Sector: Corporate M&A

In response to recent tariff threats from the United States and to provide further clarification on provisions in Cambodia’s Law on the Rules of Origin (2023), the Cambodian government has issued two Prakas aimed at tightening enforcement of the rules governing the export of goods to the US. The first Prakas addresses obtaining an Origin Certification Letter (“OCL”) to export certain goods to the US, while the second Prakas addresses anti-fraud measures. Both Prakas entered into effect on May 12, 2025 and existing regulations that do not conflict with their provisions remain in force.

Procedures for Obtaining an Origin Certification Letter

On April 30, 2025, the Ministry of Commerce (“MOC”) issued Prakas No. 047 on the Procedures for Applying for and Issuing Origin Certification Letters for the Export of Certain Goods to the United States (“Prakas 047”). It complements existing legal documents related to the prevention of origin fraud, ensuring compliance with Cambodia’s and the US’s rules of origin by strengthening verification procedures.  

Mandatory registration 

Exporters and producers must register with the MOC’s online CO Automation System at https://co.moc.gov.kh before applying for an OCL. Required uploads (in PDF) include: 

• Certificate of Incorporation 
• GSP/MFN Certificate 
• Letter of authorization for the representative from the company owner or registered manager 
• ID/passport and a 4×6 cm photo of the authorized representative or designated recipient 

On-site inspection for the first OCL 

Initial certification requires an inspection by MOC officials to verify compliance. The detailed steps for this process are outlined in Prakas 047’s Standard Operating Procedures (Annex II), which include: 

• Procedures for initial and subsequent OCL issuance, which involves giving authority to the MOC officials to do the following: 
• Inspect business premises, warehouses, and manufacturing sites 
• Examine export documents such as purchase orders, invoices, and cost breakdowns
• Inspect aspects of the manufacturing process including raw materials, workforce, machinery, production capacity, and labeling 
• Verify production records 
• Documentation responsibilities of producers/exporters 
• Mechanisms for inter-ministerial data sharing and verification 
• Risk or complaint-based inspection and enforcement measures 
• Cooperation mechanisms with competent US authorities 

After inspection, the MOC officials will issue an initial inspection report, which is required for the initial and all future OCL applications.  

Required documents for the OCL application 

After registration and inspection, applicants must submit the following through the CO Automation System: 

• Invoice and packing list 
• Cost breakdown or reference documents required by the rules of origin 
• Initial MOC inspection report 

Issuing authority and fees 

The General Directorate of Trade Support Services issues the OCL. There is no public service fee for the application. A sample OCL is provided in Annex III of the Prakas. 

Anti-Fraud Measures

The MOC and the Ministry of Economy and Finance’s Joint Prakas No. 379 on Measures to Prevent Fraud on the Origin of Certain Goods Exported to the United States was also issued on April 30, 2025. It applies to all Cambodian producers and exporters shipping certain goods to the United States (the list of applicable goods is included in Annex I of Prakas 047). 

Certification requirements 

• Exporters must obtain an OCL from the MOC in accordance with Prakas 047. 
• The OCL must be attached when submitting the customs declaration for exports claiming Cambodian origin. 

Verification and investigation 

If there are questions as to origin or at the request of the US authorities, the General Directorate of Trade Support Services and the General Department of Customs, with support from relevant institutions, will jointly investigate the origin of the goods.  

Penalties for non-compliance  

Any producer or exporter found committing fraud with regard to the origin of goods, including concealing transshipment operations, will face penalties under the Law on Rules of Origin and the Law on Customs, such as a fine ranging from KHR10 million to KHR40 million, and imprisonment of one to five years. 

On April 10, 2025, the Ministry of Commerce announced the adoption of a new template for entities’ articles of incorporation (“AOI”), which now includes an Appendix 1.

Under this update, Appendix 1 consolidates all essential corporate information, such as:

• Entity name
• Organizational structure
• Business objectives
• Registered address
• Registered capital
• Par value of shares
• Shareholder information
• Director information

One of the benefits of this new template is that when an entity has changes to its corporate information that it needs to register with the Ministry of Commerce, it will only need to update Appendix 1 of its AOI.

Our understanding is that new entities will need to begin using the new template for their AOI; entities currently operating under the old AOI format can continue to do so, and change to the new template the next time they have to update their AOI. We will provide updates on this if there are any further requirements for currently operating entities.

On April 10, 2025, Cambodia’s Ministry of Commerce issued an announcement providing an update on the progress of negotiations with the United States regarding reciprocal tariffs.

Key highlights

• Tariff reduction: On April 9, 2025 the US President suspended implementation of the US reciprocal tariffs on Cambodia for 90 days. During this period, a reduced 10% tariff will apply—down from the proposed 49%.
• Diplomatic engagement: Cambodia received a positive response from the US following a formal request to begin talks, which was submitted by Prime Minister Hun Manet and Minister of Commerce Cham Nimul on April 4, 2025. The request included a proposal to reduce tariffs from 35% to 5% on 19 categories of goods the US exports to Cambodia.
• Upcoming negotiations: An interministerial working group led by Deputy Prime Minister Sun Chanthol will begin formal discussions with US representatives soon.

