Cotic suspend EU deliveries over question around what constitutes a British product

by 51

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.

Designed in Britain but is it British?

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.

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Comments (51)

    Here’s are links to all the good news brexit stories for your perusal. You’re welcome.

    Yup, I predicted that in the Bikes forum when the decision on origin of car parts was made. I’m assuming other industries read that into the announcement…

    On the note on British product/frame/bike.

    Some of Cotic’s frames are built in UK. As is some other brands. The frames are built in the UK are more desirable than the Taiwan ones. As does Stanton bikes and other small brands.
    Even if the frame is made in the UK most of the components aren’t from UK and aren’t, British!

    So what makes it British? Or a British brand?

    The design of it for sure, ideally build in the UK and with UK products.
    But does that make it ride better?

    But it’s all about the design, ethos and passion all done in the UK.
    That’s British!

    If the EU classified Cotic bikes (complete bikes or frames) as British before Brexit. Then what’s changed? Has the EU decided to change their own classification?

    Good job they’re not made of cheese….

    Before Brexit Cotic would have paid the import duty on the frames they brought in from Taiwan just like any other EU member. Once that’s done and the goods are within the EU market then there’s no more to pay.

    However, now the import duty gets paid by Cotic on orders from Taiwan as before BUT Cotic now has to EXPORT the finished product out of one market (UK) and into another (EU) and so more import duty is now payable.

    @craig5 – what’s changed is that we’re now operating under a shonky “Free Trade Agreement” rather than the rules of the Customs Union and Single Market. This was Britain’s (well… England’s) choice.

    Doesn’t this just highlight how many “Made in UK” (or any other Western country) products are already examples of manufacturing badge engineering, and now the goalposts have just been moved a bit? If you sell a bike frame that’s “Made in the UK”, I expect it to be welded up in the UK.

    Think of it this way.. Brexit now means there is a border that Cotics’ bikes now have to cross to reach the EU that didn’t exist before. The border is a trade border and where there is a trade border there are taxes and duty to be paid, unless a deal is done to not have them. In this case the deal has been done to not have those duties but only in the case of products that are deemed to be of British origin. Cotic’s Taiwan sourced bikes are deemed to be not of British origin when judged by the agreement both the EU and the UK agreed to.

    Even if the frame was made in the UK. What about the components?
    Can you say made in the UK. But if most of it (wheels/suspension/dropper) comes from Asia or wherever is it British?
    Then where is the raw material is from?

    Yes you need to draw the line somewhere.

    Is the queen British?
    A large percentage Is German some hungarian and French and of course the home nations. But definitely designed in the UK 😉

    Always good to see a note to confirm that the good and bad stories will be shared and told. In this case, however, it is also sad to see that the note also comes with a request for any good stories as for now, there aren’t any…

    I suspect this has already been asked but apart from rear mech and shifter, I think we do have UK manufacturing on everything else (actually do we have rims and tyres?), so potentially there is the possibility of an almost entirely UK-made bike. Suspect the demand for that would be incredibly low though (and unlikely to be priced to entice most people to buy).

    What makes something ‘made in Britain’ ? You basically have to look at what British work (employing people in Britain and paying British taxes) went in.
    Forming and bending tubes.
    Welding.
    Painting.
    Smelting iron ore or bauxite and forming sheets of steel or Alu. Etc.

    Re-badging Taiwanese or Chinese frames and parts with a union jack style badge is not British manufacture. That’s clear. But its what many (but not all) British companies have been misleading people with for 30 years.

    I’d consider my Orange 5 frame to have been ‘made in Halifax’, Britain’ due to the amount of workmanship done there in bending and forming and machining and welding.
    My Brompton frame similar for East Laaardan.

    But the Kona hardtail I have is no more Canadian than it is British. Its Taiwanese. And is labelled as such. As is the Specialized bike – it’s not American. Its a Taiwanese frame with mainly Japanese parts. And a smattering of Swiss bits.

    Really so if the frame is made in Britain the bike is British?
    But what about the rest of it?

    Comes from all over the world right!!

    This is what the car industry is facing. Silly to think bikes would avoid it.

    Orange and Brompton are an interesting example… given they both spring to mind in terms of brands perceived to be ‘expensive’ or ‘poorer’ value. And i’m pretty sure various threads on here have given Stanton a fair bit of grief for how much the UK welded frames cost. I think the point is not about the ethics of various ‘made in britain’ labels or whatever. Its that we have chosen to make things just a bit harder for a significant swathe of companies for what? And currently i’m not sure harder is a good thing!

    Isn’t the solution to import Taiwanese bikes into an EU member state for assembly and distribution within the EU27 and also import Taiwanese bikes into the UK for UK distribution?

    The problem of cross border duties between UK and EU only arises because the product is imported from Taiwan and then exported with little / no real value add in between. Aside from anything importing to one market only to export to another increases inventory, working capital (stock in transit) and environmental costs.

    There is luckily solid guidance from the EU on what constitutes UK origin goods (with laughably little from the UK side), and depending on where you source parts a bike built in the UK from mostly Taiwanese parts (including the frame) could still qualify – the bike being built here is enough as long as you have sufficient value in the bike coming from the EU/or big enough mark up. However that does require some paperwork hoops to jump through in order to certify the origin.

