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BCA and Detroit Bikes ask for new tariffs on complete bike imports

Published October 22, 2018
The Section 201 duties would apply to imports from all countries, and are intended to encourage U.S. bike assembly.

WASHINGTON (BRAIN) — Two domestic bike assemblers — Bicycle Corporation of America and Detroit Bikes — have asked the U.S. International Trade Commission to look into imposing tariffs of up to 50 percent on imported bikes. The companies' Section 201 request would encourage U.S. assembly of bikes using foreign parts, they said.

The extra tariffs, if the ITC and the White House agree to the request and recommendations, would be on top of existing duties on bikes. Currently most bikes are subject to duties of 5-11 percent, while bikes from China are subject to an additional 10 percent tariff that took effect in August and increases to 25 percent on Jan. 1. The same new tariffs apply to most Chinese bike parts.

The Section 201 duties would apply to imports of bikes with a Customs value under $400 from all countries, so would give little incentive for importers to shift bike assembly out of China to other countries to avoid the newly imposed tariffs.

"This is specifically geared toward driving new bike assembly jobs in America," Zak Pashak, the president of Detroit Bikes, told BRAIN on Monday.

The tariffs imposed in August were intended to punish China for unfair trade practices, but are not specifically intended to help U.S. businesses. In contrast, Section 201 tariffs investigations primarily look at how U.S. industries are being affected by imports, without looking at what's happening on the other side of the border; they can lead to tariffs of a maximum of 50 percent as a remedy. Generally they result in tariff rate quotas (TRQs) that are collected only after a certain volume of imports has been surpassed.

Section 201 petitions, allowed under the Trade Act of 1974, are very rare, but have been successful under the Trump administration, said Kelsey Rule, an attorney who is representing Detroit and BCA. In the last 15 years, there have been only two Section 201 petitions, but both were made during the Trump administration and both were approved.

"It's one of the tools that this administration is willing to use. ... There is a bias toward action in the Trump administration," she said.

The U.S. has imported 15 million to 19 million bikes a year in this decade. To account for U.S. assembly capacity, the petition calls for a 50 percent tariff that is imposed only after 15 million bikes are imported in its first year, leaving U.S. assemblers an opportunity to make up the difference. Over the following three years, the threshold would go down by 1 million units per year, encouraging the U.S. assemblers to increase capacity. Section 201 tariffs need to be renewed after four years.

De minimis, too

The petition also recommends a reduction in the U.S. Customs de minimis for imported complete bikes. Currently, all imports valued at less than $800 per package are not subject to duty collection. The petition calls for a reduction of the de minimis for bicycles from $800 to $50 for at least four years. The bike industry has been lobbying for a reduction in the de minimis for all imports

Detroit Bikes has already secured several new bike assembly contracts as a result of the new tariffs on Chinese bikes, Pashak said. He said if Section 201 tariffs were imposed, his company would have to gear up for increased assembly work.

"We think we could (assemble) 400-500 bikes a day if we were running at full tilt," he said. "The thought of running three shifts is exciting; it would mean hundreds of new jobs here in an area where we really need jobs."

Arnold Kamler, the CEO and chairman of Kent International, declined to comment on the Section 201 petition. Kent owns the BCA factory in Manning, South Carolina.

In August, Kamler spoke at a hearing in Washington as the Trump administration heard public and industry comments on the Chinese tariffs.

He argued that the Chinese tariffs discouraged U.S. manufacturing and assembling.

"We are against all the tariffs, but we feel that manufacturing here should be encouraged, and these tariffs penalize us unfairly and actually discourage U.S. manufacturing and companies that want to invest here and employ people here to make bikes," Kamler told BRAIN at the time.

At the hearings, Kamler said he was speaking for his company as well as the Reshoring Bicycle Production Team, a newly formed group.

Besides the de minimis changes, the petition asks that components imported by U.S. producers of mass-market bicycles for use on complete bikes be exempt from duties.

Two for two

Last year after an investigation, the ITC recommended Section 201 tariffs on large residential clothes washing machines (responding to a petition initiated by Whirlpool) and on some photovoltaic cells. Last January, Trump approved tariffs of 20 percent on the first 1.2 million washers imported, increasing to 50 percent on subsequent imports. The quota on washer imports will decrease in the second and third years. On the photovoltaic cells, tariffs will start at 30 percent in the first year and decrease each year.

Whirlpool celebrated its success, but company profits have softened in recent months as the Trump administration's tariffs on steel and aluminum have driven up its manufacturing costs.

Mass market for now

The BCA and Detroit petition is specifically targeted at restoring assembly work for suppliers who serve the mass market part of the industry.

Suppliers to the dealer market are taking a wait-and-see approach. For example, Tony Karklins, the president of Little Rock, Arkansas, bike maker Allied Cycle Works, said he met with Rule but decided the time wasn't right to join the effort.

"It's certainly interesting," Karklins told BRAIN. "We are kind of watching to see if it grows and evolves into other categories."

The petition was filed last week. According to the ITC, it must determine whether there was an injury within 120 days of receipt of the petition and then must give its report to the president, with any relief recommendations, within 180 days after receipt of the petition.

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Topics associated with this article: Tariffs

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