The government will issue periodic updates as negotiations begin to keep the public informed.

Overview

The law in Cambodia that addresses monopolies and business combinations is the Law on Competition (“Competition Law”) dated October 5, 2021. It was enacted to regulate anti-competitive practices and promote fair competition. It applies to all persons conducting business activities or any actions supporting business activities that significantly prevent, restrict, or distort competition in a market in Cambodia, regardless of whether the activities take place inside or outside Cambodian territory.

The law includes provisions for the review of business combinations to prevent monopolies and protect consumers’ interests. Details of the review process are regulated by Sub-Decree No. 60 on the Requirements and Procedures for Business Combinations dated March 6, 2023 (“Sub-Decree 60”). The Cambodian Competition Commission is responsible for overseeing the implementation of the law, including the anti-monopoly review of business combinations. It has the authority to investigate and take action against business practices that may lead to a monopoly or unfair competition.

Business Combination

The concept of control is central to the Competition Law’s provisions. According to Article 3(3) of the Competition Law, the term business combination refers to:

• The acquisition of the right of control or voting rights through the purchase of shares or assets by one Person from any other Persons; or
• The combination of two or more Persons to acquire joint ownership of an existing legal person or a new legal person.

Sub-Decree 60 goes further, providing a precise definition of control, emphasizing ownership of more than 50% of the shares, voting rights, or assets of a business as a key threshold for exerting influence over the company’s operations and strategic decisions. Specifically, Article 3(13) of Sub-Decree 60 further defines the right of control as one of the following:

• One person obtains ownership of more than 50% of the shares, interests, or voting rights of another person.
• One person obtains ownership of or the right to use the assets of, or one or more of the lines of business of, another person more than 50%.
• One person has one of the following rights:
  • To directly or indirectly decide the appointment, removal, or dismissal of a majority or all of the members of the board of directors or senior executives of another person.
  • To decide on the amendment of the constating documents of another person.
  • To make important decisions on the business activities of another person, including but not limited to, the selection of its legal form and organization, its lines of business operations, its geographic area of activities; raising, allocating, and use of capital; dealing with specific customers or suppliers; and other key business decisions.

Share transfers

In Cambodia, M&As are commonly carried out through share acquisitions, whereby the acquirer gains the right of control or ownership of a company through the share transfer process. Upon the acquisition of shares, all rights and liabilities attached to the shares are transferred to the new shareholder, including the right to receive dividends, attend and vote in shareholders’ meetings, and nominate board members. Likewise, the new shareholder assumes liability for the losses incurred by the company to the extent of their capital contribution.

Share transfers must be approved and registered with the Ministry of Commerce and notified to the General Department of Taxation. If the company carries out any qualified investment projects or any activity regulated by a specific regulator, share transfers must also be approved by the relevant regulator. Share transfers are subject to stamp duty of 0.1% of the value of the transferred shares.

In the context of the Competition Law and Sub-Decree 60, share transfers are an integral part of business combinations under Cambodian law. The transfer of shares can directly affect the ownership structure of a company and, consequently, the control exerted by the shareholders. If a party acquires more than 50% of the shares or voting rights, they can gain significant control over the company, which is one of the key elements of a business combination as defined by the Competition Law.

The Competition Law and Sub-Decree 60 establishes a regulatory framework that links share transfers to the broader process of business combinations. These transfers are not merely a financial transaction but a legal mechanism that could significantly alter a company’s control and competitive dynamics in the market.

Therefore, a key consideration when contemplating a share transfer is the issue of control, particularly if it will involve a party holding more than 50% of the total shares in a company, which would generally be considered a business combination. Additionally, given the lack of precedent since the Competition Law has only recently been implemented, it would be prudent for companies to review the business combination issues and possibly request an assessment by the Cambodian Competition Commission to determine if the transaction would be considered a business combination under the Competition Law.

Introduction

Cambodia’s accession to the WTO Fisheries Subsidies Agreement (“FSA”), almost exactly one year ago, stands as a recent example of its policy to pursue an international trade posture that is more in line with sustainability, and Cambodia as an open, fair and transparent place to do business in and with. It is aligned with a policy of reducing tension with environmental and trade policies of the European Union (“EU”) as Cambodia continues to work on its domestic administrative architecture to comply with international requirements in terms of marine conservation and improve its track record, particularly in relation to the EU, on the issue of illegal, unreported and unregulated fishing (“IUU”).

We take advantage of the one-year anniversary to highlight this development, and to investigate the possible implications for this coastal state from its new commitments if and when the FSA comes into force.

An Environmentally Inspired WTO Agreement

Subsidies are perhaps the most difficult issue in international trade. As part of the Uruguay Round that transformed the GATT and established the WTO, a lightyear jump was accomplished by for the first time really defining what a subsidy is, and giving access to a binding dispute settlement mechanism. But the accomplishment of the Anti-Subsidies and Countervailing Measures Agreement (“ASCM”) (and the Agreement on Agriculture) cover only goods, not services, and do not apply to fisheries. The FSA is a landmark environmentally inspired multilateral trade agreement within the WTO suite of instruments. It was created by the Ministerial Conference 12 of the WTO in 2021 as a means of pursuing several of the Sustainable Development Goals (“SDG”). Notably, SDG 14.6 states as follows:

By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the World Trade Organization fisheries subsidies negotiation.

