Custom Law and Regulations in Nepal Nepal’s customs law governs all goods entering and exiting the country. The legal framework ensures trade compliance, revenue collection, and border security. Understanding customs regulations in Nepal is essential for importers, exporters, travelers, and businesses engaged in cross-border trade.
What Is the Legal Framework for Custom Law in Nepal?
Nepal’s customs system operates under several key laws and regulations:
- Customs Act, 2064 (2007) – the primary legislation governing customs in Nepal
- Customs Regulation, 2064 (2007) – rules derived from the Customs Act
- Customs Tariff Schedule – updated annually through the Finance Act
- Nepal Trade and Export Promotion Act, 2049 (1992)
- Foreign Exchange Regulation Act, 2019 (1962)
- Special Economic Zone Act, 2016
The Department of Customs (DoC), under the Ministry of Finance, administers all customs-related functions in Nepal. The Department of Customs Nepal oversees customs offices at border points, airports, and dry ports across the country.
Nepal Revenue Authority (NRA) plays a broader supervisory role in revenue collection, including customs duties. The Nepal Revenue Authority coordinates with the Department of Customs to ensure compliance.
What Are the Key Provisions of the Customs Act, 2064?
The Customs Act, 2064 (2007) is the principal legislation regulating customs procedures in Nepal. It establishes rules for:
- Import and export of goods
- Customs duty assessment and collection
- Customs valuation methods
- Prohibited and restricted goods
- Customs clearance procedures
- Penal provisions for smuggling and customs fraud
Section 7 of the Customs Act empowers the customs officer to assess the value of imported goods for duty purposes. The Act adopts the WTO Customs Valuation Agreement as the basis for determining transaction value.
Section 24 of the Customs Act provides provisions for seizure and confiscation of goods that violate customs rules.
Section 30 outlines the penalties for smuggling and under-declaration of goods, which may include fines or imprisonment.
The Act also establishes a Customs Review Committee under Section 100 to hear appeals against customs decisions made by customs officers.
What Are Customs Duties and Tariff Rates in Nepal?
Customs duty is a tax levied on goods crossing Nepal’s international borders. Nepal applies different types of duties depending on the nature and origin of the goods.
Types of Customs Duties in Nepal
| Duty Type | Description |
|---|---|
| Import Duty | Tax levied on goods imported into Nepal |
| Export Duty | Tax levied on goods exported from Nepal |
| Ad Valorem Duty | Calculated as a percentage of the goods’ value |
| Specific Duty | Fixed amount per unit regardless of value |
| Compound Duty | Combination of ad valorem and specific duty |
| Anti-Dumping Duty | Applied to goods imported at unfairly low prices |
| Countervailing Duty | Imposed to offset foreign subsidies |
Nepal’s customs tariff is based on the Harmonized System (HS) Code, a globally standardized system for classifying traded products. Nepal uses HS 2022 as the current classification system.
The Finance Act, issued annually by the Government of Nepal, revises customs duty rates. Currently, customs duty rates in Nepal range from 0% to 80% depending on the product category.
Basic goods like food, medicine, and agricultural inputs carry lower duties. Luxury goods, tobacco, and alcohol carry higher duty rates, sometimes reaching 80% or more when combined with other levies.
What Additional Levies Apply to Imported Goods in Nepal?
Beyond basic customs duty, several additional levies apply to imported goods in Nepal:
- Value Added Tax (VAT) – 13% applied on the customs value plus customs duty
- Excise Duty – Applied to specific goods like tobacco, alcohol, and vehicles
- Agriculture Reform Fee – 5% on agricultural products
- Road Maintenance and Development Fee – Applied to vehicles and petroleum products
- Infrastructure Tax – Levied on specific imported goods
The total tax burden on imports in Nepal can be substantial due to the cumulative effect of these levies.
What Is the Customs Clearance Process in Nepal?
The customs clearance process in Nepal involves several procedural steps that importers and exporters must follow.
Import Customs Clearance Process
- Arrival of goods at the customs point (border, airport, or dry port)
- Filing of the customs declaration (Bill of Entry/Import Declaration) through the ASYCUDA World system
- Submission of required documents to the customs office
- Assessment of customs duty by the customs officer based on HS code and declared value
- Physical examination of goods if required
- Payment of customs duty and other applicable levies
- Release of goods after clearance
Documents Required for Import Customs Clearance
- Commercial Invoice
- Packing List
- Bill of Lading or Airway Bill
- Certificate of Origin
- Import License (where applicable)
- Letter of Credit (if payment is through LC)
- Phytosanitary Certificate (for agricultural products)
- Quality or Conformity Certificates (as required)
- Insurance Certificate
- Import Declaration Form (PD Form)
Export Customs Clearance Process
- Filing of export declaration through ASYCUDA World
- Submission of export documents to customs authority
- Examination of goods if required by customs
- Assessment and payment of applicable export duties
- Issuance of Export Declaration
- Dispatch of goods from the customs territory
Nepal uses the ASYCUDA World (Automated System for Customs Data) for electronic filing and processing of customs declarations. This system reduces paperwork and speeds up clearance procedures.
What Goods Are Prohibited and Restricted Under Nepal’s Customs Law?
Nepal’s customs regulations divide goods into three categories: freely importable goods, restricted goods, and prohibited goods.
