Export-Import License in Nepal

Introduction to Export-Import License in Nepal

The Export-Import (EXIM) License is a mandatory requirement for businesses engaged in importing goods into Nepal or exporting Nepalese products to international markets. The Export-Import License, also known as the EXIM Code, is a unique identification number issued by the Department of Customs under the Ministry of Finance, Government of Nepal.

The legal framework governing export-import activities in Nepal is primarily based on the Export Import (Control) Act, 2013 (2057 BS) and the Export Import Regulation, 2015 (2064 BS). These legislations provide the foundation for the issuance and regulation of EXIM licenses, ensuring that international trade activities align with national interests and comply with international standards.

Purpose of the Export-Import License

The Export-Import License serves several critical purposes in Nepal’s trade ecosystem:

Regulatory Compliance: It ensures that businesses engaged in international trade adhere to Nepal’s trade laws and regulations.
Trade Facilitation: The license streamlines customs procedures, making it easier for businesses to import and export goods.
Statistical Tracking: It allows the government to monitor and analyze trade patterns and volumes accurately.
Revenue Collection: The license facilitates the proper assessment and collection of customs duties and taxes.
Quality Control: It helps in maintaining standards for imported and exported goods, protecting consumers and the country’s reputation.

Understanding the intricacies of obtaining and maintaining an Export-Import License is crucial for businesses looking to engage in international trade in Nepal. This comprehensive guide will delve into the requirements, processes, and legal aspects of acquiring an EXIM License in Nepal.

Requirements for Export-Import License

To obtain an Export-Import License in Nepal, applicants must meet several key requirements as stipulated by the Department of Customs and relevant trade laws. These requirements are designed to ensure that only qualified and legitimate businesses engage in international trade activities. The primary requirements include:

Legal Entity Status

Applicants must be registered as a legal entity in Nepal. This can be in the form of:

A Private Limited Company
A Public Limited Company
A Partnership Firm
A Sole Proprietorship

The registration must be completed under the Company Act, 2063 (2006) or the Private Firm Registration Act, 2014 (1958).

Tax Registration

Businesses must have a valid Permanent Account Number (PAN) or Value Added Tax (VAT) registration. This requirement is in accordance with the Income Tax Act, 2058 (2002) and the Value Added Tax Act, 2052 (1996).

Minimum Capital Requirement

While there is no specific minimum capital requirement for obtaining an EXIM License, the business must have sufficient capital to engage in international trade activities. The capital adequacy is assessed based on the nature and scale of the proposed import-export operations.

Physical Office

Applicants must have a physical office address in Nepal. This is to ensure that the business has a legitimate presence in the country and can be contacted for official purposes.

Bank Account

A business bank account in a Nepalese bank is mandatory. This account will be used for international transactions related to import and export activities.

Compliance with Sector-Specific Regulations

Depending on the nature of goods to be imported or exported, additional licenses or permits from relevant government agencies may be required. For instance:

Food items may require approval from the Department of Food Technology and Quality Control
Pharmaceutical products need clearance from the Department of Drug Administration
Agricultural products may need certification from the Plant Quarantine and Pesticide Management Center

Clean Legal Record

The company and its directors should not have any pending legal cases or convictions related to trade malpractices, customs violations, or financial fraud.

Export-Import License Process in Nepal

The process of obtaining an Export-Import License in Nepal involves several steps, each requiring careful attention to detail and compliance with regulatory requirements. The procedure is overseen by the Department of Customs, working in conjunction with other relevant government agencies. Here’s a detailed breakdown of the process:

Step 1: Company Registration

Before applying for an EXIM License, the business must be registered with the Office of the Company Registrar (OCR) or the Department of Industry (DOI), depending on the type of entity.

For companies: Registration is done under the Company Act, 2063 (2006)
For sole proprietorships or partnerships: Registration is completed under the Private Firm Registration Act, 2014 (1958)

The registration process involves submitting necessary documents, including:

Memorandum of Association and Articles of Association (for companies)
Citizenship certificates of promoters/partners
Proof of office address
Initial capital details

Step 2: PAN/VAT Registration

After company registration, the next step is to obtain a Permanent Account Number (PAN) or Value Added Tax (VAT) registration from the Inland Revenue Department.

PAN is mandatory for all businesses
VAT registration is required for businesses with an annual turnover exceeding NPR 5 million or those voluntarily registering for VAT

The process involves:

Submitting an application form
Providing company registration documents
Furnishing details of business activities and projected turnover

Step 3: License Application Submission

With the company and tax registrations in place, the business can now apply for the EXIM License. The application is submitted to the Department of Customs.

