Institutionalizing the Trade Facilitation Process in Nepal Purushottam Ojha Joint Secretary, Ministry of Industry, Commerce and Supplies Nepal.

Background Trade facilitation has been defined by WTO as the trade procedures that involve activities, practices and formalities for collecting, presenting, communicating and processing data required for the movement of goods in international trade. This definition covers a range of activities that encompasses the transport formalities, transit operation, import and export procedures (e.g. customs and licensing procedures) and payments, insurance, banking and other financial requirements.

UNCTAD has indicated that the cost of procedural hassles, delays and complexities has remained at seven to ten percent of the value of traded goods In widest terms, trade facilitation also require and indulges the efficient operation of physical infrastructures like ports, land-air-sea transportation, inland waterways, inland clearance depots, container freight stations, warehouses and running of fleet for transportation of trade.

Trade facilitation issues addressed in forums outside the General Agreement on Tariff and Trade (GATT) basically through: World Customs Organization (WCO), United Nations Conference on Trade and Development (UNCTAD) The regional bodies of United Nations like UNESCAP and UNECE. Harmonization of customs procedures under the ambit of Kyoto Convention in 1973, Harmonized Commodity Description and Coding System in 1988 and WCO Declaration of the Customs Cooperation Council Concerning Integrity in Customs, 1993.

UNCTAD as the specialized agency of UN in the field of trade has taken up the measures in facilitating trade particularly taking concerns of the least developed and developing countries. The issues were bought forward during the Ministerial meeting in Singapore in 1996 and also identified as of one of the four famous Singapore issues.

Trade Sector Reform in Nepal Nepal formally joined WTO in March 2004 after endorsing the protocol to accession handed over during Cancun Ministerial Meeting in September Meanwhile, it has become a member of two RTAs namely South Asian Free Trade Area (SAFTA) and Bay of Bengal Initiatives for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) along with its South Asian neighbors. Nepal has remained the observer in APTA and a key player in South Asian Sub-regional Economic Cooperation (SASEC), Entered into preferential trade agreement with India and the MFN treaty with other 16 countries.

Improvements in export and import business particularly after the adoption of open, free and liberal policy in 1992 as the trade document and procedures became simpler than before. The most important changes were the removal of licensing system combined with the full convertibility of the Nepalese currency in the current account

The procedural hassle has also overburdened Nepalese trade to a larger extent. Altogether 14 basic documents required to be processed with Banks, Nepalese Customs and Indian Customs at Kolkata port. Similarly, a total of 15 various documents need to be processed for importation of goods. Certain specific documents are required for specific products such as clearances from the Department of Archaeology and the value certification from Handicrafts Association Nepal (HAN) for export of handicraft. The number of copies of documents varies from one to eight depending upon the type of documents, the highest number being the certificate of origin and the single copy for enterprise, income tax and VAT registration to be produced to Nepalese Customs.

Effort for Improvement in Transport Logistics and Trade Facilitation Launching a project for containerization of trade in mid 80s with a view to address the issues of trade logistics services and trade facilitation. The implementation of the project was started in February 1998 in the name of Nepal Multi-modal Transit and Trade Facilitation Project, with the financial assistance of IDA of the World Bank. The project was comprised of the components of: physical facilities development in the form of Inland Clearance Depots (ICDs) and allied facilities, procurement of container handling equipments, trade facilitation measures including customs reform and modernization and implementation of cargo information systems.

Private sector participation in operation and management of ICDs. A regulatory board created in February 1998 by the name of Nepal Inter-modal Transport Development Board National Transport and Trade Facilitation Committee, as a forum to discuss the relevant issues on trade and transport created under the aegis of the of the Project.

Initiatives taken towards trade facilitation Multi-modal Transport/Trade Facilitation  Improve Nepal's transit transport operation.  Implement trade facilitation measures by: aligning trade procedures and documents of Nepal with international standards and practices, aligning rail transport procedures and documents for containerized cargo and updating foreign currency regulations and facilitating freight forwarders to operate as MTOs.  Modernize transport related legislation and harmonize Nepal's liability as well as term and conditions of carriage of land transport with international standards.

 Designing of express procedures for transit of containerized cargo by rail to be a part of rail service agreement between the Government of Nepal and Government of India.  Establish a local technical group at MOICS, Nepal to continue and sustain the reforms in the trade and transport sector and also provide Secretariat to NTTFC operation.

ASYCUDA The ASYCUDA project- Customs Automation Processing, Phase-I started in Nepal on September 1, Phase-II of ASYCUDA was started immediately under NMTTFP with objectives of rolling out the installation in other four major customs point, providing customs with a core team, including EDP experts, providing government with the information necessary to formulate and conduct economic and fiscal policy and providing the relevant entities with information for monitoring and controlling trade and trade financing.

