Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010 Nepalese export taxes on most agricultural products (levied as of last year), plus local developmenttaxes, are burdening Nepalese agricultural products and making them less competitive;These and other shortcomings create impediments that only Nepalese policy-makers and government officialscan address, be it with their own resources or with support from development partners.Indian Domestic IssuesNepalese exporters point to the following issues on the Indian side that, they claim, appear to be having anegative effect on Nepal’s export performance and trade opportunities: Corrupt practices at the border, especially where no SPS laboratory is available for certification andNepalese products (especially agricultural ones) can only go through by facing other ‘discretionary’costs of doing business, is often referred to as an impediment; Tampering with the seals of containers (i.e. stealing goods and re-sealing) appears to be extensive; Indian states bordering or nearby Nepal (Bihar, Uttar Pradesh, Himachal Pradesh, Uttaranchal andSikkim) are less developed than other Indian states and are benefiting from attractive developmentincentives, including to industries that compete directly with Nepalese products. Some Nepalesemanufacturers have begun shifting investment to those locations; Several Indian states apply different, non-transparent and discriminatory rules, additional taxes,additional technical barriers to trade and/or standards on Nepalese exports in contradiction of WTOcommitments and national treatment obligations and Nepal -India treaty obligations; Nepalese garment exports to India are subject to recurrent countervailing duty (CVD) by India. Intruth, this is little more than an excise duty that is meant to mirror the excise duty levied on domesticproducers. Allegedly, Indian garment producers are usually waived this levy, with a consequentNational Treatment violation, if confirmed. On top of the regular CVD, India now appears to be levyingan additional CVD of 4 per cent (for a total of 8 per cent) and charging it not on the FOB price but onthe retail price. This appears to be, if anything, WTO illegal.GoN officials need to put in place a system to record and address such issues with their Indian counterparts.Some issues do suggest conduct by national or sub-federal Indian authorities that might be illegal undera number of international obligations and commitments. Nepal should address these issues throughconsultations with India, either within the framework of the bilateral treaties or within the WTO framework,including, if need be, by means of WTO dispute settlement.3.5 Selected Views from India on Nepal-India TradeThe following section reflects some views on Nepal-India trade from an Indian perspective based on in-depthdiscussions with a number of government officials, diplomats, trade associations, and individual businessesfrom that country. Specific provisions in the current Treaty of Trade are aimed at tackling the issue of standards, especiallyfor agro-food trade. India has been offering financial, technical, and scientific assistance to improveNepalese laboratories and capacity to certify products for the last three years. Apparently, GoN hasnot taken up India on this offer thus far; India is providing assistance to Nepal to develop integrated border posts. This effort is entirely fundedby India, on both Indian and Nepalese sides of the border. In the absence of any formal complaintsby either the GoN or Nepalese traders about border or administrative delays during 2008 and 2009,134NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT