British bike makers selling to customers on mainland Europe are hitting a wall of red tape in the face of a trade deal that appears to weaken their hand on export trade and calls in to question what it truly means to buy British.
The confusion stems from the origins of components used to make up a bike. With comparably little in the way of supply of UK made, cost competitive components, bike makers are largely forced to import parts to complete the assembly of a bike; what’s more, the rule book says assembly is quite different to manufacturing in defining true product origins.
Simplified, to qualify for zero duty exports to the EU the latest advice appears to be that the value of UK-sourced / Non EU parts utilised for assembly be not above 45% of the ex-works price. For Cotic the Uk made frames eaily meet the requirement, but the Taiwanese production presumably will not, even with UK value add.
There exists an ambiguity in the terms UK origin and UK Value Add, the latter perhaps referring to a paint finish, or other modifications made once the raw product is landed.
For Cotic, which wrote a piece on its homepage detailing the situation facing customers in Europe, the puzzle was outlined as such:
“What we are currently trying to ascertain is whether our EU customers who have bought Taiwan produced frames or bikes assembled using the majority of Taiwan sourced parts might need to pay some import duty. This is because the rules regarding items being of “UK origin” are a bit unclear, and the ‘value add’ by Cotic possibly doesn’t add up to a significant enough percentage of the value of the end product supplied to qualify for zero rating. I am currently going through the full trade agreement to try and figure it out, and we are in touch with our industry body to get to the bottom of this.”
As a result, the Brit brand is not shipping anything to European clients until it has clarity. By the time the situation is resolved it is highly likely that prices will inevitably have to rise as a result of both shipping cost increases, but potentially customers will also have a local VAT payable to the courier upon delivery. UK VAT of 20% will however now not apply to EU customers.
There are other shifts in policy business trading across the Channel need to be aware of too. European businesses sending goods to the UK under £135 in value will no have to collect the VAT at the point of sale. This has been met with ire by some, but welcomed by others relishing the thought of less competition from Europe on lower retail priced items.
A number of retailers CI.N has heard from in the past few days are now reporting seeing shipping costs quadrupling to as high as €120 and lead times running from the days taken pre-Brexit to north of a month.
CI.N has reached out to a number of other UK bike makers to gather their feelings on the path ahead for Brit brands selling into the EU. If this issue affects your business and you’d be happy to share thoughts please email the editor here.