Ad Hoc Group argues for termination of anti-dumping duties on China eBikes

Anti-dumping duties, enacted by the European Commission on electric bikes from China, are under discussion again, with an Ad Hoc Group – managed by LEVA-EU – arguing for their removal. If the group gets its way it would likely make cheaper eBikes available in the EU, but would represent a landmark move which would affect European bike makers potentially negatively. It’s a big contentious debate which bears more examination. For now, here is the position of the Ad Hoc Group:

On 30 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 has requested the termination of the measures, with a number of arguments being used.

First, the Group points out that EBMA’s request for continuation of the measures contains a “multitude of incongruities”, the most striking of which are claims on the number of jobs in the “so-called EU eBike industry”. EBMA’s claim is that: “The EU eBike 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? – argues the group. It adds that it is “quite clear” that the 1,000 SMEs and 180,000 jobs in the EU bike industry as claimed by EBMA is “complete fiction”.

The combative tone continues to note 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 eBikes, in combination with the measures on essential bike components have become an inextricable legal tangle that puts the whole EU eBike industry at risk and is a threat to the future of the business.”

The group said 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, argues LEVA-EU.

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, it noted.

“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 applicable … yet?

In 2020 and 2021 a lawyer wrote to the EBMA President, stating that the European Commission had confirmed, in September 2020, that eBike 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 authorisation. And upon that, they must provide extensive guarantees, warns LEVA-EU.

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 organisation 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, said LEVA-EU: “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 the above correspondence, the Commission granted EBMA’s request to change the rule of origin for non-preferential status. The reason for the request was that 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, says LEVA-EU, 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 another 3 to 5 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

The group went on: “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 eBike 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, a cyclists organization 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 eBike market is protected from a flood of unfairly traded eBikes and to ensure that all companies can operate in a level playing field.”

Clearly, the UK is no longer part of the EU although it has so far adhered largely to EU policies such as anti-dumping. However, the Trade Remedies Authority (TRA) opened a transition review into anti-dumping and countervailing measures on electric bicycles imported from China into the UK last May.