Required documents typically include:

Completed application form (available on the Department of Customs website)
Company registration certificate
PAN/VAT registration certificate
Tax clearance certificate
Citizenship certificates of directors/partners
Passport-sized photographs of directors/partners
Bank statement showing the company’s financial capacity
Business plan outlining import-export activities

Step 4: Document Verification

The Department of Customs conducts a thorough verification of all submitted documents. This process may involve:

Cross-checking information with other government departments
Conducting physical inspections of the business premises
Requesting additional information or clarifications if needed

The verification process is crucial to ensure the legitimacy of the applicant and to prevent fraudulent activities in international trade.

Step 5: License Issuance

Upon successful verification and approval, the Department of Customs issues the Export-Import License. The license includes:

A unique EXIM Code
Details of the licensed company
Scope of import-export activities allowed
Validity period of the license

The license is typically valid for five years from the date of issuance and is renewable upon expiration.

Documents Required for Export-Import License

The application for an Export-Import License in Nepal requires a comprehensive set of documents. These documents serve to verify the legitimacy of the business, its financial capacity, and its compliance with various legal requirements. The following is a detailed list of documents typically required:

Business Registration Documents

Company Registration Certificate: Issued by the Office of the Company Registrar or Department of Industry
Memorandum of Association and Articles of Association (for companies)
Partnership deed (for partnership firms)

Tax-Related Documents

Permanent Account Number (PAN) Certificate
Value Added Tax (VAT) Registration Certificate (if applicable)
Tax Clearance Certificate for the most recent fiscal year

Identification Documents

Citizenship certificates of all directors/partners
Passport-sized photographs of directors/partners
Specimen signatures of authorized signatories

Financial Documents

Bank statements for the last six months, demonstrating financial capacity
Audit report for the previous fiscal year (for existing businesses)

Business Premises Documents

Proof of office address (rental agreement or ownership documents)
Municipality registration or recommendation letter

Business Plan and Trade Details

Detailed business plan outlining proposed import-export activities
List of products to be imported or exported
Projected volume and value of trade for the next fiscal year

Additional Sector-Specific Documents

Industry-specific licenses or permits (e.g., food import license, pharmaceutical import license)
Certificates from relevant regulatory bodies (e.g., Department of Food Technology and Quality Control)

Legal Declarations

Affidavit declaring no involvement in trade malpractices or customs violations
Power of Attorney for the person authorized to handle the license application process

Export-Import License Services in Nepal

In Nepal, various services are available to assist businesses in obtaining and managing their Export-Import Licenses. These services are provided by both government agencies and private sector entities, aiming to facilitate smoother international trade operations. Here’s an overview of the key services related to EXIM Licensing in Nepal:

Government Services

Department of Customs:
- Primary authority for issuing EXIM Licenses
- Provides guidance on application procedures
- Offers online application submission facilities
- Conducts document verification and physical inspections
Trade and Export Promotion Center (TEPC):
- Offers advisory services on export procedures
- Provides market information and trade statistics
- Assists in identifying potential markets for Nepalese products
Nepal Rastra Bank (Central Bank):
- Issues Letter of Credit (LC) guidelines
- Regulates foreign exchange for international trade

Private Sector Services

Customs Agents and Brokers:
- Assist in preparing and submitting EXIM License applications
- Provide guidance on documentation requirements
- Help in liaising with customs authorities
Chambers of Commerce:
- Offer trade facilitation services
- Provide networking opportunities with international buyers and sellers
- Issue Certificates of Origin for exports
Legal Consultancy Firms:
- Offer legal advice on trade laws and regulations
- Assist in drafting international trade contracts
- Provide representation in trade disputes
Freight Forwarders and Logistics Companies:
- Manage transportation and logistics for import-export goods
- Assist with customs clearance procedures
- Provide warehousing and distribution services
Banks and Financial Institutions:
- Facilitate international payments and transfers
- Provide trade finance solutions (e.g., export credit, import financing)
- Assist with foreign exchange transactions
Insurance Companies:
- Offer cargo insurance for international shipments
- Provide credit insurance for export transactions
Trade Consultancy Firms:
- Conduct market research for potential export markets
- Assist in developing export strategies
- Provide training on international trade practices

These services play a crucial role in supporting businesses throughout their import-export journey, from obtaining the initial license to managing ongoing trade operations. It’s important for businesses to carefully select service providers based on their specific needs and ensure that all activities comply with Nepalese laws and regulations governing international trade.

