Canadian IBDs and bike distributors unite against surtax

Guy Bombardier of Cybersport of Vancouver BC, manufacturer of Brodie Bikes, has emailed BikeBiz.com stating that the proposed surtax on bicycles imported into Canada will hurt high-end bike shops and further protect low-end domestic manufacturers who "have been sitting on their collective butts not trying to bring their business up to world standards, but rather relying on government to bail them out."
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Currently all bicycle imports into Candaa have a 13 percent import duty and some also have a 5-50 percent dumping duty applied. An additional 30 percent surtax against bikes from the Far East, as recommended to the Canadian government by the Canadian International Trade Tribunal (CITT), would "would make us the most taxed bicycle industry on the planet," said Bombardier.

The CITT recommended that Canada impose a three-year surtax on bicycles with a freight-on-board (FOB) value of $225 Canadian or less. The 30 percent tax would drop to 25 percent in the second year, 20 percent the third and would then be dropped.

The Canadian Bicycle Manufacturers' Association complained to the CITT in 2004, asking it to impose a 48 percent tariff on foreign bike imports in order to stem the flow of lower-cost foreign imports into Canada. According to reports from Procycle Inc. and Raleigh Canada Ltd, imports have almost doubled in recent years to 1,063,768 units in 2004 from 538,523 in 2000.

Procycle and Raleigh Canada fear that without the tariff protection they will lose jobs to Asian nations.

These two companies are assemblers of low-end bike typically sold in mass merchandise outlets such as Wal-Mart and Canadian Tire.

Surtax critics say Procycle and Raleigh avoid existing tariffs, duties and surcharges by importing most of their bicycle frames and components unassembled into Canada where they then assemble them for distribution.

"Gasoline prices are up, inner city smog and traffic congestion are up, greenhouses gases are up, childhood obesity is up and virtually everyone has identified bicycles as part of the solution. So where is the public interest in a 30 percent import bicycle surtax?" said Peter Lilly of CyclePath, an independent bicycle dealer (IBD) of Toronto, Ontario.

"CITT is recommending an unwarranted surcharge that will effectively price affordable, quality bicycles out of the market."

Mike Theil, owner of four Bicycle Sports Pacific stores in Vancouver, said: "It's outrageous that Canadian cyclists, my business, my staff's jobs, the health of our nation and the environment are all up for sacrifice, to bail out two globally uncompetitive businesses that have failed to adapt despite fifteen years of trade protection. They continue to try to compete for the bottom end of the bicycle market in Canada.

"These two companies need to focus on making better bikes, not continually coming back to government for more trade protection. There are many successful Canadian bike manufacturers and they do not need or support this proposed tax."

One of these is Cybersport, manufacturer of Brodie Bikes.

Cybersport's Bombardier said: "It's not just bikes at $400 retail or less that would be affected. The problem for this number is that it is $400 for a company like Canadian Tire since it imports direct and therefore avoids a middleman making the bike a $400 bicycle. Where it affects IBDs is that most brands here in Canada have a distributor so that the same bicycle that leaves the factory at $225 eventually, in the IBD channel, is a $700 retail bicycle instead of a $400 one. This is where the problem lies!

"Up to $400 the IBD doesn't spend much time or effort to sell these bikes but crank it up to $700 and there you have a rather large segment of the IBD's cash flow heading over to mass-market, and a lot of the IBD's losing big-time.

"This whole debate over $400 bikes is essentially wrong since it is part of the misinformation campaign that Procycle and Raleigh Canada are spreading here to try and put Canadian retailers to sleep and get this thing passed.

"These domestic producers have been sitting on their collective butts not trying to bring their business up to world standards, but rather relying on government to bail them out. But when is the government going to wise up and notice that these are dinosaurs being artificially kept alive?"

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