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1. Introduction to Customs Law in Nepal

The Customs Act, 2064 (2007) governs the regulation of imports and exports in Nepal, imposing customs duties on nearly all goods unless explicitly exempted. Goods that were originally manufactured or finished in Nepal and later re-imported are generally subject to the same duty as foreign imports, except in specific situations such as undelivered parcels, recipient rejection, or quality deterioration due to unforeseen circumstances. Importers also have the option to transfer ownership of their imported goods to the government, thereby waiving their customs duty obligations. Customs valuation primarily relies on transaction value, but alternative methods may be used when required.

2. Laws Regulating Customs in Nepal

The key legal provisions governing customs operations include: Customs Act, 2064 (2007), Customs Rules, 2065 (2007)

3. Customs Duty: Applicability and Exemptions

Customs duties are levied on all imported and exported goods unless an exemption is specified under the Customs Act, 2064. Goods that were previously manufactured or finished in Nepal but are later re-imported are generally subject to the same customs duty as foreign imports. However, certain exemptions apply in cases where goods are returned due to: Non-delivery, Rejection by the recipient, or Quality issues resulting from accidents or natural disasters. If the raw materials in the returned goods were initially imported duty-free, the applicable duty may still be charged.

Additionally, importers can opt to relinquish ownership of their imported goods to the government, thereby avoiding customs duty. The government has the discretion to use, auction, or dispose of such goods as needed.

4. Determination of Customs Duty

Customs duty for imported and exported goods is determined based on the prevailing tariff rate on the date the declaration form is registered at the Customs Office. If the declaration is registered before the goods arrive, duty is calculated based on the tariff rate applicable on the date of arrival.

Exceptions to General Duty Determination:

• For goods imported under diplomatic privileges or exemption facilities: Duty is determined based on the rate applicable on the date of payment.

• For goods imported under a bank guarantee: Duty is calculated based on the tariff rate in effect at the time of clearance.

Conditional Duty Exemptions and Concessions

Certain customs duty exemptions and facilities are granted to eligible individuals, organizations, or projects based on recommendations from the Ministry of Foreign Affairs and other relevant authorities. The government formally announces these exemptions through notifications published in the Nepal Gazette.

Customs duty waivers may apply to:

• Goods imported for projects financed through foreign loans or grants.

• Goods imported for international air services, including fuel, aircraft parts, machinery, food, beverages, and light drinks consumed during flights.

5. Customs Valuation Methods

5.1 Valuation of Imported Goods

Nepal’s customs valuation system aligns with the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994.

The transaction value—the price paid or payable for goods at the time of export to Nepal—is the primary basis for customs valuation. Importers must declare this transaction value when bringing goods into Nepal. If the declared transaction value meets prescribed criteria, it is used to determine customs duties.

If transaction value is deemed unsuitable, customs officials may use alternative methods, such as:

• Transaction value of identical or similar goods

• Deductive value method (based on resale prices in Nepal)

• Computed value method (based on production costs and associated expenses)

5.2 Valuation of Exported Goods

The customs value of exported goods is primarily based on the invoice value declared by the exporter. However, the Government of Nepal has the authority to establish an alternative customs value for specific goods. If a government-assigned customs value is higher than the declared invoice value, the higher value will be used for duty assessment. Like imports, the customs value of exported goods is determined in foreign currency.

6. Customs Procedures for Import and Export

6.1 Import and Export Documentation

The driver of a vehicle transporting imported or exported goods must provide required details to the Customs Officer before entering the customs premises.

Importers and exporters must submit a declaration form, along with all necessary supporting documents, to the Customs Office.

If certain documents are unavailable at the time of submission, importers/exporters may request additional time to furnish them, subject to the approval of the Customs Officer.

6.2 Inspection and Clearance

The Customs Officer verifies whether the declared goods comply with applicable import/export regulations and may conduct physical inspections if deemed necessary.

Once inspected, the Customs Officer determines the customs value and applicable duty.

Upon payment of the required customs duty, goods are cleared for import/export, unless they qualify for an exemption or waiver.

6.3 Role of Customs Agents

Individuals wishing to act as customs agents must obtain a customs agent license from the Department of Customs. Importers/exporters may designate customs agents to handle the customs clearance process on their behalf. A customs agent represents the goods’ owner in official customs matters and assumes legal responsibility for ensuring compliance.

Suspension or Cancellation of a Customs Agent License:

• If a customs agent is found violating customs laws, their license may be suspended or revoked.

• During a suspension, the agent is barred from conducting customs-related activities.

• If a license is canceled, the individual is permanently ineligible to apply for a new customs agent license.

7. Customs Offenses and Penalties

8. Conclusion

The Customs Act, 2064 provides a framework for Nepal’s import and export regulations, ensuring proper duty collection while allowing specific exemptions for diplomatic bodies and international projects. Customs valuation is primarily based on transaction value, with alternative methods applied when necessary. Strict customs procedures govern import/export operations, and violations such as smuggling, under-invoicing, and falsification incur severe penalties, including fines, confiscation, and imprisonment.