Bad news for prospective electric bike owners

[Andre Jute]

This is my response to the original post in a thread on another forum.

Emanuel Berg wrote in rec.bike.tech:
> The EU will impose duties (27.5-83.6%) on
> electric bikes from China, starting Thursday.
> https://www.svt.se/svttext/tv/pages/133.html

English report here, thanks to Tosspot:
https://www.ft.com/content/c27c4aa6-8a9c-11e8-bf9e-8771d5404543

These punitive import duties are not new. They've stood for a long time as "anti-dumping duties". I assume they will now be stringently applied, where previously they were honored in their absence. I've in fact written about these "new" duties a few years ago either here or on another forum, warning people that if the customs officer inspecting their parcel from China feels dyspeptic he could double the price and then some with import duties plus punitive anti-dumping duties, with the punitive duties being imposed on the total of the agreed value (a dangerous concept when dealing with the Excise), the transport cost, the import duty, the brokerage, and the value added tax (for Americans, sales tax), all of which easily reaches 300%. Customs officers have a wide discretion about the import duties as well, especially if the electric bike or kit is imported by a private person, on which they can overlook the duties on imports from certain countries if they're below a set figure which differs for various classes of items. People who've imported one motor have until now had the benefit of this discretion and then some.

As for the question elsewhere in this thread [on RBT] about how the value is decided, generally speaking invoices will do. But in the case of China, where the numbers written on export documents are from dreamland, and distorted by state subsidies to create what Western marketers call "loss leaders", the "Japanese model" applies. This involves the customs officer hefting the duty on a price he decides would be the wholesale price if the item, in this case an electric bicycle, was produced locally; the Japanese, with their very high materials cost and stiff labour costs too compared to their near neighbors, use such methods to keep out imports from undesirables (gaijin, a very useful weasel-sword), meaning China, the US and the EU.

It might be added that in addition, Germany, which through financial dominance rules the EU to a far greater extent than Heinz Guderian's tanks could achieve, has an electric-bike industry of its own to protect, not least its technological superiority. The Bosch-Panasonic motors are, for instance, the only ones with a commercially viable torque sensor and reaction software.

Andre Jute
Good golly, my education wasn't wasted!

PS for this forum only:
These duties are very likely also coming on standard bicycles, as Germany and other EU members have large bicycle industries to protect. Whether it will affect our sorts of bicycles (more likely to be made in Taiwan than mainland China) remains to be seen, but supermarket bikes from China will be hit as and when.

[mickeg]

I have no interest in e-bikes.  I am in USA and therefore have no concerns about EU tariffs.  I am only making a comment on economics.  I am now retired, but I have a baccalaureate degree in economics.  I worked as an economist before I got a degree in engineering and started working as an engineer.

I do not want to get into any of the politics on this as I prefer bike forums that are free of politics, so I am intentionally being silent on my opinions of tariffs.   

USA has proposed a tariff on e-bikes as one of over a thousand items on the China tariff list.
https://www.bicycleretailer.com/industry-news/2018/06/19/us-proposes-25-tariff-china-made-e-bikes#.W1EOKGjPyUk

And when one country imposes a tariff on a specific item, there suddenly is a reduction in global demand for said item, and the excess supply of that item on the world markets often tries to find a new home in a tariff free location.  Thus, some countries throw up similar tariffs to avoid being flooded with the excess supply of that item.

I have no clue if that is why there is a new EU tariff or not, but that would be my first thought as an economist.

I am not even sure why we are talking about e bikes on the Thorn forum, I rarely look at the SJS website, does SJS now sell e bikes?

[bobs]

As this was posted in the "non Thorn anything cycling related" it's  relevent.  Surely we are not restricted to discussing only things SJSC sell?

[John Saxby]

It's not only a matter of e-bikes:  Tariffs can affect a purchaser's reckoning of Thorn bikes.  Currently, Canada charges 13% duty on imported bicycles, although parts such as frames and forks are free of duty. (Electrically propelled motorcycles, interestingly, are free of duty -- not sure if an e-bike fits in this category.) Built-up wheels have a duty of 6.5%, although rims, spokes and hubs are free of duty.

These costs (the duty is imposed on the cost-insurance-freight amount, not the source cost), combined with the 13% sales tax we pay (levied on the total landed cost of a complete bike) increases the cost of a complete imported bike such as my Raven by nearly 30%.  Add to this whatever is happening on foreign-currency markets, and it becomes much more affordable to purchase key components such as frame, forks, & hub from the source (in my case, Thorn & a German supplier of the hub) and have the bike assembled here in Canada--in my case, by my LBS.

I'm guessing at the political economy of this cost structure--I haven't heard any public figure argue the case--but I think it's intended to promote assembly in Canada.  Even the high-end road bikes designed, made & sold by Cervélo, for example, as well as bikes by less well-known makes such as de Vinci, Opus, and others, include frames from Taiwan, as well as the usual grupos from other countries. Individual custom builders, such as True North Cycles or Mariposa Cycles in Ontario, and I expect Marinoni in Qué., are sheltered by this arithmetic.

[Bill]

Under CETA, bicycles from the EU can be imported into Canada free of duty.  *However* there are complicated country of origin rules with respect to components and parts. I don't know how many of Thorn's components originate in the EU. The frames, and probably most of the ocmponents are from Taiwan.

