Easing up Trading across Borders

This article was originally published by Ashesh Shrestha in the Himalayan Times on the January 27, 2019.

The ease of trading with other countries is one of the important factors that determines the level of investment in the country. Businesses and investors tend to get attracted towards the county where it is relatively easy to trade across borders. The report ‘Can Trade Facilitation Drive Manufacturing FDI, 2017’ from the Global Alliance for Trade Facilitation comprising of International Chamber of Commerce, the World Economic Forum and Centre for International Public Enterprise showed that increasing the trade facilitation by 1 percent corresponds with 3.2 percent increase of FDI into manufacturing sector. The quick movement of goods across borders means that investors are able to retrieve the required raw materials for their manufacturing establishment quickly and cheaply. Also, they can easily export the final product that they have produced without any hassle which contribute to reduction in cost of doing business to them. Hence, it becomes very necessary to ease cross border trade, specifically to the countries like Nepal, both to facilitate the domestic investors as well as to attract foreign investors. But, there are various issues that Nepal needs to resolve for easing up cross border trade. This article is an attempt to recognize some of the steps that Nepal can take to ease cross border trade.

  1. Currently, the detailed procedure regarding import and export is not easily available and hence traders, specifically new ones face difficulties while trading across borders. Even though the custom rules have specified the documents required from imports and exports, it also has a provision for requirement of additional documents like recommendations, license and certificate to be obtained from various institutions as per prevailing law. In order to access the information regarding all these documents various laws have to be referred which costs a lot of time.Hence, a comprehensive document detailing out the step by step procedure for both import and export, type of documents required and the purpose of the documents should be made so that the traders can have all the information regarding cross border trade from a single document. It will reduce the time required for preparing the necessary documents
  2. Manual inspections of the goods by customs has increased the total time required for border compliance. Installation of scanners and using it for inspection of the goods being imported and exported at border custom office could significantly reduce the total time required for border compliance.
  3. An electronic data interchange system between the Indian Customs and Nepali Customs could also reduce the time required for border and documentary compliance. Currently, physical copies of the documents like Custom Transit Declaration (CTD) has to be circulated among Indian Customs House of entry, Indian Custom office and Nepali Custom office at border which requires a lot of time. The use of Electronic Data Interchange system could save time and reduce cost of cross border trade.
  4. With the introduction of Electronic Cargo Tracking System (ECTS) for Nepal- bound cargoes from Vishakhapatnam (Vizag) port traders will be able to enjoy transshipment facility and they will not be required to carry out CTD at Vizag port and it will be done at Inland Clearance Depot (ICD), Birgunj. With this time and cost of third country trade is expected to be reduced significantly. Therefore, it is recommended that ECTS should also be extended to Kolkata-Haldia port from which highest volume of third country trade takes place. This will reduce the cost of third country trade for all the traders.
  5. Currently only two insurance companies, Indian National Insurance Company Limited and Oriental Insurance Company have authority to issue guarantees in cases of the sensitive goods as declared by India, which has caused the premium level to be high. The premium would be lesser in a more competitive setting. Hence, giving permission to other insurance companies to issue guarantees could significantly reduce the premium.
  6. For facilitation of trade, proper negotiation with the transit providing country i.e. India should be made. Through consultation with the stakeholders and experts, it has been found that traders have to comply with various documentary compliance required by the Indian side which has increased the time required for documentary compliance. With regards to such matter, proper negotiation should be made with Indian side so that time and cost involved in documentary compliance could be reduced.