WTO Moratorium for Tariffs on Electronic Transmissions from Nostalgia to Pragmatism

Since its adoption at the Second WTO Ministerial Conference in 1998, the WTO has agreed to a temporary moratorium for customs duties on electronic transmissions, which has served as a cornerstone of the multilateral framework for digital commerce.[1] Originally conceived when the digital economy was nascent, the moratorium has been extended on multiple occasions, most recently, for a final renewal, through the Ministerial Decision of 2 March 2024.[2] The WTO moratorium prohibits the imposition of customs duties on electronic transmissions, a term understood to encompass both the medium of transmission and, in some interpretations, the digital content itself.[3] With the moratorium due to lapse at the recent WTO Ministerial Conference MC14 in Yaoundé, Cameroon in March 2026, WTO Members faced a pivotal choice: whether to convert this temporary exemption into a permanent rule or to allow it to expire, thereby restoring Members’ discretion to impose tariffs on electronic transmissions. The frantic last-minute negotiations in Cameroon notwithstanding, no agreement was reached and the moratorium lapsed on 31 March 2026, pending future outcomes.

For many developing countries—of which Cambodia is taken here as an illustrative example—the decision carries particular weight. Typically, their economies are undergoing a rapid digital transformation, yet they remain heavily reliant on trade preferences and foreign investment. The central question for many of them is straightforward: should it support or oppose the permanent exemption of customs duties on electronic transmissions at the multilateral level, as advanced by the main exporting countries of digital goods and services?

This contribution illustrates the tax policy aspects of this decision against the backdrop of certain bilateral and regional normative developments.  

Is levying customs duties on digital goods and services even possible?  

Evidently, digital goods and services do not pass borders in the same way physical goods do. Nevertheless, in principle countries retain the technical capacity to impose customs duties on digital goods and services. Data packets, transmitted as electronic impulses, possess a physical dimension that could, under traditional customs rules, be treated as an importable good. The downloading of a book, for example, might be classified as the importation of a good, a service, or a hybrid of both. The 1998 moratorium was adopted precisely because such classification questions were unresolved at a time when digital trade volumes were negligible.

Thus, in theory at least, countries could regard the passing of the border by this data, or the contents, as a dutiable import. Obviously, this would require various legal and administrative adjustments, for example for the collection of duties by the receiver of the information. At the very least, this would require novel enforcement regulations and mechanisms outside of the traditional field of operations of the customs authorities of many countries. The customs laws of many countries do not even envisage imposing duties on intangible goods (except in connection with imported physical goods), which means that time-consuming revisions to laws and procedures would first have to be put in place.

In this context it is important to note that digital trade is no longer marginal to the economies of many developing countries. To take Cambodia as an example, between 2017 and 2023, digital imports rose from USD 333 million to USD 568 million, while exports of digitally delivered services nearly tripled from USD 146 million to USD 426 million.[4] These figures underscore the growing integration of Cambodia into global digital value chains. Maintaining an open, duty-free environment for electronic transmissions supports export growth, attracts foreign investment in digital services, and facilitates technology transfer—priorities explicitly aligned with Cambodia’s development strategy.

The rise of Digital Service Taxes

The practical relevance of the theoretical option to impose tariffs on data has diminished sharply in the recent decade. Technological evolution and the proliferation of alternative revenue mechanisms—most notably Digital Service Taxes (DSTs)—have rendered customs duties on electronic transmissions largely redundant. WTO Members have increasingly turned to consumption-based taxation rather than border tariffs for the digital economy. Some countries have enacted special tax regimes for digital goods and services while others have expanded existing taxes such as VAT or income tax to expressly cover such transactions or income.

For instance, Cambodia introduced a VAT reverse-charge mechanism for digital goods and services in 2021 at a rate of 10 per cent in the wake of major decreases in tax collection due to the COVID epidemic, modelled on the European Union’s 2006 VAT Directive. The system operates through a two-pronged approach: (i) non-resident suppliers serving Cambodian residents without full VAT registration (B2C transactions) must obtain a simplified VAT registration, charge VAT on supplies, and remit it to the General Department of Taxation (GDT); and (ii) in B2B transactions, the Cambodian recipient accounts for the VAT via reverse charge. Major platforms such as Facebook, Google, and Microsoft have duly obtained Cambodian VAT numbers and currently collect and remit 10 per cent VAT on supplies to Cambodian customers.

Across Southeast Asia, similar DST regimes now range between 5 and 12 per cent: Indonesia (12 per cent VAT on digital services), the Philippines (12 per cent VAT on non-resident providers), Singapore (9 per cent GST), Malaysia (8 per cent service tax), Thailand (7 per cent VAT), and Vietnam (1.5–5 per cent combined VAT and corporate income tax). These instruments have at least to a large extent displaced the need for border tariffs on electronic transmissions. Meanwhile, the G20 and OECD Pillar One initiative to restructure international taxing rights on the digital economy in return for countries abandoning their DSTs, appears (perhaps permanently) stalled.

