Treaty / Bilateral Treaties With India

I. With Reference to Article I

1. It is understood that the trade between the two Contracting Parties shall be conducted through the mutually agreed routes as are mentioned in the Annexure A. Such mutually agreed routes would be subject to joint review as and when required.
2. It is further understood that the exports to and imports from each other of goods which are not subject to prohibitions or duties on exportation or importation shall continue to move through the traditional routes on the common border.
3. The Government of India, on request from the Government of Nepal, will make best endeavour to assist Nepal to increase its capacity to trade through improvement in technical standards, quarantine and testing facilities and related human resource capacities.
4. Both Contracting Parties will facilitate cross-border flow of trade through simplification, standardization and harmonization of customs, transport and other trade related procedures and development of border infrastructure.
5. The Contracting Parties shall undertake measures to reduce or eliminate non-tariff, para-tariff and other barriers that impede promotion of bilateral trade.
   1. Both parties shall allow duty free , temporary importation of the used machinery and equipments into their territory for the purpose of repair and maintenance of such machinery and equipments ten years from the date of exportation subject to the following conditions:
      1. Goods are re-exported within six months of the date of re-importation.
      2. The Customs is satisfied as regards to the proof of identity of the used machinery and equipments.
          
   2. The importer at the time of importation executes a bond undertaking to:
      1. export the goods after repairs or reconditioning within the period as stipulated;
      2. pay on demand, in the event of its failure to comply with any of the aforesaid conditions the applicable customs duties.
6. Both parties shall take measures to exchange trade related data with each other from time to time, with a view to facilitate the flow of trade and transport.

II. With Reference to Article II

1. 1. It is understood that all goods of Indian or Nepalese origin shall be allowed to move unhampered to Nepal or India respectively without being subjected to any quantitative restrictions, licensing or permit system with the following exceptions:
      1. Goods restricted for export to third countries,
      2. Goods subject to control on price for distribution or movement within the domestic market, and
      3. Goods prohibited for export to each other's territories to prevent deflection to third countries.
2. In order to facilitate the smooth flow of goods across the border, the list of commodities subject to restrictions/prohibitions on exports to each other's territories shall be immediately communicated through diplomatic channels as and when such restrictions/prohibitions are imposed or relaxed.
3. It is further understood that when notifications regarding restrictions on exports to each other are issued, adequate provisions will be made therein to allow the export to each other of the goods which are already covered under the forward contract or by Letter of Credit or goods which are already in transit and/or booked through the railways or other public sector transport undertakings or goods which have already arrived at the borde r customs posts on the day of the notification.
4. In respect of goods falling under prohibited or restricted categories as mentioned in paragraph 1 above and where needed by one Contracting Party, the other shall authorise exports of such goods subject to specific annual quota allocations. Specific request list of such goods shall be furnished to each other by the end of November, and specific quota allocations for the following calendar year shall be made by the end of December with due regard to the supply availability and the overall need of the other Contracting Party. The quota list may be jointly reviewed as and when necessary.
5. The Contracting Parties shall take appropriate measures and co-operate with each other to prevent unauthorized import in excess of the quota of goods the export of which is prohibited or restricted from the territory of the other Contracting Party.
6. Both parties shall grant recognition to the Sanitary and Phytosanitary certificates (including health certificates) issued by the competent authority of the exporting country, based on assessment of their capabilities, in the area of food and agriculture product

( including primary, semi processed and processed) , and shall allow entry of these products into their markets on the basis of these certificates subject to meeting the mandatory requirement of the importing country.

III. With Reference to Article III

1. The Government of India will allow the Government of Nepal payment of the excise and other duties collected by the Government of India on goods produced in India and exported to Nepal provided that:

(i)

Such payment shall not exceed the import duties and like charges levied by the Government of Nepal on similar goods imported from any other country, and

(ii)

The Government of Nepal shall not collect from the importer of the said Indian goods so much of the import duty and like charges as is equal to the payment allowed by the Government of India.

