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How U.S. bike companies are steering around Trump’s China tariffs

Employees work on the production line of Kent bicycles at Shanghai General Sports Co., Ltd, in Kunshan, Jiangsu Province, China, February 22, 2019. Picture taken February 22, 2019. REUTERS/Aly Song

U.S.-based bicycle manufacturer Kent International has found a way around President Donald Trump’s tariffs – by shifting production out of China.

Like almost all U.S. bike makers, Kent has long relied on low-cost Chinese labor and parts, but Trump’s tariffs have so far inflated his costs by about $20 million annually.

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We have no choice but to – as rapidly as possible – look to move production away from China

 said Arnold Kamler, chief executive and majority owner of the Parsippany, N.J.-based bike company.

But Kent and other bike makers don’t have to move their manufacturing operations to the United States to avoid tariffs – nor do they have to stop using Chinese parts.

The company now plans to make bike frames in Cambodia while continuing to buy about half the components it will attach to those frames from producers in China. The resulting bicycles can enter the United States tariff-free because of U.S. rules that generally allow products to be designated as made-in-Cambodia as long as 35 percent of their costs for parts and labor are derived from that country.

Gaming the so-called rules of origin is a legal tariff-avoidance strategy being adopted by other major U.S. bike builders and explored across the industry, along with other manufacturing sectors, according to bike executives and supply chain consultants.

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