EU companies damaged by anti-dumping legislation meet with Commission

10 days ago

7 minutes

On 15 March, more than 40 participants, a mixture of company representatives and lawyers, signed up for the meeting with the EU Commission on the damaging effects on EU companies of anti-dumping (ADD) and anti-subsidy (ASD) measures against e-bikes from China. The meeting had been requested by LEVA-EU. In an exchange with three different Commission departments of DG Trade and DG Taxud, a long list of questions was presented. LEVA-EU Manager, Annick Roetynck, opened the meeting with a presentation of the different ADD and ASD issues that are damaging many EU companies.

LEVA-EU Manager, Annick Roetynck, opened with the ascertainment that ADD and ASD on e-bikes from China, in combination with related legislation has become an inextricable tangle. EU companies are no longer able to understand the legislation and apply it correctly. As a result, many companies come under attack with their very existence put at risk. Some companies have already gone bankrupt, some are on the brink of bankruptcy. Annick Roetynck concluded that the inextricable tangle causes legal uncertainty that poses very serious risks and threats to the whole EU e-bike industry. As a result, she requested the Commission for clarification of the legislation, for potential measures to provide legal certainty and for potential measures to improve legislation.

All Chinese components

One of the first issues on the table was the applicability of Article 13 of the Basic Regulation in court-cases involving national customs services. This Article stipulates among other things that if the Chinese parts in an EU assembly represent 60% or more of the total value of the components or if in the assembly less than 25% value is added, the assembly may be considered to be circumventing.

In several EU countries, national customs services have embarked on litigations partly based on this very article. In the past 5 years, LEVA-EU has always cautioned its members to comply with the 60/40 – 25% rule for fear of circumvention accusations and extension of the duties to essential e-bike components. It was therefore surprising, to say the least, to find the EBMA openly reassuring its members about the fact that the EU Commission itself had confirmed that the 60/40 rule or 25 % added value did not apply to e-bikes.

In the meeting, the Commission repeatedly emphasized that customs services have no legal right to invoke Article 13, for which the competence lies solely with the Commission. The Commission representatives also assured that they were prepared to raise the matter with national customs authorities, provided that companies and/or their lawyers addressed the Commission directly. With that, the Commission guaranteed absolute confidentiality.

One of the company managers in the meeting, who is subjected to a criminal court-case partly based on Article 13, reacted particularly emotionally when discussing this issue. He explained to the Commission, how all his life, he had done nothing but working hard for a third generation EU family business. His perception was that Europe was destroying not only his company but also him personally. He faces a fine of 60 million euro and 5 years in prison, a downright inhumane threat.

General Rule of Interpretation 2(a)

Unfortunately, the Commission’s assurances on Article 13, did not solve the problem since a representative of DG Taxud further complicated the issue by introducing the problem of the General Rule of Interpretation (GRI) 2(a), set out in Annex II to Council Regulation 2658/87. This Rule stipulates that the imports of parts may be considered as the import of a complete e-bike, which may prompt customs to categorize the parts under the HS-code for e-bikes instead of the codes for components. That categorization in turn, comes with ADD and ASD, if the components originate from China.

The Commission seemed genuinely surprised to find a lawyer confirming to the EBMA President in 2021 that: “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 Commission was however unable to provide further clarification on how to practically deal with GRI 2(a). The Commission representative stated: “The import of e-bike parts could be characterized as imports of complete e-bikes for customs’ clarification purposes in principle if they are imported in one or more containers presented to customs’ clearance on the same day. Nevertheless, it cannot be excluded that parts imported on different dates are considered complete e-bikes, if it is obvious from objective characteristics that they are related.” In other words, while one department of the Commission confirmed that assembling electric bicycles from 100% Chinese parts was legal for the moment, another department could not give a conclusive answer to the question of how these could be legally imported.

Import e-bike components ǂ import bike components

A few years ago, the Commission published an explanatory note for national customs services on the import of conventional bicycle parts, stating that an incomplete bicycle, whether or not assembled, is to be classified under heading 8712 for complete bicycles, if it consists of the frame, the fork and at least two of the essential bike components subject to ADD. It is not possible for the Commission to publish a similar explanatory note for e-bike components because custom services have not asked for this. In the meantime, some custom services in the EU apply the same explanatory note to e-bike components. In the meeting, the Commission confirmed that this is incorrect and declared themselves prepared to make a statement about this!

The last issue that was discussed in this meeting was the legal validity of the non-binding list rule for imports of e-bikes from outside the EU, issued by the Commission at the explicit request of the EBMA, aimed at actually refuting the change of tariff heading (CTH) for e-bikes imported from outside the EU.

In 2017, also at the request of EBMA, HS code 8711 was amended to “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars; side-cars” with a view to creating a specific HS code for electric cycles. With that, electric bikes came under the same rules of origin as motorcycles, one of which was CTH. According to the Commission, EBMA subsequently requested for a change of that rule of origin, because the rule for motorcycles was allegedly not suitable for electric bikes.

Since this change, if for instance a Taiwanese, Thai or Turkish assembler imports parts from China for the assembly of electric bicycles to be exported to the EU, that assembly does not qualify as “last substantial transformation” and must therefore be considered circumvention.

Many outstanding questions

So, EBMA requested the Commission in 2020 to close the so-called loophole by changing the rule of origin, upon which dozens of EU companies were attacked and literally and figuratively being presented with the bill. At the same time, EBMA reassured dozens of other EU companies that importing Chinese components for the assembly of e-bikes in the EU was not a legal issue.

According to the Commission, there’s no going back on this change of the non-binding list rule, because it was approved by the member states. All this still doesn’t provide a conclusive answer to the question of the legal validity of this non-binding list rule.

Furthermore, there are still many other outstanding questions about for instance OLAF’s working methods, the lack of insight into the investigations as well as the lack of redress for the European companies, that are subsequently charged by customs and dragged into legal cases that may last 5 to 10 years and cost the companies fortunes . Since at the end of this meeting, many questions remained unanswered, on behalf of the participants, LEVA-EU expressly requested a second meeting for further discussions. The classification of e-bike components and the discrimination of companies under end-use authorization as opposed to the exemption scheme are two more issues that still need to be discussed. Although some tentative steps towards improvement have been taken, this meeting has mainly shown that the legislation is an inextricable tangle that entrepreneurs simply cannot understand. A story to be continued.

Photo by Rocío Perera on Unsplash

Annick Roetynck

Annick is the Manager of LEVA-EU, with decades of experience in two-wheeled and light electric mobility.

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