UNEASY RIDER: GETTING HARLEY-DAVIDSON INTO TAIWAN

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000954

SIPDIS

STATE FOR EAP/RSP/TC, STATE PASS AIT/W AND USTR, USTR FOR
KI AND FREEMAN, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN
MBMORGAN

E.O. 12958: DECL: 03/04/2015
TAGS: ECON ETRD TW
SUBJECT: UNEASY RIDER: GETTING HARLEY-DAVIDSON INTO TAIWAN

Classified By: AIT Director Douglas Paal, Reason 1.4 d


1. (SBU) Summary: A representative from Harley-Davidson met
with AIT March 1 to discuss how best to overcome a Taiwan
regulation requiring heat shields on motorcycle exhaust
systems. Harley-Davidson believes complying with this
regulation will negatively impact the look, sound and feel of
their motorcycles and views this as the last remaining
obstacle to their entry into the Taiwan market.
Harley-Davidson has not raised this concern with the Taiwan
government, has no presence in Taiwan, has not engaged with
local industry, and is not listening to the advice of their
lawyers in Taiwan. Instead, Harley would like AIT to make
the case to the Taiwan government that Harley-Davidson should
be exempted from these requirements. AIT officials expressed
continued support for Harley-Davidson's efforts to enter the
Taiwan market but suggested several approaches that are
likely to prove more successful than Harley's current
strategy. End Summary.


2. (SBU) Harley-Davidson's Vice President for Government
Affairs, Tim Hoelter, stopped by the Commercial Section March
1 on his way to attend an international motorcycle
enthusiasts meeting in east Taiwan. Although occasionally
seen on the streets, Harley-Davidson currently has no
authorized dealer in Taiwan due to a Ministry of
Transportation and Communication (MOTC) regulation that
requires all two-wheeled vehicles to use heat shields to
cover the exhaust system. Hoelter's message to assembled AIT
Commercial and Econ staff was that complying with the MOTC
requirement would ruin the look, sound and feel of
Harley-Davidson motorcycles, could have safety implications,
and that Taiwan's requirement was a unique standard that
existed nowhere else in the world. He asked AIT to make
these points to appropriate officials in order to secure an
exemption from the regulations for Harley-Davidson products.
Hoelter said he himself had no plans to meet either with
Harley's local legal counsel or government officials while in
Taiwan.


3. (SBU) AIT staff expressed appreciation for Mr. Hoelter's
visit and desire to help Harley-Davidson bring its products
into the Taiwan market, as evidenced by our concerted efforts
to help Harley-Davidson successfully overcome emissions and
fuel economy requirements. Although the heat shield
requirement is preventing Harley-Davidson from entering the
market, other large displacement foreign motorcycle
manufacturers are already in Taiwan and have found ways to
comply with the letter of the law. The few rider
associations in Taiwan are weak and have not been mobilized
to pressure the government this issue. Without pressure from
industry groups or constituents, and without a regular
Harley-Davidson presence on the ground in Taiwan, government
officials outside of MOTC have told AIT there is little
incentive to make an exception to existing regulations solely
for the benefit of Harley-Davidson.


4. (SBU) Hoelter clearly believed that Harley-Davidson had a
strong case that was not being pursued vigorously enough by
AIT and that a resolution of the issue was being held back
only by a lack of USG involvement. However, Harley-Davidson
has not been actively pursuing a resolution to the heat
shield issue. Harley-Davidson's Taiwan representative, the
law firm Lee and Li, has not approached MOTC to discuss an
exemption from the heat shield requirements because they are
concerned that doing so without a stronger case may
perversely lead to more stringent regulations.
Harley-Davidson technical staff, during their infrequent
visits to Taiwan have also never approached the government to
discuss this issue. Harley-Davidson is unaware of rider
groups active in Taiwan and has not made efforts to discuss
the heat shield requirement with other motorcycle dealers in
Taiwan.


5. (SBU) AIT staff advised Hoelter that an effective
resolution of this issue for Harley-Davidson would be best
served by taking several steps, including the establishment
of a dedicated presence in Taiwan, preferably through the
naming of an authorized dealer willing to work for a
resolution of this issue. AIT also suggested a concerted
effort by Harley-Davidson to contact and enlist the support
of local rider groups or other interested parties for changes
in the regulations, coordination with representatives of
other large engine motorcycle manufacturers active in Taiwan,
establishing direct contact with decision-makers in the
Taiwan government, and the development of a strategy that
acknowledges the Taiwan government's health and safety
concerns while providing a reasonable means to allow
Harley-Davidson to come into the market without having to
make significant modifications to their motorcycles. AIT
stands ready to facilitate and assist Harley-Davidson's
efforts to implement a sound strategy to secure a resolution
that will allow their products to enter the market.


6. (C) Comment: AIT has already helped Harley-Davidson
overcome Taiwan regulations on emissions and fuel economy
that could have potentially proven barriers to entry into the
Taiwan market. Our commitment to seeing Harley-Davidson
products in Taiwan remains strong. The Taiwan regulation
requiring heat shields on all motorcycle exhaust systems is
clearly aimed at the ubiquitous small scooters that dominate
Taiwan's roads and sidewalks, not at the large motorcycles
that are the province of weekend pleasure riders. Other
large motorcycle dealers circumvent the intent of the law by
installing temporary heat shields that are removed soon after
inspection. Harley-Davidson understandably does not want to
play that game.


7. (C) Comment continued: Hoelter said AIT had not fully
supported Harley-Davidson's efforts to resolve the heat
shield problem. In fact, Harley-Davidson's efforts to find a
solution have been non-existent. Harley-Davidson has no
presence in Taiwan and has made no efforts to discuss this
issue with government officials, local interest groups, or
the local industry. Hoelter told AIT he has been trying to
get Harley products into Taiwan for ten years, but has made
just three visits to the island. He was unaware if there is
a local Harley enthusiast organization and had no plans to
meet with either relevant Taiwan government officials or
Harley's own local legal counsel while in Taiwan. AIT
believes it is unlikely that Taiwan government officials will
be sympathetic to a request by AIT on behalf of
Harley-Davidson to change or exempt certain products from
safety regulations on account of the negative impact on
Harley-Davidson's look and feel. Instead, AIT would welcome
and happily assist in the development and execution of a
strategy that supports Harley-Davidson as they mobilize local
interests and approach the government with a proposal that
acknowledges the responsibility of the government to protect
public safety and regional norms, while minimizing any
modifications to Harley-Davidson's iconic design. End
Comment.
PAAL