Import Duties on non-EU Bicycles

AMSTERDAM, the Netherlands - Since June 2006, the regular import duty rate on bicycles entering the European Union (EU) from outside Europe is decreased from 15% to 14%. On all so-called ‘other’ bicycles such as tricycles or unicycles and on bicycles without ball bearings the import duty is 15%. On bicycle parts it is 4.7%. The import of bikes with an auxiliary engine (both pedelecs and E-bikes) is subject to 6%.

Generalized Tariff Preferences

But there are many exceptions to this rule. On the one hand, within the scheme of Generalized Tariff Preferences (GSP), the EU grants preferential import tariffs to the least-developed countries with a view to boosting their economic development. On the other hand, the EU translates special relationships with for instance neighbouring countries or accession countries into tariff preferences. In any case, none of these preferential tariffs apply automatically.

Rules of origin

Countries that do not enjoy preferential treatment could make improper use of the preferential tariffs by means of a detour via a country with preferential treatment. In order to prevent them from doing this, the system of rules of origin has been set up. This means that the exporting country has to prove that the product really has its origin in that country.

Since 2003, the rules of origin are as follows:

• For bicycles without ball bearings, the manufacturer can choose between manufacturing a bicycle from materials not classified in heading 8714 (= parts and accessories for bicycles with ball bearings) or manufacturing a bicycle in which the value of all the non-originating materials used does not exceed 30% of the ex-works price of the product. 
• For all other bicycles and parts, only one rule applies now. The product has to be a manufacture in which the value of all non-originating materials does not exceed 40% of the ex-works price of the product. In most cases, the origin of a product is certified by means of a EUR.1 certificate or a EUR-MED-certificate which are EU documents or by a Form A, which is an UNCTAD document. These are issued by the customs in the region from where the goods are exported and checked by the competent authorities in the importing country. If the total value of the goods does not exceed € 6,000, then usually an invoice declaration may be used instead of the afore-mentioned documents. That is an invoice, a delivery note or any other commercial document, which describes the products concerned in sufficient detail to enable for them to be identified.
• For bikes with an auxiliary engine (E-bikes and pedelecs) manufacturers have two options. Either the ensure that the value of all the materials uses does not exceed 40% of the ex-works price of the product and the value of all the non-originating materials does not exceed the value of all the originating materials used. Or they produce so that the value of all the materials used does not exceed 30% of the ex-works price of the product.

In order to obtain a EUR.1 certificate or a EUR-MED certificate or a Form A, the following conditions must be met. There must be an agreement between the EU and the exporting country concerning preferential treatment. The product must comply with the rules of origin and the products must be transported directly from the country of origin to the country of destination. Storage or transhipment in a third country for reasons relating to transport is permitted, provided the goods do not undergo processing in the third country.

Cumulation rules

In this framework, the EU has made special agreements with quite a number of countries resulting in a complex system of cumulation rules. Cumulation means that two or more countries that operate the same rules of origin and that have free trade agreements can cumulate origin.

With that, there are different types of cumulation:

• Bilateral cumulation exists between the European Union and all countries that enjoy preferential trade arrangements. It means that all materials and components originating in either the EU or the exporting country have originating status in the exporting country. It does not necessarily work both ways. With Albania, Bosnia & Herzegovina and Serbia & Montenegro for instance, the EU allows bilateral cumulation in one direction only. Products originating in the Community have originating status in these countries. However, products originally manufactured in one of these three countries, do not obtain originating status in the Community.
• Diagonal cumulation is when countries A, B and C have bilateral agreements that provide for diagonal cumulation. In this framework, the Pan-European cumulation system was created in 1997. It includes European Union, EFTA except Switzerland (Iceland, Liechtenstein and Norway) and Turkey. So, Pan-European cumulation means that products that have obtained originating status in any of the 32 countries concerned may be added to products originating in any of the other countries without losing their originating status within the pan-European zone.
• Currently, the EU and a number of countries in North Africa and the Middle East are developing a Euro-Mediterranean Partnership. It will include the countries of the pan-European system plus Switzerland and the Faroe Islands on the one hand and Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia, West Bank & Gaza Strip on the other hand. This system will only be complete when all countries involved have concluded free trade arrangements with each other. Until then, the principle of variable geometry is used. This means that cumulation can only be applied if the countries of final manufacture and of final destination have concluded free trade arrangements, containing identical rules of origin, with all the countries participating in the acquisition of originating status, i.e. with all the countries from which all the materials used originate. Materials originating in a country, which has not concluded an agreement with the countries of final manufacture and of final destination will be treated as non-originating. The afore-mentioned EUR-MED certificate has been developed specifically for this Pan-Euro-Mediterranean cumulation system.
  A table of the free trade arrangements between the various countries is regularly updated and published in the Official Journal. Click here to go to the website with a relevant table under the title “cumulation”. The only country that is currently of importance to the bicycle business is Tunisia. So far it has free trade arrangements with the EU, EFTA and Turkey.
• Finally, there is regional cumulation. This concerns three groups of countries that benefit from GSP. Products originating in any of the countries of a particular GSP group and used in further manufacture in another country of that group shall be treated as if they originate in the country of further manufacture, provided the value added there is greater than the highest customs value of the products used originating in any one of the other countries of the regional group, and the working or processing carried out there is more than minimal. Where these conditions are not both fulfilled, the goods are considered to originate in the country of the regional group, which accounts for the highest customs value of the originating products coming from other countries of the regional group.

No-drawback rule

To the rules of origin, some other rules have been added mainly in order to regulate re-exportation. The no-drawback rule can be explained best with a concrete example. Suppose a European bicycle manufacturer uses a number of non-European parts to produce his bicycles and these parts have been imported into the EU at the preferential tariff of 1.2%. The bicycles of the European manufacturer are destined for export to Switzerland. Their ex-works price amounts to € 100. The value of all the parts imported from outside the EU may not exceed € 40. If that condition is satisfied the European manufacturer may export the bicycles to Switzerland at the zero tariff with the EUR.1 certificate. This implies however that the non-European parts used in the manufacture of the bicycle are no longer exempted from import duty. Consequently, the difference between the preferential rate (1.2%) and the standard duty (4.7%) must be made up.

Further details

The website of DG taxation and Customs Union contains a lot of information on many different customs’ aspects: http://ec.europa.eu/taxation_customs/customs/customs_duties/index_en.htm.

There, you can consult, among other things, a User’s Handbook (http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_duties/rules_origin/preferential/handbook_en.pdf) to the rules of preferential origin used in trade between the European Community, other European and the Mediterranean countries”.

Furthermore, there is a Guide for traders on GSP rules of origin (http://ec.europa.eu/taxation_customs/resources/documents/guide-contents_annex_1-en.pdf).

Finally, there is a list of all countries that enjoy preferential trade arrangements (http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/article_403_en.htm).

For each of these countries, you can look up what types of cumulation apply, which drawback rules are in force and which form should be used to proof origin.

Combined Nomenclature (CN)

Since 1992, the general rules for goods traffic between the EU and the rest of the world have been fully harmonized and were laid down in the Community Customs Code (Council regulation no. 2913/92). To these ends, all goods have been catalogued in the combined nomenclature. In this register, each product has been given a code that allows it to be identified in import and export statistics and in determining import and export duties. In this so-called Combined Nomenclature (CN) all bicycles and their parts fall under chapter 87: “Vehicles other than railway or tramway rolling stock and parts and accessories thereof.” Bicycles are classified in four different categories, and parts in 17 code categories (see table).

 Import Duties on non-EU Bicycles & Components