On 30th April, the EU Commission will hear the Ad Hoc Group of EU E-Cycle Companies in the case of the expiry review of the anti-dumping (ADD) and anti-subsidy (ASD) duties on e-bikes from China. In a written submission sent to the Commission last February, the Ad Hoc Group which is managed by LEVA-EU has requested the termination of the measures.

The Ad Hoc Group’s request to terminate the measures against e-bikes from China is based on multiple arguments. First, the Group points out that EBMA’s request for continuation of the measures contains a multitude of incongruities.

The most striking example is EBMA’s claims on the number of jobs in the so-called EU e-bike industry: “The EU e-bike industry is one of the largest green industries, with more than 1,000 small and medium-sized enterprises (SMEs) having provided approximately 180,000 jobs in the EU.”

In the Definitive Regulations imposing the AD and AS duties, the Commission calculated that there were 3,493 employees in the EU e-bike industry. So, where have the other 176,507 jobs come from in the short space of time between the Investigation Period used in that investigation and the new one in the Expiry Review Request? The Ad Hoc Group argues that it’s quite clear that the 1,000 SME’s and 180,000 jobs in the EU bike industry as claimed by EBMA is complete fiction.

Sword of Damocles

The most important reason for the Group to request the termination of the measures is that fact that many EU companies are attacked because of the measures, attacks which cause serious injury to the companies and sometimes even their demise. The measures against e-bikes, in combination with the measures on essential bike components have become an inextricable legal tangle that put the whole EU e-bike industry at risk and is a threat to the future of the business.

With that the risk of extended duties hangs like a sword of Damocles over the head of the European electric bike sector.  From the moment the measures came into effect, LEVA-EU has systematically urged its members to comply as closely as possible with the 60/40 rule or the 25% added value. The fear was then particularly great that, as had happened with conventional bicycles, the measures would be extended from electric bicycles to their parts. If that were to happen, it would be a death sentence for many assemblers as there are insufficient non-Chinese parts available to meet the entire European demand, let alone to respond adequately to a growing demand.

As time went on, it became apparent that EBMA did not intend to apply for the extension of duties to electric bicycle parts. It was at least surprising that, while circumvention of the duties on bicycles from China had been tackled so extensively by, among other things, expanding the duties to the parts, now that suddenly didn’t seem to be an issue for electric bicycle assembly in the EU. Why wouldn’t Chinese exporters use the same techniques to circumvent duties for electric bicycles as they allegedly did and, after 30 years, still threaten to do for conventional bicycles?

Commission confirms: Article 13.2 not (yet) applicable!

In 2020 and 2021 a lawyer wrote to the EBMA President, stating that the European Commission had confirmed, in September 2020, that e-bike parts were not subject to the extended duty on bicycle parts nor to the threshold of 60% of parts originating in China. And yet, all new companies coming on the market effectively pay 48.5% import duties on components for electric bicycles until they obtain their exemption or end-use authorization. And upon that, they must provide extensive guarantees!

As for the General Rule of Interpretation (GRI) 2(a) set out in Annex II to Council Regulation 2658/87, the lawyer writes to the EBMA President: “Until now, the EU customs nomenclature does not define the parts needed in order to have the “essential character” of a complete electrical bicycle, and there has not been any authoritative ruling by the European Courts on the question of the minimum parts needed together to consider that they have the essential character of an electrical bicycle.” The lawyer further suggests that the organization of “the various shipments of parts coming from various suppliers would not itself justify a reclassification of imported parts”. In other words: don’t bring everything in in one and the same container. That appears to indicate some doubt about the soundness of the legal basis of this matter. And rightfully so since in the meantime, dozens of European companies have been and are taken to court under Rule 2(a). One of those companies is facing a possible fine of 60 million euros and 5 years imprisonment for the manager.

