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Industry braces for tariff increases this month as exclusions expire

Published August 3, 2020

Editor's note: A version of this article ran in the August issue of BRAIN.

WASHINGTON, D.C. (BRAIN) — The Trump administration has given little indication that it intends to extend tariff exclusions granted to several key bike product categories imported from China. Some of those exclusions from the 25% Section 301 tariffs are set to expire August 7, while others expire in September.

The U.S. Trade Representative had granted exclusions for youth bikes, road bikes, e-bikes, helmets and several narrower product categories since the tariffs first took effect in 2018. But the USTR has yet to rule on requests to extend those exclusions past the upcoming deadlines.

“It looks as though the USTR is taking pretty seriously the idea that the exclusions were intended to allow companies additional time to work on sourcing (outside of China). If companies weren’t able to figure out new sourcing in that window, then that’s it,” said Alex Logemann, PeopleForBikes’ policy counsel.

The USTR is expected to make an announcement before Aug. 7 with any last-minute extensions. 

The USTR has granted extensions for some non-bike products, but only for about 35% of the exclusion requests early in the process, and at a lower rate as the deadline approached, Logemann said.

The USTR usually provides some terse explanation when it grants or denies an exclusion, but, as of late July, the industry hasn’t been able to gain any insight through those comments, because no bike-related product had been granted or denied an exclusion. 

“When you make these extension requests they go into a black box where decisions are made. It’s all a little opaque," he said.

Exclusions granted to the kids’ bikes expire Aug. 7. Exclusions on helmets and lights expire Sept. 1, and exclusions on e-bikes expire Sept. 20.

Although some of those exclusions — such as one for carbon frame parts and rims requested by Santa Cruz — were granted as recently as May, they were all retroactive, allowing importers to recover the extra tariffs they had paid since they were imposed, plus interest. 

Arnold Kamler, the CEO of Kent International, a major bike importer for the mass market, said he’s not expecting any extensions. 

“We’re planning on it not happening,” Kamler told BRAIN. “But right now it doesn’t matter, because no one is questioning the price on a bicycle.”

While the exclusions may have been intended to allow importers time to find sourcing outside China, Kamler said Kent has so far made few changes. The company’s Chinese partner had planned to open a factory in Cambodia and bought land there, but then decided against building immediately.

“They started work on Cambodia, but they ran into obstacle after obstacle. It’s really very difficult to get set up there. At the same time, they have built a 250,000 square foot factory in Malaysia, which really will only make sense if the tariffs come back,” he said. 

Other bike brands, including Trek, have moved bike production from China to Cambodia in recent years, and many, including State Bicycle, have shifted some work to Taiwan. Many importers tell BRAIN they have developed increasingly flexible sourcing plans because of the unpredictable tariff situation: not necessarily abandoning Chinese production, but developing other options so they can respond as conditions change. 

Meanwhile, domestic manufacturers, like Detroit Bikes, Saris, Greenfield, and Alta Racks, have picked up new business as a result of the tariffs. Supply chain delays resulting from COVID-19 also has encouraged domestic manufacturing

Topics associated with this article: Coronavirus, Tariffs

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