WASHINGTON, D.C. (BRAIN) — Dealers and distributors could feel the bite from a one-sentence provision in a 160-page trade bill that, in effect, has made it easier for consumers to buy more bicycle parts and accessories from foreign websites.
The legislation, signed into law Feb. 24, raised the amount consumers could spend on overseas Internet purchases without paying import duties. The old amount was $200. That threshold has been raised to $800.
It's uncertain what effect the new threshold would have at retail or on distributors since the current duty on many items is either minimal or zero. Complete bikes are generally subject to an 11 percent duty, and pedals and saddles are subject to an 8 percent duty. Other components have no duty.
On the other hand, dealers who buy from overseas vendors, particularly those buying Shimano parts, could place fewer orders and save a few dollars in duty expenses. As for shipping, purchases over $99 at Chain Reaction are shipped free, while Wiggle's minimum is $50. U.S. purchasers also pay no sales tax on the items.
U.S. distributors took notice of the new $800 amount especially after Wiggle and Chain Reaction, two of the industry's more aggressive overseas online vendors, posted notices on their websites in mid-March telling U.S. consumers of the change.
Matt Moore, QBP's in-house legal counsel, said he generally follows trade issues and legislation but this one slipped past him. "By the time I had gotten an email notice about it, it had gone through and been sent to the President," Moore said.
President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015 calling it a "significant bipartisan effort." The bill overhauls some custom functions and beefs up enforcement against those who try to evade duty payments.
Other provisions require U.S. Customs and Border Protection to aggressively investigate complaints of companies evading anti-dumping duties, especially those who mislabel products.
However, language increasing the duty-free amount was tucked into what was called "Title IX—Miscellaneous Provisions."
It was a single sentence amending the Tariff Act of 1930 in a five-sentence paragraph. The rest of the paragraph called for other countries to establish so-called "de minimus" values for express and postal shipments making them exempt from some custom duties and taxes. That change could—theoretically—make it easier for U.S. online retailers to sell overseas.
Several reports have noted that the change reflects the cost to Customs to check on a growing volume of small purchases. Carriers that deliver the products also could benefit since they generally collect the duty and remit it to customs.
Moore said it will be difficult to trace the impact the new rule would have on parts and accessory sales. "I suppose the best indicator would be if Chain Reaction and Wiggle reported sales went up dramatically. It's hard to gauge, other than anecdotally, what impact it will have," he said.
Nonetheless, Chain Reaction and Wiggle are powerhouses in the world of online sales for parts and accessories. And recently, Chain Reaction and Wiggle announced a merger. If UK authorities approve it, the combined company would boast annual revenue in excess of $425 million.
Both online retailers have been a thorn in the side of many U.S. dealers who are often asked by consumers why their prices are so much higher, particularly for Shimano parts. Both companies also have made significant inroads in Australia and New Zealand where retail sales for parts and accessories have fallen.
Chain Reaction has aggressively courted U.S. consumers and for the past several years has been a gold-level sponsor at the Sea Otter Classic.
