I. Purchasing Procedures
Purchases from India
- Purchases from India are normally paid for in Indian Rupees since the currency is fully convertible in Nepal. When Indian suppliers sell their products to Nepalese importers, Indian excise duty must be paid and included in the sale price by the supplier. The rate of excise duty varies widely from product to product. However, if payment is made in hard currency, the goods are exempted from payment of excise duty in India, i. e. the supplier does not have to charge it.
- Government of Nepal also allows imports of specified products from India with payment in foreign currency. The Nepal Rastra Bank (NRB) currently enlists 29 such products (Annex 1) for importation from India by Nepalese industries against payment in foreign currency.
Purchases from Third Countries
- All 13 commercial banks deal in foreign exchange transactions in accordance with the Foreign Exchange (Regulation) Act 1962, Foreign Exchange (Regulation) Rules 1963 and directives issued from time to time by NRB. The policy of liberalization allows open imports without a licence. NRB issues general directives with modifications from time to time to the commercial banks on the opening of Letters of Credit (documentary documentary credits-L/C) and the release of payments for imports accordingly.
- Advance payments for goods and separate payments for freight are not allowed. Therefore, the normal type of purchase is CIF/C&F Calcutta for sea and CIF/C&F Kathmandu for air. Project cargo and public sector purchases by sea are imported also on CIF Nepal basis. Only by opening an L/C through an authorized bank can payment be made in hard currency. The banks at the both ends normally mention in most L/C documents that the credit is subject to the ICC Uniform Customs and Practice for Documentary Credits-UCP 500 (1993).
- With the exception of prohibited and quantitatively restricted goods (Annex 2), there is no restriction on the release of foreign currency for importing any type and quantity of goods. But to obtain foreign currency from the commercial bank the importer has to open a documentary credit (L/C) by fulfilling the requirements of the bank. Irrevocable L/C is the commonly used documentary credit for the settlement of payment in imports from third countries. Under the usual terms of L/C, the correspondent bank normally releases payment to an exporter or beneficiary on production of shipment documents.
Procedures for opening and paying L/C in a commercial bank.
- An importer has first to open an account with a commercial bank.
- It is customary for a bank to sanction total amount of credit limit to the importer on different headings/transactions like loan, overdraft and L/C payments on an annual basis. For other type of customers/importers requiring only casual transactions, the bank fixes a credit limit on ad-hoc basis for L/C purpose.
- An importer fills in a foreign exchange control form BBN 3 (Annex 3) requesting the bank to open a L/C in the name of a nominated overseas exporter. Then the BBN 3 is submitted along with an undertaking of the importer indemnifying the bank against any liability, and other supporting documents like pro-forma invoice, Registration Certificate of Department of Commerce (Annex 4) or Department of Industry (Annex 5) or Department of Cottage and Small Industry (Annex 6) or Company Registrar Office (Annex 7), Registration Certificate of Department of Income Tax (Annex 8) and Registration Certificate of Department of Value Added Tax (Annex 9). Since November 1999, Kathmandu Tax Payers Service Centre is issuing computer-based Permanent Account Number (PAN) Card to all the tax payers of Kathmandu valley for gradual extension later to other districts. PAN is issued with a new tax certificate (annex 9a, 9b & 9c) for identification of all taxes including VAT & Customs. For importing raw wool, the Carpet and Wool Development Board (CWDB) issues a recommendation letter specifying the quantity and standard of wool to be imported by an applicant/importer in the name of the concerned bank.
- Depending upon the credit limit sanctioned by the bank for L/C purpose and the relation with the bank, the importer is generally required to deposit an amount ranging from 10 to 100 percent of the L/C value at the bank.
- As negotiated with the importer, the bank contacts its corresponding bank located at the exporter's place for opening L/C based on sight payment or deferred payment terms.
- Under the widely used 'Sight L/C', full payment is made to the exporter by the correspondent bank at the time of submission of shipment documents as specified in L/C. Similarly, the Nepalese importer is also required to make full payment to his bank at the time of release of shipment documents.
