The exports of 60,000 metric tons of iron slag—a non-metallic byproduct of iron and steel—from Nepal to Bhutan have come to a halt after the Government of Nepal changed its Harmonized System (HS) Code classification and imposed a customs duty on the product, which is considered industrial waste in Nepal but generates income from exports.

Previously, iron slag was exported under HS code 2618.00, which carried no customs duty. However, the Department of Customs’ Classification and Revision Branch reclassified it under HS code 7204.41, making it subject to a customs duty of Rs 10 per kilogram—far exceeding its market price of Rs 6 per kilogram. As a result, the export of iron slag, which has no use in Nepal, has effectively stopped.

The Nepal Iron Rod Manufacturers Association has submitted a letter to the Mechi Customs Office, urging authorities to restore the previous HS code to allow duty-free exports. Industrialists argue that iron slag, which forms as a thin layer when iron billets are heated and beaten, is considered industrial waste in Nepal and that its disposal is a challenge.

Anupam Rathi, president of the Morang Trade Association, criticized the decision, stating that imposing customs duty on a waste product discourages exports and creates unnecessary disposal problems. Similarly, Hari Neupane, president of the Nepal Steel and Rod Manufacturers Association and owner of Ambe Steel, emphasized that exporting iron slag not only generates foreign exchange, albeit in small amounts, but also reduces environmental waste. He warned that taxing a product that industries would otherwise discard contradicts the government's goal of promoting exports.

Despite repeated appeals, the issue remains unresolved. Mechi Customs Office Chief Rajendra Prasad Chudal confirmed that he forwarded the industrialists’ concerns to the Department of Customs but has not received any implementation directives. He noted that stopping an already established export practice seems unnecessary.

According to Customs Office data, Mechi Customs facilitated the export of 23,860 metric tons of iron slag worth Rs 359.3 million in Fiscal Year (FY) 2022/23 and 24,523 metric tons worth Rs 345.9 million in FY 2023/24.

Biratnagar Customs Office Chief Gyanendra Raj Dhakal suggested that the issue could have been preemptively addressed had industrialists raised concerns earlier. He acknowledged that iron slag, if not exported, contributes to waste accumulation and should be encouraged for exports for environmental reasons. He mentioned that the problem could be resolved by adding a sub-heading in the Finance Act but urged patience until April.

Government data shows that Biratnagar Customs Office exported 157 metric tons of iron slag worth Rs 43 million in FY 2022/23 and 243 metric tons worth Rs 49.3 million in FY 2023/24. In the first six months of the current fiscal year, 278.46 metric tons of non-ferrous metal residues worth Rs 56.7 million were exported.