More than 1.5 million bicycles will be sold in Canada this year and $550 million spent on Canada's fourth most popular leisure activity, as Canadians in increasing numbers take up biking.
But the euphoria over the increasing numbers of bike riders remains muted as Canadian bike retailers, bike makers, importers and cycling associations, await the federal government's decision on whether to impose a proposed 30-per-cent surtax on low-cost imported bikes. The charge is aimed at protecting Canadian bicycle assemblers from low-cost Asian imports.
The Canadian International Trade Tribunal (CITT) recommended last fall that the federal government impose a surtax on imported bikes selling in Canada for $400 or less. The surtax would be 30 per cent in the first year, 25 per cent in the second year and 20 per cent in the third year.
"Bike retailers oppose any more taxes on bicycles," says Barry Near, a member of the Independent Bicycle Retailers of Canada (IBRC) and manager of Sport Swap, a sports specialty store in Toronto and Barrie. About 1,000 retailers, employing 5,000 people, belong to the IBRC.
"It (the surtax) would be very detrimental to us. Over 30 per cent of our adult and children's' bikes sell in the $400 range. The tax would make the first bicycle purchase too expensive for many children and families," he says.
Most children's bikes and entry-level adult bikes currently sell for less than $400.
"It could put a lot of bike stores out of business," Near says.
The Canadian Bicycle Manufacturers' Association complained to the federal trade tribunal in 2004 that the increasing numbers of bicycles imported into Canada cause serious injury to domestic bicycle manufacturers. The CBMA says its members account for the majority of value and volume of domestic bicycle production.
Between 2000 and 2004, the number of bicycles imported into Canada almost doubled from 538,523 to 1.06 million, the CITT says. During the same period, domestic production of bicycles fell 35 per cent to 480,878 from 740,150.
The CITT says that between 2000 and 2004 total sales of domestic and imported bikes increased 25 per cent. More than 1.5 million bicycles are sold annually in Canada, according to the Canadian Cycling Association.
The two largest domestic bicycle producers are Groupe Procycle, which has its manufacturing facility and head office in Saint-Georges de Beauce, Que., and Raleigh Industries of Canada, which has its head office in Oakville and its manufacturing facility in Waterloo, Que.
Earlier this month, Rocky Mountain Bicycles of Delta, B.C., a subsidiary of Procycle, announced it was reorganizing its operations because of "fierce international competition and a desire to capitalize on the specific competitive advantages developed by each of its two plants."
A total of 19 employees will be affected by the restructuring, which will see the final manufacturing stage in the bicycle assembly process transferred to the Quebec facility from Delta. Research and design, manufacturing and high-performance frame-assembly operations will remain in B.C.
Among the groups opposing the imposition of additional taxes on imported bicycles is the Bicycle Trade Association of Canada (BTAC).
In a prepared statement the BTAC says that prior to the election "the Conservative government stated their opposition to the surtax and we want to hold them to that promise."
"We are planning meetings in Ottawa and will be delivering the message that high bike prices will negatively impact independent bike dealers across the country," says BTAC executive director Janet O'Connell.
The BTAC says there are more than 1,000 independent bicycle dealers in Canada that source their bicycles from domestic producers and from importer-distributors. Also lined up against the CITT's recommendation are bicycle-friendly cities, including Saskatoon and Vancouver.
Near says bicycles imported into Canada already have a 13- per-cent import duty and some imported bicycles can have up to a 50-per-cent dumping duty applied. "We have to stop putting more and more taxes on bicycles," Near says. "This surtax will put a third level of tax on bikes. It is not healthy for society to tax something that is fundamentally safe, promotes exercise and cuts back on greenhouse gases. " Countries with which Canada has free-trade agreements, the United States, Mexico and Israel, would be exempt from the surtax. The low-cost imported bicycles come from China, Taiwan, Vietnam and Thailand.
The Quebec district of the United Steelworkers wants the surtax applied to protect jobs. The number of employees in Procycle's Quebec plant has fallen to just more than 100 from more than 500 because of the importation of low-cost bicycles from Asia, the union says.
"There is no doubt in our mind: If measures to safeguard the Canadian bicycle and frame manufacturing industry are not adopted, the importation of bicycles and bicycle frames, which was the focus of the complaint filed by the Canadian producers, will increase, under conditions unacceptable to the Canadian bicycle and bicycle frame manufacturing industry," the union says.
The federal government is reviewing the CITT report and recommendations, but has not made a decision on the report, Department of Finance spokesman Greg Scott says.
He gave no deadline on when the government will compete its review and release its decision.
However, Greg Kanargelidis, a customs and revenue tax lawyer with Blake, Cassels & Graydon LLP in Toronto, is doubtful that the surtax will come into effect.
"It is highly unlikely that the government will impose this because of the trade friction it would cause between Canada and China," Kanargelidis says. "A lot of time has passed since the recommendation was made. Things might have changed for the better or worse.
"The longer the delay continues the less justification for the government to impose these measures," he adds. "In other industries (tobacco) where surtaxes were recently recommended by the trade tribunal, the government did not approve the surtax."
One major bike retailer - Canadian Tire Corp. - has appealed to the Federal Court of Appeal to overturn the CITT recommendation, Kanargelidis says.
About 68 per cent of bicycles are sold through mass merchants, such as Canadian Tire, Wal-Mart, Zellers, Costco, London Drugs and Federated Co-operatives Ltd., according to the CITT.
Canadian bicycle manufacturers can not compete at the low end, says Narayana Reddy, a bicycle mechanic instructor with the Toronto District School Board.
"Bicycles can be brought in from Asia for as low as $16. We can't compete at that price. Canadians should concentrate on the higher-value bikes where we are competitive like Toronto's Cervelo," Reddy says.
Near says he expects that once the government makes its decision on the surcharge, bicycle retailers will ask for the removal of the other taxes now applied to bicycles. "The gloves are off. These taxes are holding back the industry."
(Charles Wyatt can be reached at wyatt@businessedge.ca)