- Another type of L/C payment is called 'Usance or Time L/C' under which terms the payment is deferred for a certain period of time as specified in the L/C. Under the term the correspondent bank is required to release payment to the exporter only after 30 days or 60 days or 90 days from the date of receiving shipment documents. This L/C is also named as 30/60/90 days Sight L/C.
- The customs entry point in Nepal has to be stated in the L/C. The bank can make necessary agreed amendments in L/C clauses except the customs entry point. In order to change the customs entry point in L/C, the importer has to apply substantiating reasons for the change to the Department of Commerce, which then issues a letter to the concerned bank with copies to the applicant and the concerned Customs. The process for changing the customs entry point costs NPR 5 as postage stamp and NPR 10 as application fee to apply to the Department.
- After the overseas exporter sends documents through the correspondent bank on the completion of shipment of goods, the importer collects the documents from his bank and confirms that the documents are complete and free of any discrepancies. When the importer had not made full payment at the time of opening L/C, the bank instructs its correspondent bank through stipulation in the L/C a clause to consign shipment documents particularly the air waybill or bill of lading (B/L) in the bank's name or to show the bank as consignee in the documents. In such case the importer obtains the bank's endorsement on the documents or a delivery order to the concerned agencies at the time of releasing the documents from the bank.
II. Import Licensing, Permits and Pre Shipment Inspection (PSI).
- Except for prohibited and quantitatively restricted items, no licence is required for imports.
- In order to maintain export quality of hand knotted woollen carpets Nepal government has specified that the imported wool is required to have a minimum length of 4" with a thickness of not more than 38 microns for which a test certificate from an authorized agency is to be produced at the time of customs clearance. Only suspicious cases as and when reported and observed by the concerned Customs become subject to detention, inspection and test by a team from the concerned agencies including the Department of Quality Standards and Measurement. Restrictions on old vehicles, including three wheelers and two stroke motorcycles, in terms of the permissible level of smoke emission are also in application. In most cases, a test certificate issued by the manufacturer/producer/certifying authority at the place of origin is required for customs clearance purposes.
- Under the Plant Protection Act 1972 and the Plant Protection Rules 1975, an import permit is required for plant and plant products including fruits, leaves, and seeds. However, no permit is required for the import of processed food, packed and tinned food, dried fruits and vegetables, cocoa, tea and tobacco.
- For importation of plant and plant products, an importer has to apply to the Plant Quarantine office for import permit. The application form (Annex 10) is to be filled in with details of the plant and purpose of importation. Documents like income tax registration and enterprise registration, and recommendation letter of a concerned institute, if imported for research purposes, are also submitted along with the application. After examining the application, an import permit (Annex II) is issued to the importer. A fee of NPR 10 per application is charged for issuing an import permit. If imported plant and plant products require treatment, the quarantine office levies a charge of NPR 2 per cubic feet fumigation chamber space and NPR I per kg for seed treatment.
- The Department of Agriculture has a separate Plant Quarantine Section (PQS) at its Harihar Bhawan premises in Pulchowk in addition to seven quarantine checkpoints at the customs posts of Kakarvita, Biratnagar, Jaleshwar, Birgunj, Bhairahwa, Nepalgunj and Tribhuvan International Airport. All these eight offices conduct quarantine examination and issue import permits and phytosanitary certificates. Normally the phytosanitary certificate is issued. abroad at the place of origin and produced at the Customs for the clearance of imported plants. Only doubtful cases are examined at the quarantine customs checkpoints.
- There is no generalized system of preshipment inspection (PSI). A few commodities like wool, pharmaceuticals and industrial chemicals may need pre-shipment quality inspection certificates to maintain certain standards in Nepal.
III. Procedures at the seaport of entry.
- Most imports by sea arrive at Calcutta Port or Haldia Port. Both the ports fall under the administrative control of the Calcutta Port Trust (CPT). The port of Haldia is about 120km southwest of Calcutta. For cargo clearance from Haldia port, the customs processing of documents is completed at the Customs House, Calcutta. The bilateral Treaty of Transit and its Protocol and Memorandum prescribe in detail the cargo clearance procedures, customs processing of documents, mode of transport, transit route, border entry points and duty insurance requirements. The Treaty of Transit as renewed on 5 January 1999 for a period of seven years has incorporated 'an important provision for its automatic renewal thereafter for periods of seven years.