1. 1. The following primary products would be eligible for preferential treatment:
      1. Agriculture, horticulture, floriculture and forest produce,
      2. Minerals which have not undergone any processing,
      3. Rice, pulses, flour, atta, bran and husk,
      4. Timber,
      5. Jaggery (gur and shakar),
      6. Livestock, poultry bird and fish,
      7. Bees, bees-wax and honey,
      8. Raw wool, goat hair, bristles and bones as are used in the manufacture of bone-meal,
      9. Milk, home made products of milk and eggs,
      10. Ghani-produced oil and oilcakes,
      11. Herbs, ayurvedic and herbal medicines, including essential oils and its extracts,
      12. Articles produced by village artisans as are mainly used in villages,
      13. Akara,
      14. Yak Tail,
      15. Stone aggregate, boulder, sand and gravel,
      16. Any other primary products, which may be mutually agreed upon.
   1. It is understood that in the matter of internal taxes or charges the movement of primary products of either Contracting Party to any market destinations in the territory of the
   2. other shall be accorded treatment no less favorable than that accorded to the movement of its own primary products within its territory.
2. It is also understood that the aforesaid provisions will not preclude a Contracting Party from taking any measures, which it may deem necessary on the exportation of primary products to the other.

IV.

With Reference to Article IV

V.

With Reference to Art icle V

1. The Government of India will provide preferential access to the Indian market free of customs duties normally applicable and quantitative restrictions except as mentioned elsewhere, for all articles manufactured in Nepal, provided they fulfill the qualifying criteria given below:

(a) The articles are manufactured in Nepal wholly from Nepalese materials or Indian materials or Nepalese and Indian materials. In addition, the following products, but not limited to, shall be considered as wholly produced or manufactured.

(i) Raw materials or mineral products extracted from soil, water, riverbed or beneath the riverbed.

(ii)		Products taken from the seabed, ocean floor or sub-soil thereof beyond the limits
		of national jurisdiction, provided it has the exclusive rights to exploit that seabed,
		ocean floor or sub-soil thereof, in accordance with the provisions of the United
		Nations Convention on the Law of the Sea (UNCLOS).
(iii)		Used articles collected there, fit only for the recovery of raw materials.
(iv)		Waste and scrap resulting from manufacturing operations conducted there.
(b)	(i)	The articles involve a manufacturing process in Nepal that brings about a change
		in classification, at four digit level, of the Harmonized Commodities Description
		and Coding System, diffe rent from those, in which all the third country origin
		materials used in its manufacture are classified; and the manufacturing process is
		not limited to insufficient working or processing as indicated in Annexure "B",
		and
	(ii)	The total value of materials, parts or produce originating from non-Contracting
		Parties or of undetermined origin used does not exceed 70% (seventy percent) of
		the FOB price of the articles produced, and the final process of manufacturing is
		performed within the territory of Nepal.

Note: The value of materials, parts or produce originating from non-Contracting Parties shall be the CIF value at the time of importation of materials, parts or produce, at the point of entry in Nepal, where this can be proven, or the earliest ascertainable price paid for the materials, parts or produce of undetermined origin in the territory of the Contracting Party where the working or processing takes place.

(c) For Nepalese articles not fulfilling the conditions given in sub-para-1 (b) (i) above, but fulfilling the condition at sub-para-1 (b)(ii) above, preferential access may be given by the Government of India, on a case by case basis, after satisfying itself that such article has undergone a sufficient manufacturing process within Nepal.
 

(d)However, the import of Nepalese manufactured articles described in Annexure "C" which fulfill the criteria in sub-para-1 (a) or (b) (i) & (ii) above will be governed by the terms specified in this Annexure.
 

(e)In the case of other articles manufactured in Nepal which do not fulfill the qualifying criteria specified in sub-para-1 (a) or (b) (i) & (ii) above, the Government of India will provide normal access to the Indian market consistent with its MFN treatment.