Timeframe for EXIM Code Registration in Nepal

The process of obtaining an Export-Import License, or EXIM Code, in Nepal involves several stages, each with its own timeframe. While the overall duration can vary depending on the completeness of the application and the efficiency of the relevant authorities, here’s a general timeline for the EXIM Code registration process:

Pre-Application Preparation: 1-2 Weeks

Gathering required documents
Completing company and tax registrations (if not already done)
Preparing a business plan and other supporting documents

Application Submission and Initial Processing: 1-3 Days

Submitting the application to the Department of Customs
Initial review of the application for completeness

Document Verification: 1-2 Weeks

Thorough examination of submitted documents by customs officials
Cross-verification with other government departments if necessary

Physical Inspection (if required): 3-5 Days

Scheduling and conducting an inspection of the business premises
Preparing and submitting the inspection report

Final Review and Approval: 1-2 Weeks

Evaluation of all verified documents and inspection reports
Decision-making by the authorized customs officials

License Issuance: 2-3 Days

Preparation and printing of the EXIM License
Notification to the applicant for license collection

Total Estimated Timeframe: 4-6 Weeks

It’s important to note that this timeline is approximate and can be influenced by various factors:

Completeness and accuracy of the submitted documents
Workload of the Department of Customs
Complexity of the business structure or proposed trade activities
Any additional clarifications or documents required during the process

To ensure a smooth and timely process, applicants are advised to:

Double-check all documents for completeness and accuracy before submission
Respond promptly to any queries or requests for additional information
Consider using the services of experienced customs agents or trade consultants

The Department of Customs in Nepal has been working towards streamlining the process and reducing the overall timeframe for EXIM Code registration. Recent initiatives, such as online application submissions and improved inter-departmental coordination, aim to make the process more efficient.

Businesses should also be aware that once issued, the EXIM License is typically valid for five years. Planning for renewal should begin well in advance of the expiration date to ensure continuity in import-export operations.

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Costs Associated with Export-Import License

Obtaining and maintaining an Export-Import License in Nepal involves various costs. These costs can be categorized into official fees, service charges, and indirect expenses. Understanding these costs is crucial for businesses planning to engage in international trade. Here’s a comprehensive breakdown:

Official Government Fees

EXIM License Application Fee:
- Approximately NPR 5,000 to NPR 10,000 (subject to change)
License Issuance Fee:
- Varies based on the type and scale of business, typically ranging from NPR 10,000 to NPR 25,000
Renewal Fee (every 5 years):
- Usually similar to the initial issuance fee

Service Charges (Optional but Common)

Customs Agent or Broker Fees:
- Can range from NPR 15,000 to NPR 50,000, depending on the complexity of the application and the agent’s expertise
Legal Consultancy Fees:
- If legal assistance is required, fees can range from NPR 20,000 to NPR 100,000 or more
Document Preparation Services:
- Approximately NPR 5,000 to NPR 15,000 for assistance in preparing and organizing required documents

Indirect Costs

Company Registration Costs (if not already registered):
- Registration fees, stamp duties, and lawyer fees can total NPR 30,000 to NPR 100,000 or more
PAN/VAT Registration:
- Minimal official fees, but may involve costs for professional assistance
Bank Charges:
- Opening and maintaining a business account, typically NPR 5,000 to NPR 10,000
Notarization and Authentication of Documents:
- Approximately NPR 500 to NPR 1,000 per document
Travel and Logistics:
- Costs associated with visiting government offices, estimated at NPR 5,000 to NPR 10,000
Compliance Costs:
- Ongoing expenses for maintaining compliance with trade regulations, which can vary widely

Additional Sector-Specific Costs

Special Permits or Licenses:
- For certain products (e.g., pharmaceuticals, food items), additional licensing fees may apply, ranging from NPR 10,000 to NPR 100,000 or more
Laboratory Testing Fees:
- For products requiring quality certification, fees can range from NPR 5,000 to NPR 50,000 per product

Total Estimated Cost Range

For a straightforward application: NPR 50,000 to NPR 150,000
For complex cases or large-scale operations: NPR 150,000 to NPR 500,000 or more

It’s important to note that these costs are approximate and can vary based on:

The nature and scale of the business
The complexity of the trade activities
Changes in government fee structures
The extent of professional services utilized

Businesses should also budget for ongoing compliance costs and potential expenses related to specific import-export transactions, such as customs duties, freight charges, and insurance.

