Are bikes ‘made’ by Cotic that consist of frames built in Taiwan actually British products? That’s the question that Cy at Cotic is grappling with right now (as well as many other British based manufacturers) and until that question is answered Cotic have suspended orders destined for EU customers.
The tricky situation comes down to the detail of the trade deal between the UK and the EU. The UK has a trade deal that allows British products to be be exported to the EU tariff and tax free. However, that requires a legal definition of what constitutes a British product. Within the detail of the trade deal that has been defined as a product that consists of at least 70% British sourced components, materials or the ephemeral term of ‘added British value’. It sounds complicated (and it is) but you can also see the point.
A made up example
Here’s an example we just made up..
If a British company were to import cheap toasters from a country that does not have a trade deal with the EU and then simply added a made in the UK badge before selling them tariff free to EU customers then that would be a loophole. That’s why there are now rules about what constitutes ‘British’ when it comes to manufactured products. In a nutshell (and I’ll come back to nuts later) simply adding a ‘Made in UK’ badge does not constitute enough ‘added value’ to allow it to be defined as a British product.
The nuts and bolts of it all mean that if Cotic import their Taiwan made frames to their HQ and then build them up to sell them, even though the frame has been designed by Cotic as far as the EU is concerned that may not add enough ‘British value’ to the product to make it actually a British product. That means there is a big question hanging over the export status of bikes built up from frames and components sourced from outside the UK as to whether an EU customer would be faced with an import duty charge on delivery. In order to not land their EU customers with unexpected bills on delivery Cotic have decided to halt deliveries to EU customers until they get it all sorted out.
Here’s what Cy Turner, owner of Cotic, sent to their customers via their mailing list yesterday..
| EU Exports |
| Despite the trade deal having been signed between the UK and the EU, there is still some lack of clarity on the charging of import duty for certain Cotic product lines. However, some things we know: At the moment we are clear that UK made frames (so that is currently RocketMAX and Rocket) attract Zero duty when shipped to the EU. All purchases made by EU customers are now charged without 20% UK VAT, and they will attract VAT in the country of delivery which will be payable by the customer to the courier when it arrives. This will apply even if you ordered before 31st December 2020 and paid a deposit. Don’t worry, deposits don’t attract VAT, so you won’t end up over paying any taxes if you have a deposit with us. If you paid in full, this also leaves you unaffected because completed transactions made prior to 31st December 2020 are to remain under the previous rules. This situation will persist for 6 months whilst the new EU/UK VAT collection system is put in place. The unclear situation is with Taiwan produced frames, and possibly complete bikes using Taiwan made frames. The Zero duty situation is for goods that are “UK Origin” or have a significant proportion of UK ‘value add’. For the UK made frames they easily meet these requirements because they are more than 70% UK made or processed by value. 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. The upshot of all this is that for this week at least and maybe longer, and until we know exactly what the duty situation is, we are not shipping anything to customers in the EU. We want to give ourselves time to understand and apply the new rules correctly, and then be able to explain them to customers. There will be increases in shipping prices as well due to the couriers having to clear products through customs now, so once we have all the costs understood, we will be in touch to agree any cost increases with you. If you have an order placed already, but don’t wish to pay the extra fees, then we will cancel and refund. No problem at all. At the very least, we will do everything we can to look after you whether you want to complete the order or not. What I really want to stress is that as soon as we have a firm operating procedure and pricing for our friends in the EU, we will start shipping again, but in the meantime you are more than welcome to place provisional orders with us so you can make sure you have a place in the queue for our upcoming deliveries. |
The situation for trading with the rest of the world remains unchanged but if you think the way bike sales are affected is complicated you should check out what it means for the food export industry when it comes to processed ingredients. Importing nuts in shells and then removing the shells in the UK before using them as ingredients in food products apparently does not add enough ‘British value’ to warrant the final product being permitted to be exported to the EU tariff free.
We are now outside of the EU but what is becoming clear is that there are uncertain times ahead of us before everything settles down to the new normal. Although, if anyone can predict what the new normal will look like we can add your addendum to our Predictions for 2021 story.
Brexit isn’t all bad, is it?
Finally, Brexit has happened – there’s no changing that now. We have been criticised over recent months for being overly negative about the transition. While it’s true that we don’t think it was a good decision and we’d have preferred a different result that’s now in the past. We will report stories objectively about Brexit and its effects on the bike industry but that doesn’t mean we will only publish the negative stories. We are actively looking for the good news stories too and if you have any to share with us then we’d be happy to hear them. Send your good news Brexit stories to us at newsdesk@singletrackworld.com or post them below.
and the interesting one, filling out a customs declaration on returns to CRC if they expect them to go to NI in future.
