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US seeks to produce bicycles in Kingdom, move away from China

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The Kingdom’s exports of bicycles to the US are expected to grow due to US-imposed tariffs on China. Post staff

US seeks to produce bicycles in Kingdom, move away from China

Cambodian exports of bicycles to the US are expected to gain from recent tariffs imposed by the US on China, thanks to several bicycle producers who have unveiled plans to move to the Kingdom, a report from a leading industry portal said.

Bicycle Retailer, the website of Kent International Inc – an American importer and distributor of bicycles and bicycle accessories – plans to move a large share of its production from China to Cambodia in the next few months.

As evidence of this, one of Kent’s major Chinese suppliers is building a new 500,000sq ft (46,452sqm) factory in Cambodia.

Kent CEO Arnold Kamler said the factory will begin shipping bicycles in September next year.

“Assuming the 25 per cent tariff takes effect, the idea is to move essentially all of our production from China to Cambodia,” he said.

After imposing a 10 per cent tariff on Chinese bicycles in September, the tariff is set to increase to 25 per cent in January.

To comply with US Customs’ rules of origin, Kamler said Cambodian parts and labour would make up at least 35 per cent of the value of Kent’s Cambodian bicycles, which will have Cambodia-made frames and forks.

The report said the factory that Kent is working with is in the south, near Phnom Penh.

Besides Kent International, Trek Bicycle Corporation – another US-based bicycle and cycling product manufacturer and distributor – is also reported to have plans to move production of at least 200,000 bicycles from China to Cambodia next year.

Cambodia Chamber of Commerce (CCC) vice-president Lim Heng said on Monday that the US’ decision to increase the tariff on Chinese products could lead some types of production in China slow down.
This, he said, will eventually negatively affect the export of some raw materials from Cambodia to China.

However, he said Cambodia should gain more than it loses as many factories in China, including those that produce bicycles, plan to relocate their production to the Kingdom where the cost of doing business is cheaper, and from where products can be exported duty-free to many major markets.

“We [CCC] have received more contact from investors abroad to know about Cambodia’s investment potential as they want to open their factories here. When they seek to expand their production, they should find Cambodia more interesting,” he said.

US trade data show that Cambodian bicycle exports accounted for $24 million last year. This placed the Kingdom third behind China and Taiwan which exported $874 million and $390 million worth respectively.

Besides the US market, Cambodia became the largest bicycle supplier to the EU last year when it exported more than 1.42 million bicycles – an increase of nine per cent from 1.29 million bicycles in 2016.
Cambodian made bicycles can be exported duty-free into the EU under the blocs Everything But Arms (EBA) programme.

Despite the tariff advantage and lower labour costs, there are challenges for manufacturing in Cambodia as the Kingdom lacks an industry cluster, which means many components must be imported, making it time-consuming and affecting costs.

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