Nepali Exporters Call for Duty-Free Facilities in Upcoming TIFA Council Meeting

As Nepal and the United States prepare for the upcoming Trade and Investment Framework Agreement (TIFA) Council meeting, Nepalese ready-made garment exporters have urged the government to advocate for customs exemptions on additional ready-made garments.

Officials from the Ministry of Industry, Commerce and Supplies have announced that the TIFA Council meeting is scheduled to be held in Nepal towards the second week of September. The United States remains the largest market for Nepalese ready-made garments.

Under the Nepal Trade Preference Program (NTPP), the United States currently provides zero customs duty on 77 types of Nepalese goods. However, ready-made garment exporters have requested the government to lobby for the inclusion of additional garments with high export potential in the duty-free list.

They have also called on the government to engage in high-level diplomatic lobbying to extend the NTPP, which has been in effect since 2016. The NTPP was introduced following the 2015 earthquake to support Nepal's economic recovery by granting customs exemptions on 77 items, including ready-made garments. This program is set to expire in December 2025, and with only 16 months remaining, exporters are pushing for an extension.

Pashupati Dev Pandey, president of the Nepal Readymade Garment Association, told New Business Age that during a government-organized meeting on Wednesday, ready-made garment exporters recommended that the government request duty-free facilities for items with high export potential that currently face high customs duties.

Under the current NTPP, 77 harmonized codes cover items such as shawls, luggage, carpets, handbags, purses, travel bags, headbands, blankets, hats, and gloves.

“These items require only 4 to 9 percent customs duty,” said Pandey. “However, due to Nepal's landlocked status and poor infrastructure, our costs are higher than those of other countries, so the customs facilities for these items are not sufficient, and exports have not increased significantly.”

According to Pandey, goods that Nepalese exporters aim to ship to the US face customs duties ranging from 14 to 34 percent. He believes that if these goods are granted duty-free status, it could significantly boost Nepal's ready-made garment exports.

The association identified 15 types of Nepalese ready-made garments with high export potential to the US. “We have informed the government that even if only eight of these items are exempted from customs duties, exports can increase,” said Sanjay Agarwal, treasurer of the association. “These items, which include half-pants, shirts, jackets, and women's clothing, fall into fast-moving goods categories, with separate categories for cotton and synthetic materials.”

He added that although the current 77-item list is beneficial, the Nepalese garment industry could thrive if the United States grants customs facilities for these additional eight items.

A 2022 study by South Asia Watch on Trade, Economics, and Environment (SAWTEE), a Kathmandu-based think tank, revealed that Nepal has not fully benefited from the NTPP. While the overall export of various goods to the US increased between 2017 and 2021, the export of goods under the NTPP declined.

The association’s officials emphasized the need for extending the NTPP and securing duty-free facilities for Nepalese ready-made garments, which have significant export potential. “This won’t be achieved with minimal effort,” said Pandey. “The American Congress needs to make the decision, so high-level lobbying is essential.”