If a ‘consignment’ (in other words a single parcel) comes to more than £135 then the receiver will be responsible for paying all taxes, duty and handling fees. If the order is less than this then the seller has to collect the VAT from the customer at checkout and then account for that to HMRC. This is the main issue right now with EU sellers who are stopping deliveries to the UK. They have to get setup with HMRC in order to handle all that VAT collection, accounting and payments to HMRC. When they do get set up I can imagine we will see many retailers (on both sides) setting minimum orders at this £135 threshold in order to be able to pass all the extra tax and duty payment gubbins on to the customer when they receive their parcel.
Still waiting for any good news Brexit stories to land in our inbox. It’s tumbleweed in there at the moment.
webstore then duty will be due at import? And what about Wiggle / CRC selling to the EU, or do they have a EU presence?
Mark explains where the responsibility sits in his post above re the £135 threshold.
But in essence YES the Taiwanese part sold to you that 1st went to Germany will have to have UK VAT and also any extra tariff for it realy being from Taiwan paid by SOMEONE. Which will always be you ultimately. Whether direct to HMRC or to the German retailer who subsequently pays HMRC.
//Mod edit to try to tidy the page up a bit – hope it makes sense now//
Some of your points get closer to the heart of the problem… price. There has been a general race to the bottom for the last 30 years because people want cheap products. And in doing so British companies both large and small have ditched UK manufacturing, UK investment, training of UK staff, etc etc etc. So strangely we as British don’t have the skills or capacity any more. Same across many fields – engineering, medical, etc (the NHS would collapse instantly without foreign staff and their skills as an example).
But you really can’t hide that fact that some British companies push their Britishness in marketing BS whilst really not making much in Britain.
Dyson a great example (who is now avoiding UK tax by having the HQ in Singapore). Or Lewis (personality of a brick) Hamilton being a British driver who just happens to avoid paying UK tax by being resident in Monte Carlo.
https://eu.pygamountainbikes.com/2021/01/04/news-story-zero-import-duty-or-u-k-value-added-tax-costs-on-pyga-frames/
Perhaps Cy should chat to the folks at Pyga. They seem to have nailed it to their own advantage.
“Customers will then receive an invoice for their local area/country tax via the parcel company. Once the invoice is paid, the PYGA will be delivered.” – VAT and handling charge would be payable by the customer to take delivery. I’m not sure about import tariff for them, but there is an EU:SA agreement (TDCA) which is more generous than normal as regards RoO, I don’t know how the UK fits in with that right now.
TDCA has been replaced by the SADC-EU EPA.
“Perhaps Cy should chat to the folks at Pyga. They seem to have nailed it to their own advantage.”
Did you read the contents of the link you posted?
Unless Cotics are made in South Africa (spoiler, they aren’t) then it’s irrelevant.
Its relevant because the hop through the UK is allowed, as SA has a trade deal with both the EU and UK. So SA tariff free part counts towards the UK tariff free part (As I understand it). Essentially if you did the job in the UK thats done in SA its equivalent, so Cy’s UK made frames would be that. Going back to my earlier point of this is just a trade deal, they forgot to tell us until now what would count as UK. Of course thats where the sense ends really.
– Making your customers have to deal with a courier and paperwork and paying their VAT isn’t ‘easier’. If they wanted to make it as easy as possible then that would be paid by Pyga for the customer – exactly what we offer right now on request for our non-EU customers and are rolling out as standard for our EU customers. By the end of Jan the purchase process for buying a Bird frame in the EU will be exactly as it was before Brexit, at the same price (Shipping will likely remain a bit higher than it used to be – sorry). Your invoice will have a few extra lines on it to help with our shipping but thats the only difference an EU customer will notice.
– Tariff rates would be 4.7% not 6.5% for high end alu, but thats sort of irrelevant as its not seen by the customer normally.
– VAT is dropped from the UK, but there’s only 5 countries in the EU (I think) with lower tax rates than us, of them only Germany isn’t a relatively small state (Malta, Cyprus, Luxemborg….) So most people will pay more not less from this new way of doing things, even when its tax free.
So kudos to Pyga for getting their certification in place straight away, but its still a worse deal for pretty much everybody.
Interesting one for Wiggle and CRC, with Wiggle (physically) being in the UK, and Chain Reaction Cycles being in Ireland, where the grass is certainly looking greener on the other side of the border. Will we see their websites move apart in terms of mirror image stock and pricing, and splitting their bulk imports into Ireland and UK destinations? With Wiggle becoming the default shop front for the UK and CRC doing Europe? Rest of World customers would be able to choose whichever source has the preferable trade deal.