LEVA-EU urges Commission to end ADD on bicycle components from China
Comments Off on LEVA-EU urges Commission to end ADD on bicycle components from ChinaThe European Commission has initiated a review of long-standing anti-dumping duties (ADD) on conventional bicycles from China. This marks 31 years of duties on Chinese bicycles and 27 years on components. In this framework, LEVA-EU is calling for the abolition of duties on bicycle components, arguing that these measures are extremely detrimental to the European electric bicycle industry.
While the ADD on bicycles, originally imposed in 1993 (!) are reviewed every five years, there is no such requirement for reviewing duties on components. Since the introduction of such duties in 1997, the European Commission has only reviewed them once, in 2008, and decided to maintain them.
The measures have now turned into a nightmare for the electric bicycle industry in Europe. This is due to the Commission having failed to make a correct and adequate distinction in the regulations between conventional and electric bicycles.
No CN-code for e-bike components
Whilst for electric bicycles, a specific CN code was created, separate from conventional bicycles, the same distinction was omitted for electric bicycle components. As a result, the mechanical components used in electric bicycles still come under the same CN code as those for conventional bicycles.
When the duties on bicycles were extended to components in 1997, the e-bike industry in Europe was in its infancy. The EU companies that produced electric bicycles in those early days were originally conventional bicycle companies. They benefited from a Commission exemption that allowed them to import parts from China without paying anti-dumping duties, as long as they complied with Article 13.2 of the Basic Regulation[i]. They were using the exemption for the import of components for both conventional and electric bicycles.
However, over time, the production of e-bikes became more widespread, with many new companies focusing exclusively on e-bikes and not conventional bicycles. Nevertheless, e-bike production in the EU remained relatively limited, with much of the component manufacturing concentrated in China. For European companies, it was more efficient to design e-bikes in Europe and have them assembled in China, near component manufacturers.
This system was disrupted in 2019 when the European Union imposed trade defence measures (TDM) on e-bikes imported from China. These measures forced most European companies, that had previously assembled e-bikes in China, to relocate their assembly operations, either to other Asian countries or within the EU.
Discrimination Electric Bicycle – vs Hybrid Assemblers
Some European assemblers who had been producing both conventional and electric bicycles had capacity available. They continued to use their Commission exemptions to import parts for the assembly of both types of bicycles from China without paying anti-dumping duties.
Companies that assembled electric bicycles only could not apply for an exemption from the Commission. They were required to obtain end-use authorisation from national customs authorities to avoid paying duties on components for e-bikes. In some cases, national customs authorities themselves were not aware of this procedure and thus failed to allow the companies to obtain the necessary authorisation. In other cases, the companies were not aware of the procedure and imported their parts from China without the authorisation, effectively paying dumping duties. This was despite the fact that the Commission consistently stated that parts for electric bicycles were not subject to dumping duties.[ii]
In 2020, the Commission introduced Regulation 2020/1296 to distinguish between “hybrid assemblers” (producing both conventional and e-bikes) and “electric bicycle assemblers“. With this Regulation, the Commission gave hybrid assemblers a legal carte blanche to effectively use the exemption for parts for conventional and electric bicycles.
Companies that only assemble e-bikes face much more stringent conditions. They must first import parts and pay ADD for some time before they can apply for end-use authorisation. If they manage to obtain the authorisation, the duties paid are not refunded. They then must provide a considerable guarantee. Moreover, they must maintain costly and complex administrative processes to prove that imported parts are used exclusively for e-bike assembly.
Discrimination New vs Old Hybrid Assemblers
With Regulation 2023/611, the Commission further tightened the rules for obtaining exemptions. This regulation imposes stricter conditions that are making it impossible for new companies to start up assembly of conventional and electric bicycles in Europe. Whereas existing companies received a blank check, new companies now also must pay a substantial guarantee. They must keep their records for 5 years instead of 3. If their application is refused, they must wait 3 years instead of 1 to reapply.
