The U.S.-China trade conflict has spun off a side skirmish in the all-terrain vehicle industry, pitting a major U.S. manufacturer against retailers that sell Chinese versions of the popular off-road machines.
Nearly 150 ATV retailers have asked the U.S. Trade Representative’s Office to waive tariffs on off-road vehicles made by China’s Zhejiang CF Moto Power Co. Ltd. The filings, by the retailers and the maker’s U.S. arm, say the products are unique for reasons including CFMoto’s “industry leading dealer profit margin."
Minnesota’s Polaris Inc. opposes granting the exclusion but has asked the USTR to exempt items including Chinese parts it imports to build its products in the U.S.
Granting exclusions for finished Chinese ATVs “without granting meaningful tariff relief for components used in the U.S. manufacture of comparable ATVs disadvantages U.S. manufacturers and workers," Polaris said in its filing.
The conflict in the ATV industry illustrates one of the dilemmas facing the Biden administration as it considers granting exemptions to Chinese import tariffs imposed by former President Donald Trump.
The Trump administration granted fewer than 7,000 tariff exemptions to U.S. companies that claimed they couldn’t find comparable products in other countries or domestically. But with the exception of medical equipment needed to fight the pandemic, most of those exemptions expired by 2020.
In October, the Biden administration said that it would consider reinstating previously granted tariff exclusions on 549 categories of products.
Since then, it has received more than 2,000 requests from businesses—most seeking to have tariffs peeled back, but some pushing to keep them in place as protection against lower-cost Chinese imports.
The application window for exemptions expired Dec. 1, and the USTR’s office hasn’t made any decisions—frustrating some businesses that say the delay is costing them money, which has been a chronic issue.
For others, an even bigger problem is that the Biden administration is only considering granting exclusions for items that had previously been granted exemptions.
“Tariffs are adding to the inflationary pressures on American manufacturers, businesses and families," said Myron Brilliant, the executive vice president and head of international affairs at the U.S. Chamber of Commerce.
“We’re hopeful the administration will respond soon with a more robust tariff exclusion process, and we’re going to keep pressing for that, whether it comes through administration action or legislation," he said.
While the Trump administration granted fewer than 7,000 exemptions, it received about 53,000 tariff exclusion requests from 2018 to 2020.
The U.S. Innovation and Competition Act approved by the Senate last year would require the USTR to reopen the exclusion process to all requests, although so far that isn’t in the House version passed Feb. 4.
U.S. Trade Representative Katherine Tai said in October that the administration is open to expanding the exclusion process but hasn’t announced any plans to do so. Her office didn’t respond to requests for comment.
The U.S. and China signed a trade deal in 2020 but the U.S. kept tariffs in place as leverage to force China to comply with terms of the pact, including a commitment to buy more U.S. goods.
China failed to meet those purchase targets, prompting some business groups to call on the U.S. to expand tariffs. The U.S. needs to “hold China accountable for, once again, violating an international agreement," said Zach Mottl, chairman of the Coalition for a Prosperous America, a trade group which says China routinely flouts trade deals.
Beijing has repeatedly said that removing tariffs on both sides would be mutually beneficial to the U.S. and China.
Many U.S. businesses agree that it makes sense to remove the tariffs, including those that sell ATVs, which are used for recreational off-roading and as utility vehicles on farms and ranches.
Rod Hall, who sells CFMoto ATVs at two powersports dealerships he and his wife own in La Crosse and Prairie du Chien, Wis., said in his filing that his profit margins on the CFMoto product have suffered by about 2% since the tariffs were imposed.
“In the powersports business, this 2% decline is substantial considering in an average year my [businesses] average a 3% net profit on gross sales," he wrote.
Mr. Hall acknowledged that the tariffs may be hurting China, but he said they are also hurting U.S. businesses.
“As a small-business owner that operates on very slim margins, with these tariffs being passed on to me…it can make the difference at the end of the year from being profitable and not being profitable," he said in an interview.
CFMoto Powersports Inc., the Chinese company’s wholly owned U.S. subsidiary in Plymouth, Minn., in a statement said the exclusion extension “is critical to the long-term protection and viability of U.S. small business dealerships and their customers across the USA."
Polaris, which makes ATVs, snowmobiles and other products at 13 locations in the U.S., is one of fewer than a half dozen companies with comments both supporting some reinstatements and opposing others. That reflects both the competition Polaris faces from Chinese-made ATVs as well as its need to keep costs down on the Chinese-made parts used for its own machines.
“The exclusion request would create an unlevel playing field for dealers across the powersports industry, as it removes added tariff costs solely for this non-U.S.-manufactured ATV product," Polaris said in a statement. “If USTR wants an exclusion for ATVs, they also should grant exclusions for the parts we use to manufacture our products in the U.S."
Other companies seeking tariff exemptions include Apple Inc., which has asked for reinstatement of an exclusion on its Apple Watch and on components used to build its U.S.-made Mac Pro.
Auto maker Tesla Inc. filed comments supporting reinstatement of exclusions on artificial and natural graphite, saying in one comment that “no company in the United States is currently capable of producing artificial graphite to the required specifications and capacity needed for Tesla’s production."
The National Retail Federation, a trade group, filed 70 comments supporting removal of tariffs on products ranging from air purifiers to laundry detergent powder to submersible pumps.
But among the thousands of calls for tariff relief are 52 opposing comments from companies and industry groups saying that some of the products that were granted exemptions are available from U.S. makers that are hurt by lower-cost Chinese goods.
“The goods covered by the exclusion are easily available from multiple U.S. producers," the American Iron and Steel Institute said in several comments. “Rather than encourage imports that displace U.S. sales and harm U.S. workers, while doing nothing to address China’s considerable unfair trade practices, USTR should keep duties in place."
This story has been published from a wire agency feed without modifications to the text
