Cambodia Investment Review

Explainer: The Cambodian Law on Rules of Origin and Its Impact on International Trade

Explainer: The Cambodian Law on Rules of Origin and Its Impact on International Trade

David Mol – Tilleke & Gibbins (Cambodia)

Cambodia’s new Law on Rules of Origin, published on July 5, 2023, represents a significant and positive shift in the country’s trade regulations. This law has been established to foster transparency and to align with the international norms set by ASEAN and the WTO. It is anticipated that the introduction of this law will not only enhance consumer protection but also facilitate the growth of Cambodia as a significant manufacturing and processing hub within the ASEAN region.

Understanding Rules of Origin and Cambodia’s Unique Role

Rules of origin play a pivotal role in international trade, defining the country in the production chain that qualifies as the origin country. Before the establishment of the new Law on Rules of Origin, Cambodia’s approach was relatively unstructured, with ad hoc rules often dependent on bilateral and multilateral agreements.

Read more: What impact will RCEP rules of origin have on Cambodia?

Different export destinations, such as the EU and the US, had their rules that, at times, led to inconsistencies and ambiguities for Cambodian exporters. The new law aims to clear these uncertainties, providing a more equitable platform for traders.

Cambodian Perspectives on Rules of Origin

Exporters in Cambodia are keen on whether their products qualify for preferential treatment under the rules of origin. This new law helps define the criteria for qualifying, primarily based on the level of processing or manufacturing happening within Cambodia’s borders.

In recent times, the Cambodian government has promoted the “Made in Cambodia” label. While this effort has spurred investment in quality manufacturing within Cambodia, the lack of clear legal guidance has caused some exporters to face challenges in compliance with foreign rules of origin.

Cambodia’s New Law on Rules of Origin: A Deeper Insight

The new law elucidates how to manage and apply rules of origin, shedding light on different aspects, including products seeking preferential trading access and those that do not.

Products Seeking Preferential Trading Access

For products seeking preferential trading access, the law reaffirms that the rules set by international agreements and trading schemes apply. Additionally, the law provides guidance for government institutions to facilitate Cambodian exporters’ access to these schemes, such as certificates of origin.

Products Not Seeking Preferential Trading Access

For products not seeking preferential treatment, the law offers distinct rules, especially regarding products entirely made or extracted within one country. If a product undergoes “essential processing” in Cambodia, it is considered Cambodian.

Country-of-Origin Markings: “Made in…”

The law requires further regulations on country-of-origin markings, aligning with the rules of importing countries or international agreements.

Comments and Insights from Industry Experts

David Mol, a trade expert in Cambodia, hailed the new law, stating, “This legal development aligns Cambodia with international best practices, enhancing its global trade position.”

Another trade analyst, Priscilla Kwan, commented, “The Law on Rules of Origin will undoubtedly boost Cambodia’s reputation as a reliable trading partner, fostering greater investment within the country.”

Conclusion

The Law on Rules of Origin is undeniably a critical milestone for Cambodia, clarifying uncertainties and aligning with international norms. Although some implementation details still need to be finalized, the law sets a clear path forward, particularly for products not seeking preferential trading access.

By incorporating insights from industry experts and reflecting on the multifaceted implications of the law, it becomes evident that Cambodia is moving in the right direction to strengthen its role in international trade. The law not only benefits Cambodian exporters but also sends a strong signal to the international community about Cambodia’s commitment to adhering to global trading standards.

Want to know more?

Consult with Made in Cambodia: New Law on Rules of Origin Brings Clarity to International Trade.

About the Author

David Mol, a senior associate in Tilleke & Gibbins’ Phnom Penh office with considerable experience handling legal matters in Cambodia, is regarded by his clients and peers as a trusted advisor for doing business in Cambodia. Mobile: +855 23 964 210 / Email: david.m@tilleke.com

About Tilleke & Gibbins

Tilleke & Gibbins, with over 230 lawyers and consultants in Cambodia, Indonesia, Laos, Myanmar, Thailand, and Vietnam, we provide a full range of legal services for companies doing business across Southeast Asia.

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