New Trade Restrictions Take Aim at Cambodia and Its Deepening Relationship With China

On December 8, 2021, the US Department of State (State) and the US Department of Commerce (Commerce) issued new restrictions on exports to Cambodia in an effort to address human right abuses and corruption concerns.¹ The new restrictions also seek to counter growing People’s Republic of China (PRC or China) influence within Cambodia and in the broader South Asian region. Working in tandem, the updated regulations signal US concern about deepening Cambodia-China relations and adopt a “more restrictive treatment for Cambodia” in the future.²

State amended the International Traffic in Arms Regulation (ITAR) to add Cambodia to its list of countries that receive a presumption of denial when seeking licenses and other approvals for the export and import of defense articles and services. Meanwhile, Commerce updated its own Country Group designation to reflect the State Department’s arms embargo and amended the Export Administration Regulations (EAR) to restrict “end-use and end user restrictions [] on exports and reexports to Cambodia, and in-country transfers … of sensitive items.”³ Through these efforts, Cambodian defense entities and related individuals will have limited access to dual-use items, defense articles and services, and other sensitive military items. The new rules took effect on December 9, 2021.

Secretary of Commerce Gina Raimondo said in a statement, “The United States remains fully committed to Cambodia’s independence and the sovereignty of its people. We urge the Cambodian government to make meaningful progress in addressing corruption and human rights abuses, and to work to reduce the influence of the PRC military in Cambodia, which threatens regional and global security.”⁴

Background

The US first expressed concern about Cambodian sovereignty and regional security back in June 2021. During an official visit, Deputy Secretary of State Wendy Sherman voiced apprehension about China’s new military installations at the Ream Naval Base in Cambodia, which could negatively affect US-Cambodia relations. Despite these concerns, China continued to expand its presence in the Gulf of Thailand.

In November 2021, the US imposed sanctions on two Cambodian military officials because of their connection to the naval base and their conspiracy to profit from its expansion. An inter-agency advisory was subsequently issued cautioning US businesses about their potential exposure if engaging with Cambodian businesses with reported corrupt practices, human rights abuses or criminal activities.

Key Takeaways

The rules issued by both State and Commerce impose broad changes for Cambodia and those engaging in business with the country, including:

• Cambodia was added to ITAR Section 126.1. As a result, exports and imports of defense articles and defense service destined for, or originating in, Cambodia are now largely prohibited.
• Cambodia is now subject to a more restricted licensing policy for National Security-controlled items.
• Cambodia was also added to the list of countries subject to 15 C.F.R. § 744.21, which adds additional license requirements for certain items when destined for a “military end use” or “military end user” in Cambodia.
• Applications to export, reexport, or transfer EAR items intended for military-intelligence end users are now subject to a license requirement set out in EAR Section 744.22. The § 744.22 imposes an additional licensing requirement on items subject to the EAR (even under the lowest level of control, such as EAR99) to Cambodia when the item is destined for a “military-intelligence end use” or “military-intelligence end user." These applications will be reviewed under a general presumption of denial.
• Cambodia is now listed in Country Group D:5 “U.S. Arms Embargoed Countries” of the EAR, which imposes additional restrictions on de minimis US content, licensing and licensing exceptions.