- The system of insuring import goods against the payment of import duty accruing from the loss and pilferage of transit cargo while in transit in India, is called duty insurance.
- Under the Treaty of Transit, three types of duty insurance policy coverage depending on the means and ownership of transport are required as follows:
(NTWCL-Nepal Transit and Warehousing Company Limited, NTC-Nepal Transport Corporation, MV- Market value of goods in India, normally calculated as 250% of the CIF value, CIF- Cost, insurance and freight.)
|Mode of Transport
|2. Road-trucks belonging to
|Customs duty plus an Undertaking by NTWCL to pay
the difference of MV- (GIF + Customs Duty).
|3. Goods moving by road other than 2) above
- The cost of duty insurance is 0.30 percent of insured value as premium plus 5 percent of the premium amount as service tax plus INR I as stamp duty.
- The requirement of duty insurance is waived on goods imported by public sector agencies in Nepal provided an undertaking is given by NTWCL. NTWCL's charge for issuing the letter of undertaking to the Indian Customs is 0.07 "/o for cement and fertilizer, and 0.15 % for other products on GIF imports. There is also a provision for making Indian Railways, where liable as carriers under the Indian Railways Act, liable to pay the GIF price to the importer in the event of loss.
- The duty insurance policy is assigned to the Commissioner of Customs, Calcutta and the insured amount becomes payable if the goods do not reach Nepal.
- Under the 1999 Treaty of Transit duty insurance is required only on those goods which are specified as sensitive by the Government of India with prior intimation to Nepal government and that the importer will have the option of giving a bank guarantee in lieu of such insurance subject to the satisfaction of the Commissioner of Customs. For goods other than the specified sensitive ones, the importer is required to furnish, to the Commissioner of Customs, Calcutta, a legally binding undertaking that the amount equal to the difference between the market value of the goods in India and their GIF value shall be paid, on demand, to the Commissioner in the event of the goods not reaching Nepal.
- At present only the Calcutta office of the Indian National Insurance Company Ltd. (NICL) is issuing the duty insurance policy (Annex 12) to the satisfaction of the Commissioner of Customs, Calcutta.
- Processing of documents at Calcutta Customs can proceed only after the filing of an import general manifest (IGM) by the shipping line or ship's agent because the ship's rotation no. and manifest line no. have to be shown on the customs transit declaration (CTD) (Annex 13). Normally the IGM is filed before the arrival of a vessel.
- The importer has to send all original shipment documents with a letter of authority to a clearing agent (CA) who is licensed by the Indian Customs for cargo clearance in Calcutta. Calcutta Customs require that the signature on the letter of authority must be certified by the importer's bank that issued the L/C. The importer is required to endorse B/L in the name of the nominated CA.
- After receiving documents from the importer, the CA obtains 'Delivery Order' (DO) against B/L from the concerned Shipping Line. If any payment is to be made to the Shipping Line, the CA pays the dues for obtaining the delivery order. CA also has to obtain a document of duty insurance policy from NICL for private sector imports or a letter of undertaking from the NTWCL for public sector imports. Then CA prepares six copies of CTD and files to the Nepal Section of the Customs House, Calcutta with the following documents:
- CTD (Red colour for Private imports and Green colour for Government imports).
- Duty insurance policy for specified sensitive goods or legally bindingundertaking for other imports, or letter of undertaking from NTWCL forGovernment imports.
- Delivery order or B/L-original.
- Letter of authority of CA-original.
- Packing list-original.
- Copy of L/C (certified by the L/C operating bank or by the Royal NepaleseConsulate in Calcutta).
- Certificate of origin (COO).
- Import licence, if required-original.
- Duty insurance or NTWCL's undertaking letter for container.
- Additional documents for specific cargo such as health certificate for rawwool (required by Calcutta Port Trust), phytosanitary certificate for plantsveterinary certificate for animals etc.