The Certificate of Origin for MFN export will be as prescribed in Annex D/II

1. Import of articles in accordance with the para-1 above shall be allowed by the Indian customs authorities on the basis of the Certificate of Origin to be issued by the agency designated for this purpose by the Government of Nepal in the format prescribed at Annexure – D/I for each consignment of articles exported from Nepal to India. Information regarding the basis of calculation for grant of such Certificates of Origin to the manufacturing facilities in Nepal will be provide d to the Government of India on an annual basis. Preferential facility shall not be available for the articles listed at Annexure-"E".
2. On the basis of a Certificate issued, for each consignment of articles manufactured in the small-scale units in Nepa l, by the Government of Nepal, that the relevant conditions applicable to the articles manufactured in similar Small Scale Industrial units in India for relief in the levy of applicable Excise Duty rates are fulfilled for such a parity, Government of India will extend parity in the levy of Additional Duty on such Nepalese articles equal to the treatment provided in the levy of effective Excise Duty on similar Indian articles under the Indian Customs and Central Excise Tariff. However, this facility will be applicable only to articles manufactured in Nepal in such small-scale units, which qualify as small-scale units under the Nepalese Industrial Policy as on 5^th December 2001.
3. The "Additional Duty" rates equal to the effective Indian excise duty rates applicable to similar Indian products under the Indian Customs & Central Excise Tariff will continue to be levied on the imports into India of products manufactured in the medium and large-scale units in Nepal.
4. Whenever imports into India of products manufactured in the medium and large scale units of Nepal attract an "Additional Duty" over and above an Additional Duty equivalent to the effective duty of excise applicable to similar products produced or manufactured in India, Government of India shall, upon request from Government of Nepal, consider waiver of such additional duties on imports of products from Nepal.
5. In regard to additional duty collected by the Government of India in respect of manufactured articles other than those manufactured in "small" units; Wherever it is established that the cost of production of an article is higher in Nepal than the cost of production in a corresponding unit in India, a sum representing such difference in the cost of production, but not exceeding 25 per cent of the "additional duty" collected by the Government of India, will be paid to the Government of Nepal provided the Government of Nepal have given assistance to the same extent to the (manufacturers) exporters.
6. Export of consignments from Nepal accompanied by the Certificate of Origin will normally not be subjected to any detention/delays at the Indian customs border check posts and other places en route. However, in case of reasonable doubt about the authenticity of Certificate of Origin, the Indian Customs Authority may seek a clarification from the certifying agency, which will furnish the same within a period of thirty days. Meanwhile, the subject consignment will be allowed entry into India on provisional basis against a bond i.e. a legally binding undertaking as required. After examining the information so provided by the certifying agency, the Indian Customs Authority would ta ke appropriate action to finalize the provisional assessment. Whenever considered necessary, request for a joint visit of the manufacturing facility may be made by the Indian Customs Authority, which would be facilitated by the concerned Nepalese authority within a period of thirty days.
7. Where for social and economic reasons, the import of an item into India is permitted only through public sector agencies or where the import of an item is prohibited under the Indian Trade control regulations, the Government of India will consider any request of the Government of Nepal for relaxation and may permit the import of such an item from Nepal in such a manner as may be found to be suitable.
8. For the purpose of calculation of import duties customs valuation procedures, as prescribed under the prevailing customs law, will be followed.

Explanation: Additional Duty shall mean a duty levied under Section 3(5) of the Customs Tariff Act, 1975 of India.

VI. With reference to Article VI

The Government of Nepal, with a view to continuing preferences given to Indian exports, will waive additional customs duty on all Indian expor ts during the validity of the Treaty.

VII. With reference to Article VII

Both Contracting Parties shall make provisions so that no discrimination will be made in respect of tax, including central excise, rebate and other benefits to exports merely on the basis of payment modality and currency of payment of trade. This would be made effective from the date to be mutually agreed to, after which the Protocol to Article III would become redundant.

