The Executive Vice President of US cycling giant Specialized Bicycle Components has leant on the Trump administration to crack down on cheap bicycle imports, citing billions of dollars in missed tariffs and the illegal import of Fentanyl as key factors.
A change of trade policy with an incoming new administration is nothing new and is to be expected. It’s far from newsworthy to point out that the Trump administration has a far more protectionist and isolationist trade policy than the previous Biden administration did.
New trade policies often come with a period of public consultation. A chance for individuals and businesses alike to air their grievances on the current system, suggest alternatives, and outline the impacts.
These comments are a matter of public record, and it's come to the attention of Cyclingnews that Specialized's Executive Vice President, Robert Margevicius - or at least someone using his name - is among the 768 reports lobbying the Trump administration, in which he calls for stricter import regulations.
While this is entirely reasonable for a business or individual to do, the reasons stated are slightly harder to square, given they are coming from a bicycle componentry business.
As well as pointing out reasons relating to port of counterfeit goods and an unfair tariff imbalance, the submission under Margevicius' name also levelled the accusation that the current trade policy allows international sellers to "Import undetected drugs (fentanyl and many others), without detection."
When approached for comment, a Specialized spokesperson called it an "industry wide position that is aligned with PeopleForBikes."
PeopleForBikes is a USA-based nonprofit organization that advocates for better cycling infrastructure and policies. Its board counts prominent figures from over 20 well-known brands, including SRAM, Giant, Cycling Sports Group, Trek and more.
According to the public docket, however, no other cycling brand has lobbied the Trump administration on this matter, although a percentage of submissions have the name and organisation redacted for confidentiality.
While the import of fentanyl is no doubt a pressing issue in the United States, the overwhelming majority of it enters the country via the southern border, and not in the packaging of imported bicycle components.
Given that this is a cycling website, not normally given over to discussions of trade policy, there is an amount of background that is necessary before we approach the public comments.
The America First Trade Policy
On January 20th, the Trump administration released its ‘America First Trade Policy’ on the White House website, in which it sets out in broad terms the work that will be undertaken by the Secretary of Commerce, the Secretary of the Treasury, and the United States Trade Representative, as well the Secretaries of Defense and Homeland Security.
Within the America First Trade Policy, the United States Trade Representative (USTR) has a remit to assess trade agreements with other countries, but to also embark on public consultation pursuant to any change in trade policy.
In its own words, it is exists to “negotiate directly with foreign governments to create trade agreements, to resolve disputes, and to participate in global trade policy organizations” as well as to “meet with governments, with business groups, with legislators and with public interest groups to gather input on trade issues and to discuss the President's trade policy positions.”
Within the body of the America First Trade Policy, in section 2 (Addressing Unfair and Unbalanced Trade), subsection i states that the USTR in collaboration with several of the Secretaries, shall “assess the loss of tariff revenues and the risks from importing counterfeit products and contraband drugs, e.g., fentanyl, that each result from the current implementation of the $800 or less, duty-free de minimis exemption under section 1321 of title 19, United States Code, and shall recommend modifications as warranted to protect both the revenue of the United States and the public health by preventing unlawful importations.”
The de minimis exemption
The de minimis threshold, in import/export terms, is simply the level each nation sets as a goods value below which import duties are not applied. The latin translation is, in non legalese, ‘too small to bother with’.
As it stands at the time of writing the United States of America has a de minimis threshold of $800 per shipment per person per day.
To contextualise this, the de minimis thresholds of other nations have been shown below according to Zonos, a company providing international commerce and shipping solutions, adjusted using the exchange rate at the time of writing to an equivalent US dollar value:
- Australia - $630
- Canada - $14
- China - $0
- France - $161
- Germany - $162
- Japan - $66
- New Zealand - $573
- Singapore - $298
- United Kingdom - $174
From this we can see that the United States has a very generous de minimis threshold, something the Trump administration wants to lower to bring in line with other nations to address what it sees as an unfair imbalance.
The threshold was previously set at $200, but was raised in 2016 to $800 as part of the Trade Facilitation and Trade Enforcement Act of 2015.
Public consultation and Specialized Bicycle Components
Following the publication of the America First Trade Policy, the USTR, on February 20th, sought public comment relating to the policy, stating that “These comments will assist the U.S. Trade Representative in reviewing and identifying any unfair trade or non-reciprocal foreign trade practices.”
Public consultation comments are a matter of public record, and Cyclingnews has seen that Robert Margevicius, on behalf of Specialized Bicycle Components, (or at least somebody entering that name and company, as the system requires no verification), lobbied the USTR to impose stricter import tariffs.
The request focussed on the reduction of the de minimis threshold, citing three key reasons: Impact on US small businesses, competitive disadvantage for domestic businesses, and a lack of oversight of what is physically entering the country.