To optimize costs, businesses can:

Ensure thorough preparation of documents to avoid delays and additional fees
Consider handling simpler aspects of the application process in-house
Compare service fees from different customs agents and consultants
Stay informed about any government initiatives that might offer fee waivers or reductions for certain types of businesses or sectors

By carefully planning and budgeting for these costs, businesses can ensure a smooth entry into international trade activities while maintaining financial prudence.

Relevant Laws and Authorities

The export-import licensing system in Nepal is governed by a complex framework of laws, regulations, and government authorities. Understanding this legal and administrative landscape is crucial for businesses engaged in international trade. Here’s an overview of the key laws and authorities relevant to EXIM licensing in Nepal:

Primary Laws and Regulations

Export Import (Control) Act, 2013 (2057 BS):
- The foundational law governing export-import activities in Nepal
- Provides the legal basis for licensing and regulation of international trade
Export Import Regulation, 2015 (2064 BS):
- Detailed rules and procedures for implementing the Export Import (Control) Act
- Specifies documentation requirements and licensing procedures
Customs Act, 2064 (2007):
- Governs customs procedures, duties, and border control measures
- Crucial for understanding the practical aspects of import-export operations
Foreign Exchange (Regulation) Act, 2019 (1962):
- Regulates foreign exchange transactions related to international trade
- Administered by Nepal Rastra Bank
Industrial Enterprises Act, 2076 (2020):
- Provides the framework for industrial policy, including export-oriented industries
- Relevant for businesses manufacturing goods for export
Company Act, 2063 (2006):
- Governs the registration and operation of companies in Nepal
- Relevant for establishing a legal entity for import-export activities
Foreign Investment and Technology Transfer Act, 2075 (2019):
- Regulates foreign investment in Nepal, including in export-oriented industries

Key Government Authorities

Department of Customs:
- Primary authority for issuing EXIM Licenses
- Oversees customs procedures and trade facilitation
Ministry of Industry, Commerce and Supplies:
- Formulates trade policies and regulations
- Oversees overall trade and industrial development
Trade and Export Promotion Center (TEPC):
- Promotes Nepalese exports and provides trade information services
Nepal Rastra Bank:
- Regulates foreign exchange transactions
- Issues guidelines on letters of credit and other trade finance instruments
Department of Industry:
- Registers and regulates industrial enterprises
- Issues industry-specific permits and certifications
Office of the Company Registrar:
- Handles company registrations and related corporate matters
Inland Revenue Department:
- Manages tax registrations (PAN/VAT) and tax-related matters for businesses
Department of Food Technology and Quality Control:
- Regulates food imports and exports
- Issues quality certifications for food products
Department of Drug Administration:
- Oversees the import and export of pharmaceutical products
Plant Quarantine and Pesticide Management Center:
- Regulates the import and export of plant and agricultural products

International Agreements

Nepal is a member of various international trade organizations and agreements, which influence its trade policies and practices:

World Trade Organization (WTO)
South Asian Free Trade Area (SAFTA)
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)

These agreements provide frameworks for trade facilitation, tariff reductions, and dispute resolution mechanisms that impact import-export activities.

Compliance and Updates

It’s crucial for businesses to:

Stay updated on changes in laws and regulations
Ensure compliance with all relevant legal requirements
Consult with legal experts or customs agents for complex matters
Regularly check official government websites and notifications for updates

Understanding and navigating this legal and regulatory landscape is essential for successful and compliant import-export operations in Nepal. Businesses should consider these laws and authorities as integral parts of their trade strategy and operational planning.

Export-Import Practices in Nepal

Nepal’s export-import practices are shaped by its unique geographical position, economic structure, and international trade policies. Understanding these practices is crucial for businesses looking to engage in cross-border trade with or through Nepal. Here’s an overview of key export-import practices in the country:

Export Practices

Major Export Products:
- Textiles and garments
- Carpets and rugs
- Tea and coffee
- Herbs and spices
- Handicrafts
- Pashmina products
Export Promotion Initiatives:
- Cash incentives for certain export products
- Duty drawback schemes
- Export processing zones (EPZs)
Quality Control:
- Mandatory quality certifications for specific products
- Adherence to international standards for export competitiveness
Documentation:
- Commercial invoice
- Packing list
- Certificate of Origin
- Letter of Credit (L/C) or other payment terms
Logistics:
- Primarily land-based transportation to India
- Air freight for high-value, low-volume goods
- Use of Indian ports for sea freight (primarily Kolkata and Visakhapatnam)

