Custom Law and Regulations in Nepal

I. What is Customs Law?

Customs law refers to the comprehensive legal framework that governs the movement of goods across international borders. In Nepal, customs law encompasses a wide array of regulations, procedures, and practices designed to control imports, exports, and transit goods. The primary objectives of customs law include revenue collection, trade facilitation, and protection of national security and public health.

Nepal’s customs law is rooted in the country’s sovereign right to regulate cross-border trade and is aligned with international standards and agreements. The legal framework is designed to strike a balance between facilitating legitimate trade and enforcing necessary controls to prevent smuggling, tax evasion, and the entry of prohibited or restricted goods.

II. Legal Framework for Customs in Nepal

The legal framework for customs in Nepal is primarily based on the Customs Act, 2064 (2007), which serves as the cornerstone of customs regulation in the country. This Act provides the fundamental principles and procedures for customs operations, including the assessment and collection of customs duties, import and export procedures, and enforcement mechanisms.

In addition to the Customs Act, several other laws and regulations contribute to the comprehensive legal framework:

1. Customs Rules, 2064 (2007): These rules provide detailed guidelines for implementing the provisions of the Customs Act.
2. Export Import Control Act, 2013 (1957): This Act regulates the import and export of goods, including licensing requirements and restrictions on certain commodities.
3. Revenue Leakage (Investigation and Control) Act, 2052 (1995): This legislation aims to prevent and control revenue leakage, including customs duty evasion.
4. Foreign Exchange (Regulation) Act, 2019 (1962): This Act governs foreign exchange transactions related to international trade.
5. Nepal Treaty Act, 2047 (1990): This Act ensures that Nepal’s international treaty obligations, including those related to customs and trade, are incorporated into domestic law.

The Department of Customs, under the Ministry of Finance, is the primary government agency responsible for implementing and enforcing customs laws and regulations in Nepal.

III. Customs Clearance Process in Nepal

The customs clearance process in Nepal involves several steps, each governed by specific legal provisions and administrative procedures. Understanding this process is crucial for importers, exporters, and customs brokers operating in Nepal.

A. Step 1: Pre-Arrival Documentation

Before goods arrive in Nepal, importers or their authorized agents must prepare and submit pre-arrival documentation. This step is crucial for expediting the clearance process and is mandated by Section 18 of the Customs Act, 2064 (2007). The required documents typically include:

1. Commercial Invoice
2. Packing List
3. Bill of Lading or Airway Bill
4. Certificate of Origin
5. Import License (if applicable)
6. Letter of Credit (if applicable)

These documents must be submitted electronically through the Automated System for Customs Data (ASYCUDA) World system, as per the Electronic Transactions Act, 2063 (2006).

B. Step 2: Arrival and Declaration

Upon arrival of the goods at a Nepali customs point, the importer or their agent must file a customs declaration. This process is governed by Section 18 of the Customs Act, 2064 (2007) and involves:

1. Submitting a Customs Declaration Form (also known as Pragyapan Patra)
2. Presenting original copies of all required documents
3. Declaring the value of goods for customs purposes

The declaration must be accurate and complete, as false declarations can lead to penalties under Section 57 of the Customs Act.

C. Step 3: Assessment and Valuation

Customs officers assess the declared goods and determine their value for duty purposes. This process is guided by the provisions of Chapter 7 of the Customs Act, 2064 (2007), which incorporates the WTO Valuation Agreement principles. The assessment involves:

1. Physical examination of goods (if deemed necessary)
2. Verification of declared value against reference prices
3. Classification of goods under the Harmonized System (HS) code

If discrepancies are found, the customs officer may reassess the value or classification, as per Section 13 of the Customs Act.

D. Step 4: Payment of Duties and Taxes

Once the assessment is complete, the importer must pay all applicable duties and taxes. The legal basis for this step is found in Chapter 10 of the Customs Act, 2064 (2007). Payment methods include:

1. Cash payment at the customs office
2. Bank transfer
3. Electronic payment through the ASYCUDA World system

Failure to pay duties and taxes can result in the goods being held at customs and potential penalties, as outlined in Section 57 of the Customs Act.

E. Step 5: Clearance and Release

After all requirements are met and payments are made, the customs officer issues a release order. This final step is governed by Section 23 of the Customs Act, 2064 (2007). The process includes:

1. Issuance of a Customs Release Order
2. Final inspection of goods (if required)
3. Release of goods from customs control

The importer must remove the goods from the customs area within the time specified in the release order, typically within 7 days, as per Rule 34 of the Customs Rules, 2064 (2007).

