U.S. companies currently or potentially doing business in Cambodia are being urged to “apply appropriate due diligence to mitigate the reputational, economic, and possible legal risks” associated with problems in that country such as corruption and forced labor.
According to a Nov. 10 advisory from the departments of State, Commerce, and the Treasury, there are two primary areas of exposure for U.S. companies in Cambodia: (1) illicit financial activities and related risks in the financial, real estate, casino, and infrastructure sectors, and (2) entanglements with Cambodian entities involved in trafficking in persons, wildlife and narcotics trafficking, and related risks in some areas of the manufacturing and timber sectors.
Specific areas of concern highlighted in the advisory include (1) Cambodia’s “largely cash-based, dollarized economy,” (2) human rights abuses in connection with large-scale infrastructure projects, (3) forced labor in the brickmaking sector, (4) child labor in rubber production and construction, and (5) wildlife trafficking and illegal logging.
Businesses are therefore encouraged to conduct due diligence into their supply chains to ascertain their exposure to these and other indicated problems. The advisory points out that there can be significant ramifications for not doing so. For example, companies charged with knowingly benefiting from participating in a venture that obtains or provides forced labor could face fines of up to $500,000 and their executives could face up to 20 years in prison. In addition, criminal penalties for unlicensed exports of controlled items to Cambodia may include up to $1 million in fines and 20 years in prison, along with administrative penalties of up to $311,562 per violation or twice the value of the underlying transaction (whichever is greater).
The advisory adds that once the Generalized System of Preferences is reauthorized the Office of the U.S. Trade Representative will conduct an assessment of Cambodia’s GSP eligibility as part of a broader GSP evaluation, including any new or amended eligibility criteria established by Congress.
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