As the popularity of electric bikes grows, so does the legal and trade obstacles here and abroad. In 2022, over a million e-bikes were in sold in the US. China is a large part of the bike supply chain as about 85 percent of bikes purchased in the US are manufactured in China, and many bike manufacturers rely on China for most, if not all, of their components. And while this figure is staggering, many overlook details regarding the most important component for e-bikes, the battery. With the increased focus on electric vehicles and the escalating trade war, e-bike batteries are often caught up in the mix.
In an effort to support US business, both President Trump and President Biden created tariffs against Chinese products. E-bikes and some components have been subject to tariffs as high as 25%. However, for several years, the U.S. Trade Representative (USTR) has established an exclusion process for e-bike and certain components, excluding them from the additional Section 301 duties. Unfortunately, those exemptions expired in June, resulting in higher tariffs for many e-bike components.
Additionally, in September of this year, that the USTR published a Federal Register notice announcing its final modifications to its Four-Year Statutory Review of U.S. Section 301 tariffs on a range of Chinese-origin goods. Under these modifications, e-bike lithium batteries would be subject to a 25% tariff in 2026, up from the current 7.5% rate.
We understand that, many e-bike or e-bike component manufacturers have diversified their supply chain or shifted production or final assembly out of China in recent years to avoid being caught in the crossfire of U.S.-China trade tensions. However, companies should carefully review whether such supply chain restructuring or production shift would be substantial enough to change the country of origin of the products to be exported to the U.S. market.
In addition, steel, a major component of e-bike, is identified by the U.S. Customs and Border Protection (CBP) as a high enforcement priority under the UFLPA. Companies should also review their supply chain to assess if any components of the goods are subject to the UFLPA, as this would lead to product detentions by by the CBP at U.S. ports.
Finally, many US states and localities are also taking a hard look at safety and traffic regulations as they relate to e-bikes, only increasing the regulatory framework for manufacturers and users alike.
And it is not just the US involved in the regulation of e-bikes. China recently passed new laws regarding the safety, production, and sale of lithium batteries. These new regulations, while passed with good intentions, will certainly increase the cost of batteries. The new regulations cover many specific areas within the lithium battery production pipeline, including design, production, and fire risk, and are expected to begin on November 1, 2024. Although the regulations are specific to Chinese domestic sale of e-bikes, it highly unlikely that such batteries will be made exclusively for sale outside of China. Therefore, those involved in the production of lithium batteries will need to update their process and technology in an effort to conform to these new regulations. This in turn may lead to price increases and delay in production efforts. As such, US e-bike companies should be taking a hard look at their potential future and should consider doing the following:
Takeaways
- Contact a trade expert to understand the details of existing and new laws and how your company fits into them.
- Consider whether your patents and trade secrets are exposed, particularly though Chinese component makers or bike manufacturers, as China becomes involved in your production chain.
- Contact a regulatory expert to evaluate whether you should submit comments or be involved with the creation of regulatory regimes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