    Yeah, well done brexit voters

    ” the bike being built here is enough as long as you have sufficient value in the bike coming from the EU/or big enough mark up”

    The mark up doesn’t count from what I’ve seen. If it did you could sell anything tarif free if you charged enough for it. You need to evalute the value of the British content in the total value.

    If you can demonstrate that the British materials and labour amount to 70% of the value you can sell it. You can’t buy a Taiwanese frame then add a 200% mark up and claim the product is 70% British.

    Typo – add a 220% mark up

    This has been the biggest problem for the consumer in Britain, finding any product that is genuine British made.
    Maybe its because a lot of companies have decided to stop production here, employing and paying British craftsman and taken production to the far east where wages are a lot lower so that they can make more profit.
    I would rather pay extra for a British made product, knowing that I am not only supporting that company but also its employees and their families.
    Bring back the “BUY BRITISH” campaign.

    I can’t believe this is happening, bikes are only one small product that are intrinsic to our daily lives and there are companies in Britain and Europe having difficulty doing business. We have a government who had 4 years to work this out and still companies can’t figure it out. This will surely leave their customers and potential customers confused and less inclined to purchase a British product, what a shame.

    Generally speaking of course you’re correct but bikes (and frames) have a pretty liberal policy, far more than the stock 10% of costs for non EU/UK parts that most products fall under. You’re allowed a sufficiently high percentage of value that the ex works price for the completed article could be getting close to the normal factory or wholesale price assuming you’re not selling them super cheap. So if you can find a way to reduce your non EU/UK costs (polish wheels, maybe British brakes etc. Or perhaps just the frame itself could be enough for someone like Brompton) Then you’ll potentially find that it fits in the rules.

    I can only assume it’s been done this way because it’s recognised that bikes are an assembly of parts not a singular manufacturing unit, and hence the policy is not damaging either side disproportionately (unlike say a car equivalent would damage the German/french car industries).

    Early days yet but it looks doable.

    Incidentally the EU has had a 48% anti-dumping tarif on bikes for some time and will be extremely vigilant on bikes from Britain which may try to avoid it. There’s a huge bike factory in Portugal which has boomed since the introduction of tarifs on cheap imports. Use Google translate if you don’t understand:

    https://www.lci.fr/international/video-comment-le-portugal-est-devenu-le-premier-fournisseur-de-velos-d-europe-2170510.html

    Should also say for those not familiay with the system you can’t import something and resell it as the same item so the example Educator gives is correct, you can’t import a frame, mark it up and resell it as british, but not based on the value of the mark up, it has to change hs codes essentially, or more specifically you can’t include any items in your assessment that are the same import type as what you’re selling, so if you import a frame and sell it again it’s not qualified for any relief. However if you import a load of parts under 8714xxxx codes and turn them into a bike exported under 8712xxxx then that is different.

    But not unless the British/EU value is 70%, Ben. If all the parts a cleary from China just assembling them isn’t going to be enough. Is having a British brazed frame made with Renolds tubes and a few locally sourced components enough? That I think is the dilema companies like Cotic and Brompton are facing, and looking for guidance.

    Use Google translate if you don’t understand:

    I think youre going to need a bit more than Google translate 🙂

    I think the problem is that the UK hasn’t published the tolerances yet, but the EU has, so its a question of having the information isn’t it? I am not a lawyer and I await the opinions of people that are hopefully in the next week or so, but the information published indicates that if you can show that your non EU-UK parts costs were under the right amount as a proportion of the Ex Works (onward Sales price excluding all taxes and pretty much everything else) then it would qualify for preferential rates.

    This isn’t new, the EBA agreement with Cambodia gives the same kind of deal (I think maybe the tolerances are a touch wider) and there’s a ton of bikes coming into the EU from Cambodia – I can only assume because of the import rates, and of course they’re all laden with Taiwanese and other non-cambodian parts. More directly comparable Vietnam has a 5% discount on the standard tariff and they operate (as far as I can tell) an identical regime to that proposed / agreed for the UK and again they are sending the EU massive numbers of bikes, all running non Vietnamese kit.

    In both cases the material mainly comes from China, its welded and painted in country and then assembled with overseas parts before export to the EU.

    This is all getting very silly and i’m going to make it even worse…

    What happens if Hope makes their bikes in the Uk but uses an American engineer to design the bike, a Polish person to operate the Japanese cnc machine powered by electric than is produced by a french power station (there are cables between countries) machining Chinese aluminium? Does this still count as a British product or a mix and if so who decides what percentage of production valve?

    ahh, the great lie of Boris’s free-trade deal.I own and run Stooge, i design my frames in the UK but get them produced in Taiwan. This is nothing to do with pulling the wool over people’s eyes and rebadging a taiwanese frame as a British product or any other skulduggery, it’s about using somebody with the skills to produce my frames to a high quality but at a price that means i can sell them for what i think is a good price. I’d love to get my frames made in the UK but the option quite simply isn’t there, and if it were i’ve no doubt i’d have to charge nearly double what i charge now. Would the product be any different or better? No.. Hats of to Stanton for biting the bullet and making the no-doubt huge investment to bring production in-house, looks like it was a canny move when it comes to EU sales, and the same goes for Cotic using Fiveland. I’m no fan of Brexit, as a tiny one-man bike company it’s played havoc from the beginning to the bitter end, but onwards we march. More shocking is that we’ve been told to get ready for Brexit for months with no idea what we’re supposed to be getting ready for, and even now clear guidance is notable by its complete absence.

