Understanding Customs Law in Nepal: Major Highlights

Whether you're an importer, exporter, business owner, or just a curious reader, understanding Nepal’s customs law is crucial in navigating cross-border trade. This article explores the major highlight of the Customs Act, 2064 (2007) “Custom Act,” which serves as the primary legislation that governs how goods enter and exit Nepal. It's not just about duties and taxes—this law sets out a comprehensive framework ensuring safe, systematic, and transparent trade. 

 

 

Customs law in Nepal is the set of rules that controls how goods are brought into and taken out of the country. It helps make sure that trade happens legally and that the government collects the right amount of tax, called customs duty. The following laws are made to make customs processes clear, organized, and in line with international standards. They provide a legal framework for how goods should be declared, checked, and taxed, and what happens if someone breaks the rules. Since Nepal does a lot of trade through its borders, customs law is very important for the country’s economy and security.

 

Nepal's customs regime is governed primarily by:

a. The Customs Act, 2064 (2007)

b. Customs Rules, 2065 (2007) 

c. Directives and Notifications – released by the Department of Customs to clarify ongoing practices or temporary adjustments.

 

This legal structure aligns Nepal with international trade norms, especially under the World Trade Organization’s valuation agreement.

 

 

The Department of Customs, under the Ministry of Finance, is the primary authority responsible for implementing the law. Customs officers, chiefs of customs offices, and sub-customs offices all operate under this central body to ensure legal compliance at the border points. 

 

Moreover, the Custom Officers have a wide range of roles and responsibilities in ensuring the enforcement of the Custom Act and maintaining cross-border trade of Nepal.

 

Some of these duties and responsibilities include following:

 

S.N.	Responsibilities	Details
1	Control and Supervision of Customs Areas	Customs officers are responsible for overseeing designated customs areas, checkpoints, and trade routes. They ensure that goods are cleared only through authorized routes and procedures pursuant to Section 3(2) of the Custom Act.
2	Examination and Valuation of Goods	Section 20 of the Custom Act provides authority to the officers to conduct full or partial physical examination of goods. Officers have the authority to inspect goods, verify declarations, and determine their customs value. This helps prevent under-invoicing, misdeclaration, or false documentation.
3	Assessment and Collection of Duty	Under Section 22 and Section 23 of the Custom Act, the Custom Officers must determine payable duty based on classification and value, and must ensure that goods are not released unless due duties are paid or guaranteed.
4	Investigation and Seizure Powers	Customs officers are empowered under Section 44 of the Customs Act, to stop, search, and seize goods suspected of smuggling or misdeclaration. Section 45 mandates a detailed seizure report specifying the type and quantity of goods seized.
5	Arrest and Detention	When customs-related offenses involve criminal conduct, officers are empowered to arrest suspects, even without a warrant under Section 40(1) in smuggling cases.
6	Quasi-Judicial Function	Customs officers also have quasi-judicial functions. They can decide cases of customs violations, impose fines, order confiscation, or recommend prosecution.

 

In addition, Under Section 3, and Section 5 and Section 8 of the Custom Act, the Government of Nepal has the right to:

a. Declare customs areas and routes through official Gazette notifications

b. Set and revise tariff rates based on trade policy or economic strategy

c. Any import or export must occur through designated customs routes—using unauthorized paths is treated as smuggling.

 

 

If goods made in Nepal are exported and then re-imported, customs duty is generally applicable. However, exemptions are granted in special cases—such as returned undelivered parcels, rejected goods, or returns due to quality issues or calamities.

 

The law allows for full or partial exemptions, especially in cases such as:

a. Diplomatic imports

b. Projects funded by foreign aid

c. Industries in Special Economic Zones (SEZs)

d. Goods sold to duty-free shops

 

Facilities like bonded warehouses and bank guarantees make it easier for certain industries to manage import costs.

 

If you're planning to import or export goods, here's what the process generally looks like:

 

Step	Process	Description
Step 1	Declaration Form Submission	Fill out a declaration form detailing the goods. Attach necessary documents like invoices, packing lists, permits, and shipping documents. Submit it electronically or physically at the customs office.
Step 2	Document Examination	Customs officers will review your paperwork. If any documents are missing due to unavoidable reasons, you may request additional time to submit them.
Step 3	Physical Examination of Goods	Customs may inspect your goods physically or use a selective method (based on risk profiling). Some goods may be cleared based only on document checks.
Step 4	Valuation and Duty Assessment	The value is determined based on the transaction value (invoice + freight + insurance). If the declared value is suspiciously low, customs can reassess it using other methods (identical/similar goods, deductive, or computed value methods).
Step 5	Payment and Clearance	Duties are calculated and collected. After payment, a clearance order is issued, and goods can be removed from the customs area.
Step 6	Re-examination (if necessary)	Even after clearance, customs has the authority to re-inspect the goods, especially in case of suspicion.

 

 

Pursuant to Section 34 of the Custom Act, even after your goods are released, customs can audit your books—checking records, invoices, bank transactions, and inventory to verify if proper duty was paid. This can happen within four years of clearance.

 

Following legal proceeding is followed in case any individual is found to be in violation of the Custom Law:

 

a. Initiation of Cases

If customs suspects smuggling, under-invoicing, or illegal routing, they can seize goods and vehicles, arrest responsible individuals and begin legal proceedings within 24 hours.

 

b. Bail or Detention

Under Section 41 of the Custom Act, the Custom Officer may release a person on bail. Bail may be granted upon deposit of the amount for imprisonment and fine that can be imposed. If the bail is not granted or furnished, detention cannot exceed the maximum penalty term under the law .

 

c. Punishment

Depending on the offense, penalties can include:

a. Forfeiture of goods and transport

b. Fines in proportion to value of the disputed/ smuggled goods

c. Imprisonment in accordance with the proportion of the value of the smuggled goods as below:

 

In extreme cases, such as violent resistance during smuggling, the law even permits the use of force or firearms, but only under strict conditions.

 

S.N.	Value of Smuggled Goods	Period of Imprisonment
1	25,000 to 1 Lakh	Up to 2 months
2	1 Lakh to 5 Lakh	2 months to 6 months
3	5 Lakh to 25 Lakh	8 months to 2 years
4	50 Lakh to 1 crore	1 year to 3 years
5	Amount exceeding 1 crore	2 years to 5 years

 

 

If you disagree with any decision; like fines or license suspension, you can file an appeal to the Director General within 35 days. The Director General’s decision is final, although further judicial review may be possible under administrative law.

 

Nepal’s customs law strikes a balance between facilitating trade and protecting the nation’s revenue. Whether you're a regular trader or just starting out, knowing the legal process and your rights under the Customs Act can help you avoid delays, penalties, or worse.

 

If you're unsure, it's always wise to consult with a customs agent or legal expert before engaging in trade. After all, a smooth customs experience begins with the right knowledge.

 

Date of Publication: 21 April 2025

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. It reflects the laws and practices in Nepal as of April 21, 2025. Readers are advised to consult qualified legal professionals for guidance on specific matters.