So, the context is just as much one of international trade, notably organizing global trade in fisheries that is as free as possible, as it is one of sustainability, particularly addressing IUU and overfished stocks.

What is Targetted Under the WTO Agreement?

The focus of the FSA is on subsidies. This term may recall programs where Governments hand out cash grants to private companies, and that is indeed included, but subsidies as defined in the ASCM (referred by the FSA) goes well beyond such scenarios. As per the ASCM, a subsidy can involve a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees), but also in case of government revenue that is otherwise due is foregone or not collected (e.g. tax exemptions or incentives). Also within the potential scope are situations where a government provides goods or services other than general infrastructure, or purchases goods, or when a government makes payments to a funding mechanism. It is also possible that some of these functions are carried out by a private body, under certain circumstances. It is in all instances required that a benefit is conferred on the beneficiary.

So, many situations may give rise to a subsidy, depending on the circumstances and condition of a benefit. A Government not collecting taxes owed as per the law, or exempting one or more enterprises from taxes may be a subsidy. A Government buying goods from an enterprise or industry may be a subsidy. Or the other way around, a Government providing goods or services to an enterprise or an industry may be seen as a subsidy. Interest free or low-interest loans, or guarantees may be subsidies. Price interventions may also constitute subsidies.

Just because it is a subsidy does not mean that other WTO Members can apply countervailing measures because under the ASCM this is only provided for prohibited and actionable subsidies, not all for subsidies. But it does mean that the potential exists for trade remedies to be applied should indeed the subsidies fall within those two categories.

IUU and Overfished Stock

A recent OECD study found that various government aid to fisheries can be crucial to bring about effective fisheries management. But, Governments that “make it easier and cheaper to fish can drive overfishing and illegal fishing, particularly where fisheries management is weak”.

The study found that more than 40% of support policies in OECD states and up to 90% in non-OECD states (possibly such as Cambodia) have a risk of encouraging overfishing and illegal fishing (OECD Review of Fisheries 2025, OECD Publishing, Paris).

The FSA does not address all subsidies in the fisheries sector, only the following:

• ‘No Member shall grant or maintain any subsidy to a vessel or operator5 engaged in illegal, unreported and unregulated (IUU) fishing or fishing related activities in support of IUU fishing’ (art. 3.1. FSA) and
• ‘No Member shall grant or maintain subsidies for fishing or fishing related activities regarding an overfished stock’ (art. 4.1. FSA).

Accordingly, there has to be a determination made to ensure that a vessel or an operator is indeed engaged in IUU or overfishing of stock. This determination of IUU can be made by coastal members. For example, Cambodia as a coastal state might make such a determination based on objective information and under procedures set out in the FSA about vessels that come and fish in its Exclusive Economic Zone (“EEZ”). Flag states or by Regional Fisheries Management Organization or Arrangements (“RFMO”) such as the Southeast Asian Fisheries Development Center (“SEAFDEC”) and the Western and Central Pacific Fisheries Commission (“WCPFC”) may also make this determination.

The determination that a stock is overfished is to be recognized by the coastal member or by the relevant RFMO and must be based on scientific evidence.

Timing

Cambodia will be able to benefit from a 2-year exemption on dispute settlement procedures started by other Members but only with respect to fishing that happens within its own EEZ. Cambodia measures that relate to outside its EEZ, if any, may be challenged by WTO Members immediately from the moment the FSA enters into force.

The FSA has not yet entered into force at the time of writing. It requires 2/3rd of the WTO Members to sign on it to enter into force. At this time, another 30 or so Members are still needed.

Defensive: Which Practices in Cambodia May Be Within the Scope of the FSA?

First of all, challenges can only be expected after a determination has been made of IUU or overfishing. But if we assume that is bound to happen at some point, it seems one of the main practices that might be challenged relates to the enforcement of tax laws. Although Cambodia’s tax system requires registration for income tax and value added tax assuming a certain volume of revenue, enforcement in general and in the agriculture and fisheries sector has been unclear, and rife with various exemptions. This could be a first angle for other WTO Members in the region seeking to mount some kind of a challenge against Cambodia under the FSA.

Offensive: the FSA Gives Cambodia the Legal Tools to Better Protect Its Overfished Waters

Cambodia’s waters suffer from IUU from both domestic and foreign sources. For instance, fishing trawlers that operate at night in marine reserve areas can be particularly harmful. Other instances of IUU are the use of nets with too small meshes, fishing without permits, fishing of protected species in protected areas, and unregulated transfers at sea. The improvement of domestic monitoring infrastructure is an important part of Cambodia’s policy priority.

As a signatory of the FSA, it has an additional firm legal basis and a binding dispute settlement mechanism to curb foreign sourced vessels and operators that engage in these adverse activities. To do so effectively, Cambodia should keep updated on the wide range of policies and practices that other countries in the region maintain so that it may be in a good position to protect its interests under the FSA.