Policy of double standards

What’s more, around the same time as that correspondence, the Commission grants EBMA’s request to change the rule of origin for non-preferential status. Reason for the request: companies that assemble electric bicycles in non-European countries from mostly Chinese parts are allegedly circumventing. Result: OLAF goes on the hunt in Taiwan, Thailand, Turkey, …. and finds violations of the new rule everywhere, violations which are heavily blamed on the European customers of the companies involved. These European companies are not only faced with overdue rights, but also with very serious fines in anticipation of which they must pay very heavy guarantees. Their case has already been dragging on for 3 to 4 years, whilst they are facing a period of 3 to 5 more years before they can expect a decision from the court. Not everyone will survive this.

All this cannot be described in any other way than a policy of double standards. While some assemblers in the EU are given free rein by the Commission itself to use maximum parts from China for the assembly of electric bicycles, others are being attacked based on a different interpretation of GRI 2(a), of Article 13.2 of the Basic Regulation or on a non-binding list rule for the import of e-bikes from outside the EU.

What’s more, the fact that EBMA communicated so openly about not having to adhere to the 60/40 or 25% rule, the fact that so many companies in the EU know and use this, created a particularly high risk. The Basic Regulation states in Article 13.3 “Investigations shall be initiated pursuant to this Article on the initiative of the Commission or at the request of a Member State or any interested party on the basis of sufficient evidence regarding the factors set out in paragraph 1.”

Potentially indescribable damage to the whole EU sector

If one “interested party” files a complaint, the Commission will have to launch an investigation in which there is a very real chance that circumvention will be established, and the duties will have to be applied to parts from China for electric bicycles. This would cause indescribable damage to the whole EU electric bike sector as the availability of parts outside China is far from sufficient to meet demand. Numerous European companies would be forced to close their doors, especially since the Commission has also made imports of electric bicycles from non-EU countries, other than China, significantly more difficult by changing the rule of origin.

If the Commission decides to renew the measures, that immense risk will continue to hang like a sword of Damocles over the head of the European electric bike sector. There may well be a real risk for parties who feel unfairly treated to submit a request for an investigation in accordance with Article 13.3 of the Basic Regulation.

Against the Union’s interest

As a result of all the above, the Ad Hoc Group also claims that the measures are not in the Union’s interest for the following reasons.

As explained, the measures cause injury to many EU companies and in some cases even result in the demise of companies. The measures pose a huge threat to the whole EU e-bike sector due to the looming risk of extension of duties to essential electric bicycle parts. The measures are also a major obstruction for new companies to enter the market.

Furthermore, that negative impact of the ADD and ASD measures on the companies also has a negative effect on the EU citizens. A shrinking number of companies in the e-bike sector will eventually reduce the offer, will undermine R&D and innovation and will inflate prices. This will deter citizens from buying and using e-bikes.

Diminishing sales equals less income for the companies, job losses and a negative impact on the EU economy through less revenues from taxes and social security contributions. Less e-bikes will also hamper the transition to sustainable mobility and worsen transport poverty. Velo Mondial, an NGO committed to partnering with municipalities to promote urban mobility planning with a particular focus on cycling, opposes the measures. The European Cyclists Federation (ECF) traditionally sides with EBMA because of the financial interconnection with the companies behind EBMA.

The legislation has become such an inextricable tangle that it threatens to undermine the image of the EU Commission and by extension of the whole EU.

Finally, the Ad Hoc Group points out that with market surveillance, there is a valid alternative for ADD and ASD, to ensure that not only entry-level and mid-range markets, but the whole EU e-bike market is protected from a flood of unfairly traded e-bikes and to ensure that all companies can operate in a level playing field.

The full open version of the Ad Hoc Group’s submission to the Commission is here: https://www.dropbox.com/scl/fi/hlcgfu61vy0w8br1zuxhr/Submission-open.docx?rlkey=nnynkqfjygx9xakoqmkq5fvwq&dl=0
Companies interested in joining the Ad Hoc Group and participating in the hearing with the Commission should contact LEVA-EU Manager Annick Roetynck, annick@leva-eu.com, tel. +32 475 500 588.

Photo by Sandro Gonzalez on Unsplash