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Cambodia’s Duty Free Export Status Continues

Laws & Regulations 4066

BRUSSELS, Belgium – This month (July) ‘Brussels’ is to decide on a request from the Cambodian government on extending the derogation of the country’s GSP+ status. This duty free export status safes bicycle exporters to the EU’s 14% import duty. The European Bicycle Manufacturers’ Association (EBMA) and the Confederation of the European Bicycle Industry (CONEBI) hold no objections to such further derogation.

Cambodia’s Duty Free Export Status Continues
Strongman is a major Cambodian bicycle exporter making Bulls bikes for ZEG. The EU imported close to 1.4 million bicycles from Cambodia in 2015; up 14% on the 2014 total. – Photo Bike Europe

Because the current derogation term and quota ends this July  Cambodia requested extension of the special EU duty exemption for bikes. That took place last March at the ASEAN Economic Ministers (AEM) – EU Trade Commissioner Consultations. Here officials from Cambodia’s Commerce Ministry asked European Union Trade Commissioner Cecilia Malmström to consider extending a special exemption applying to locally-produced bicycles exported to Europe.

Request for derogation for another 3 years

Cambodia’s Ministry of Commerce requested that the EU should extend the derogation for another 3 years period from 2016. This derogation applies to bicycle’s part imported from Malaysia. Shimano (with manufacturing plants in Malaysia and Singapore) components contributed significantly towards meeting the 30% local content threshold.

CONEBI and EBMA

After sources close to CONEBI indicated to Bike Europe that the Confederation holds no objections to the continuation of the derogation also EBMA reacted likewise. EBMA’s general secretary Moreno Fioravanti said, “We share the European Union Commission’s view of helping developing countries with GSP+ policies, provided that Cambodian workers profit from such policies while there’s no circumvention taking place from Chinese exporters.

The cumulation with bicycle parts made in Malaysia was going the wrong way, as it was putting together Shimano parts with parts made in China with which the Cambodian exporters claimed to be fulfilling the 70-30% local content rule. They did that without the need to invest in Cambodia to produce frames and other parts. Now they have to invest in such parts production, as the cumulation with Malaysia made parts is finished. This results in thousand’s Cambodian workers to enjoy a long term industrial job thanks to the European market for bicycles.”

‘Derogation’

Components used in the Cambodian export bikes sourced from Singapore and Malaysia were no longer considered to be local content since January 1, 2014. However, the EU regulations have a system of ‘derogation’ which basically means where a developing country can demonstrate that a new rule or a change in rules will detrimentally affect their development, they are able to apply for a derogation and actually be ‘excused’ from the new rule for a period of time. This extra time is given to allow any fledgling industries to prepare themselves for the eventual normalization of the rule.

Young and growing bicycle industry

The Cambodia Government supported its young and growing bicycle industry by applying for the derogation in the start of 2014, after some investigation into the justification of their case and Cambodia’s eligibility, the European Commission agreed to a derogation which was published in the official journal on July 29, 2014 (EU Commission regulation (EU) No 822/2014).

Quota

The derogation meant that once again producers in Cambodia were able to include parts from Malaysia as local content. The assistance lasted 3 years and was based on quota with a sliding scale. For 2014 the quota stood at 400,000 bikes; for 2015 at 300,000 and for 2016 at 150,000 bikes.

Further development

The derogation quota is only used on those bicycles which cannot pass the rule of origin without major spec changes. CEO Jon Edwards of A&J, which is a major bike producer and exporter in Cambodia, said: “For the general low to mid-range bicycles from Cambodia, the derogation has little or no effect. The derogation is helpful for the further development of the mid to high end business, and to give more time to prepare more parts production in Cambodia.”

End of derogation term and quota

As said the current derogation term and quota ends this July. On the last March request from the Cambodian government for another three years of derogation EU Trade Commissioner Cecilia Malmström responded to consider the request and revert back to Cambodia in due course. This ‘consideration’ included consultations with stakeholders like the EU industry. As said EBMA and CONEBI hold no objections to a further extension of the derogation of Cambodia’s duty free export status. So it is very likely to continue. Whether that will include quota is yet unknown.

Cambodia’s export data

According EU’s data bureau Eurostat the 28 EU member states imported close to 1.4 million bicycles from Cambodia in 2015; up 14% on the 2014 total. The average value per imported bike stood at 226 euro; up 17% on the 2014 value.

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