IV. Required Documents for Customs Clearance

To ensure smooth customs clearance in Nepal, importers must prepare and submit several key documents. These requirements are stipulated in various sections of the Customs Act, 2064 (2007) and associated regulations. The primary documents include:

1. Commercial Invoice: A detailed invoice from the supplier, showing the value, quantity, and description of goods.
2. Packing List: A document detailing how the goods are packed, including quantity, weight, and dimensions.
3. Bill of Lading or Airway Bill: A transport document that serves as evidence of the contract of carriage.
4. Certificate of Origin: A document certifying the country where the goods were manufactured or produced.
5. Import License: Required for certain restricted goods, as per the Export Import Control Act, 2013 (1957).
6. Letter of Credit: If applicable, as evidence of payment arrangement.
7. Insurance Certificate: Proof of insurance coverage for the imported goods.
8. Customs Declaration Form (Pragyapan Patra): The official declaration of imported goods.
9. Purchase Order or Sales Contract: Evidence of the commercial transaction.
10. Quarantine Certificate: For plant or animal products, as required by the Plant Protection Act, 2064 (2007) or Animal Health and Livestock Services Act, 2055 (1999).
11. Quality Certificate: For certain goods, as mandated by the Nepal Bureau of Standards and Metrology.
12. Pre-shipment Inspection Certificate: If required for specific goods or countries of origin.

Failure to provide these documents can result in delays, additional inspections, or even refusal of entry, as per Sections 18 and 19 of the Customs Act, 2064 (2007).

How to Draft Articles of Association in Nepal | Highlights of Companies Act 2063 | Company Registration Fees in Nepal

V. Our Customs Consulting Services

As experienced customs consultants in Nepal, we offer a comprehensive range of services to assist businesses and individuals in navigating the complex customs landscape. Our services are designed to ensure compliance with all relevant laws and regulations while optimizing the customs clearance process.

Our key services include:

1. Customs Classification Assistance: We help clients accurately classify their goods under the Harmonized System (HS) code, ensuring compliance with Section 11 of the Customs Act, 2064 (2007).
2. Valuation Consulting: We provide expert advice on customs valuation methods, helping clients navigate the complexities of Chapter 7 of the Customs Act.
3. Documentation Preparation: We assist in preparing and reviewing all necessary customs documents to ensure compliance with Section 18 of the Customs Act.
4. Customs Procedure Optimization: We analyze and optimize clients’ customs procedures to minimize delays and costs while ensuring full legal compliance.
5. Duty and Tax Calculation: We provide accurate calculations of applicable duties and taxes, helping clients budget effectively and avoid unexpected costs.
6. Representation before Customs Authorities: We represent clients in dealings with customs authorities, including during inspections and audits, as permitted under Rule 15 of the Customs Rules, 2064 (2007).
7. Training and Education: We offer customized training programs on Nepal’s customs laws and procedures to help clients build in-house expertise.
8. Compliance Audits: We conduct thorough audits of clients’ customs practices to identify and address potential compliance issues before they become problems.
9. Appeals and Dispute Resolution: We assist clients in navigating the appeals process for customs-related disputes, as outlined in Chapter 11 of the Customs Act.
10. Strategic Customs Planning: We help businesses develop long-term strategies for managing their customs obligations efficiently and cost-effectively.

Our team of experts stays up-to-date with the latest changes in customs laws and regulations, ensuring that our clients always receive current and accurate advice.

VI. Typical Timeline for Customs Clearance

The timeline for customs clearance in Nepal can vary depending on several factors, including the type of goods, the completeness of documentation, and the workload at the specific customs point. However, a typical timeline based on the provisions of the Customs Act, 2064 (2007) and associated regulations is as follows:

1. Pre-Arrival Documentation: 1-3 days before arrival (As per Section 18 of the Customs Act)
2. Arrival and Declaration: 1-2 days (As per Section 18 of the Customs Act)
3. Assessment and Valuation: 1-3 days (As per Chapter 7 of the Customs Act)
4. Payment of Duties and Taxes: 1 day (As per Chapter 10 of the Customs Act)
5. Clearance and Release: 1-2 days (As per Section 23 of the Customs Act)

Total typical timeline: 5-11 days

It’s important to note that this timeline can be extended if there are issues with documentation, valuation disputes, or if additional inspections are required. Conversely, the process can be expedited for certain types of goods or under specific circumstances, such as perishable goods or goods imported under preferential trade agreements.

VII. Customs Duties and Associated Costs

Understanding the various duties and costs associated with importing goods into Nepal is crucial for effective business planning. The primary components are:

1. Customs Duty: Levied on imported goods based on their classification in the Nepal Customs Tariff. Rates vary from 0% to 80%, as per the Finance Act issued annually.
2. Value Added Tax (VAT): Generally 13% on the CIF value plus customs duty, as per the Value Added Tax Act, 2052 (1995).
3. Excise Duty: Applicable on certain goods, rates specified in the Excise Act, 2058 (2002).
4. Agriculture Reform Fee: 5% on certain agricultural products, as per the Agriculture Reform Fee Rules, 2064 (2008).
5. Customs Service Fee: Nominal fee for processing customs declarations, as per Rule 35 of the Customs Rules, 2064 (2007).
6. Special Duty: Imposed on certain goods for protective purposes, rates specified in the annual Finance Act.
7. Anti-Dumping and Countervailing Duties: Imposed on goods deemed to be dumped or subsidized, as per the Safeguard, Anti-Dumping and Countervailing Act, 2076 (2019).
8. Safeguard Duty: Temporary duty to protect domestic industries, as per the Safeguard, Anti-Dumping and Countervailing Act, 2076 (2019).

