Proposed Bill Could Shut Down Cheap E-Bike Imports

Have you ever wondered how all those “cheap e-bikes” got imported into the U.S.? Last year we asked Ed Benjamin, founder and president of the Light Electric Vehicle Association (LEVA). Benjamin told us that they were getting into the country as de minimis shipments.
 
To explain, U.S. international trade import laws allow so-called non-market economies, such as China, to ship goods for import valued under $800 to come into this country free of duties, taxes or fees. Import value translates to FOB value, not wholesale or retail, but the value of the goods. So, a “cheap” e-bike with an import value of $800 or less is shipped directly to a consumer in this country from a company or brand in China, or to a closer-to-market Canadian or Mexican warehouse, that in turn ships directly to U.S. consumers. 
 
How many? Based on Benjamin’s estimates for 2021, HPS is projecting the preliminary total number of e-bikes imported into the U.S. was approximately 780,000 to 800,000, with 260,000 to 270,000, (or about 1/3) imported as de minimis shipments directly to American consumers. This estimate will be refined over the next month.
 
Cheap e-bikes with an FOB value of $800 or less also include approximately 260,000 to 270,000 cheap lithium-Ion (L-I) batteries, because the most expensive component on any e-bike is battery, costing more than the electric hub or mid-drive motor. This large quantity of low-cost batteries enhances the probability of a catastrophic battery failure, resulting in a fire.
 
The Sourcing Journal reported January 19 the introduction of a bill by Representative Earl Blumenauer (D-Ore.), chairman of the House Ways and Means Trade Subcommittee, that would stop non-market economies from exploiting the de minimis threshold.
 
“The number of packages we receive in the United States has skyrocketed to more than 2 million daily packages, a number that will only climb in the coming years,” Blumenauer said relative to imports under the current de minimis provision. That means a total of 712 million packages entering the U.S. annually free of duties, taxes or fees, including bicycles, e-bikes and related parts and accessories.
 
The bill also prohibits goods subject to enforcement actions from using de minimis provisions. In principle, federal enforcement statutes, such as Section 301 and 232, provide the United States with leverage by assessing an additional punitive tariff on top of any already existing tariffs.
 
Bicycles, e-bikes and related parts and accessories imported from China have been, and currently are, subject to a punitive tariff of 25 percent under Section 301. However, these same products imported from China under the de minimis provision are exempt from the punitive tariff that mainstream importers are subject to, undercutting this enforcement action and creating unfair competition.  
 
The bill was subsequently incorporated into a trade package that has passed the House and has been sent to the Senate. The current language will put a stop to the abuses of the de minimis rule, and in the process stop the proliferation of cheap batteries. However, there may still be amendments affecting this language in the Senate.
 
We will keep you advised of both the status of the language and movement of the legislation through the Senate, conference and to the President for signature. If you have any questions, please contact me.
 
Jay Townley, jay@humanpoweredsolutions.com

What Keeps Me Up at Night

As the pandemic evolves to endemic, and we begin an entirely new level of geopolitical sourcing risk, the Ides of March approaches.

So too does the conference and summit season in the form of the PeopleForBikes (PFB) Bicycle Leadership Conference (BLC), and the Sea Otter Classic Summit, from the former producers of the BLC.

The BLC is a face-to-face bicycle industry conference March 21-23 (the Ides of March is the15th) at Dana Point, California. The Sea Otter Classic Summit, also a face-to-face conference, is April 5-7 at Monterey, California. It appears the two bicycle business, executive level, multi-day conferences are in competition, if the $1K+ cost to attend each is any indicator.

There is also the fact that 2022 is a transition year, with PFB now owning and producing its first live BLC, and Sea Otter Classic’s new owner’s (Life Time Inc.) attempting to find, along with previous owner Frank Yohannan, who will stay on to manage for several years, a replacement for the annual BPSA BLC that had become a regular part of the bicycle business event calendar.

Why does this keep me up at night? Even after the sales and service surge, there are few specialty bicycle retailers who can afford the cost of either of the business conferences that have now emerged from the pandemic. From the supply side this may be a sign, even if short-term, that there is no reluctance to spend the increased revenue and profit realized over the last two years.

PFB announced its agenda for the two-day BLC in a press release published in Bicycle Retailer and Industry News February 22. While very detailed and sufficiently populated with top-tier speakers, it seems to me to lack a connection to the reality of both the new era of geopolitical and economic risk we entered February 25, the in-transit goods tied up in supply chain congestion that is weighing heavily on company balance sheets, and more urgently the inventories already amassed to meet anticipated strong consumer demand that began to ebb during the fourth quarter of last year, and continues to ebb as the conference and summit season is upon us.

The Sea Otter Classic’s Summit agenda is just beginning to emerge, and new speakers were announced in BRAIN February 22.