- For moving containerized cargo some additional procedures need to be complied with. CA has to submit a cash deposit or bank guarantee or a bond equivalent to the value of the container (the container valuation differs also with Shipping Lines) to the Shipping Line to obtain permission to take container to Nepal and bring it back. Some of the Shipping Lines also ask for insurance of the container against any damage or loss. Permission of the Customs is also obtained by submitting the permission of the Shipping Line and a duty insurance of an insured value of INR 100,000 for a TEU. For the Government cargo a letter of undertaking for the Value of only INR 30,000 per TEU and INR 60,000 per FEU from NTWCL in lieu of duty insurance is submitted to the Calcutta Customs
- The 1999 Treaty of Transit has clearly specified that only four documents, namely B/L, invoice, packing list and a copy of the L/C authenticated by the Royal Nepalese Consulate in Calcutta or the issuing bank will be required for submission along with CTD to the Calcutta Customs and that no other additional document may be asked for, except where considered necessary for clearance of specific goods.
- When documents are filed at Calcutta Customs, the CTD is stamped as a receipt of the document. An Assistant Commissioner of Customs (AC) heads the Nepal Section of Calcutta Customs, which also deals in the Bhutanese cargo. The customs clearance of documents normally takes two to four days. The appraiser and AC put their signatures on originals including the certificate of origin for recognition by the Port Customs before returning these to CA. The Calcutta Customs retains three copies of invoice, 5th and 6th copies of the CTD, and one copy each of other documents.
- Depending upon the request made in CTD by CA, the CTD is stamped on its back with a rubber stamp instructions in the name of a Shed Appraiser/Preventive Officer (PO) to check one-time-lock (OTL) for taking containers to Nepal, or for allowing loading of the cargo into an open truck/container. AC and appraiser at the Calcutta Customs jointly sign the rubber stamp instruction on CTD. Then CA approaches the Customs shed appraiser and Examining Officer (EO) at the concerned shed with documents cleared by the Calcutta Customs. At the same time CA obtains a bill for port dues from the port shed, and makes payment at the Calcutta Port Trust (CPT) payment counter, which is also located close to the Calcutta Customs in the city area. CA again goes back with the payment receipts to the concerned shed and the staff/stevedore of the Shipping Line, and obtains their clearance.
- At the dock shed both the appraiser and EO normally examine only the seal number and condition of OTLs of containers. If the goods are to be destuffed, about 5 % of the total packages are checked to ensure that the contents are in accordance with the declaration in CTD. The Treaty of Transit contains a specific provision to facilitate the movement of containerized cargo sealed with OTL whereby the Indian customs officer posted at the seaport will merely check OTL and if found intact, allow onward transportation of container without examination of the contents unless there are valid reasons to do otherwise. In case OTL is damaged or tampered with, the Customs will allow CA or Shipping Line to put a fresh OTL by endorsing OTL number in CTD. After checking, the appraiser and EO issue 'Pass Out' order on the back of CTD. Normally PO works during office hours, and EO works before and after office hours; both perform the same job. After booking of port workers and mobile crane of the private operator or Port, and lock & key from the Customs for non-containerized cargo, the container is allowed loading onto a flat truck or loading of break bulk from shed or containers to trucks, as the case may be, in the presence EO or PO. After the loading is completed, PO makes necessary endorsements on the back of CTD by mentioning the seal number of OTL and, incase of the break bulk, the lock and key numbers. The Port Customs does not write anything on other documents except some markings, for instance, a circle on the OTL number in B/L or DO and on the invoice value. The fourth copy also called as queen copy of CTD and DO, and one photocopy each of invoice and packing list are retained by the port shed for record purposes.
- After completion of the loading at the dock shed, PO issues a temporary permit called Transit Pass (TP) to CA or driver of the vehicle for allowing clearance at border pending the issuance of the sealed cover containing the second and third copies of CTD especially for those cases where full consignment could not be cleared in one day. Recently due to objections raised by the Raxaul Border Customs, TP is almost abandoned except for bulk cargo, which requires a number of days to clear from the port. Generally after the final endorsement on CTD by the Port Customs, a photocopy is made and signed by the Port Customs for carriage along with the cargo by the driver. This is used as a replacement of TP and accepted by the Border Customs for clearance.