The Specialized spokesperson did not deny that Margevicius was indeed behind the submission, and instead clarified the submission's motives, saying the "de minimis exemption has opened the door to varying problems that include unsafe products and intellectual property violation," adding that "[The] EU and most developed countries have either eliminated de minimis or limit it strictly."
Impact on small businesses
Relating to the impact of the United States’ generous de minimis threshold, the submission entered the following comment:
“While U.S. small businesses face strict regulations and high costs when exporting to countries with low de minimis thresholds, foreign sellers can freely ship products into the U.S. without equivalent restrictions.”
Given the imbalances of de minimis thresholds, it is perhaps fair to say that small US domestic businesses have an unfair deal.
United States producers of boutique bicycle parts could not easily sell them to the UK, while UK businesses could on the face of it send products to customers in the USA without exceeding the threshold.
Specialized Bicycle Components is not a small business, however, but a multinational retailer of bicycles and parts, and so is likely to see more of its products exceed the de minimis threshold of any nation.
In addition, Specialized's sheer scale likely means the majority of its imports exceed the existing $800 de minimis threshold, and so a lower one wouldn't have an impact.
Though some large US businesses sell or import strategically to fall within de minimis, it is largely a loophole exploited by overseas platforms selling at more competitive prices.
Competitive disadvantage for domestic businesses
Why would a giant corporation like Specialized be sticking up for smaller domestic businesses, which are ultimately competitors? It could be altruism, but Margivicius' comments on competitive disadvantage are more revealing:
“This policy gives international marketplace sellers an unfair edge over American retailers, many of whom have been driven out of business due to the cost disparity and lack of regulatory enforcement. De minimis is one of the most damaging trade policies currently in place, undermining U.S. businesses while allowing foreign sellers to exploit regulatory loopholes.”
International marketplaces, the likes of eBay and AliExpress, give customers in the United States access to bicycle parts under the value of $800 without having to pay import duties.
Reducing the de minimis threshold would therefore be advantageous to Specialized to encourage more customers to buy domestic products (even if they themselves have been produced overseas), and it is entirely reasonable that a business should lobby a government in its own interests.
While the submission in Margevicius' name doesn’t put a monetary value on the potential revenue from the import of bicycle products alone, he states that the potential harm caused by the current de minimis threshold as “Billions [of dollars] of collectable tariffs”.
The reality of greater tariffs is a little more complex, though, and greater tariffs do not necessarily lead to greater tax receipts.
Whether lowering the threshold would result in the same level of imports but with people paying tariffs, or whether it would simply discourage these smaller imports and encourage more domestic business remains to be seen.
Lack of oversight and fentanyl imports
With a high de minimis threshold, it’s not unreasonable to suggest that more packages and parcels enter the USA unchecked. To this end, the submission made the following comments to the USTA:
“The current de minimis policy allows overseas sellers to: Avoid tariffs, imposed sanctions, countervailing duties (CVDs), and anti-dumping duties. Bypass intellectual property protections. Import products that fail to meet U.S. regulatory and safety standards. Import undetected drugs (fentanyl and many others), without detection.”
It’s impossible to blame any business for lobbying to protect its intellectual property. One only has to browse the aforementioned marketplaces to find counterfeit goods, despite the best efforts of the marketplaces in question.
Are illegal drugs coming into the United States in packages of bicycle products? While lower cost imports may be subject to fewer trade inspections, it's important to keep in mind that drug trafficking is a matter of law enforcement rather than trade regulation.
As for whether this is a practice likely to be present in the bicycle industry – the submission kept its comments broad, relating to all imported goods, though it is of course lobbying on behalf of a bicycle and bicycle components business.
According to a declassified 2020 Drug Enforcement Agency report on the imports of Fentanyl:
“Currently, China remains the primary source of fentanyl and fentanyl-related substances trafficked through international mail and express consignment operations environment, as well as the main source for all fentanyl-related substances trafficked into the United States. Seizures of fentanyl sourced from China average less than one kilogram in weight, and often test above 90 per cent concentration of pure fentanyl.”
However, according to BBC Verify, the broadcaster’s fact-checking service, most fentanyl by quantity (98%) enters the USA via the southern USA-Mexico border with less than 1% entering via its northern border with Canada and the remainder coming via sea routes.
While China certainly does export chemicals from which fentanyl can be produced (the legality of which can vary depending on the chemical in question), Mexico is still the overwhelming route of entry for the drug, and not via small mail packages.
With that in mind, the impact of untaxed low-cost bicycle product imports on Fentanyl trafficking is an unusual line of argument for one of the world's most prominent bicycle manufacturers to pursue.
