Vietnam to Offer Reduced Tariffs on Select Cambodian Goods

Preferential import tariffs for some Cambodian goods entering Vietnam have been introduced and could boost trade between these two neighbors. Here are the details.

Earlier this year, the Vietnamese Government issued Decree 5/2024/ND-CP (‘Decree 5’), which states that a range of imports from Cambodia will be eligible for lower import tariffs in certain situations.

Items eligible for tariff-free entry must fulfill the following criteria:

• They must belong to Vietnam’s preferential import tariff schedule;
• Have a certificate of origin form issued by the Kingdom of Cambodia; and
• Goods must enter through specific border gates detailed in the decree.

These new arrangements should see a boost to trade between these two countries. Notably, said trade, in 2023, reached nearly US$6.6 billion, however, it is hoped that it can grow much higher.

In this light, the Vietnam Briefing looks at how this trade is shaping up.

Cambodia’s exports to Vietnam

Cambodia’s total export value to Vietnam surpassed US$3.68 billion in 2023. The biggest of these exports were cashew nuts and rubber.

Cambodia’s exports to Vietnam, 2023

Source: General Customs Department of Vietnam

Rubber

Rubber is one of Cambodia’s top exports to Vietnam. Cambodia made more than US$888 million in 2023 from rubber exports to Vietnam.

Although Vietnam ranks third in the world in natural rubber production and exports,

the quality of local rubber does not always fulfill manufacturing requirements, according to the Vietnam Rubber Association. Hence the need to import from Cambodia.

Cashew nuts

Cambodia is Vietnam’s leading supplier of cashew nuts in Southeast Asia. Although export turnover to Vietnam has decreased, the price of Cambodian cashew nuts remains competitive. In 2023, Cambodia shipped over 614,000 tons of cashew nuts to Vietnam, earning over US$836 million.

Vietnam’s exports to Cambodia

On the contrary, Vietnam’s exports to Cambodia were slightly higher than the reverse, totaling more than US$4.88 billion in 2023.

Vietnam’s exports to Cambodia in 2023

Source: General Customs Department of Vietnam

Textiles and garments

Textiles and garments make up an enormous portion of Vietnam’s overall export turnover to Cambodia. This is in line with greater integration in garment and textile supply chains in Southeast Asia. Materials are often shipped between these two countries with different parts of the production process taking place in each country.

Iron and steel

In 2022, Cambodia was Vietnam’s second-biggest export market for iron and steel. This did, however, represent a fall from first place in previous years. This could be attributed to challenges facing Cambodia’s real estate market which is a key buyer of Vietnamese steel and iron.

Moving forward

Vietnam is among the top foreign investors in Cambodia. Both countries are members of ASEAN and benefit from a number of regional trade agreements. This has been further helped along by Decree 5 which should make it cheaper to move goods between these two countries.

With this in mind, firms may be able to realize a number of benefits by integrating both of these countries into their supply chains. For more information, foreign manufacturers should contact the business advisory experts at Dezan Shira and Associates.

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