The extension of the ADD to conventional bicycle components resulted from a Commission investigation at the explicit request of European Bicycle Manufacturers’ Association (EBMA). Even though large numbers of companies that assemble electric bicycles in the EU are not in compliance with Article 13.2, and the Commission is well aware of this, no investigation will ever be initiated into the potential circumvention of the TDM against electric bicycles from China. Instead of requesting an investigation, EBMA is reassuring its members that component imports from China that exceed 59% will not be sanctioned!
This exemption system, therefore, benefits established members of the EBMA, headed by the EU’s 4 largest bike concerns The system allows them to import parts from China freely, while making it difficult for new companies to enter the market. EBMA’s protectionist approach discourages competition, as evidenced by a sharp decline in exemption requests since the year 2000. In 2021 and 2022, no exemptions were granted, while only four requests were under examination.
EU Component Supply Largely Insufficient
Compounding these issues is the lack of sufficient bicycle and e-bike component production within Europe. The EU market for conventional and electric bicycles ranges from 20 to 22 million units per year, yet component production within Europe remains far below the demand. Despite some efforts to increase component production in the EU, dependency on Chinese imports is unlikely to decrease in the short to medium term. As a result, companies assembling e-bikes in Europe are often left with no choice but to source components from China.
A further problem has emerged with customs authorities in several EU Member States, who are now accusing companies, which import e-bike components from China of circumvention. These authorities are applying the General Rule of Interpretation 2(a), which allows for classifying incomplete or unassembled articles as finished products. In other words, the import of e-bike components from China, not subject to TDM, may be considered as the import of full e-bikes, subject to duties. This has led to legal uncertainties, with companies facing accusations of dumping and risking massive fines that may result in bankruptcy. Company directors are also facing potential prison sentences. Apart from causing enormous individual distress for 5 up to 8 years, these actions are also stifling growth and innovation within the sector.
Destructive Legal Uncertainty
There is no way to know with any certainty from which point EU customs will consider parts of an electric bicycle as a complete e-bike. There is no formal guidance about a possible rational basis for the application of GRI2(a) in this case. Furthermore, the Commission has explicitly confirmed to LEVA-EU that the Explanatory Note for the import of parts for conventional bicycles does not apply to the import of parts for electric bicycles Nevertheless, a Belgian judge recently invoked this Explanatory Note as a legal basis in the conviction of an electric bicycle assembler. So, no legal certainty available here either.
While European companies are burdened with these enormous challenges, Chinese companies continue to flood the EU market with cheap, and often illegal e-bikes, despite the trade defence measures. These imported e-bikes are widely available online, undermining European manufacturers.
Anti-Dumping Measures Fail to Protect EU Businesses
LEVA-EU argues that the current anti-dumping measures have failed to protect European businesses and, in fact, are harming them. LEVA-EU calls for effective enforcement of EU technical regulations, which would ensure compliance with safety and environmental requirements, while allowing for fair competition. Market surveillance authorities in each Member State should focus on monitoring Chinese imports to ensure adherence to these regulations, rather than relying on ADD that primarily serve to protect established companies at the expense of new entrants.
The dumping legislation also requires the Commission to assess whether the measures serve the community interest. LEVA-EU contends that the current measures are not in the broader interest of the EU’s electric bicycle industry or its citizens. The anti-dumping duties are causing harm by limiting competition, stifling innovation, and driving up prices, ultimately discouraging the adoption of e-bikes.
In conclusion, LEVA-EU argues that the existing measures on bicycle components from China are outdated and harmful to the e-bike industry and the broader EU economy. They urge the Commission to remove the anti-dumping duties on bicycle components to foster a more competitive and innovative market for e-bikes in Europe.
Annick Roetynck,
LEVA-EU Manager
[i] This article considers circumvention of duties if parts from China constitute 60% or more of the total value of the assembled product, unless the value added during assembly exceeds 25% of the manufacturing cost
[ii] In a letter to LEVA-EU, DG Trade Director, Mrs Sabine Weyand stated that “the bicycle parts for the assembly of electrical bicycles are legally not subject to the extended anti-dumping or countervailing measures”. She also asserts that “the assembly operations of electrical bicycles remain outside the scope of the Exemption Regulation (which logically can only exempt measures which are covered by the antidumping/countervailing measures in the first place.)”