Prohibited Goods in Nepal
Under the Customs Act and related regulations, the following goods are prohibited from import or export:
- Narcotic drugs and psychotropic substances (except for medical use under license)
- Arms, ammunition, and explosives without government authorization
- Pornographic materials
- Counterfeit currency
- Goods that violate intellectual property rights
- Wildlife and wildlife products protected under CITES
- Radioactive materials without authorization
Restricted Goods in Nepal
Certain goods require prior licenses, permits, or government approvals:
- Medicines and pharmaceuticals (require Drug Administration approval)
- Agricultural seeds and plants (require quarantine clearance)
- Communication equipment and radio transmitters
- Precious metals and gemstones
- Cultural artifacts and antiques
- Firearms for personal use (require Ministry of Home Affairs permission)
What Are the Customs Valuation Rules in Nepal?
Customs valuation determines the taxable value of goods. Nepal follows the WTO Agreement on Customs Valuation, which is incorporated into the Customs Act, 2064.
Customs Valuation Methods (in Order of Priority)
| Method | Basis of Valuation |
|---|---|
| Transaction Value Method | Actual price paid or payable for the goods |
| Transaction Value of Identical Goods | Value of identical goods previously imported |
| Transaction Value of Similar Goods | Value of similar goods previously imported |
| Deductive Value Method | Based on selling price in Nepal minus costs |
| Computed Value Method | Based on production cost plus profit |
| Fall-Back Method | Reasonable means consistent with WTO principles |
The Transaction Value Method is the primary method used in Nepal. If the customs officer doubts the declared transaction value, they may apply subsequent methods as provided under Section 7 of the Customs Act.
What Are the Special Economic Zones and Bonded Warehouses in Nepal?
Nepal’s customs law provides for special arrangements to facilitate trade and investment.
Special Economic Zones (SEZ): Under the Special Economic Zone Act, 2016, goods entering SEZs are exempt from customs duties and VAT. SEZ Authority Nepal (www.sezanepal.gov.np) manages these zones.
Bonded Warehouses: Importers can store goods in bonded warehouses without paying customs duty until the goods are cleared for the domestic market. This facility benefits industries that import raw materials for manufacturing.
Duty Drawback: Exporters who use imported raw materials in manufactured goods can claim a refund of customs duty paid on those materials. This is known as the duty drawback scheme under Nepal’s export promotion policy.
Temporary Import/Export: Goods for exhibitions, trade fairs, or professional equipment can be temporarily imported or exported without full customs duty payment, provided they are re-exported within a stipulated time.
What Are Penal Provisions Under Nepal’s Customs Law?
Nepal’s Customs Act, 2064 establishes strict penalties for customs violations.
Section 30 of the Customs Act provides penalties for smuggling:
- Confiscation of smuggled goods
- Fine equal to the value of smuggled goods
- Imprisonment for up to 5 years for serious violations
Under-declaration of value results in:
- Recovery of unpaid duty
- Additional fine up to three times the unpaid duty amount
False declaration may result in:
- Cancellation of import/export licenses
- Criminal prosecution under the Act
Obstruction of customs officers during examination is a punishable offense under Section 34 of the Customs Act.
Appeals against customs decisions can be filed before the Customs Review Committee and subsequently before the Revenue Tribunal of Nepal.
How Does Nepal’s Customs Law Relate to Trade Agreements?
Nepal is a member of several regional and international trade agreements that affect customs duties and procedures.
SAFTA (South Asian Free Trade Area): Member countries including India, Pakistan, Bangladesh, Sri Lanka, Bhutan, and Maldives offer preferential tariff rates on goods traded within the region. Nepal benefits from reduced customs duties under SAFTA rules.
BIMSTEC: Nepal participates in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, which includes trade facilitation measures.
WTO Membership: Nepal became a WTO member in 2004. This subjects Nepal to WTO agreements including GATT, customs valuation rules, and trade facilitation requirements.
Trade and Transit Treaties: Nepal has special trade and transit treaties with India, which govern customs procedures at land border crossing points.
Conclusion
Nepal’s customs law framework, primarily under the Customs Act, 2064 and Customs Regulation, 2064, provides a comprehensive legal basis for governing cross-border trade. The Department of Customs Nepal administers these laws through customs offices at major entry and exit points. Importers, exporters, and traders must comply with customs duty obligations, documentation requirements, and customs clearance procedures to avoid penalties. Understanding prohibited goods, tariff classifications, customs valuation methods, and special facilities like SEZs and bonded warehouses helps businesses operate efficiently within Nepal’s customs framework. For updated tariff information and customs procedures, visit the Department of Customs Nepal and Nepal Revenue Authority official websites.
FAQs
1. What is the main law governing customs in Nepal?
The Customs Act, 2064 (2007) is the primary legislation governing customs in Nepal. It regulates import and export procedures, customs duty assessment, customs valuation, prohibited goods, and penal provisions for violations.
2. What is the maximum customs duty rate in Nepal?
Nepal’s customs duty rates range from 0% to 80% depending on the product category. Luxury goods, tobacco, and alcohol carry the highest rates. The Finance Act revised annually sets these tariff rates.
3. What system does Nepal use for customs declarations?
Nepal uses the ASYCUDA World (Automated System for Customs Data) for electronic submission and processing of customs import and export declarations at customs offices and border points.
4. Can customs decisions be appealed in Nepal?
Yes. Aggrieved parties can appeal customs decisions before the Customs Review Committee under Section 100 of the Customs Act, 2064, and subsequently before the Revenue Tribunal of Nepal.
5. What additional taxes apply to imported goods besides customs duty?
Imported goods in Nepal attract VAT (13%), excise duty, agriculture reform fee, road maintenance fee, and infrastructure tax in addition to the basic customs duty, depending on the product type.
6. What happens if someone smuggles goods into Nepal?
Under Section 30 of the Customs Act, 2064, smuggled goods are confiscated and the violator faces fines equal to the goods’ value and possible imprisonment of up to 5 years for serious offenses.