The importance of Electronic Advanced Data for the growing e-commerce and small package parcel trade

“One of the most viable strategies to achieve national development goals in both developing and developed nations is to promote small- and medium-sized enterprises (SMEs). SMEs increase competition, generate employment and develop entrepreneurship while boosting economic vitality at the community level and creating sustainable livelihoods.” Echoing this approach, the Cambodian Ministry of Commerce also officially launched its E-commerce strategy on 25th November 2020, which outlined a pathway for SMEs to integrate into Cambodia’s digital economy. 

Cambodia has experienced steady economic growth over the last two decades. Data from the Ministry of Economy and Finance shows the country maintained an average annual GDP growth rate of 7.7% from 2000 to 2019. The economy is driven by the private sector, where most businesses are small and family-run.The growth of small SMEs adopting online resources such as Facebook Shops or even via Instagram have grown exponentially in Cambodia, and 2020 saw businesses embrace or pivot to embrace digital to generate an income as COVID-19 made its harsh financial impact on people’s livelihoods.

These rapid technological and digital advancement and adaptations have dramatically changed the way businesses operate. A report by Statista highlights the revenue in the e-commerce market in Cambodia, expected to grow at an annual rate of 8.98% from 2021 to 2025. Moreover, the enactment of the E-Commerce Law in November 2019 and the E-Commerce Strategy in November 2020 adds an even stronger momentum, providing an institutional, legal, and regulatory framework for electronic transactions and for accessing and sharing information and data in e-commerce transactions.[1] These technological advancements have further enabled and contribute to the expansion of e-commerce beyond the Cambodian borders. The Express Mail Service or EMS packages accounted for 47% of Cambodia Post’s revenue in 2019, with the volume increasing by around 43% and 38% for outbound and inbound, respectively, from 2017.

Cambodia has made remarkable improvements in digital trade facilitation, using modern information and communication technologies to simplify and automate cross-border trade procedures. Similar improvements are called for in response to the uptrend of cross-border e-commerce. Specifically, an enhanced cooperation of Cambodia Post and the Customs administration or the General Department of Customs and Excise of Cambodia (GDCE) and the Ministry of Commerce will facilitate the movement of small packages across Cambodia’s border.

Challenges to Small Package Exports

One of the biggest hurdles for logistics providers is to guarantee the timely delivery of packages. Now that hurdle has become even more significant, as more countries have started mandating Electronic Advanced Data (EAD) compliance. The EU-Import Control System and the US Stop Act, which will come into effect in early 2022, requires EAD compliance for outbound postal packages from Cambodia. This requirement has become crucial now more than ever: at least 48 countries, such as the United States, United Kingdom, Switzerland, Hong Kong, China, Iceland, Hungary, Japan, and Norway, are enforcing these new laws for EAD requirements for postal items arriving on their soil. This heightened enforcement implies that Cambodia’s postal shipments to those countries risk being returned or destroyed by their customs administrations. The lack of EAD would also result in slow and inefficient clearance process of the postal shipments, thus becoming time-consuming for SMEs.

EAD is essentially the sender's name and address and contents of the shipment, which needs to be sent to the destination postal service in advance and converted into an electronic format. EAD compliance can be completed by linking the declaration data between Cambodia Post's Customs Declaration System (CDS) and customs clearance system (ASYCUDAWorld/AW) of Cambodia's Customs administration (General Department of Customs and Excise (GDCE). AW is the automated customs processing system implemented by GDCE at all ports and checkpoints to capture and process customs declaration data of export and import consignments. The CDS system was developed by the UPU Postal Technology Centre for member postal operators such as Cambodia to capture declaration data of postal shipments. Linking the two systems would ensure the regulatory compliance of the outbound postal shipments to EAD countries.

Opportunity for Cambodia and contribution towards post-COVID recovery

In order to address this issue of EAD compliance and support SMEs to venture into international trade, the Improving Small Package e-Trade for SMEs (SeT4SME) project of the Global Alliance for Trade Facilitation, implemented by Swisscontact in Cambodia aims to make it easier, quicker, and more cost-effective to send parcels internationally by enabling the EAD. The initiative also includes complementary support around the EAD implementation, such as awareness-raising, capacity building, and public communications. The project is being implemented in Cambodia by Swisscontact in collaboration with the Ministry of Commerce, GDCE and Cambodia Post. The United Nations Conference on Trade and Development (UNCTAD) and the United Postal Union (UPU) are also involved with developing the fully operational EAD.

In addition, SeT4SME is working with the Cambodian Women’s Entrepreneur Association (CWEA) to develop a new online portal that will serve as an e-trade ‘one-stop’ service point for SMEs looking to ship packages internationally through the post. With women-led businesses accounting for 65% of Cambodian SMEs, the CWEA will promote awareness of the possibilities of cross-border e-trade and help SMEs build their capacity for breaking into world markets. Through EAD compliance, support through the e-portal and capacity building, the project will create addition value for Cambodia’s economic recovery from the shock of the pandemic, as it would enable SMEs to venture into international trade.

Intended outcomes

Establishing a fully operational EAD will strengthen the government’s efforts in employing modern information and communication technologies in their reforms around cross-border trade facilitation, while at the same time benefiting Cambodia’s private sector, which increasingly embraces the global e-trade and digital economy.[1] EAD component of the SeT4SME project also contributes to progressing Cambodia’s commitments under Article 7.1 on the Pre-Arrival Processing and Article 7.4 on Risk Management of the WTO Trade Facilitation Agreement (TFA).

Furthermore, SMEs and Women Owned Businesses (WOB) will benefit from uninterrupted trade because of EAD compliance, followed by time reduction in customs clearance processing in Cambodia for inbound and outbound small packages. The project would also allow for pre-arrival processing of customs information in destination country, potentially speeding up the clearance process of Cambodia’s packages in country of destination.