(BRAIN) — There are as many ways to calculate Section 232 tariffs on imported steel and aluminum as there are companies importing products containing those common materials. But most bike importers tell BRAIN that if bikes and e-bikes become subject to the tariffs, it will add hundreds of dollars to the cost of bikes at wholesale, and even more at retail.
Some bike products, including e-bikes, chains, exercise bikes/trainers and some hand tools are already subject to Section 232 tariffs. The chains and tools were added in March; e-bikes and trainers were added in August.
Now, Guardian Bikes and an aluminum extruder trade group have requested that all bikes, bike frames and some e-bikes be added to the derivative lists for both Section 232 steel and aluminum tariffs. If added, these new tariffs would apply to imports from all countries.
PeopleForBikes said such a move would be “crushing” to the industry and is urging industry members to leave comments in opposition on a Department of Commerce website.
Since the first list of derivatives was released this spring, importers have struggled to understand how to apply them.
An aggressive approach, which some importers have taken, is to assume that the Section 232 tariffs were intended to apply to the raw value of the materials in the product. That makes the cost relatively small because even an e-bike with an import value of $1,000 might contain only 40 pounds of raw steel, valued at perhaps 50 cents per pound, for a Section 232 tariff cost of less than $10 (not counting other tariffs — more on that lower down).
Wouldn't it be pretty to think so? But most companies take a far more conservative approach, which is why the requested tariff increases this week have importers extremely concerned.
The more conservative approach is to apply the 50% tariff to the importer’s price paid for each of a bike's steel or aluminum components.
Other than bikes with carbon or titanium frames, more than 90% of the value of most bikes and e-bikes is steel or aluminum — just about everything except the tires, inner tubes, saddles and grips.
The conservative approach is to add up the cost of each component — say a steel cassette that cost the bike brand $11. A frame that cost $100. A handlebar that cost $4. In the end, a bike valued at $1,000 at import might contain steel and aluminum components worth over $900. So a 50% Section 232 tariff would add $450 to the tariffs on that bike.
“I was told second-hand by a supplier that there's one or two brands in the industry that are saying, 'oh, yeah, we hired a lawyer and they looked into it, and we're only adding about five bucks a bike.’ I would caution brands to be very careful about making that kind of claim,” said one importer who takes the more conservative approach.
“I'm going with the understanding I have and avoiding risk to my company as best I can,” the importer said. (He said his company doesn't count tiny steel parts like water bottle bolts and reflector brackets. "There's a limit," he said.)
PeopleForBikes policy counsel Matt Moore told BRAIN that the “valuation of merchandise for customs purposes is a complicated area.”
But Moore said a Customs and Border Protection FAQ page is clear about how to value steel products.
“It’s the ‘price paid’ for the steel content in the form purchased," Moore told BRAIN, paraphrasing the FAQ. "Not the price of the raw material farther up the supply chain.”
Stacking costs.
Since the first Trump administration imposed Section 301 tariffs of up to 25% on Chinese imports, industry experts have been quick to note that these tariffs “stack” on top of pre-existing tariffs, instead of substituting for them.
The second Trump administration has added more varieties of tariffs and most continue to stack, but there are some exceptions. Importers say the exceptions are subject to change and often hard to determine. The differences can amount to hundreds of dollars on the landed costs of even a modest bike, or hundreds of thousands of dollars on a container load of them.
It’s fairly certain that, if imposed, the steel and aluminum tariffs requested this week would stack on top of most existing tariffs, including the long-standing MFN duties of 5.5-11% on bikes, Section 301 tariffs on Chinese imports of up to 25%, and the so-called fentanyl tariff on Chinese goods of 20%.
But there is some uncertainty about whether the new Section 232 tariffs, if imposed, would stack on the administration’s “reciprocal” tariffs, which range from 10-50% depending on the country of origin (Reciprocal and fentanyl tariffs are each imposed under the International Emergency Economic Powers Act (IEEPA)).
According to another CBP FAQ, reciprocal tariffs do NOT stack on top of Section 232 steel and aluminum tariffs. Instead, the FAQ suggests that a product's steel and aluminum content would be subject to the Section 232 tariff while only the product’s non-steel or aluminum content would get hit with the reciprocal.
Other industry sources interpret the stacking rules differently and believe both the reciprocal and Section 232 steel and aluminum tariffs would apply fully.
The differences add up.
In the example of a non-electric bike from China valued at $1,000, the total tariff burden might be:
- $450 Section 232 on steel or aluminum content (50% of $900 value)
- $10 Reciprocal (10% IEEPA) on the non-steel or aluminum content
- $250 Section 301 (25% applied to $1,000)
- $200 fentanyl (20% IEEPA applied to $1,000)
- $110 MFN (duty of 11% applied to $1,000).
For a total tariff of $1,020 in tariffs, or an effective rate of 102%.
If the reciprocal tariff stacked on the 232, the total on a Chinese non-electric bike would look like this:
- $450 Section 232 steel or aluminum content (50% of the $900 value).
- $100 Reciprocal (10% IEEPA applied to $1,000).
- $250 Section 301 (25% applied to $1,000).
- $200 fentanyl (20% IEEPA applied to $1,000).
- $110 MFN (duty of 11% applied to $1,000).
For a total of $1,120, or an effective tariff rate of 112%
The same bike from Taiwan is not subject the Section 301 or fentanyl tariffs. So the non-stacking costs would be:
- $450 Section 232 steel or aluminum content (50% applied to the $900 value).
- $20 Reciprocal (IEEPA) rate applied to the remaining $100 of non-steel or aluminum content.
- $110 MFN duty of 11% applied to the $1,000 value.
For a total of $570, or an effective tariff of 57%.
If the Section 301 and reciprocal tariffs stack, the Taiwanese bike's tariffs would be:
- $450 Section 232 steel or aluminum (50% of the $900 value).
- $200 Reciprocal (IEEPA) 20% applied to $1,000.
- $110 MFN duty of 11% applied to $1,000.
The total: $760, or 76% effective tariff.
Bottom line: Whether the Section 232 tariffs stack or not, they add up to hundreds of additional dollars on the importer’s landed costs, which equates to even more added to wholesale and retail costs.
No drawbacks.
In another twist, the Section 232 tariffs paid are not eligible for drawback, meaning if an importer re-ships a product to another nation, they would not be able to recover the Section 232 tariffs paid, the way they can recover other tariffs paid. This adds costs for importers who service other countries from a U.S. warehouse.
