Discussion notes on Trade Facilitation Nepal’s perspective

1. Discussion notes onTrade Facilitation Nepal’s perspective Compiled by BishnuPandey

2. Background • Not a very new phenomena • TF very much part of the agenda of many international and regional organizations • GATT • WCO • UNCTAD • World Bank • OECD • UNECE • APEC and so on

3. Defining TF • Des not have a commonly accepted standard definition • WTO defines as - ‘The simplification and harmonization of international trade procedures where trade procedures are the activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade’ .

4. Defining … • United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), defines trade facilitation as ‘the simplification, standardization and harmonization of procedures and associated information flows required to move goods from seller to buyer and to make payment’. • OECD defines trade facilitation as “simplification and standardisation of procedures and associated information flows required to move goods internationally from seller to buyer and to pass payments in the other direction”

5. Defining …. • Occasionally, the term ‘trade facilitation’ is also used more literally, and is extended to mean the improvement of transport infrastructure (that is, transport facilitation), removal of government corruption, reduction of customs tariffs, removal of inverted tariffs, resolution of non-tariff trade barriers, export marketing and export promotion. • Three main components – • Simplification of procedures, • Harmonization of laws & regulations, • Standardization of means

6. Defining .. • Simplification - the process of eliminating all unnecessary elements and duplications in formalities, process and procedures • Harmonization - alignment of national formalities, procedures, operations and documents with international conventions, standards and practices • standardization - process of developing internationally agreed formats for practices and procedures, documents, information and other means

7. TF Objectives • To improve the trade environment and reduce or eliminate any transaction cost between business and government • To make the transactions easier, quicker and more economical than before • To enable trading activities to be carried out with minimum efforts and costs

8. TF in WTO • Initiated by Singapore Ministerial 1996 - one of four focused areas (trade facilitation, trade and competition, trade and investment, and transparency in government procurement) • Doha Ministerial recognized the case for further expediting the movement, release and clearance of goods, including the goods in transit and the need of TACB • General Council decision on 1 August (July Package) – Modalities of Negotiation (Annex D) (only TF was taken up) • Hong Kong Ministerial – reaffirmed the mandate and modalities adopted by July Package

9. WTO negotiation Negotiations based on three GATT Articles • Article V – Freedom of Transit • Article VIII – Fees and formalities connected with importation and exportation • Article X – Publication and Administration of Trade Regulations

10. Nepal’s context: Measures undertaken to FacilitateTrade Sector • Customs Related: Adoption of Harmonized Customs Codes Tariff Structure Rationalized (Lowered & Slabs reduced) Implementation of Automation (ASYCUDA) in 9 major Customs Container Sealing Facility introduced Gradual Phasing out of ODCs • Import/Export Related: Abolition of Quantitative Restrictions and NTB on imports Elimination of Export Import Licensing Bonded Warehouse & Duty Drawback Scheme One Spot Export Clearing House in Kathmandu Current Account Convertibility Market determined Exchange Rate

11. Measures undertaken to … • Trade Related Agreements: Bilateral Trade Agreements with 17 Trade Partners Transit Facilitation Agreement with India and Bangladesh Accession to WTO, SAFTA, BIMSTEC SAARC agreement on Mutual Administrative Assistance in Customs Matters South Asian Sub-regional Economic Cooperation on Trade Corriders • Trade Related Physical Infrastructures Operationalizationof Rail Connected Inland Container Depot at Birgunj and Road Connected at Biratnagarand Bhairahawa ICD in Kakarbhitta in the final stage

12. Nepal’s Needs Assessment Nepal undertook needs assessment in 2009. The following three categories were used to assess our needs- • Those measures that they have already undertaken or they can be undertaken relatively easily and that they can therefore agree to implement straight away, as soon as the agreement is finalized • A second category that the national needs assessment exercise has shown they would require time to carry out, and • A third category for which they require not only time but also technical assistance and capacity building support in order to complete satisfactorily. The result was as follows: Already Compliant with 3 (5%) Partially compliant with 40 (68%) Not compliant with 13 (22%) Not applicable with 3 (5%)– E.g. F.3- Import/Rapid Alerts and I.1- Elimination of Consular Transaction