The project also provided declaration processing and accounting module of ASYCUDA to customs, carried out extensive training programs to the customs employees, introduced reform through electronic processing of customs declaration through modified Single Administrative Document (SAD).

Advanced Cargo Information System (ACIS) The project aimed at installing and operationalizing the freight transit monitoring system between Kolkata and Birgunj, but could not be made operational due to lack of effective cooperation and coordination with the port and port customs authorities. Limited freight tracking was done through implementation of Border Pass Monitoring System (BPMS), which provided information on cargo vehicles passing through the concerned land border stations. Limited Backbone Information System (BIS) between Kolkata and Birgunj was to be installed and made a part of computerized management system of the Terminal Operator which has also been included as part of obligations of the Terminal Management Company in the leasing arrangements

National Transport and Trade Facilitation Committee (NTTFC) The project was also instrumental in setting up a coordination body by the name of National Transport and Trade Facilitation Committee under the chairmanship of the Secretary in the Ministry of Commerce of the Government of Nepal. The Committee comprises of 18 members and the membership included as follows

Secretary, Ministry of Industry, Commerce and Supplies. Joint Secretary, International Trade Division of Ministry of Industry, Commerce and Supplies. Deputy Governor, Nepal Rastra Bank (Central Bank of Nepal) Representatives from Ministry of Finance, Ministry of Transport, Department of Customs. Executive Director of Trade Promotion Center. Chairmen of Federation of Nepalese Chambers of Commerce and Industry, Nepal Chamber of Commerce. Chairmen of Nepalese Freight Forwarders Association (NEFFA), Nepal Insurers Association, Central Carpet Exporters Association, Export Councils, Nepal, Handicraft Association, Nepal, Nepal Garment Association and Nepal Goods Carriers Association.

Objectives of Facilitation Committee: Facilitation Regulatory activity Development objectives Human Resources Development (HRD) NTTFC is composed of three key players of trade and transport sectors that are: Government, Service providers and Traders. It is also a consultative body for proposing facilitation recommendations to the government and private sector institution concerned.

Important tasks taken up by the Committee  Drafting of transport legislations. The legislations include Multi-modal Transport Act, Railway Act, Carriage of Goods by Road Act and the Marine Insurance Act.  The Committee considered the report submitted by the consultant on Simplification of the Procedure and Documentation for movement of Goods in Transit by Rail as well as by Road  Review of implementation progress of Nepal Multi-modal Transit and Trade Facilitation Project  Considered and debated the bid process for leasing out the multi-modal terminals under Nepal Inter-modal Transport Development Board

Various sub-committees formed to look into various portfolios Documentation, Procedures and Banking Sub-committee, Insurance Sub-committee Facilitation Sub-committee

The formation of such sub-committees were done in an ad- hoc basis, as the need of resolving certain issues would appear while carrying out the implementation of the project. Advantages of having Sub-committees under NTTFC has been towards finding a quick fix to some of the simple issues without going through the long bureaucratic process.

Some issues resolved at the initiation of Facilitation Sub-committee  Issue on Twenty-four hour cooling period for cargo in Tribhuvan International Airport  Willful damages to the export items while examining cargo at the airport by the reckless customs examiners.  The use of worn off stamps in GSP certification.  Stuffing of containers at Katmandu.  Hassles in obtaining visa by the buyers.  A one spot clearance center was opened at the initiation of NTTFC

Issues Related to Functioning of NTTFC  Transfer of staffs and loss of institutional memory,  Lack of fund to support the reform; Impact of Conflict:  Slow progress in operation of the only rail connected ICD;  Lack of diversification of activities of the Committee;

 Transport sector not getting adequate place in allocation of job  Committee not able to take up the HRD and other developmental activities commensurate to the stated objectives.  Lack of professional staffs and experts to carry on the reform process. Issues Related to Functioning of NTTFC

Measures for Improvement  Establish a well organized secretariat  Assume the presidency either by the Minister for Commerce or Minister for Transport.  Ensure equal mix of representation both from private and public sector in the committee.

 Reorganize the Committee and Subcommittees with the clear delineation of the role and responsibilities  Networking with trade experts, research institutions and academician  NTTFC should be mandated to discuss and endorse any policy changes in the trade and transport sector  The Committee should prepare its annual plan and program in order to meet its goal and objectives.

 A separate unit needs to be created under the Committee to look into the issue of transit  The Committee should be specifically mandated to provide technical inputs and guidance's in preparing national positions in the international trade, transit and transport cooperation negotiations.  Facilitation activities should be expanded at the sub-regional and regional level