On 05 July 2023, the Royal Government of Cambodia enacted the Law on Rules of Origin (“Law on Rules of Origin”) to establish the fundamentals and rules in determining the origin of both exported and imported goods in Cambodia. The primary objective of this law is to promote and facilitate trade that benefits from trade preferences and non-preferential practices, as well as to serve as a safeguard against counterfeiting of origin – in line with the Rules of Origin (“ROO”) under the World Trade Organization Agreement.
The Law on Rules of Origin applies to: (1) manufacturers, exporters and importers who require proof of origin for such goods; (2) a legal entity or institution involved in trading activities who declares the origin of the goods; and (3) the authorities responsible for issuing certificates of origin (for exported goods) and verifying the origin of imported goods.
We provide below the salient features provided under the law.
Determination of the origin of goods
The law provides the criteria for the origin of the goods that are subject to preferential and non-preferential treatment.
(1) Preferential Trade System refers to rules set out under the Free Trade Agreement (“FTA”) between contracting parties in compliance with the General Agreement on Tariffs and Trade 1994 of the World Trade Organization or other preferential trade agreements. This includes the Regional Comprehensive Economic Program (“RCEP”) and other existing FTAs entered by Cambodia.
- For Preferential Trade System covered under an FTA or other trade agreements (e.g., RCEP, ATIGA, etc.): The ROO will be determined following the provisions of the existing FTA and other trade agreements entered by Cambodia.
- For Preferential Treatment covered under a unilateral agreement/concession: The ROO will be determined following the rules of the importing country.
(2) Non-Preferential Trade System refers to rules that govern the implementation of various aspects, including the most-favoured-nation tariffs, anti-sales, tariff windows, compensation and protection measures in determining the origin of goods, quantitative restrictions on government procurement, and collecting trade statistics.
For Non-Preferential Trade System, the ROO will be determined based on the following criteria:
- whether goods are wholly obtained or produced in one particular country; or
- essential processing if the production involves many countries or have undergone substantive transformation.
The Law on Rules of Origin provides examples of goods that are considered as goods wholly obtained or produced in one country. This includes mineral products, live animals raised in the country, and goods entirely made from such country.
Meanwhile, for “essential processing” criterion, the ROO will be determined by changing the classification of goods in accordance with tariff schedule or value-added percentage rule. The Ministry of Economy and Finance (“MEF”) and the Ministry of Commerce (“MOC”) will issue a separate Prakas to cover the details of the “essential processing” criterion.
In addition, the law further states that goods retain their originating status when directly shipped from the origin country to the importing country without undergoing any modification or further processing in intermediary countries. Furthermore, this law also specifies that certain operations or processes, such as storage, packaging improvements, simple assembly, mixing of goods of different origins, etc., are considered insufficient to provide the origin of the goods.
Proof of origin
The proof of origin covers all types of evidence to support that the declared goods originated in a particular country. This includes the certificate of origin (“CO”), whether in paper or electronic format, and the declaration of origin (“DO”).
For those under Preferential Trade System, the proof of origin should adhere to the stipulated requirements under the FTA or trade agreements entered with Cambodia (e.g., Form RCEP for those goods under RCEP, and Form D for those goods under ATIGA relief). Meanwhile, for those under unilateral agreements/concession, the proof of origin should be compliant with the ROO of the importing country. In both cases, the use of electronic CO – if allowed under existing FTA or Trade Agreement entered with Cambodia – will also be permitted, subject to MOC’s confirmation of authenticity of the document.
In addition, the CO of preferential trade should adhere to the minimum information requirements and comply with the prescribed CO form as determined by the MOC.
Manufacturers and exporters must keep the proof of origin documents at their business premises in Cambodia for a period of three years (in case reviewed by the MOC). However, manufacturers and exporters must also maintain the documents in compliance with the Law on Customs (in case reviewed by the General Department of Customs and Excise or “GDCE”). This effectively extends the retention period to 10 years.
Moreover, this law strictly prohibits the intentional falsification of the origin of goods to obtain preferential treatment or evade taxes. It outlines particular actions that constitute offenses related to counterfeiting the origin of goods or proof of origin information. In addition, non-compliance in certifying the origin of goods is also prohibited, such as false declarations of the origin of goods/raw materials, incorrect information on invoices, criteria of origin of goods, means of production and expenses, and incorrect classification of goods and report of production.
Competent authorities
The MOC is responsible for issuing the CO (both in paper and electronic formats) and is authorized to verify the origin of goods for export from Cambodia. Meanwhile, the GDCE is responsible for verifying the origin of goods imported into the country.
Penalties
Under the Law on Rules of Origin, administrative and/or criminal penalties may be imposed on individuals or legal entities that do not comply with origin requirements (e.g., failure to keep the proof of origin documents, counterfeiting of origin, etc.). Administrative penalties may include written warnings, suspension or cessation of business operations, and/or revocation of licenses/permits. Meanwhile, criminal penalties include transitional penalties, fines, or imprisonment depending on the type of offense committed.
DFDL Comments
The Law on Rules of Origin is a welcoming development as it outlines the ROO procedures in Cambodia, as well as application of penalties in case of non-compliance. The law promotes a fairer playing field especially for Cambodian exporters and traders who rely on the ROO to benefit for any tariff concession or relief. This would promote investment and trade preferences into the country while also fostering domestic and international trade ties. At the same time, it also increases compliance among trading partners, which could help boost the country’s overall exports and economic growth.
While the Law on Rules of Origin has not yet provided specific details regarding CO marking on packaging, labels or goods, we expect that this matter will be regulated via separate regulations to be issued by the relevant authorities (MEF, MOC or GDCE). From a consumer protection perspective, the ROO can play an important role in protecting consumers from misleading labeling, counterfeit goods and unfair competition. It will ensure that goods are labeled accurately and adhere to established standards through the ROO.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