13. Needs assessment … Priority areas identified for Technical Assistance • Periodic Review of Formalities • Coordination of Activities of Border Agencies • Use of International Standards • Test Procedures • Specific Parameters for Fees and Charges connected with Importation and Exportation • Single Window • Advance Rulings • Risk Management • Post-Clearance Audit • Strengthened non-discrimination of transit operators • Reduction/Simplification of Transit Fees • Promotion of regional Transit Agreements • Monitoring

14. On-going Efforts Towards Trade Facilitation Transit Facility • Exploring alternate Transit of Mumbai, Phulbari, Mongla • Developing Nepal as Transit Point to facilitate trade between India and China Bilateral, Regional, and Multilateral Initiatives • Negotiation under SAFTA and BIMSTEC for Trade Facilitation Measures of Harmonization Recognition Accreditation Certification of Standards, Simplification of Customs , Banking Procedures, Business Visa, Transit Facilities • Regional Cooperation for Transport Infrastructure Development • Participation on Negotiating Group on Trade Facilitation in the WTO

15. On-going Efforts towardsTrade Facilitation Customs Administration • Provisions of Revised Kyoto Convention in the amendment of Customs Act • Custom Valuation based on transaction value • Broker module applied in 6 Customs (1 more planned for June) • Single Administrative Document through electronic media • Selectivity Module applied in 4 customs (1 more planned for June) • PCA office established, • Risk Management initiated • Time bound Clearance, Simplification of Procedures • Performance based incentive mechanisms applied • Monitoring of Custom office performances • Automation, publications of Manuals, Training are ongoing activities under three years Customs Reform and Modernization Action Plan (2009-2013)

16. On-going Efforts…. Trade Instruments and Infrastructure • Provision of Export Promotion and Special Economic Zones • Provision of Single Negotiable Multimodal Transport Document • Integrated Physical Facility at four land Custom adjoining India (Biratnagar, Birgunj, Bhairahawa, Nepalgunj) • Exploring the possibilities of establishing ICD at various places including Tatopani, Rasuwa, Krishnanagar…. • Activating National Trade Facilitation Committee (?)

17. Service providers in TF Trade facilitation depends on the activities of many service providers. • shipping lines, airlines, banks or finance companies, • express curriers intermediaries including postal services, • trucking and haulage companies' • railway companies' freight forwarders, customs brokers • insurance companies, seaport and airport operators, • International rail-terminal operators, • inland container port operators, • cargo handlers and handling agents, • warehouse operators, transit-shed operators, • transit transport operators, • independent testing and inspection companies, • sanitary and Phyto-sanitary measures • port community system providers • specialist IT service providers and so on

18. Separate files on - • Documents used in importation and exportation • Port clearance flow chart • Comparative tables

19. Major issues • Poor infrastructure customs and ports • Lengthy and cumbersome procedure in transit port • Resource constraints in investment in physical infrastructure along border points and trade/transit corridors • High transaction costs • Lack of coordination • Complex procedures, laws and regulations • Customs administration more revenue oriented than facilitation, with almost 90 percent clerical staff • Absence of separate clearance tracks as express, sensitive and regular at border custom points

20. Way forward • Harmonizing simplifying and standardizing documents and procedures • Network of national and intra-regional transport infrastructure development • Negotiating bilateral/regional trade, transport, transit agreements • Enhancing capability for PCA and risk management • Optimizing the use of ICT and managing web for online services • Enhancing enforcement and facilitating capability of customs • Human resource development plan for customs modernization

21. Doing the same thing and expecting different results is a sign of madness. - Albert Einstein Thanks for your patience