- When the Port is open but the Customs closed on some holidays, CA has to book the Customs to work overtime at port by paying a fee of INR 600 per 8 hours-shift. No other Indian customs fees are payable in respect of transit goods. As the cargo is subject to heavy port demurrage charge after a lapse of 7 days free time, which is allowed only to Nepal and Bhutan transit cargo in comparison to 3 days to local cargo, cargo clearance at holidays is not an uncommon practice.
- After the delivery of cargo and endorsements on documents by the Port Customs, which normally takes one full working day, CA goes to the Calcutta Customs in the following working day for obtaining a sealed cover (an envelope closed with customs seal). Another section of the Calcutta Customs, after recording details of cargo delivery and CTD number, hands over the original CTD to CA and makes' a sealed cover containing a key of customs lock put on the transport, the duplicate and triplicate copies of CTD, and the Railway Receipt for cargo dispatched by rail. In most cases, CA supplies locks used as a customs seal for conventional transportation of cargo. The sealed cover is sent to the concerned Border Customs by post. But as an option to avoid delay in postal transmission, the sealed cover is handed over to CA. This facility is not allowed to the importer or the authorized representative who defaults in the production of these documents within a reasonable period to the Indian Border Customs Office.
- CA dispatches the sealed cover with other documents by courier to his authorized agent or to the importer's nominated agent stationed at the Indian border customs post or sometimes to the importer in Nepal.
IV. Procedures at the Indian border.
- When the goods arrive at the Indian Border Customs, the importer or his authorized CA presents the original CTD and the sealed cover to the Customs at the Indian border. In case the original CTD or the sealed cover is not available or where part shipments done by breaking CTD in different lots, TP or the photocopy of CTD endorsed by the dock customs is produced to the Customs. The Indian customs officer compares the original CTD with the duplicate and triplicate copies received in the sealed cover. The officer examines OTL of containerized cargo, and the lock and seal of other conventional transport. In cases where seals and/or locks on the wagons or containers and on packages are intact, the customs officer identifies the consignment against CTD, and if satisfied, endorses all copies of CTD without examining the goods. The officer permits onward transportation or unloading or breaking bulk as the case may be under the customs supervision. If the seals and locks on wagons or on containers or on the packages are not intact, or there is otherwise suspicion, the officer examines the goods to ensure that they correspond with the information contained on CTD before endorsing it.
- After checking at the border, the goods are allowed to move onward by road. As per the provisions of the Transit Treaty, the Indian customs officer will provide necessary escorts or supervision to ensure that the goods cross the border and reach Nepal, and certify on the copies of CTD that the goods have crossed into Nepal. Then the original CTD is given to the importer, the duplicate CTD is sent to the Indian customs house of entry-Calcutta Customs and the triplicate CTD to the corresponding Nepalese Border Customs, which is then retained at the Indian Border Customs after it is received back duly endorsed by the corresponding Nepalese customs officer.
- If a consignment in transit particularly bulk cargo is received at the border in more than one lot, the Indian border customs officer releases the goods in lots after necessary examination, and makes endorsement on the relevant documents only after release of the entire consignment as covered by CTD and sends the triplicate copy of CTD to the Nepalese Border Customs.
- If duplicate and triplicate copies of CTD are not received at the time of arrival of the goods at the Indian border, the Border Customs will contact, by telephonic or other quick means of communication with the Calcutta Customs to seek confirmation to prevent delay, and on the basis of confirmation so received allow dispatch of goods.
V. Entry into Nepal.
- The Customs valuation provides a basis for declaration of value by an importer in the Nepalese Customs Declaration Form (Annex 14) for the calculation of applicable duty and tax. After following the set customs valuation system for a long period in the past, the Customs has been assessing customs duty on the basis of the transaction price declared by the owner of the goods for the last two years as per the amendments to the Customs Act of 1962 in July 1997.
