On February 12th, 2020, The European Union (EU) moved forward with a partial withdrawal of preferential tariff treatment from Cambodia due to human rights abuses.
Cambodia is considered a Least Developed Country by the UN Committee for Development Policy and as such is entitled to the EU’s Generalized System of Preferences (GSP) Everything But Arms (EBA) scheme. This scheme provides imports from Cambodia duty and quota free access to the EU Single Market for all products except from arms and armaments.
While countries do not need to apply to benefit from EBA, they are added to and removed from the list through delegated legislation. Countries can be removed from the EBA scheme if there is systemic and ongoing violations of fundamental human and labour rights conventions.
Cambodia still remains a party to the GSP scheme. However, its removal from EBA status is expected to impact a significant percentage of import volumes into the EU. Assuming there are no objections in the European Parliament and Council, the reversion back to WTO Most Favoured Nation (MFN) tariffs will take place on August 12, 2020. The current third country duty rate, which Cambodia will revert to in August, is as high as 12 percent for certain articles of clothing.
Emerging industries in Cambodia will remain duty and quota free, along with high value-added garments and certain footwear. In making its determination, the EU Commission purposefully avoided products that required “significant training and investment in skills,” including bicycles and higher value garment products.
As stated above, this change will not take place until August 12, 2020. It is unlikely that the European Parliament or Council will object to its implementation. The EU may ease these restrictions over time if it sees improvements to the political and human rights situation in Cambodia.
Should you have any questions on the EU’s trade relationship with Cambodia and how it may impact your compliance program and duty obligations, please do not hesitate to reach out to Tradewin.