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US framemakers face new EU tariff, an 'unpleasant surprise'

Published December 1, 2020

BENTONVILLE, Ark. (BRAIN) — Last year the bike industry escaped collateral damage from the long-running dispute between the European Union and the United States over commercial aircraft industry subsidies. But this fall, in a continuation of that dispute, the EU has imposed a 25% tariff on U.S.-made bike frames, forks, and frame parts.

The tariff imposed last month applies to complete frames and frame parts, but not complete bikes. The bike products are on a list of U.S. exports valued at $4 billion annually subject to the new duty. Other products on the list include ketchup, chocolate, frozen orange juice, rum and vodka, video game consoles and exercise equipment, all subject to a 25% tariff. U.S.-made aircraft are subject to a new 15% tariff.

The U.S. has accused the EU of subsidizing commercial aircraft manufacturers, Airbus in particular, and last year imposed new tariffs on European goods including cheese and wine. European-made bike parts, including cassettes (think Campagnolo) and hubs (think DT Swiss) were originally on the list, but testimony by the U.S. bike industry led to their removal.

The EU, which says the U.S. subsidizes Boeing through tax breaks, responded on Nov. 9 with the list that includes bike frames, forks and parts thereof. The EU imported about 13 million euros ($15.7 million) in those products from the U.S. in 2019, according to European Commission trade reports.

One of the best known U.S frame makers, Allied Cycle Works, does considerable sales internationally, thanks in part to a special edition frame model the company did with Rapha this year, said Brendan Quirk, Allied's CEO. 

Quirk said the tariff was "an unpleasant surprise" and "a disappointment."

The special frame was connected to Allied and Rapha-sponsored gravel racer Colin Strickland, and the two brands may do another special edition bike in 2021, Quirk said.

"Naturally, this (bike) would have global reach. The tariffs certainly won't help us sell bikes in the EU," Quirk said.

Quirk said Allied also has expanded sales in Europe and began setting up distribution there in 2020. "We did a lot of good work in this area, but we have a long way to go. These tariffs will be a drag as we explore key untapped markets for Allied such as Germany."

However, Quirk noted that the tariff applies only to frames, not complete bikes.

"So, honestly, it's an opportunity to turn every potential EU frameset sale into a complete bike sale. If someone wants an Allied (or Moots, or Guerilla Gravity, or Seven, or Mosaic) badly enough — they're likely to pony up for the full bike."

In announcing the new tariff last month, EU Trade Commissioner Valdis Dombrovskis said he was eager to settle the dispute and remove the tariffs imposed on both sides. But he said that due to lack of progress in negotiations the EU "had no other choice" but to impose the tariffs.

U.S. Trade Representative Robert Lighthizer responded to the EU move with a statement of his own last month.

"The United States is disappointed by the action taken by the EU today," Lighthizer stated. "The alleged subsidy to Boeing was repealed seven months ago," Lighthizer said, referring to a Washington State tax that was repealed on April 1, 2020.

He said the World Trade Organization prohibits member countries from unilaterally imposing retaliatory tariffs on a trading partner.

"The EU has long proclaimed its commitment to following WTO rules, but today's announcement shows they do so only when convenient to them," he said. Lighthizer said the USTR continues to negotiate with the EU to resolve the issue.

Allied did a special bike for Rapha RCC's international members.
Topics associated with this article: Tariffs

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