In a bid to regulate traders involved in import of goods, the Department of Customs is preparing to introduce export, import code on International Customs Day — January 26 — this year. The ExIm Code Implementation Guidelines, endorsed by the director general of the Department of Customs, has envisioned some critical reform measures that are expected to control bogus firms and revenue leakage and introduce price uniformity in the market. The government has claimed that the enforcement of the ExIm code is to facilitate trade by reducing the time consumed in customs clearance. However, the private sector is quite upset with some provisions related to paid-up capital requirement and bank guarantee in the ExIm Code Guidelines. Pushpa Raj Acharya and Sujan Dhungana of The Himalayan Times caught up with Sishir Kumar Dhungana, director general of DoC, and Pashupati Murarka, president of the Federation of Nepalese Chambers of Commerce and Industry, to know more on their views regarding the guidelines. Excerpts: 'All the traders have to obtain ExIm code by the end of this fiscal' — Sishir Kumar Dhungana DoC is preparing to introduce ExIm code for traders involved in foreign trade from International Customs Day on January 26. What actually does the ExIm code mean for traders? The export import code or ExIm code is an identification number of the exporters and importers which the DoC is preparing to introduce from January 26 and it will be effective from next fiscal. All the exporters and importers of the country have to obtain ExIm code by the end of this fiscal to be eligible for export and import. This is one of the reform initiatives of the customs, which will facilitate trade by digitalising Customs Transit Declaration (CTD) at Kolkata port and Visakhapatnam port because we have been preparing for electronic data interchange with Indian customs. This will reduce the time and cost of Nepal’s foreign trade because it will shorten time in customs clearance process. On the other hand, it will control the number of bogus traders, who vanish after a certain time without fulfilling tax compliance. Do even the small traders need to obtain ExIm code? Considering the business of the small and medium traders at the border points, we have provisioned that traders who import cargoes valued at over Rs 25,000 per consignment and those whose exports are worth Rs 100,000 per consignment need to mandatorily follow the new rule that the DoC is going to implement. We have been facing a raft of problems, especially in imports. There are around 30,000 importers in the country and there is no particular specialisation in import of goods. It is difficult to regulate the large number of importers and find out who are credible importers and who are not. After the enforcement of the new rule, traders mandatorily have to show bank guarantee of Rs one million to import goods of over Rs 25,000 per consignment. However, there is no provision of bank guarantee for exporters to promote the country’s export sector. The private sector has expressed dissatisfaction with the rule citing that the minimum paid-up capital requirement of Rs two million and the provision of bank guarantee will hit the small and medium traders. What do you have to say on this? We have prepared the guidelines after a series of discussions with private sector representatives, not only in Kathmandu but also in Birgunj, Biratnagar, Bhairahawa and other parts of the country. There is a minimum paid-up capital requirement for exporting and importing firms, which we will disclose on the occasion of International Customs Day and also distribute ExIm code to some traders. As we are trying to reform this sector by promoting only credible importers, the private sector should support our move. Credible importers do not need to worry about the new rule as it will ultimately help them. Those importing goods by abiding to all the rules of customs and disclosing actual price at the customs points are facing obstacles from those who import goods with false declaration at the customs points. The reason is because importers who present false declaration regarding price and quantity can offer goods at cheaper rates in the market than those who import goods through genuine declaration. There is concern among some private sector players that the new rule will affect the small and medium traders but I do not think those who import goods worth above Rs 25,000 per consignment are small traders. When firms have to abide by a certain paid-up capital requirement and bank guarantee provision I believe they will be more self-regulated and avoid being involved in malpractices. As you have mentioned that there is practice of false declaration at the customs points, what is the DoC doing to control it? We have ways to control such practices that usually occur due to the nexus between traders and customs officers and various other reasons.For example, we have developed reference price for 380,000 goods to ease the customs valuation process. On the other hand to avoid the nexus between traders and customs officers, we have developed online-based declaration process called ASYCUDA World and installed IP cameras to monitor the activities at the customs offices. Similarly, the government has allocated a fund of Rs 50 million to purchase goods at the customs points if the customs officer feels that the goods have been under invoiced. All these efforts have been made to bring transparency, control revenue leakages, and facilitate trade, which is why we expect support from all the stakeholders on the reform process.

'Implementation of ExIm code is restrictive for small and medium traders' — Pashupati Murarka

The government is introducing the ExIm Code Implementation Guidelines from January 26 that has raised paid-up capital requirement for importing firms. How has the private sector taken this decision? The government’s decision to regulate importing firms is a good one and needed too. However, it should not hamper small and medium traders by making it mandatory for them to have paid-up capital of Rs two million and bank guarantee of Rs one million for each consignment of over Rs 25,000. Such a provision is quite impractical and can hurt many small traders. As Nepal shares an open border with India, a majority of small Nepali entrepreneurs are into trading business with India though their trade volume is small. In such a context, implementation of ExIm (export, import) code with such a provision is an injustice to small and medium traders. In a sense, increasing paid-up capital to Rs two million and making bank guarantee of Rs one million mandatory only increases the pie of large scale importers in overall imports. The guideline should not be restrictive. It should facilitate all small, medium and large scale importers in the country. However, the government claims that this move would help curb illegal trade practices that has become rampant due to the increase in number of bogus firms. What do you have to say on this? A majority of traders — small, medium or big — are already registered under Value Added Tax (VAT) and Permanent Account Number (PAN). Therefore, their trading is not illegal. Increment in paid-up capital and provision of Rs one million bank guarantee for each consignment of above Rs 25,000 can directly hit even traders who are involved in low scale imports in a legal manner. Currently, the registration fee for an importing firm ranges from Rs 5,100 to Rs 10,100 based on the nature of goods that a company plans to import and there are no other restrictive provisions like paid-up capital and bank guarantee. Similarly, though the government is implementing such provisions on imports from India and third countries, a large number of small and medium importers import goods from India with which we share an open border. As a result of Nepal’s open border with India, many small traders are importing goods from India every day in a low scale by clearing customs procedures. Before implementing such restrictive provisions, the government should note that traders who are legally importing goods in a low scale might not have the capacity to raise their paid-up capital and bank guarantee as will be required by the new guideline. Due to this they might have to even quit their trading business. However, it is also a fact that there are some bogus firms operating in the country. But the government should use some other state mechanisms to control bogus firms and their illegal trading activities. Do you mean that the new provision that is going to be introduced will have a negative impact on the country’s economy? I feel that the government itself is not clear about introducing such provisions. Is it to allow only a certain level of entrepreneurs to do import business or to actually regulate the country’s imports? The implementation of ExIm Code will certainly displace small importers who have a major stake in Nepal’s overall imports. It puts businesses of small importers at risk. It looks like the government has not done proper study on the future implications of such restrictive provisions on small importers. In the long run, implementation of such provisions can impact the country’s economy. So, what other alternatives would you suggest the government to regulate imports? It is difficult to completely regulate imports as we share an open border with India. However, the government should try to regulate imports through customs offices. But customs procedures should be made hassle-free. Similarly, the government should encourage traders to come under VAT, PAN or any other government body. I personally feel that the implementation of ExIm code will not only be restrictive but also full of hassles for importers.