How to benefit from Cambodia’s free trade agreements

How to benefit from Cambodia’s free trade agreements - Pactics

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Producing, exporting and importing fashion or apparel from overseas can be a tricky business. To get it right, a wide range of variable factors, such as payments, shipping or insurance, packaging, or clearing customs in the importing country need to be carefully managed. Any one of these can trip you up if you get it wrong and result in unanticipated costs. On the other hand, if you get your logistics documentation correct there can be substantial financial benefits of producing abroad, in a country that qualifies for a free trade agreement (FTAs) with the buyer’s country of destination.

Free trade agreements
A free trade agreement aims to reduce or eliminate barriers to import and export between the signature countries, and for buyers looking for production locations, the existence of a trade agreement between their country and another can result in significant cost differences.

The existence of a trade agreement between their country and another can result in significant cost differences

But what factors do you need to consider when thinking about free trade agreements?

Duties are not the same for each product or country
Sometimes called customs duties, tariffs, import tax or import tariffs, import duties are paid by the entity importing the goods, usually the buyer. Their scope and scale vary from product to product and country to country depending on the nature and composition of the product, and so buyers importing multiple types of goods may find themselves paying differing rates across their product range.

Products are categorized under a product-specific Harmonized System (HS) code, a global index used to describe every good being exported or imported. This means that goods exported from one country under one code must be imported under a similar code upon arrival at their destination. HS codes vary slightly from country to country however the first 4 digits are normally the same.

It is advisable to engage the services of a broker to advise the correct HS code and necessary certificate of origin to avail of the duty-free benefit of the FTA

The difference that free trade agreements can make to your bottom line is substantial. For example, brands located in the US or UK can save as much as 40% on import duties, though the actual amount depends on the country of origin and relevant product category and any ongoing trade barriers with competing countries and the destination country. It is therefore important to check and compare the rates applicable according to the country of origin and intended product category. It is advisable to engage the services of a broker to advise the correct HS code and necessary certificate of origin to avail of the duty-free benefit of the FTA.

Brands in the UK or USA – Cambodia
Due to Brexit, the United Kingdom will have its own GSP (Generalized System of Preferences) rules as of the end of 2021, which should extend the benefits currently available to brands in the UK. From Cambodia, currently duty free is possible to the UK under the GSP by submitting a form A certificate of origin.

Looking at the US, the current trade war between America and China means that on some commodities the USA has imposed up to 25% additional tariff on goods originating in China, generating additional costs to be borne by importers.

Cambodia is included in the GSP implemented by the United States, which means that buyers can import duty-free on a wide range of products, generating savings of as much as 40% on the cost of importation

This is why countries such as Cambodia should be of significant interest to buyers. Cambodia is included in the GSP implemented by the United States, which means that buyers can import duty free on a wide range of products, generating savings of as much as 40% on the cost of importation.

Local partners
No matter where you are looking to base your fashion and apparel production, as always research pays large dividends. Partnering with a reliable company that already has a successful track record of duty-free imports, has a long and successful history of exporting to household-name clients in both the US and UK and can assist you with your supply chain and consult on such issues such as international logistics, payments, duties, and packaging. A partner that can reduce your risk and make sure you stay ahead in your industry can make a significant difference.

Would you like to find out more? Or are you interested in discussing the future of sustainable manufacturing with us? Contact us directly.

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