Made In Cambodia: New Law On Rules Of Origin Brings Clarity To International Trade

• Published date: 18 July 2023
• Subject Matter: International Law, International Trade & Investment
• Law Firm: Tilleke & Gibbins
• Author: Mr David Mol

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

Cambodia's new Law on Rules of Origin, which was published on July 5, 2023, is an important legal development that will help the country become a more important trading, manufacturing, and processing hub in the ASEAN region.

This legal development accords with the government's aims to increase consumer protection and clarity on product origin, encourage cross-border trade, position Cambodia as a source for quality manufacturing and processing, and push the "Made in Cambodia" quality label.

These new, much clearer rules of origin also bring Cambodia's legal framework in line with trading obligations set by ASEAN and the WTO. Furthermore, the new rules help clarify the implementation of several multilateral and bilateral trade agreements that Cambodia has concluded in recent years, such as free trade agreements with China and South Korea and the Regional Comprehensive Economic Partnership.

Rules of Origin and Cambodia's Role

In international trade, products often make multiple trips before they end up with the consumer'the raw materials may be sourced in one country and processed in another, and then the product may be finished in a third country before the finished product is exported to a different country altogether.

Rules of origin determine which country in the production chain qualifies as the country of origin. This is important because the country of origin may be subject to a preferential trading scheme, or there may be legal requirements to declare the correct origin in the country of sale, for example, based on labeling and consumer protection rules.

Prior to the new Law on Rules of Origin, ad hoc rules of origin applied in Cambodia, often depending on bilateral agreements, multilateral agreements, or international preferential trading schemes.

For example, the EU, US, and Japan have individually adopted preferential trading schemes with selected countries through Generalized Scheme of Preferences (GSP) programs. These GSP programs often set their own rules of origin for products in a bid to regulate what types of products are eligible for preferential treatment.

The origin rules ideally ensure that the origin country is accurately and fairly attributed so that the exporting country benefits from the preferential treatment. When an exporting country receives preferential treatment, it often leads to higher investment in quality manufacturing and processing'which is...