Import Practices

Major Import Categories:
- Petroleum products
- Vehicles and spare parts
- Machinery and equipment
- Electronics and electrical goods
- Pharmaceuticals
Import Regulations:
- Import licenses required for certain goods
- Restrictions on import of harmful or luxury items
- Compliance with technical standards and labeling requirements
Customs Procedures:
- Risk-based inspection system
- Electronic customs declaration (ASYCUDA World system)
- Valuation based on transaction value method
Tariff Structure:
- Multiple tariff rates based on product categories
- Preferential rates for imports from SAFTA countries
Non-Tariff Measures:
- Technical barriers to trade (TBT)
- Sanitary and phytosanitary (SPS) measures

Trade Facilitation Measures

Single Window System:
- Gradual implementation of an electronic single window for trade
- Aims to streamline documentation and reduce processing time
Authorized Economic Operator (AEO) Program:
- Facilitates faster clearance for compliant traders
Risk Management System:
- Selective inspection of cargo based on risk profiling
Bilateral and Multilateral Agreements:
- Preferential trade agreements with India and other countries
- Participation in regional trade initiatives (SAFTA, BIMSTEC)

Challenges in Nepal’s Trade Practices

Landlocked Geography:
- Dependence on transit countries for sea access
- Higher transportation costs
Infrastructure Limitations:
- Inadequate road and rail networks
- Limited cold storage facilities for perishable goods
Trade Imbalance:
- Significant trade deficit, particularly with India
Non-Tariff Barriers:
- Complex documentation requirements
- Frequent changes in import policies
Currency Fluctuations:
- Impact on trade competitiveness and import costs

Best Practices for Traders

Thorough Market Research:
- Understanding demand, competition, and regulatory environment
Compliance Focus:
- Strict adherence to quality standards and documentation requirements
Relationship Building:
- Developing strong partnerships with local agents and distributors
Logistics Planning:
- Careful selection of transportation routes and modes
Risk Management:
- Use of trade insurance and hedging instruments
Continuous Learning:
- Staying updated on trade policies and market trends
Leveraging Technology:
- Adoption of e-commerce and digital trade facilitation tools

Nepal’s export-import practices are evolving, with efforts to modernize and streamline processes. Traders should stay informed about these developments and adapt their strategies accordingly. Despite challenges, Nepal offers unique opportunities in international trade, particularly in niche products and as a gateway to the South Asian market.

Conclusion

The Export-Import License system in Nepal plays a pivotal role in regulating and facilitating international trade. It serves as a crucial mechanism for ensuring compliance with national trade policies, maintaining quality standards, and promoting economic growth through controlled cross-border commerce. As Nepal continues to integrate into the global economy, the importance of a well-functioning EXIM licensing system cannot be overstated.

Key takeaways from this comprehensive guide include:

Legal Framework: The Export-Import licensing process is governed by a robust set of laws and regulations, primarily the Export Import (Control) Act and related regulations.
Procedural Complexity: Obtaining an EXIM License involves multiple steps, from company registration to document verification and final approval.
Documentation Requirements: A comprehensive set of documents is required, emphasizing the need for meticulous preparation and attention to detail.
Government and Private Sector Services: A range of services are available to assist businesses in navigating the licensing process and managing international trade operations.
Time and Cost Considerations: While the process can be time-consuming and involves various costs, proper planning and preparation can optimize both time and expenses.
Evolving Practices: Nepal’s export-import practices are continuously evolving, with efforts to streamline processes and adopt modern trade facilitation measures.
Challenges and Opportunities: While challenges exist, particularly due to Nepal’s landlocked geography, there are significant opportunities in niche markets and regional trade.

For businesses looking to engage in international trade in Nepal, it is crucial to:

Thoroughly understand the legal and regulatory requirements
Prepare comprehensive and accurate documentation
Consider seeking professional assistance for complex aspects of the process
Stay informed about changes in trade policies and practices
Develop a long-term strategy that accounts for Nepal’s unique trade environment

As Nepal continues to develop its international trade capabilities, the EXIM licensing system is likely to undergo further refinements. Businesses should remain adaptable and proactive in their approach to international trade, leveraging the opportunities presented by Nepal’s strategic location between two of Asia’s largest economies.

In conclusion, while navigating the Export-Import licensing process in Nepal can be complex, it is a necessary and valuable step for businesses aiming to participate in international trade. With proper preparation, compliance, and strategic planning, businesses can effectively leverage the EXIM License to expand their global reach and contribute to Nepal’s growing role in the international trade landscape.

Banasthali, Kathmandu, Nepal

info@companynp.com

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