Cambodia Requests Continued Quota for Duty Free Bike Export
BRUSSELS, Belgium – In a letter dated October 13, 2016 the Kingdom of Cambodia has officially requested for an extension of the quota regulations for bicycles imported from Cambodia into the EU that are in place since 2014. These ‘Derogation’ rules made it easier to comply with local content regulations in place for the duty free import of bicycles made in Cambodia under the EU General System of Preferences (GSP).
The current derogation to the GSP rules of origin were granted in 2014 and end on 31st December 2016. The fact that the official letter from Cambodia was delivered only last October to the European Commission’s Directorate-General Taxations and Customs Union will certainly mean that no action will be taken before the end of 2016. But there’s more that comes into play with regard to the fact that it will get more difficult to import Cambodia made bicycles into the EU under the GSP+ duty free scheme.
That the derogation on the GSP rules for Camboda made bikes is to end has to do with the position in this matter of the association of the European bicycle industry. The European Bicycle Manufacturers’ Association (EBMA) says on the request by the Cambodian government, “As they already had 3 years with the previous agreement to which also EBMA contributed, we will oppose such derogation request. In particular as it doesn’t take more than six months to one year to increase the local production of bicycle components.”
Last month Directorate-General Taxations and Customs Union organized a first meeting with stakeholders from the EU member states on the request for further derogation by the Cambodian government. Here EBMA brought its opposition to the request forward. The industry association expects a decision by Brussels to take at least a few months.
Derogation rules were applied to the Cambodian import of bicycles into the EU under GSP after it was considered that parts sourced from Singapore and Malaysia used in the Cambodian export bikes were no longer to be local content. Since January 1, 2014 it ruled out the use of parts from Shimano Singapore and Malaysia, that contributed significantly to the 30% local content of bikes made in Cambodia.
With Derogation the import from Cambodia was ‘excused’ from the new rule for a period of 3 years. This extra time was given to allow the Cambodia bicycle industry to prepare themselves for the eventual normalization of the rule.
The Cambodia Government applied for the Derogation beginning 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 EU Official Journal on July 29, 2014 (EU Commission regulation (EU) No 822/2014). It ruled that once again producers in Cambodia could include parts from Malaysia as local content. The Derogation was to last 3 years with for 2014 a quota that stood at 400,000 bikes; for 2015 at 300,000 and for 2016 at 150,000 bikes.
Challenges for reaching local content
With the end of the Derogation and with the use of Shimano parts sourced from Singapore and Malaysia it will be more challenging to reach the local content required on higher end bikes. Sources in Cambodia say that some spec changes and adjustment of price points may be required. And that on lower end bikes the local content is easier to reach with frames made in Cambodia.
Lowered import from Cambodia?
The end of the Derogation rules and the quota system in place since 2014 will probably not result in a lower number of imported bicycles from Cambodia into the EU. That import totaled close to 1.4 million bicycles in 2015; up 14% on the 2014 total. With that 1.4 million units Cambodia holds a 18.7% share in the total EU import of bicycles that amounted 7.5 million units in 2015.
Production back to Europe
One of the most prominent buyers of Cambodian made bicycles is Europe’s biggest dealer cooperative ZEG. Whether ZEG will be expanding its sourcing from Cambodia’s OEM maker Strongman is the question. In particular as ZEG acquired the former Kettler bicycle facility in Germany in November 2015.
What also comes into play with regard to the import from Cambodia is that there’s a strong trend to bring production back to Europe. This has already brought about that one Taiwan bike producer – Fritz Jou – announced to start production in Portugal. Two of the Cambodian bicycle manufacturers also stem from Taiwan based companies.