As a commerce ministry note suggests, Harley — which has a plant in this country since 2011 —imports a lot of its components like engines, gear box, transmission mechanism etc in a pre-assembled form that are liable for just a 10% duty. (Reuters)
US President Donald Trump’s statement that Harley-Davidson is subject to a massive 100% tax for exporting motorcycles to ‘one country’ seemed targeted at India, but the fact is the iconic American bike maker pays as little as 10% duty here on much of its supplies. As a commerce ministry note suggests, Harley — which has a plant in this country since 2011 —imports a lot of its components like engines, gear box, transmission mechanism etc in a pre-assembled form that are liable for just a 10% duty. So, the argument that India has been imposing a 100% duty on Harley is “incorrect”, it stresses. Harley sold 4,080 units in India in 2014 and 4,445 units in 2015, much higher than its imports of 1,445 and 2,742 units in 2014 and 2015, respectively. This means a large number of Harley bikes are manufactured in India at its plant in Haryana where imposing a 100% tax “doesn’t come into picture”, according to the note. In fact, Harley has an over 50% share of the Indian market in the bike segments ranging from 800cc to over 1,600cc. FE was the first to report on March 10 that India was providing its embassy in Washington DC with these facts on the Harley issue to clear any ‘misconceptions’ there, if required.
Explaining the duty structure in India, the note says bikes imported in completely knocked-down (CKD) conditions attract just 10%, while for imports in semi-knocked-down (SKD) condition, the duty is 30%. Imports of new bikes under 800cc attract a 60% duty and those of over 800cc are taxed at 75%. Only purchase of used bikes from overseas attract 100%, as the government doesn’t want India to be a dumping ground of second-hand motorcycles. Importantly, India has the mandate under the World Trade Organization (WTO) to impose up to a 100% import duty on luxury bikes. In a meeting with the US assistant trade representative here earlier this week, the Indian side, without naming Harley, is learnt to have conveyed that the imposition of tariffs on products is guided by the country’s commitment to the WTO and its own domestic interests. This shouldn’t be a sore point in any bilateral ties, especially when it’s not country-specific.
Last month, a Harley spokesperson told FE that motorcycles are built from scratch here, assembled from CKD kits and completely built units (CBUs) were also imported. Other global majors such as Honda, Yamaha and Suzuki have large Indian plants and do not complain about high duties. A senior government official had earlier told FE: “A lot is being said there, and amid the clutter, it’s very important for India to keep engaging with the US to convey the actual picture on issues like Harley-Davidson and visas etc. If India doesn’t do that, vested interests will try to influence the Trump administration’s policies towards it.” Interestingly, the US is a major exporter of bikes to India in the over 800cc category (nearly all of Harley’s exports to India fall in this bracket) making up for 45%, 55% and 43% of total imports of bikes (in number of units) by India in 2014, 2015 and 2016, respectively, the note points out.
Also, the average price at which these Harley bikes were imported from the US was $6,026 in 2016, much lower than those of bikes from competing countries — $8,129 of Japanese bikes (mainly Suzuki and Kawasaki brands), $9,065 of Italian bikes (dominant brand is Ducati) and $15,592 of the German motorcycles (key brand is BMW). In his speech to Congress, Trump had said: “They (executives from Harley-Davidson) told me — without even complaining because they have been mistreated for so long that they have become used to it — that it is very hard to do business with other countries because they tax our goods at such a high rate.” “They said that in one case another country taxed their motorcycles at 100%,” he said of their meeting. CNN quoted Trump as saying: “They (Harley) weren’t even asking for a change. But I am.”