Both Contracting P arties agreed to develop modalities for transition from the existing to the new system.

VIII. With Reference to Article IX

In the event of imports under the Treaty, in such a manner or in such quantities as to cause or threaten to cause serious injury to the domestic industry relating to the article, an investigation for application of safeguard measures may be initiated. The following conditions and limitations shall apply to an investigation for application of safeguards measures.

a.	a Party shall immediately deliver written notice to the other Party upon:
	(i)	initiating an investigatory process relating to serious injury or threat thereof and the
	reasons for it;
	(ii)		making a finding of serious injury or threat thereof caused by increased imports; and
	(iii)		taking a decision to apply a safeguard measure;
b.	in making the notification referred to in paragraph (a), the Party proposing to apply a
	safeguard measure shall provide the other Party with all pertinent information, which shall
	include evidence of serious injury or threat thereof caused by the increased imports, precise
	description of the goods involved and the proposed measure, proposed date of introduction
	and expected duration; the Party proposing to apply a measure is also obliged to provide any
	additional information which the Party considers pertinent;
c.	a Party proposing to apply a measure shall provide adequate opportunity for prior
	consultations with the other Party as far in advance of taking any such measure as
	practicable, with a view to reviewing the information arising from the investigation,
	exchanging views on the measure and reaching an agreement. Such consultation shall take
	place at the Joint Committee meeting set up by the two governments. If the consultations in
	the Joint Committee fail to resolve the issue within a period of sixty days from the date of
	request for consultation, then the requesting government shall be free to take appropriate
	remedial measures. The Nepal-India Inter Governmental Committee (IGC) will review such
	measures.

Explanation: The terms "Domestic Industry" and "Serious Injury" shall be interpreted as defined in the WTO Agreement on Safeguards.

The determination of 'Serious injury' shall be as per the WTO Safeguard Agreement.

" Threat of injury" means a situation in which a substantial increase of imports under the Treaty is of a nature so as to cause injury to the domestic producers, and that such injury, although not yet existing is clearly imminent. A determination of threat of injury shall be based on facts and not on mere allegation, conjecture, or remote or hypothetical possibility.

IX. With reference to Article XI

1. In case of problems arising in clearance of goods at the land customs stations, provided that the quality of goods in questions would deteriorate or perishes due to delays, such problem shall be dealt at the joint meeting of the local authorities comprising of the followings:

a. Customs officers

b.Quarantine/ food test officers

c. Representatives of local chambers

d. Any other local officials nominated by the respective government.

1. Such consultation will be carried out with a view to resolving the issue in an expeditious manner and at facilitating trade through resolving the issues in situ. However the case will be referred to the respective government, if the resolution could not be settled through such consultation.
    
2. Issues on bilateral trade and other trade related matters will be referred to an Inter-Governmental Committee (IGC) led by Secretaries in the Ministry of Commerce of the two Governments. The Committee shall meet at least once in a six months alternatively in Kathmandu and New Delhi. An Inter-Governmental Sub-Committee (IGSC) shall be constituted at the level of Joint Secretaries of the Ministry of Commerce of the two countries, which shall meet at the in terval of two IGC meetings. The Inter-governmental Sub-Committee shall be responsible for taking up extensive consultation and decisions on trade and trade related issues with a view to facilitating bilateral trade and making recommendation to Inter-governmental Committee, whenever necessary. The Sub-Committee shall also work as the Joint Committee as mentioned in Protocol with reference to Article IX above.