Maybe if you ordered a Campy equipped Italian bike? (But how many Campognolo components come from Asia?)

In any case, avoiding the politics of the situation, it looks like we are leaving an era of freeish trade and heading in to an era of protectionism and higher tariffs. Costs of most manufactured items are going to go up, some of them substantially. If you are thinking of getting a new bike, electric or not, do it now.

[mickeg]

My Thorn Nomad frame and fork (plus rims, some tires, some other parts in the same order) I expected to pay a 4 percent duty in USA.  I was surprised that it was a bit over 6 percent.  But a complete bike from EU would have been 11 percent.  These numbers are as of 2013 when I bought the frame and fork to build it up.  My Nomad frame has S&S couplers, plus the other stuff in the box might have pushed the value high enough that they bothered with the duty.  I bought my Rohloff hub from Germany and expected to pay 4 percent on that, but that arrived free of duty.  Perhaps the Rohloff was below a value threshold?

I bought my Sherpa frame used from someone in Canada, but he had a job in USA.  He told me that he could ship it from USA to avoid any possible customs duty, which he did.  And he could cash my USA check within USA without any problem.

[Andre Jute]

...it looks like we are leaving an era of freeish trade and heading in to an era of protectionism and higher tariffs. Costs of most manufactured items are going to go up, some of them substantially. If you are thinking of getting a new bike, electric or not, do it now.

Emphasis added.

Canadians have been and probably will continue to be lucky because they have favored nation status with the EU, which cuts both ways in, for instance, "harmonizing" customs duties, i.e. the Canadian brazier faces the same duties when exporting to the EU as the EU brazier faces in exporting to Canada.

I think it possible that once Britain is out of the EU, Canada as a Commonwealth country may have a more favorable bilateral customs regime, and thus likely to import Thorn bikes without the 30% loading John has calculated. (Of course, Italian road bikes will become much more expensive...) It seems likely that in such a case (hard Brexit) Americans will be in the same boat as Canadians because the current US Administration is explicitly keen to have a beneficial bilateral trade agreement with the UK.

For a giggle, imagine if the US and Canada had different rates of duties on importing Thorn bikes, why, then a smuggling operation of Thorn bikes across the border might ensue. "Liberate the Raven!"

[mickeg]

...
For a giggle, imagine if the US and Canada had different rates of duties on importing Thorn bikes, why, then a smuggling operation of Thorn bikes across the border might ensue. "Liberate the Raven!"

There are so few Thorns in the USA, a smuggler would likely starve.

[Bill]

I bought my Sherpa frame used from someone in Canada, but he had a job in USA.  He told me that he could ship it from USA to avoid any possible customs duty, which he did.  And he could cash my USA check within USA without any problem.

Its definitely cheaper to ship stuff in the US than Canada, and shipping across the border seems to double or triple the cost even when no duties or taxes are applicable.

We do have banks here, and they even can do foreign exchange. Imagine that!

I've tried to look up the duty rates on chinese e-bikes imported into Canada, but I can't find anything relevant. I suspect that if other jurisdictions are assessing anti-dumping duties on Chinese e-bikes, we will too.

[mickeg]

...
We do have banks here, and they even can do foreign exchange. Imagine that!
...

I hope your banks are better at currency conversions than some of the banks around here.  I have had banks here tell me that they do not charge any fees for currency conversions, but when you make a conversion you find that they charged you about 10 to 12 percent by giving you a terrible currency conversion rate. 

[Bill]

...
We do have banks here, and they even can do foreign exchange. Imagine that!
...

I hope your banks are better at currency conversions than some of the banks around here.  I have had banks here tell me that they do not charge any fees for currency conversions, but when you make a conversion you find that they charged you about 10 to 12 percent by giving you a terrible currency conversion rate.

I get a better rate than I do by credit card. Most credit cards here add 2.5% for foreign currency conversion. I think US credit cards give you a better deal.

[mickeg]

Apologies for being so far off topic here.

...
We do have banks here, and they even can do foreign exchange. Imagine that!
...

I hope your banks are better at currency conversions than some of the banks around here.  I have had banks here tell me that they do not charge any fees for currency conversions, but when you make a conversion you find that they charged you about 10 to 12 percent by giving you a terrible currency conversion rate.

I get a better rate than I do by credit card. Most credit cards here add 2.5% for foreign currency conversion. I think US credit cards give you a better deal.

Most USA credit cards charge 3 percent for currency conversions.  Some cards that are more oriented towards travel that have an annual fee might waive the currency charges.  I have one card that only charges 1 percent for currency conversions, no annual fee, I got that card specifically for a month long trip in Europe because my other cards charged 3 percent.  I used to have an airline branded card that waived the currency charges but the annual fee was more than I wanted to pay so I dropped that card.

When I have gone to Europe I often got a lot of cash out of ATM machines with a debit card, that card sometimes charged about 1 percent, sometimes no charge.

Now that almost all USA cards have a chip in them, at least we are half way to conforming with standards set by the rest of the world, but our cards are almost always chip and signature, not chip and pin cards.  So we are not completely in conformance with rest of world standards.

[Bill]

This is still way off topic, but it inspired me to find a credit card with 0% foreign transaction fee and no annual fee.
Thanks!

[John Saxby]

Not so far off-topic, Bill:  we've all got to find ways of dealing with fluctuating (mostly rising) costs, whimsical (that's the generous word) policy decisions, etc., etc.