Quota Implemented for Duty Free Cambodia Import
BRUSSELS, Belgium – Last Friday, September 5, Bike Europe reported on an investigation started by the European Commission on possible illegal bike export to the EU under GSP+ conditions by Cambodia, the Philippines and Pakistan. However, there’s more going on that in particular affects the Cambodian bike export to EU markets.
It all has to do with changes in the local content regulations that came into force at the start of this year, required for obtaining EU’s GSP Plus status for Cambodia’s 14% import duty free export to Europe. The changes caused that components used in the Cambodian export bikes sourced from Singapore and Malaysia are no longer considered to be local content since January 1, 2014. This rules out the use of components from Shimano Singapore and Malaysia, which contributes significantly to the 30% local content.
However, 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 the year, 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 29th (EU Commission regulation (EU) No 822/2014).
The derogation means that once again producers in Cambodia can include parts from Malaysia as local content, the assistance will last 3 years and as is normally the case is based on an quota with a sliding scale. For 2014 the quota stands at 400,000 bikes; for 2015 at 300,000 and for 2016 at 150,000 bikes.
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 (and its eventual expiry in 3 years’ time) 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.”