 

Annexure " A "

AGREED ROUTES FOR MUTUAL TRADE

1. Pashupatinagar/Sukhia Pokhari
2. Kakarbhitta/Naxalbari
3. Bhadrapur/Galgalia
4. Biratnagar/Jogbani
5. Setobandha/Bhimnagar
6. Rajbiraj/Kunauli
7. Siraha, Janakpur/Jayanagar
8. Jaleswar/Bhitamore (Sursand)
9. Malangawa/Sonabarsa
10. Gaur/Bairgania
11. Birgunj/Raxaul
12. Bhairahawa/Nautanwa
13. Taulihawa/Khunwa
14. Krishnanagar/Barhni
15. Koilabas/Jarwa
16. Nepalgunj/Nepalgunj Road
17. Rajapur/Katerniyaghat
18. Prithvipur/Sati (Kailali)/Tikonia
19. Dhangadhi/Gauriphanta
20. Mahendranagar/Banbasa
21. Mahakali/Jhulaghat (Pithoragarh)
22. Darchula/Dharchula
23. Maheshpur/Thutibari (Nawalparasi)
24. International Airports connected by Direct Flights between Nepal and India (Kathmandu/Delhi, Mumbai, Kolkatta and Chennai)
25. Sikta-Bhiswabazar
26. Laukha-Thadi
27. Guleria/Murtia

 

Annexure " B "

ILLUSTRATIVE LIST OF

INSUFFICIENT WORKING OR PROCESSING

The following shall be considered as insufficient working or processing to confer the status of originating or manufactured or produced or made in Nepal, to an article, whether or not there is a change in heading classification at four digit level, of the Harmonized Commodities Description and Coding system, different from those in which all the third country origin materials used in its manufacture are classified:

a)	Operations to ensure the preservation of articles in good condition during transport and storage
	(e.g., ventilation, spreading out, draw ing, chilling, placing in salt, sulphur-dioxide or other
	aqueous solutions, removal of damaged parts and like operations);
b)	Operations consisting of removal of dust, shifting or screening, sorting, classifying, matching
	(including the making up of sets), washing, painting, cutting up;
c)	Changes of packing and breaking up and assembly of consignments;
d)	Slicing, cutting, slitting, re -packing, placing in bottles or flasks or bags or boxes or other
	containers, fixing on cards or boards, etc., and all other packing or re-packing operations;
e)	The affixing of marks, labels or other like distinguishing signs on articles or their packaging;
f)	Mixing of articles, whether or not of different kinds, where one or more components of the
	mixture do not meet the conditions laid down in para 1 (b) of Protocol to Article V of the Treaty
	to enable them to be considered as manufactured or produced or made in Nepal;
g)	Assembly of parts of an article to constitute a complete article;
h)	A combination of two or more operations specified in a) to g) above.

 

Annexure " C "

Nepalese manufactured articles allowed entry into India

free of customs duties on a fixed quota basis.

S.no.	Nepalese Article	Quantity in MT per year
1.	Vegetable fats (Vanaspati)	100, 000 (One hundred thousand)
2.	Acrylic Yarn	10, 000 (Ten thousand)
3.	Copper products under Chapters 74.00	10,000 (Ten thousand)
	& Heading 85.44 of the H.S. Code
4.	Zinc Oxide	2,500 (two thousand five hundred)

a)	Imports into India of the above four commodities for quantities in excess of the fixed quota
	mentioned above will be permitted under normal MFN rates of duty, notwithstanding any
	concession in any other preferential arrangement.
b)	Imports into India of the above commodities will be permitted through the Land Customs
	Stations (LCS) at Kakarbhitta/Naxalbari, Biratnagar/Jogbani, Birganj/Raxaul,
	Bhairahawa/Nautanwa, Nepalgunj/Nepalgunj Road and Mahendranagar/Banbasa.
c)	Modalities of operationalization of the fixed quota on vegetable fat (Vanaspati) shall be as
	agreed from time to time.
d)	The existing administrative arrangements for operationalization of the fixed quota of Sl. no 2, 3
	and 4 shall be reviewed for further simplification, as required.