This bicycle business conference still has an opportunity to examine and discuss the reality of the movement from just-in-time (JIT) inventory management to just-in-case (JIC) inventory management, and companies and retailers building inventories to meet what has been strong consumer demand. Over-ordering has been rife, and the impact is spreading through the supply chain. This trend will halt when demand recedes, as it inevitably will, and suppliers, brands and retailers will be holding excess inventories.

I completely understand that the antitrust laws of the land prohibit discussing certain aspects of this situation and the potential going forward, but there is plenty of room for experts to speak and interact on panels to discuss what can be the grist for public forums.

There is extensive primary consumer research that was conducted in November by Sports Marketing Surveys (SMS) for the National Bicycle Dealers Association (NBDA) that has been available since December. It can greatly enhance supplier, brand and retailer understanding of the new adult American cyclist that emerged during the pandemic years of 2020-2021. 

We say “new” because 27 percent of all adult cyclists during 2020-2021 were new to cycling, and had not participated in bicycle riding prior to the pandemic.

Add to this 20.7 percent of all adult cyclists during 2020-2021 who returned to cycling during the pandemic, and you have a total of 47.7 percent who were either new or returned to cycling during the pandemic.

Ethnicity of adult cyclists in America has been a constant and troubling demographic reality for over four decades. There has been some recent information that 44 percent of new cyclists during the pandemic were racial minorities, resulting in 56 percent being white/Caucasian, four percentage points below the national percentage of 60.1 percent.

The reality, identified by the NBDA Consumer Research, is that 73.3 percent of adults who had not cycled before and took up bicycle or e-bike riding during the pandemic were white/Caucasian, continuing the large over-indexing of the last four decades.

All demographics of American cyclists need to be reviewed and discussed because this data, along with all the other findings of the NBDA consumer research, illustrates the opportunities for the real growth of bicycle riding participation going forward.

The NBDA research was the first to identify and call out the emergence over the last two years of the new direct-to-consumer (DTC) channel of trade for bicycles and e-bikes. It provides detailed data about the American adults who identify with this new DTC retail channel, the innovative functionality of the new electric assist and throttled e-bikes, and the future intention to purchase.

In follow-up discussions with bicycle dealers and their employees, it has become clear that (1) during the last two years the DTC channel of trade has moved to an early stage of maturity, and (2) the top-tier DTC bicycle brands are primarily electric assist, and (3) the top tier DTC e-bike brands have established several new segments of e-bike product, including the so called “electric-BMX.”

While a much better name needs to be attached to this new segment, it has also become readily apparent that the American bicycle business needs to acknowledge and further define the new DTC channel of trade for retailing bicycles and separate it from online, which also needs to have its definition modified to fit the findings of the NBDA consumer research.

Defining the DTC channel of trade and its new segments includes the NBDA research findings that:

  • 50.7 percent of e-bike cyclists purchased an e-bike with a throttle because of its “ease of use.”
  • Females were more likely to purchase an e-bike with a throttle so they pedal less.
  • 88.4 percent of females stated they would consider a throttle on future purchases.
  • 94.4 percent of males stated they would consider a throttle on future purchases.

We think it is important for the American bicycle business to discuss this snapshot of important findings about the purchase intentions of e-bike cyclists, as those intentions will affect future e-bike product offerings and regulations.

This leads to Human Powered Solutions (HPS) advocacy for lithium-Ion (L-I) battery safe charging and storage. Our primary objective is to educate and inform American specialty bicycle retailers about safe battery storage and charging procedures. A summary of recommendations is available on the HPS and NBDA websites (www.nbda.com).

These protocols are offered by HPS founding partner and chief technology officer Mike Fritz as recommendations for bike shops and their policies and procedures associated with e-bike battery packs. While knowing that the chances of a battery fire are miniscule, the ramifications of a L-I battery fire are so significant that the relatively simple steps recommended are more than justified.

Why does this keep me up at night? HPS is concerned that there appears to be a reluctance on the part of much of the bicycle business to place L-I battery safety education and information on the same level, and with the same resources and visibility, as L-I battery recycling.

While I could launch into a long and detailed discussion of relevant facts and concerns, I don’t believe it would be productive. Instead, I direct you to the two webinars HPS and Mike Fritz have presented for the NBDA on this subject over the last two quarters. The recordings of both webinars are available for viewing by contacting rachelle@nbda.com.

What is appropriate is to observe, unless I am missing something, that the PFB BLC agenda published to-date does not appear to focus on or cover e-bike L-I battery safe charging and handling. Nor does the preliminary Sea Otter Classic Summit agenda published to date.

What keeps me awake at night is the knowledge that the window of opportunity may be closing for the American bicycle business to get out ahead of the adult cycling consumer’s future wants and needs relative to bicycles and safe battery charging and storage.

However, the door for HPS clients and readers of this newsletter will remain open. I will be happy to discuss this article, and what keeps me up at night, anytime. I will probably be awake.

Jay Townley: jay@humanpoweredsolutions.com