Nepal import rules tightened

the department of revenue has issued a notification to tighten the rules of origin on duty free imports from nepal. the ministry has also outlined special conditions and quotas for sensitive goods like vanaspati. the exemption of the countervailing duty, equivalent to the excise duty on similar goods manufactured in india, will be applicable only to small scale units registered with the government of nepal. analysis shows that there are nine sets of conditions which must be fulfilled by the goods for duty free entry into india. that the product has been wholly manufactured in nepal will be verified by the department of customs of india. however, nepali exporters will have to prove that foreign-origin content is below 75 per cent mark. the balance 25 per cent should consist of value addition in nepal or india. (the ceiling of 75 per cent will be lowered to 70 per cent in the next financial year to check the re-routing of third country goods through the duty free channel of nepal. however, the percentage is nowhere near the 65 per cent specified in the indo sri lanka free trade agreement.) the origin criteria has been amplified further to spell out the internationally acceptable â€˜substantial transformation ruleâ€™ used to determine the origin. under this, origin is conferred only when the final product and the foreign origin raw material and parts are in separate headings. thus an assembly of computer system falling under heading 84.71 will fail the origin test because both the hard disks, printer and cpu as well as the system falls under the sub-headings of the same heading. the notification goes on to say that if exporters from nepal manage to get past the substantial transformation rule, he must contend with the â€˜insufficient working and processingâ€™ hurdle. assembly, mixing, remarking or labelling, repacking, preservation, sorting painting and cutting will be treated as insufficient working and disqualify the product for zero duty entry into india. in addition to fulfilling the above conditions, the goods must also bear a certificate of origin from an approved agency of nepal government certifying the local value addition percentage of 25 per cent. the full detail of the consignment must also be mentioned in the origin certificate. the duty free entry is subject to tariff rate quotas for the sensitive goods. vanaspati clearances will be limited to only one lakh tonnes per year. acrylic yarn is fixed at 10,000 tonnes while copper and zinc oxide are slapped with a quota of 7,500 tonnes and 2,500 tonnes respectively per year. these goods are also subject to the 4 per cent sad (special additional duty) nuisance which is otherwise exempted on all other goods. last, sensitive goods can enter india only at six notified stations which include the raxaul and nepalganj land customs stations. the final blow to imports from nepal comes from exemption on the countervailing duty equivalent to the excise duty on similar goods manufactured in india. the concession will be allowed only to small scale units registered with the government of nepal. the coverage is already limited as a large number of manufactured goods like garments are not covered for exemption. as things stand, the exemption was limited only to 60 per cent of the normal excise duty on clearances upto rs 50 lakh and 80 per cent of the normal duty on the next rs 50 lakh worth of clearances. all other units must pay the full 16 per cent excise duty from day one. implications: it remains to be seen whether the restrictions will lead to a change in the structure of indo-nepal trade or pump yet another cylinder of gas in the transaction cost balloon. the indian side wants to correct the negative balance of trade with nepal and hopes that the restrictions will check the official inflow into the india. the economists say that the established units in nepal for the four sensitive goods like vanaspati now have an official monopoly on the india trade. they can keep new investments out as the market is restricted by quotas. the limited quotas will be cornered by existing units which will jack the price up to encash the tariff quota rent. nepal has played its cards well. it has successfully negotiated the renewal of trade and transit treaty while maintaining substantially lower tariffs compared to india. there is free trade between the two countries without a common external standard tariff for trade with third countries. it has exploited the fear of chinaâ€™s rising influence in the himalayan kingdom. the substantial increase in paperwork and cost of transactions with the rise in the number of conditions in the notification is of little concern to the officials on both the indian and nepal side. they love to meet visitors pushing cases for clearances and permissions. epch meet: the export promotion council for handicrafts organised meetings on exim policy in the second fortnight of april in new delhi, jaipur, jodhpur and moradabad. the exporters are depressed over the ineffective working of government agencies, especially in matters of drawback disbursal and settlement of outstanding claims. (the delhi exporter association is organising the annual drawback clearance month on 1 may in new delhi.) the exporters also feel that the sezs get all the attention and benefits while those in the domestic area, who are also exporting all their production, are denied the benefit of income tax exemption. thus dta exporters must pay tax on half their income this year while sezs and the eous get the holiday till 2010. a special dispensation for employment oriented exports is called for. (academy of business studies)

Nepal import rules tightened

The department of revenue has issued a notification to tighten the rules of origin on duty free imports from Nepal. The ministry has also outlined special conditions and quotas for sensitive goods like vanaspati.

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