I n all countries, governments seek to control and regulate the goods crossing their
borders. They do so for a variety of reasons, only one being the generation of revenue
for the national treasury. Other reasons include safeguarding national security,
protecting society and social mores from unwanted influence or degradation, protecting
the consumer from poor quality or fake goods, protecting and promoting local industries
from competition by foreign goods, and export promotion.
Cambodia's customs policy is only beginning to take form. In implementing such policies,
the Royal Government of Cambodia faces two main obstacles. One obstacle is smuggling.
The second is the falsification of import-export documentation and the evasion of
required import or export procedures.
In an effort to strengthen its ability to effectively implement a viable customs
policy, the Ministry of Economics and Finance (MOEF) has developed a "Pre-Shipment
Inspection" program in cooperation with a Swiss company. This program has two
major goals, one direct and obvious, the other less obvious, but equally as important.
The most obvious and direct purpose of the program is to increase the collection
of tax and duties on imported goods. The less obvious purpose is to increase the
government's control over the quality and quantity of imports, thereby enabling the
government, in theory, to implement the various aspects of its customs policy more
In 1989 the State of Cambodia began relinquishing its monopoly control over import
and export activities in the territory of the State of Cambodia. These import-export
reforms were implemented primarily through the "Law on customs duties and Import-export".
Article 1 of this Law grants to the Customs Department of the MOEF the responsibility
for creating and collecting customs duties and taxes.
The Ministry of Commerce also has its own customs agency called "Kamcontrol"
with competence similar to the Customs department, having a monopoly on customs clearance
, but excluding collection of duties. Added to Kamcontrol and the Customs Department
are the Economics Police and the Border Police, both under the supervision of the
Ministry of Interior.
As mentioned above, the MOEF recently entered into an agreement with a Swiss Company,
Societe General de Surveillance, S.A. ("SGS"), and has issued the "Regulations
on the Implementation of Pre-Shipment Inspection Services, dated 8th September 1995"
and Declaration No 321, of 8 October 1995. According to these regulations, SGS, in
cooperation with affiliated companies, will be responsible for conducting a "Pre-Shipment
Inspection" of most goods imported into Cambodia. SGS will also take over certain
government customs activities.
Under this Pre-Shipment Inspection Program ("Program"), goods imported
into Cambodia must be inspected in the country of supply by an inspection company
authorized by SGS. The inspection will verify that the goods conform in quality,
quantity, and value to the figures on the documents submitted by the importer to
the Cambodian customs authorities. The findings of this inspection will be reported
to the relevant Cambodian authorities, who will levy the appropriate tax and duty
based on the report. Before October 1, 1995, inspection of goods imported into Cambodia
was made when the goods crossed the border into Cambodia.
Most goods imported to Cambodia on or after October 1, 1995 will be required to undergo
such inspection. There are, however, exceptions, including all goods with an actual
or declared shipment value of less than US$5000, and certain listed goods, such as
precious stones and metals, art objects, live animals, newspapers and periodicals,
personal effects, parcel post, and certain gifts to embassies, humanitarian and UN
The regulations also exclude from the Pre-Shipment Inspection program, on a temporary
basis as determined by the Ministry of Economy and Finance, cigarettes, motorcycles,
TVs, cassette players and radios, VCR's and petroleum products.
Effect of Pre-Shipment Control
There has been much speculation on the effect that the Pre-Shipment Control Program
will have on the Cambodian economy, state treasury, and the Rule of Law.
Will prices of goods in Cambodia increase? Almost certainly. Most people would agree
that prices of most goods in Cambodia will increase significantly. Prior to the Program,
importers could easily under-report the value or quantity of the imported goods.
The Program makes such under-valuation very difficult. However, the ability of importers
to accept lower profits and to avoid certain import transaction costs not required
under the Pre-Shipment Program may soften the inflationary impact of the Program.
Will the Pre-Shipment program decrease falsification of documents? Probably-at least
for imports large enough to fall under SGS's control (i.e. US$5000 or more).
Will the program significantly decrease smuggling? Unlikely. Cambodia's borders are
porous and long. Because smuggling is by definition, outside the law, the new Pre-Shipment
Inspection regulations will do little to decrease smuggling. In fact, smuggling may
even increase. Unless Cambodia can increase control of its land borders, it is likely
that importers will turn to overland routes in an effort to avoid the customs regulations.
Will the program raise government revenues? Almost certainly. But any increase must
considered in light of any revenue loss resulting from an increase in smuggling and
increases due to the "special tax on certain goods" or other new taxes
levied at the border.
- David Doran is a principal of the law firm of Dirksen Flipse Doran & Le,
and is located in its Phnom Penh office. Kim Yeat Dararith, a legal adviser with
DFDL, concentrates on tax and customs law.