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
