The government, at the highest level, is learnt to have intervened on the issue of high import duty on Completely Built Units or CBUs of American motorcycle manufacturer, Harley-Davidson, with the Prime Minister’s Office (PMO) having sought an explanation from the Central Board of Excise and Customs (CBEC) on the matter, two senior government officials said. The move comes close on the heels of Prime Minister Narendra Modi’s visit to the US in the last week of June.
US President Donald Trump had, in the recent past, been vocal about his support for Harley-Davidson — the motorcycle manufacturer viewed as a flag bearer of the American manufacturing story and is only one of two US motorcycle makers that have survived the Great Depression. Four months ago, Trump, in his Presidential address to a joint session of the US Congress, had even hinted at mistreatment to Harley-Davidson due to high import duty of as much as 100 per cent in foreign market.
Tax officials, however, do not see a strong ground for a reduction in import duty for completely built units of Harley-Davidson motorcycles, which currently stands at 100 per cent. “They (Harley-Davidson) have, in fact, benefitted from the high import duty on CBUs. They have become the biggest exporters of their segment of motorcycles from India,” a senior government official said. Harley-Davidson’s Media spokesperson, Katie Whitmore, when contacted by The Indian Express, said, “Certain Harley-Davidson motorcycles can be taxed at or above 100 per cent in certain international countries — India is one example. While the company has not made a direct request to the Indian government for a tariff reduction on certain motorcycles imported as CBUs, we do however, support periodic reviews of all tariffs, taxes and fees applied to imported motorcycles to ensure the greatest value to our customers.” A text message sent to PMO’s Public Relation Officer J M Thakkar on the issue went unanswered.
As per the latest figures for April-June released by the Society of Indian Automobile Manufacturers (SIAM), even though H-D Motor Company India Pvt Ltd, the Indian arm of Harley-Davidson, clocked a year-on-year decline of 18.2 per cent in its domestic sales at 901 units, it still continues to hold a share of 57 per cent in the high-end motorcycle segment. British company Triumph Motorcycles (India) Pvt Ltd followed with domestic sales of 433 units in April-June, 7.2 per cent higher than last year, while India Kawasaki Motors Pvt Ltd, a unit of the Japanese motorcycle manufacturer, sold 246 units, recording a decline of 29.9 per cent from last year. Exports of Harley-Davidson motorcycles from India, however, increased 28.4 per cent year-on-year to 1,269 units in April-June, the SIAM data showed.
In February, Trump in his Presidential address to a joint session of US Congress had said that the company had raised the issue of high rates of taxation for international sales. “I just met with officials and workers from a great American company, Harley-Davidson…at our meeting, I asked them, how are you doing, how is business? They said that it’s good. I asked them further, how are you doing with other countries, mainly international sales? They told me — without even complaining, because they have been so mistreated for so long that they’ve become used to it — that it’s very hard to do business with other countries because they tax our goods at such a high rate. They said that in the case of another country, they taxed their motorcycles at 100 per cent. They weren’t even asking for a change, but I am. I believe strongly in free trade but it also has to be fair trade. It’s been a long time since we had fair trade,” he said.
Trump had also said, “Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes. But when foreign companies ship their products into America, we charge them nothing, or almost nothing.”
In March, Peter Navarro, Director of White House National Trade Council, in a letter to the editor of The Wall Street Journal, as a response to the debate generated from his earlier March 6 op-ed piece, had said, “If India agrees to lower its tariffs on Harley Davidson motorcycles, Indian consumers will buy more Harleys and save less while Harley will sell more Harleys and invest more.”
Fully assembled motorcycles which do not require any manufacturing operation after their import in India are subject to an import duty of 100 per cent ad valorem, while motorcycles imported in a Completely Knocked Down (CKD) form, implying import items that are not capable of being further dismantled and involve maximum labour and assembling activity in India, are subject to import duty of 10 per cent. An import duty of 60 per cent is levied on two-wheeler CBUs with engine capacity less than 800 cc. But, most Harley-Davidson motorcycles have engine capacity of more than 800 cc, thus, attracting 100 per cent levy.
Harley-Davidson India appointed the first dealership in July 2010. Since early 2011, it has been assembling motorcycles in India at its CKD assembly unit at Bawal in Haryana. Harley-Davidson offers a range of 13 models, out of which 8 models are assembled at the CKD assembly unit at Bawal in Haryana. India is the second country where Harley-Davidson has CKD assembly operations outside the US, after Brazil.