    Isn’t this all to do with how you define “value” though?

    If a generic hardtail frame from a TW factory is sold (in bulk) for the equivalent of 100 GBP (I have no idea, so I’ve just picked a round number), they are imported into the UK where a team of crack marketers and (cringe) influencers run a super-successful campaign, adverts, promos, demo days etc etc, to the point that these frames can be (and are) sold for 1000 GBP – then surely, the UK team have added 900 GBP of “value”? And that’s before you factor in things like the value of good customer support, warranty etc, which people are prepared to pay for.

    Otherwise are we just defining value only in manufacturing/raw material terms?

    Speaks to Jonestown’s point above – how does he quantify the “value” that his design adds to the frame he’s had built in Taiwan, if not in it’s “markup” over a generic one from the same factory – then how?

    Sorry, genuinely don’t understand.

    You can’t just mark up something. There’s a qualification you must meet for it transforming to a UK product which boils down to a change of tariff class as well as at least a ‘non simple assembly’ process occurring, both of which must be met. So buying a set of stickers and restickering a £100 frame won’t cut it, nor would just marking it up with no change to the class.

    There’s documented examples and real life cases (eg Vietnam) that demonstrates that bikes qualify and how the exworks mark up works. So the only question is one of interpretation of ‘non simple assembly’, and where your product falls in terms of the cost thresholds.

    I would think for the UK made frames cotic should be able to make it work, for the Taiwan frame only, no chance, Taiwan complete bikes, possibly.

    FWIW I will add one more thing – the process we’re going through isn’t new or unusual, it is the same as with Canada when the EU signed its deal there, or the same as 100 countries went through before. We have a trade deal with the EU. Nothing more, nothing less. All trade deals are different, ours is more ‘generous’ than most.

    The problem is that it’s been signed into law with literally a weeks notice, giving no one time to prepare for the actual rules. You cant get a certificate of origin for a bike if you don’t know the tolerance on non UK/EU parts. So there was no way to be ready.

    All we have had is months of trolling from UK Gov telling us to prepare while giving no details on what to prepare for. Now the detail is out there (from the EU at least, nothing from the UK side) we can all get on and make the necessary applications for our certificates of origin etc. To be honest we should have started this process a few months ago ‘just in case’, but we couldn’t have completed it until the deal was known.

    Does this work the opposite way? Ie will european “made” bikes built in Taiwan incur import duties into the UK?

    Thanks for the insight Ben. So, whether a product is “British” or not is based soley on the product itself – not the design, or “soft” side of the business (marketing, after sales etc), but purely on the actual physical item?

    Would be great to hear from Mr Dyson at this point – I wonder if he can be reached for comment?

    The soft elements will be incorporated into the Ex Works price. The higher the EXW price the more likely you meet the tolerances. Yes I know that sounds a bit nuts but its the way it is. Remember this tolerance vs. EXW price isn’t on all products, only a limited number (like bikes) where its deemed necessary for the process of production to actually work.


    Does this work the opposite way? Ie will european “made” bikes built in Taiwan incur import duties into the UK?

    Yes it will, its a totally reciprocal arrangement, but you don’t think companies like YT and Canyon have been beefing up their UK presence over the last couple of years because they like the weather do you 😉 ?

    “I would rather pay extra for a British made product, knowing that I am not only supporting that company but also its employees and their families.
    Bring back the “BUY BRITISH” campaign.”

    This is one of the many reasons Brexit, simple answers to complex problems. My numbers are somewhat out of date but Giant employ more people than Orange and Cotic combined so if you really want to support British jobs then your argument isn’t as simple as you think.

    “Brexit isn’t all bad, is it?”
    Are you ******* joking?

    “Send your good news Brexit stories to us at newsdesk@singletrackworld.com or post them below.”
    Two hopes with that.

    I’ve just been trying to buy some skis for my son. All the usual Euro outlets are now not shipping to the UK. When the full picture of how Brexit is going to **** up the minutiae of everyone’s lives is clear the public is going to **** themselves.

    “”Does this work the opposite way? Ie will european “made” bikes built in Taiwan incur import duties into the UK?”
    ———Yes it will, its a totally reciprocal arrangement”

    Does that mean if I purchase some made in Tawain components from a German webstore then duty will be due at import? And what about Wiggle / CRC selling to the EU, or do they have a EU presence?

    have you tried to buy from German websites recently? Bike Discount have implemented a minimum order value to get round the VAT bit of a mess. 2.5% + 20% vat + a couriers handling fee,. not sure of the order those are applied.

    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.

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