- The customs duty on imported goods is assessed on the basis of their transaction price. The owner of the goods is required to submit to the Customs bills and invoices showing their price, as well as such other necessary documents relating to imports as demanded by the Customs for the purpose of verifying their transaction price. If such quoted price does not conform to the procedure of fixing the actual transaction price, the Chief Customs Authority, or a Customs Officer designated by him, shall fix the price of the goods on the basis of the recorded price, price-list or the prices of the goods of the same nature, and assess customs duty accordingly. While fixing the price of goods for the purpose of assessing customs duty, the Chief Customs Authority, or a Customs Officer designated by him, may do so on the basis of the recorded price or the price-list submitted by the manufacturer of distributor, or the available data or information, or the suggestions of an expert or the concerned agency or institution. No demurrage is charged on the imported goods until they are valued for the purpose of assessing customs duty. In case the price declared by the owner is found under- invoiced up to 20% of the actual value, the customs duty will be assessed on the full value by adding the differential value to the price of the goods. Similarly, if the under-invoice is in the scale of between 20% and 50% of the actual value, it will be subject to full customs valuation by adjusting the differences and also an additional payment of 50% duty as penalty. If the declared value is found under-invoiced by more than 50%, the Chief Customs Authority may decide to purchase, by the Customs itself or others, the imported goods at the price declared by the owner.
- Industrial machinery and parts,
- Imports by hotel industries under duty preference as allowed by the Act,
- Surgical and medical equipment,
- Readymade life saving drugs, and
- Heavy equipment and parts imported by construction companies.
- After the cargo reaches Nepal border, the importer or CA goes to the Nepalese Customs with the following documents:
- Nepal Customs import declaration (white colour),
- Letter of authority of the clearing agent to act on behalf of the importer,
- Bill of lading,
- Packing list,
- Certificate of origin (this is not strictly required except where imported goods
are subject to a special tariff concession on account of their place of origin such as Tibet Autonomous Region of People's Republic of China, SAPTA- member countries and MFN rates for countries having bilateral agreements with Nepal),
- Certificate of insurance,
- Original CTD,
- BBN 4 form issued by bank,
- Certified copy of L/C,
- Enterprise registration certificate,
- VAT registration certificate/PAN,
- Income tax registration certificate/PAN.
- The documents numbered 11,12 and 13 bear the renewal date for every fiscal year as certified by the concerned Departments. Therefore, the production of these documents to the Customs for cargo clearance implies that they have been renewed to date with payment of all the dues to the concerned authority.
- The documents numbered 10 to 13 are not normally required for clearance of duty free goods or imports by the Government. For duty free project/aided goods only main documents including duty free certificate and related project documents are required by the Customs.
- The above documents do not include the copy of BBN 3 received earlier by the Customs from a L/C opening bank.
- The requirement of certificate of insurance by the Customs is only for customs valuation, which is calculated on GIF Nepal/border basis. In the absence of such insurance document the cargo clearance is not stopped but the Customs adds 2 % of C&F invoice value as insurance cost for customs valuation. But if a document showing insurance only up to Calcutta is produced, no extra valuation is added to the invoice value in order to cover insurance from Calcutta to border for the purpose of customs valuation. Therefore, any insurance document submitted by the importer is acceptable to the Customs for valuation purposes. Regarding the transportation charge from Calcutta to Nepal border to convert the GIF Calcutta value to GIF border value, the Customs adds NPR 1.03 per kg on the basis of weight of the cargo.
- The Customs verifies BBN 4 document issued by a commercial bank with BBN 3 received previously from the same bank at the time of opening L/C. After the goods are cleared, the Customs certifies BBN 4 and hands over to the importer for delivering to the issuing bank. If the commercial bank is not located in the same place or city area. the certified copy of BBN 4 is send by post to the bank.
- After the documents have been checked. Customs assess the applicable duty and VAT for payment by the importer before releasing the cargo. When the goods are cleared after the payment of customs dues, the Nepalese customs officer endorses the original and triplicate copy of CTD, and the original is returned to the importer and sends back the triplicate copy in lots of about 7 days with a covering letter for delivery to the corresponding Indian Border Customs.
- The importer is required to submit the original CTD to the corresponding Indian Border Customs within 15 days of the date on which the goods were released at the Indian port of entry or such extended time as the concerned Assistant Commissioner of Customs House may allow. A penalty of INR 1.00 for every INR 1,000 of the Indian market price of the goods per week is payable by the importer for delay in presenting the original CTD.