 

Annexure "D/I"

CERTIFICATE OF ORIGIN FOR EXPORTS FREE OF CUSTOMS DUTIES UNDER THE TREATY OF TRADE BETWEEN THE GOVERNMENT OF NEPAL AND THE GOVERNMENT OF INDIA

Reference No. ______________________

1. Articles consigned from (Exporter's business name, address)
2. Articles consigned to (Consignee's name, address)
3. Means of transport and route
4. Item Number (HS Tariff Line)
5. Marks and number of package
6. Description of Articles
7. Gross weight or other quantity
8. Number and date of Invoice together with value
9. FOB value of the articles manufactured in Nepal:
   1. (i) Whether articles are manufactured in Nepal under Para 1 (a) of the Protocol to Article V of the Treaty of Trade (Yes / No);
      1. If articles are manufactured in Nepal under Para 1(b) (i) & (ii) of the Protocol to Article V of the Treaty of Trade;
      2. CIF value of materials, parts or produce origina ting from Non-Contracting Parties (i.e. other than Nepal & India) at the point of entry in Nepal: -
      3. Value of materials, parts or produce of undetermined origin.
10. Percentage of the sum of the value of col. 10 (ii) (A) & (B) to the value of col. 9:
11. Declaration by the exporter;

The undersigned hereby declares that the details furnished above are correct, that the articles are produced in Nepal and that they comply with the Rules of Origin specified in the Treaty of Trade between the Government of Nepal and the Government of India.

(Place & Date, Signature of authorized signatory).

13. Certification

It is certified that the articles herein referred to are eligible for preferential treatment as per provisions of the Treaty of Trade between the Government of Nepal and the Government of India. It is further certified that:

1. 1. The articles have been manufactured in Nepal at a factory situated at _________________________(name of the place/district) by M/s._______________________ ___________________________
   2. (name of the company).
2. The articles involve manufacturing activity in Nepal and that the manufacturing activity satisfies the criteria given in the Protocol to Article V of the Treaty of Trade.
3. The articles in question are notproducts of third country origin *.

For the Government of Nepal (Place and Date, Signature & Stamp of certifying authority)

14. For Official use of Indian Customs

The consignme nt has been examined and allowed to be imported into India as it complies with the provisions as stipulated under Article V of the Treaty of Trade between the Government of Nepal and the Government of India.

Signature & Seal of the Certifying authority Dated:

Place:

* For the purpose of the above item No.3, the articles which have undergone a manufacturing process in Nepal as defined in the Protocol to Article V of the Treaty will not be treated as product of third country origin.

Annexure -"D/II"

Certificate of Origin for export to India under MFN arrangement.

1. Product Name:
2. HS Code:
3. Manufacturing Unit in Nepal:
4. Article consigned from (Exporter's business name, address):
5. Article consigned to (Importer's name and address):
6. Marks and number of packages:
7. Description of Articles:
8. Gross weight or other quantity:
9. Number and date of Invoice together with value:
10. Ex-factory price of the Articles:
11. Declaration by exporter:

The undersigned hereby declares that the details furnished above are true and correct and complies with the provisions of Nepal-India Trade Treaty.

Place and Date, Signature of authorized signatory.

12. Certification by the competent authority:

The above declarations are correct to my knowledge and hence recommend for export to India under MFN arrangement.

Signature and seal of certifying authority Annexure " E "

MFN LIST OF ARTICLES WHICH WILL NOT BE ALLOWED PREFERENTIAL ENTRY FROM NEPAL TO INDIA ON THE BASIS OF CERTIFICATE OF ORIGIN TO BE GIVEN BY AGENCY DESIGNATED BY THE GOVERNMENT OF NEPAL

1. Alcoholic Liquors/Beverages (*) and their concentrates except industrial spirits,
2. Perfumes and cosmetics with non-Nepalese/non-Indian Brand names,
3. Cigarettes and Tobacco.

Note: Government of India may, in consultation with the Government of Nepal modify the above list.

(*) Nepalese beers can be imported into India on payment of the applicable liquor excise duty equal to the effective excise duty as levied in India on Indian beers under the relevant rules and regulations of India. (Nepalese beer has been exempted from the whole of the additional duty vide customs notification No. 178/2003-customs date 17.12.2003)