Nepal Implements New Customs Regulations 2083, Replacing 17-Year-Old Rules

Kathmandu. The government has implemented 'Customs Regulations, 2083' with the objective of making international trade technology-friendly, transparent, and efficient. The Ministry of Finance, through a notice published in the Nepal Gazette, has stated that the nearly 17-year-old 'Customs Regulations, 2064' has been completely abolished (as per Section 130) and a new, era-appropriate regulation has been issued.

This regulation, which came into effect immediately upon publication in the Gazette, simplifies export and import procedures and has taken strict measures to control revenue leakage.

The old regulation was mainly based on paper procedures and physical inspection, which traders complained led to delays and hassle in trade. The new regulation embraces global recognition of trade facilitation, legal recognition of electronic systems, and respect for honest traders.

What's New?

In the past, traders had to physically submit files to various government agencies such as the Department of Commerce, Plant Quarantine, etc., for customs clearance. However, with the new regulation giving legal recognition to the National Single Window system, all permit and recommendation work will now be done through a single electronic portal.

Furthermore, ending the practice of treating all types of traders with the same approach under the old system, the new regulation has introduced the concept of an 'authorized business person'. Honest traders who have complied with the law for three consecutive years and have no outstanding dues or penalties will be placed in this category and will be provided special facilities for immediate clearance through a separate dedicated area without holding their goods at customs.

The new regulation has also resolved the old dispute between customs officials and traders regarding the classification (HS code) or origin of goods, which used to arise only after the goods arrived at the customs point. Now, traders can obtain 'advance rulings' by applying to the Director General before importing goods, which will end months of delay and hassle at the border.

Similarly, the old practice of customs officials opening and inspecting most of the goods arriving at customs has been replaced by moving the customs administration to a modern selectivity module.

Now, the computer system will analyze risks and send goods through red, yellow, blue, or green channels, with goods in the green channel passing directly without any physical inspection.

To fulfill the lack of a formal legal mechanism for coordination between traders and customs administration when policy or practical problems arise, the new regulation envisions a Trade Facilitation Committee. These committees, to be formed under the leadership of the Director General at the center and the office chief in the districts, will ensure the legal representation of the private sector, including the Federation of Nepalese Chambers of Commerce and Industry.

While trade facilitation is being done at the border, post-clearance audit has been made very strict. In the old regulation, the work was considered complete once goods were released from customs. Under the new system, customs officials can inspect documents, bills, and inventory at the trader's office or warehouse at any time within four years of the goods being cleared.

In addition, the regulation has made a clear provision to limit the discretionary power of customs officials in customs valuation, making the transaction value the primary basis, and if in doubt, valuation should be done using scientific methods based on similar or comparable goods.

To fulfill the lack of a formal legal mechanism for coordination between traders and customs administration when policy or practical problems arise, the new regulation envisions a Trade Facilitation Committee. These committees, to be formed under the leadership of the Director General at the center and the office chief in the districts, will ensure the legal representation of the private sector, including the Federation of Nepalese Chambers of Commerce and Industry.

10 Percent Reward for Informants Providing Information on Gold Smuggling

Similarly, to encourage informants providing information on customs smuggling or import/export, Rule 113 (6) of the Customs Regulations, 2083, has reduced the reward rate for precious metals like gold and silver to 10 percent of the confiscated auction amount for informants and 10 percent for those who seize them. For other general goods, the old rates (15, 20, and 30 percent) remain the same.

In the Customs Regulations, 2064, there was generally a provision to give 15 percent reward to informants, 20 percent for seizing only goods, and 30 percent for seizing both people and goods. However, in the past, due to this rule, informants and seizing employees received millions of rupees in rewards when precious items like gold and silver were seized.

This led to widespread criticism that the practice of arranging gold seizures for rewards had increased. Later, the government set a limit through a directive, capping the reward at a certain amount (e.g., not exceeding 5 million rupees).

How Many Times Amended Since 2064?

The foundation of modern customs administration in Nepal was laid by the Customs Act, 2015. Exercising the authority granted by Section 33 of the same Act, the then government introduced the first Customs Regulations, 2016. This was the first attempt to bring the import-export of goods across the country's borders under a legal framework.

With the change of time and Nepal's membership in the World Trade Organization (WTO), it became necessary for Nepal to align its laws with international standards. Consequently, replacing the old law, the Customs Act, 2064, and Customs Regulations, 2064, were issued. Until now, Nepal's customs administration was operating based on these 2064 regulations, which had been amended 16 times as needed.

Since 2064, continuous improvements have been made to the regulations for trade facilitation, revenue leakage control, and technology-friendly administration. By the 10th amendment to the regulations on October 5, 2074, measures such as systematizing post-clearance audits and initiating e-payments were implemented.

The government brought the 16th amendment on Jestha 14, 2081, just before the budget for fiscal year 2081/82 was announced. This amendment brought a revolutionary change in the management of confiscated goods. It provided customs officers with the authority to immediately auction goods that are perishable or lose value before the case is decided.

The 11th amendment (2077/03/15) tightened the provisions for submitting applications through electronic means. The 12th amendment (2078) to the regulations gained significant attention, paving the way for opening new licenses for customs agents, which had been halted for nearly two decades. It opened the path for conducting examinations for new licenses for customs agents, which had not been done for a long time.

It also improved the process of maintaining records for goods receiving exemptions.

The 13th amendment (2079/02/23) attempted to expedite the renewal of import-export codes and the auction process for confiscated goods.

Similarly, the 14th amendment (August 2080) facilitated waste management at customs yards by allowing old vehicles and machinery under auction to be sold as scrap. It also modified the provision for appointing representatives for customs agents. It also made the customs laboratory's test reports more official.

15th and 16th Amendments

Fiscal year 2081 appears to have been a very active year for legal reforms in customs administration. The regulations were amended twice this year alone. The 15th amendment on Jestha 24, 2081, primarily provided significant relief to customs agents. It offered a final opportunity for agents who missed their license renewal to renew it by paying a fine. Furthermore, the system of requiring the photo or catalog of the imported goods to be entered into the customs system (ASCUDA) when declaring them was further systematized.

The government brought the 16th amendment on Jestha 14, 2081, just before the budget for fiscal year 2081/82 was announced. This amendment brought a revolutionary change in the management of confiscated goods. It provided customs officers with the authority to immediately auction goods that are perishable or lose value before the case is decided.

In addition, it adopted a policy to further simplify and paperless the process for goods being exported to promote exports. It mandated digital systems for the clearance of goods under diplomatic privileges and government projects, thereby discouraging administrative delays.