Importers should also be aware of additional costs such as demurrage charges, warehouse fees, and agent fees, which, while not government-imposed, can significantly impact the total cost of importation.

VIII. Relevant Laws and Authorities

The customs regime in Nepal is governed by a complex web of laws, regulations, and administrative bodies. Key among these are:

1. Customs Act, 2064 (2007): The primary legislation governing customs procedures and duties.
2. Customs Rules, 2064 (2007): Detailed regulations implementing the Customs Act.
3. Export Import Control Act, 2013 (1957): Regulates the import and export of goods.
4. Value Added Tax Act, 2052 (1995): Governs the application of VAT on imports.
5. Foreign Exchange (Regulation) Act, 2019 (1962): Regulates foreign exchange transactions related to trade.
6. Safeguard, Anti-Dumping and Countervailing Act, 2076 (2019): Provides for the imposition of special duties to protect domestic industries.
7. Plant Protection Act, 2064 (2007): Regulates the import of plant materials.
8. Animal Health and Livestock Services Act, 2055 (1999): Governs the import of animal products.

The primary authorities responsible for customs administration in Nepal are:

1. Department of Customs: The main body responsible for implementing customs laws and procedures.
2. Ministry of Finance: Oversees customs policy and issues annual Finance Acts setting duty rates.
3. Nepal Bureau of Standards and Metrology: Sets quality standards for certain imported goods.
4. Department of Commerce: Issues import licenses for restricted goods.
5. Nepal Rastra Bank: Regulates foreign exchange transactions related to trade.

Understanding these laws and authorities is crucial for anyone engaged in international trade with Nepal.

IX. Current Customs Practices in Nepal

Nepal’s customs practices have been evolving to align with international standards while addressing local needs. Some current practices include:

1. Implementation of the ASYCUDA World system for electronic customs declarations and risk management.
2. Adoption of the WTO Valuation Agreement principles for customs valuation.
3. Use of post-clearance audit to facilitate trade while maintaining control.
4. Implementation of Authorized Economic Operator (AEO) program for trusted traders.
5. Gradual reduction of tariff rates in line with Nepal’s WTO commitments.
6. Enhanced cooperation with other border agencies for integrated border management.
7. Increased focus on non-intrusive inspection techniques to facilitate trade.
8. Implementation of advance ruling system for classification and valuation.

These practices aim to balance trade facilitation with regulatory control, in line with the objectives of the Customs Act, 2064 (2007) and international best practices.

X. Conclusion

Navigating Nepal’s customs laws and regulations requires a thorough understanding of the legal framework, procedures, and current practices. While the system has been modernizing and aligning with international standards, it still presents challenges for traders unfamiliar with local requirements.

Proper preparation, accurate documentation, and compliance with all relevant laws are crucial for smooth customs clearance. Engaging with experienced customs consultants can significantly ease the process and help avoid costly delays or legal issues.

As Nepal continues to integrate into the global economy, its customs practices are likely to evolve further. Staying informed about these changes and maintaining open communication with customs authorities will be key to successful international trade operations in Nepal.

FAQs:

1. What items are prohibited from import into Nepal? Prohibited items include narcotic drugs, arms and ammunition without proper licenses, beef and beef products, and materials deemed harmful to national security or public health. The specific list is maintained by the Department of Customs and can change, so it’s advisable to check the current regulations before importing.
2. How are import duties calculated? Import duties are calculated based on the customs value of the goods, which is typically the CIF (Cost, Insurance, Freight) value. The duty rate is determined by the classification of the goods in the Nepal Customs Tariff. Additional taxes like VAT and excise duty may also apply.
3. What’s the process for temporary imports? Temporary imports are governed by Chapter 5 of the Customs Act, 2064 (2007). Importers must declare the goods as temporary imports, provide a security deposit or bank guarantee, and obtain approval from customs. The goods must be re-exported within the specified time frame, usually within one year.
4. How does Nepal handle transit goods? Transit goods are regulated under Chapter 6 of the Customs Act, 2064 (2007). They must be declared as transit goods, and a transit declaration must be filed. The goods must follow the prescribed route and exit Nepal within the specified time frame.
5. What are the rules for personal imports? Personal imports are subject to duty-free allowances as specified in the Baggage Rules under the Customs Act. These allowances vary depending on the duration of stay abroad and the type of goods. Quantities exceeding these allowances are subject to regular import duties and taxes.
6. What’s the penalty for customs fraud? Penalties for customs fraud are severe and are outlined in Chapter 12 of the Customs Act, 2064 (2007). They can include fines up to the value of the goods, confiscation of goods, and imprisonment for up to five years, depending on the nature and severity of the offense.