However, Cambodia’s DST regime operates under untested emerging restraints. Article 3.1 of the 2025 Cambodia–US Reciprocal Trade Agreement (concluded as a compromise against the Trump Administration’s so-called ‘reciprocal tariffs’) prohibits “digital services taxes, or similar taxes, that discriminate against U.S. companies, in law or in fact.” Given the predominance of United States–based digital service providers across many market segments, there is concern that this concession heightens the risk of claims—whether well founded or not—that Cambodia’s existing 10 per cent VAT may be de facto discriminatory, thereby exposing a significant portion of its DST revenue to latent challenge.

Mega-Regional Free Trade Agreements

Regional trade agreements are already moving tentatively toward duty-free digital trade. Under the Regional Comprehensive Economic Partnership (RCEP), to which Cambodia is a party, Members undertake not to impose customs duties on electronic transmissions.[5] While RCEP does not explicitly reference “content transmitted electronically,” the provision nonetheless signals a regional consensus against border duties.

By contrast, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—to which Cambodia is not a party—contains more expansive language: “no Party shall impose customs duties on electronic transmissions, including content transmitted electronically.”[6] Vietnam’s participation in CPTPP further illustrates the direction of travel in Southeast Asia. These mega-regional instruments reinforce the multilateral trend and reduce the practical utility of retaining the option to impose tariffs.

Cambodia’s 2025 bilateral commitment to the United States

A perhaps decisive constraint on Cambodia’s negotiating flexibility arises from its already mentioned 2025 Reciprocal Trade Agreement with the United States. Article 3.5 of that Agreement expressly provides:

“Cambodia shall not impose customs duties on electronic transmissions, including content transmitted electronically, and shall immediately and unconditionally support multilateral adoption of a permanent moratorium on customs duties on electronic transmissions at the WTO.”

This provision appears to bind Cambodia not only to refrain from imposing such duties bilaterally but also to advocate actively for a permanent multilateral moratorium. The language is unambiguous and leaves little, if any, room for Cambodia to oppose or even abstain from supporting permanence at MC14. Any deviation would risk breaching the bilateral agreement, with potential consequences for Cambodia–US trade relations, investment flows, and access to the US market, for example by the reinstatement of exorbitant tariffs on the import of Cambodian goods into the US well in excess of the US’s WTO commitments. Politically and legally, therefore, Cambodia’s decision space may already be markedly circumscribed.

A pragmatic stance  

Many developing countries may engage in a pragmatic calculus. On the one hand, they may anticipate incremental revenue gains; yet such gains remain uncertain, depend on novel and untested collection mechanisms, and may in any event be more effectively realised through DSTs. On the other hand, there is the geopolitical consideration of avoiding unnecessary provocation of the principal exporters of digital goods and services. As the Reciprocal Trade Agreement between Cambodia and the United States illustrates, there may in addition be normative dimensions for several countries, as commitments of this nature effectively pre-commit parties to support a permanent exemption at the WTO, limiting its multilateral manoeuvrability.

At the same time, the global shift toward DSTs has rendered customs duties on electronic transmissions increasingly obsolete as a revenue tool. In a calculation that is applicable to many other countries, Cambodia’s own 10 per cent VAT reverse-charge regime already captures significant value from digital supplies, while the economic data demonstrate that digital trade is a dynamic and growing component of its economy. In this context, the revenue forgone by forgoing (novel and untested) tariffs on electronic transmissions appears at best modest relative to the gains from enhanced digital connectivity and the revenue stability provided by existing and effective DST mechanisms.

Furthermore, mega-regional agreements that already bind their state parties, such as RCEP, indicate that the region is converging on a duty-free approach. Although the United States could potentially challenge Cambodia’s DST as discriminatory under the bilateral agreement—whether that may be legally justified is another matter—Cambodia appears to have accepted this risk when it concluded the 2025 Agreement.

In sum, a permanent moratorium on customs duties on electronic transmissions would likely impose minimal additional constraints on countries like Cambodia while aligning its trade policy with the realities of the contemporary digital economy and pre-existing legal commitments. Such a stance would not sacrifice tax revenue which is already (or could better be) assured through DSTs, but it would reinforce countries’ credibility as a rules-based trading partner and support the continued expansion of its digitally delivered exports.

[1] WTO Ministerial Conference, ‘Declaration on Global Electronic Commerce Adopted on 20 May 1998’ (25 May 1998) WT/MIN(98)/DEC/2.

[2] WTO Ministerial Conference, ‘Work Programme on Electronic Commerce – Ministerial Decision Adopted on 2 March 2024’ (4 March 2024) WT/MIN(24)/38 and WT/L/1193.

[3] The precise scope remains subject to ongoing debate in WTO bodies; see generally the Work Programme on Electronic Commerce.

[4] WTO Trade Policy Review of Cambodia (2025).

[5] Regional Comprehensive Economic Partnership (signed 15 November 2020, entered into force 1 January 2022) (RCEP) art 12.11.

[6] Comprehensive and Progressive Agreement for Trans-Pacific Partnership (adopted 8 March 2018, entered into force 30 December 2018) (CPTPP) art 14.3(1).

About the author

Edwin Vanderbruggen is an alumnus of the World Trade Institute (Diploma of Advanced Studies in International Law and Economics). He is the Senior Partner of legal and tax advisory firms Andersen in Cambodia and Vietnam and VDB Loi in Bangladesh, Indonesia, Myanmar, and Laos where he advises governments, international financial institutions and corporate groups on the international law of tax, trade, and investment.