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Country Commercial Guides for FY 2000: Nepal Report prepared by U.S. Embassy Kathmandu, released July 1999 Note*

CHAPTER VI. TRADE REGULATIONS, CUSTOMS, AND STANDARDS

* TARIFFS AND IMPORT TAXES/CUSTOMS VALUATION

Import tariffs are generally assessed on an ad valorem basis. Nepal uses the Harmonized Tariff System (HTS) for classification purposes. Import duty rates vary from 0 to 140 percent. Live animals, fish, and most primary products are exempt from import duties. Machinery or goods related to basic needs are charged at a five percent rate. Products hazardous to health such as cigarettes and liquor are taxed at 110 percent. Goods imported into Nepal are also liable for a sales tax of 15 percent. Custom duties are generally assessed on the cost, insurance, and freight (c.i.f.) value. Sales tax is levied on CIF plus customs duty.

* IMPORT LICENSES

All imports may be brought in without a license except for banned or quantitatively restricted items such as (a) products injurious to health (including illicit drugs -- see section on Prohibited Imports further in this Chapter); (b) arms and ammunition, explosive materials (or products required for production of explosive materials, and guns and bullets); (c) communications equipment including computers and home entertainment products such television sets and VCRs; (d) valuable metals and jewelry; and (e) beef and beef products (dietary restrictions of the majority Hindu religion prohibit the consumption of beef).

* IMPORT/EXPORT DOCUMENTATION

Documents required for shipment to Nepal include a commercial invoice, a customs declaration form, clearly marked and labeled packaging, and a certificate of origin. Similarly, exported items sent by air require a customs declaration form (CDF), a copy of the export license (if applicable), a commercial invoice, a certificate of origin, a copy of the letter of credit or advance payment statement from a bank, a foreign exchange declaration form, a packing list, a photocopy of income tax registration certificate, airway bill, and an authorization letter are required.

In addition to the above, except for the airway bill, the following documents are required for surface export shipments: transport manifesto (one copy per truck), customs transit declaration, and transit declaration invoice for goods in transit via India or Bangladesh to a third-country destination. Special documentation such as visa stamps from the VISA Section of National Productivity and Economic Development Center is essential for export of ready-made garments to the United States.

* TEMPORARY ENTRY

Goods - including vehicles, machinery, and equipment - may be imported temporarily for special purposes such as domestic exhibitions or fairs by making a refundable deposit of the applicable duty. Such goods must be taken out of the country within three months of the completion of the work unless the duty has been paid and the item sold for the use of others or retained for personal use. An extension of the three-month period may be granted on appropriate and reasonable grounds upon payment of an additional ten percent of the applicable duty amount. If the duty is not paid or the goods are not re-exported within six months of entry, action may be taken on a charge of smuggling.

* SPECIAL IMPORT PROVISIONS

Duty reductions of five or ten percent have been given to imports from the Tibet Autonomous Region of the People's Republic of China, member countries of the South Asia Association for Regional Cooperation (SAARC) and designated most favored nations.

* LABELING/MARKING REQUIREMENTS

No special labeling or marking is required by law. For customs purposes, the packaging and labels of a shipment should clearly identify country of origin and destination, and include a commercial invoice with a list of items in the package, a customs declaration form (CDF), and a certificate of origin.

* PROHIBITED IMPORTS

The following products are prohibited for import:

1. Products injurious to health: a) narcotic drugs such as opium and morphine; and b) liquor containing more than 60 percent alcohol.
2. Arms and ammunition and explosives (except under import license of His Majesty's Government): a) materials used in the production of arms and ammunition; b) guns and cartridges; c) caps other than those of paper; and d) arms and ammunition and other explosives.
3. Communication equipment: wireless walkie-talkie and similar other audio communication equipment (except under import license of His Majesty's Government).
4. Valuable metals and jewelry (except permitted under bag and baggage regulations).
5. Beef and beef products.
6. Any other product as per notification of the Government of Nepal in The Nepal Gazette.

* EXPORT CONTROLS

All products other than banned ones, or those under quantitative restriction, may be exported freely. Banned items include articles of archeological and religious importance, controlled wildlife and by-products, narcotic substances, articles related to explosive materials or required for the production of arms and ammunition, industrial raw materials (such as raw leather, raw wool, imported raw materials, parts, capital goods), and other goods such as logs and timber. Items subject to quantitative restriction are subject to notification by the Government of Nepal from time to time. Past examples have included foodgrains, oilseeds, and some types of pulses (lentils). As a rule, the re-export to India of goods not of Indian origin is prohibited.

* STANDARDS (E.G., ISO 9000 USAGE)

Nepal does not follow the ISO 9000 series. No standard is required by law for import of products other than food products. For food products, the importer is required by law to have a sample tested by the Food Research Laboratory under the Food Act and Nepal Standard (Certification Mark) Act. Nepal has established its own standards for various food products.

* FREE TRADE ZONES/WAREHOUSES

Nepal has not established Export Processing Zones (EPZ). However, any industry exporting 90 percent or more of its products is entitled to privileges equivalent to those normally provided by an EPZ; i.e., no tax, duty or fee is levied on the machinery, tools and raw materials utilized by the industry in manufacturing the export products. Export-oriented industries may also enjoy bonded warehouse facilities. Raw materials can be imported via entry in a passbook without paying any custom duty or sales tax. The same value of raw materials is deducted from the passbook upon export of the finished product. The industry must also submit a bank guarantee which must be sufficient to cover applicable duties.

* MEMBERSHIP IN FREE TRADE ARRANGEMENTS

Nepal has ratified the South Asian Association for Regional Cooperation (SAARC) Agreement on Preferential Trading Arrangement (SAPTA). Under its terms, the seven SAARC nations (Nepal, Bhutan, India, Bangladesh, Pakistan, Sri Lanka, and the Maldives) have pledged to cut tariff rates on a product-by-product basis. Following the third round of trade negotiations in 1998, a total of 5000 items, from all member countries, are now entitled to preferential duty treatment in one or another of the participating countries.

In addition, Nepal will also participate in the negotiations for the establishment of a South Asian Free Trade Area (SAFTA). The draft treaty of association for this free-trade area is now being prepared under the auspices of SAARC and should be available for review and ratification by SAARC's seven-member states by October 2000.

Finally, Nepal has applied for membership in the World Trade Organization. Nepal submitted its memorandum on its foreign trade regime to the WTO secretariat in June 1998 and expects to begin negotiations with the WTO's working party during the fall of 1999.