DUTY SUSPENSION IS GOOD NEWS, BUT CREATES MARKET UNCERTAINTY
As reported in Bicycle Retailer and Industry News (BRAIN) September 7, the U.S. Trade Representative has extended its tariff exclusions for some China-made bicycle products until December 31. The products affected include children’s bikes and some electric bikes, BRAIN reported.
PeopleForBikes has estimated that the extension will apply to products with an import value of more than $100 million, meaning the exclusion from the 25 percent tariff will save the industry more than $25 millionThe Section 301 tariffs were to be applied in addition to pre-existing tariffs on China-made bikes. The exclusions began in March 2022, and have been extended previously. The current extension was due to expire September 30.
The saga of Section 301 punitive tariffs adding 25 percent of the FOB value (or cost of goods loaded into a shipping container in China), to the regular import tariffs of 11 percent, 5.5 percent or “0” (for e-bikes), on Chinese-sourced bicycles and e-bikes, goes back to List 2 effective August 23, 2018.
List 3 followed on July 17, 2018, and was applied to imports that arrived after June 1, 2019, after which importers of record paid a total tariff of 25 percent of the FOB value on e-bikes originating in China, and 30.5 percent or 36 percent of the FOB value on regular bicycles originating in China. Since the total tariff was paid by the importer, it was passed along through cost of goods and product retail pricing to retailers and American consumers.
List 4, effective June 24, 2019, covered all the bike products imported from China that had not been previously covered by Lists 2 and 3.
So, the higher and punitive tariffs were in effect, and included in pricing from the last half of 2019 through the end of the first quarter of 2022. At that time, the Section 301 punitive tariff of an additional 25 percent was suspended, and bicycles and e-bikes imported into the U.S. from China, were charged a reduced import duty of 11 percent or 5.5 percent for pedal-only bicycles, and “0” for e-bikes.
The suspension of the additional 25 percent tariff substantially reduced the landed cost of bicycles and e-bikes, but because of the feeding frenzy of consumer demand, we have no way of knowing if it resulted in any wholesale or retail price reductions.
It is this suspension of the 25 percent additional punitive tariff that is now in effect on imports from China until December 31, 2023. At that time, USTR will decide if this punitive tariff is to be either (1) continued into 2024, or (2) continued to be suspended, or (3) eliminated permanently.
This has created uncertainty about pricing, forecasting, purchasing, manufacturing schedules and financial planning going into 2024.
Contact Jay Townley: jay@humanpoweredsolutions.com