Cambodia’s fledgling bicycle industry is under threat following changes to the European Union’s duty-free trade incentive plan, the European Union’s delegation to Cambodia said Tuesday.
Beginning in January, the E.U. revised its Global System of Preferences (GSP)—which allows developing countries to pay lower or no duties on their exports to the E.U. The goal is to refocus trade preferences on countries most in need.
The reform saw Malaysia and Singapore, two major suppliers of bicycle parts, graduate out of the plan. But Cambodia’s bicycle industry relies heavily on parts produced in those countries.
“Countries like Singapore and Malaysia, in the ASEAN region, will not be able to cumulate regionally anymore,” Pok Poun, press officer for the E.U.’s delegation in Cambodia, said in a statement, referring to international assembly procedures.
“Cambodia has submitted a request asking for a temporary derogation for three years to continue sourcing bicycle parts from Malaysia and Singapore to allow its industry to adapt,” the statement continues.
“The [E.U.] Commission understands the potential disruption on the supply for the bicycle industry which is the third export to the E.U. after garments and rice. The Commission is exploring the different options for a derogation,” the statement concludes.
Cambodia’s bicycle exports increased from $268 million in 2012 to $357 million in 2013. Total exports to the E.U. increased 30 percent last year, totaling $2.4 billion, with bicycles accounting for 10.3 percent of those exports.
The new regulations mean Cambodia needs new local sources to meet the minimum requirement that 30 percent of a unit must be made using local parts.
The Commerce Ministry did not respond to requests for comment.
A report from the online trade publication Bikes-E.U. said that the new duty would threat exports to German firm ZEG, which sources “several hundred thousand bicycles from factories in Cambodia.”
(Additional reporting by Ben Sokhean)