Implementation of ExIm code

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

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.