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CITT Tariff Ruling Update

Sept. 21, 2005 – As expected, the CITT’s (Canadian International Trade Tribunal’s ) recent recommendations were a central and controversial topic for Canada’s cycling industry at ExpoCycle 2005, the Canadian bicycle industry’s trade show staged by BTAC (Bicycle Trade Association of Canada) and held Sept. 16-18 at Place Bonaventure in Montreal, Que.

On the morning of the show’s first day, BTAC hosted an information session on the CITT’s recommendations to apply a 30% tariff on most imported bikes with a freight-on-board (FOB) value of $225, which, according to the CITT report, translates to a retail price of $400. The tariff drops to 25% in the second year and 20% in the third, before expiring. This sort of additional protection, afforded by Global Safeguard Action, was originally sought by the CBMA (Canadian Bicycle Manufacturers Association) in the face of low-cost bicycle imports from other countries, and it led to the CITT inquiry and its subsequent recommendations. These recommendations are now in the hands of the ministry of finance.

To a jam-packed room, a panel of seven speakers gave their take on the recommendations and the potential effect on their businesses and the cycling industry. The panel included Jacob Heilbron (Kona Bicycles), one of the founders of CASBI (Canadian Association of Specialty Bicycle Importers), the primary organization leading the crusade against the CBMA and the CITT’s recommendations; Mike Hietpas (Trek Bicycles), who sat through the nine days of hearings in Ottawa while the CITT inquiry reviewed the matter; Raymond Dutil (Procycle), who heads up the CBMA along with Raleigh Canada; and IBDs (Independent Bicycle Dealers) Brian Sipthorpe (Bow Cycle), Ian Dawes (Ecclestone Cycles), Reynold Van Herpe (Reynold Cycle) and Eric Primeau (Andre-Primeau Velo).

All except Dutil spoke out against the CITT’s ruling, claiming that the cycling industry and consumers will be unduly injured by the additional tariffs and that IBDs’ interests have been ignored in the process. They stated that the $400 retail threshold applies to mass merchants, not IBDs, for whom an FOB of $225 translates to a retail value of approximately $600, and if implemented, would hurt IBD businesses across the country. Heilbron stressed the unfairness of the recommendations as they would add a third layer of tariffs on most imported bicycles that already face a 13% customs tariff (higher than other consumer products that are subject to such customs tariffs) and anti-dumping protectionary duties (in place since 1992) previously initiated by the CBMA. Other panelists said that the recommendations would discourage participation in cycling at a time when skyrocketing gas prices were making alternate modes of transportation much more relevant. In addition, they claimed that the new tariffs would dampen enthusiasm for the sport and lead to job loss.

Dutil countered that the CBMA was mainly trying to save 600 factory jobs and that this initiative was an attempt to create a level playing field. He said it was directed at mass merchants, who have the bulk of the low-end bicycle business, and not the IBD sector. To support this, he added that most of Procycle’s business (80%) was with the IBD market, while only 20% was with mass merchants. He disagreed with the notions that IBDs would be adversely affected by the recommendations and that participation in cycling would decline. Dutil stated that a stronger Canadian dollar was also a factor putting pressure on business. He then went on to add that Procycle’s factory could handle a substantial increase in output to meet industry demand for orders placed now, and guaranteed spring delivery. He emphasized that their current pricing, set prior to the CITT’s ruling, would not change.

The floor was opened to questions and the audience remained unconvinced as Dutil was continually questioned or rebuffed by many retailers and suppliers who agreed with other panelists’ claims that the situation was dire and would have a negative impact on their businesses and the sport at large. A couple of members from the audience were sympathetic to Dutil and the CBMA, stating that they believed the situation was not as bad as purported and may even be good for business. A mood of frustration and anticipation filled the air when the meeting ended, and as everyone headed back to the show, the question of what to do next lingered.

CASBI Call to Action
At the end of the day, CASBI held a meeting to another filled-to-capacity room. CASBI’s lawyer, Jim McIlroy, re-outlined the association’s position, further explaining and detailing the two current tariffs and duties on bicycles and this third pending layer. He urged a call to action to stop the CITT’s recommendations from being signed into law by the Ralph Goodale, the minister of finance. The association presented a prepared letter for IBDs and suppliers to send to the minister and to their local MP, and offered up a petition that CASBI will present to the minister of finance. Both the letter and the petition cited CASBI’s points of contention, which included the unfairness of the additional tariff, its effect on the environment and on Canada’s Kyoto commitment, the likelihood of reduced participation in cycling, and the damage to countless IBD businesses across Canada. Signs that read “Say No to 30% Surtax On Bicycles” were distributed, and one dealer suggested that an organization to protect Canadian IBD interests be started. As attendees lined up to sign the petition, they were given plenty of encouragement to act now, before it is too late.

BTAC Annual General Meeting
At BTAC’s Annual General Meeting (AGM), held on the final day of the show, BTAC’s board of directors began by stating that they were undecided as to whether to remain neutral, or what position the organization should take on the CITT matter, claiming that there were BTAC members in both camps and that the issue was complex. Seeking a mandate, the board decided to request member feedback prior to the start of the AGM. However, the AGM was poorly attended, and of the few members who spoke, most urged BTAC to take a stand against the CITT’s recommendations. This included Trek’s Hietpas, a former BTAC president and outgoing board member, who dissented from the board’s non-position on it. In the end, the board opted to poll its membership by email before issuing a formal statement and its position on the matter.

Pedal will continue to monitor the situation.

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