year by new tariffs on steel, aluminum, ball bearings and GPS bike computers. A tariff on e-bikes and e-bike motors takes effect Thursday.

Cunnane told BRAIN that though his solution was not specifically responding to the merits of the proposed tariffs, members of the committee seemed responsive and questioned him about it after his presentation.

In comments submitted online to the USTR, at least two bike retailers have also raised the issue of the $800 minimum. Mike Jacoubowsky, a partner in California's Chain Reaction Bicycles; and Jeff Selzer, general manager of Palo Alto Bicycles, each support lowering the minimum.

"Why is U.S. policy so consistently lining up against the local brick & mortar retailer?" Jacoubowsky asked in his comment to the USTR. "Offering a consumer a savings of 25 percent on a direct purchase, when made online and purchased from China, could be the final nail in the coffin for many of us."

The minimum was raised from $200 to $800 during the Obama administration. The rationale at the time was that the higher minimum frees officials to focus on inspecting imports for security risks.

Earlier in his remarks, Cunnane spoke specifically about the proposed tariffs. He said ASE employs 2,000 Americans and sells to more than 1,500 specialty bike retailers in the U.S., as well as in more than 80 other countries. Performance has 104 stores. He said the company's annual revenues exceed $250 million.

"Simply put: We anticipate a serious and harmful effect to our industry if these tariffs are approved. Our industry will see the tariffs increase by more than $250 million if a 25 percent tariff is approved, which will lead to fewer sales and less secure jobs."

Cunnane was part of a testifying group that included Jen Harned of Bell Sports, Bob Margevicius of Specialized, and Matt Moore of QBP, along with representatives from other industries. Each panel member was allowed 5 minutes to speak and then took questions from committee members.

Several other bike industry members will testify before the committee on Thursday.

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Topics associated with this article: Trade/tariffs

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