Table of Contents
Exporting handmade crafts from Nepal offers tremendous opportunities for artisans, entrepreneurs, and businesses to reach global markets. Nepal's unique handicrafts—including pashmina shawls, hand-knotted rugs, thangka paintings, lokta paper products, metal crafts, and wooden carvings—are highly valued worldwide for their cultural authenticity, craftsmanship, and sustainability. However, successful export requires understanding and compliance with Nepal's export regulations under the Customs Act 2064 (2007), Customs Rules 2065 (2007), and international trade agreements. This comprehensive guide covers the complete legal framework, registration requirements, documentation, and preferential market access available to Nepali exporters.
Legal Framework Governing Exports from Nepal
Nepal's export trade is regulated by a comprehensive legal framework designed to facilitate legitimate trade while ensuring compliance with domestic and international standards:
| Legislation/Regulation | Purpose |
|---|---|
| Customs Act, 2064 (2007) | Primary law governing import and export, customs valuation, and duty determination |
| Customs Rules, 2065 (2007) | Detailed procedures for customs clearance, documentation, and compliance |
| Export Import (Control) Act, 2013 | Controls on restricted and prohibited export items |
| Foreign Exchange (Regulation) Act, 2019 | Regulates foreign exchange transactions for export payments |
| Industrial Enterprises Act, 2076 (2019) | Industrial registration and export-oriented industry provisions |
| Nepal Rastra Bank Directives | Foreign exchange repatriation and banking channel requirements |
Regulatory Authorities for Export Trade
| Authority | Role in Export |
|---|---|
| Department of Customs | EXIM code issuance, customs clearance, duty administration |
| Ministry of Industry, Commerce and Supplies | Trade policy, export licensing, restricted items approval |
| Trade and Export Promotion Centre (TEPC) | Certificate of Origin, REX registration, export promotion |
| Nepal Rastra Bank | Foreign exchange regulations, export payment verification |
| Federation of Handicraft Associations of Nepal (FHAN) | Handicraft certification, invoice certification, NOC for animal products |
| Federation of Nepalese Chambers of Commerce and Industry (FNCCI) | Certificate of Origin issuance |
| Nepal Chamber of Commerce (NCC) | Certificate of Origin issuance |
| Department of Archaeology | Museum Pass Certificate for antique-style items |
| Department of Forest and Soil Conservation | Recommendation for forest-based products |
| Department of Mines and Geology | Recommendation for mineral-based products |
Popular Nepali Handicrafts for Export
Nepal's handicraft sector produces diverse products with strong global demand:
| Product Category | Examples | Key Markets |
|---|---|---|
| Textiles & Apparel | Pashmina shawls, Dhaka fabrics, woolen garments, felt products | Europe, USA, Japan |
| Carpets & Rugs | Hand-knotted Tibetan carpets, wool rugs | Germany, USA, Europe |
| Metal Crafts | Singing bowls, Buddhist statues, bronze items, silver jewelry | USA, Europe, Australia |
| Paper Products | Lokta paper, journals, gift wraps, cards | Europe, USA, Japan |
| Wood & Bone Carvings | Wooden masks, deity statues, decorative items | Europe, USA |
| Thangka Paintings | Buddhist scroll paintings, mandala art | USA, Europe, Buddhist countries |
| Jewelry | Semi-precious stone jewelry, silver ornaments, beaded items | Global |
| Natural Fiber Products | Allo (nettle) products, hemp items, jute crafts | Europe, eco-conscious markets |
Prerequisites for Exporting from Nepal
Before commencing export operations, businesses must fulfill the following requirements:
1. Business Registration
Exporters must have a legally registered business entity:
- Private Limited Company: Register at Office of Company Registrar (OCR)
- Sole Proprietorship/Partnership: Register at Department of Cottage and Small Industries or local ward office
- Manufacturing Industry: Register at Department of Industry
2. Tax Registration
- PAN Registration: Obtain Permanent Account Number from Inland Revenue Office
- VAT Registration: Mandatory for exporters seeking duty drawback facility on imported raw materials
3. Bank Account
Open a current account with a Category "A" Commercial Bank for:
- Foreign currency transactions
- Letter of Credit processing
- Advance payment receipt
- Export proceeds repatriation
4. EXIM Code Registration
Obtain Exporter-Importer Code (EXIM Code) from the Department of Customs. This unique identification number is mandatory for all export activities.
5. REX System Registration (For EU Exports)
Register in the Registered Exporter (REX) system through Trade and Export Promotion Centre (TEPC) for exports to the European Union to claim GSP preferences.
Export Order Requirements
An export order can be executed under the following conditions:
| Condition | Details |
|---|---|
| Letter of Credit (L/C) | L/C opened in the exporter's name by the foreign buyer's bank |
| Advance Payment | Payment deposited in convertible currency in exporter's bank account |
| Sample Exports | Samples up to US$150 value can be exported without L/C or advance payment |
| Special Waivers | Exports to India and Tibet enjoy waiver of L/C/advance payment requirements |
| Specific Products | Certain products may be exported without L/C/advance payment conditions |
Documents Required for Handicraft Export
Standard Documents (Required for All Exports)
| Document | Issuing Authority | Purpose |
|---|---|---|
| Commercial Invoice | Exporter (certified by FHAN for handicrafts) | Value declaration, customs assessment |
| Packing List | Exporter | Details of package contents, weight, dimensions |
| Certificate of Origin | FNCCI, NCC, or local Chamber of Commerce | Proves Nepali origin for preferential tariffs |
| Nepal Rastra Bank Declaration Form | Exporter | Foreign exchange compliance |
| Letter of Credit / Advance Payment Proof | Bank | Payment arrangement verification |
| Letter of Authorization | Exporter | Authorizes customs agent if appointed |
| Customs Declaration Form | Exporter/Customs Agent | Official export declaration to customs |
| Firm Registration Certificate | OCR/DCSI | Business registration proof (once annually) |
| PAN/VAT Certificate | Inland Revenue Department | Tax compliance (once annually) |
| Customs Agent Registration | Department of Customs | If customs agent is appointed |
Product-Specific Documents (If Applicable)
| Document | Issuing Authority | When Required |
|---|---|---|
| Museum Pass Certificate | Department of Archaeology | Antique-style items, old-looking artifacts |
| GSP Form A | TEPC/Chamber of Commerce | Claiming GSP preferential tariffs |
| FHAN No Objection Letter | Federation of Handicraft Associations of Nepal | Products made from domestic animal parts |
| Department of Mines Recommendation | Department of Mines and Geology | Mineral-based products, semi-precious stones |
| Department of Forestry Recommendation | Department of Forest and Soil Conservation | Forest-based products, wooden items |
| Phytosanitary Certificate | Department of Agriculture | Plant-based products |
| CITES Certificate | Department of National Parks | Products from CITES-listed species |
Important: Document requirements vary based on the nature of handicraft products. Always verify specific requirements with FHAN or the Department of Customs before shipping.
Step-by-Step Export Process
Step 1: Business Registration and Tax Compliance
- Register company/firm at OCR or DCSI
- Obtain PAN from Inland Revenue Office
- Register for VAT (if seeking duty drawback)
- Open current account with commercial bank
Step 2: EXIM Code Registration
Apply for EXIM Code at the Department of Customs with:
- Business registration certificate
- PAN/VAT certificate
- Bank account details
- Completed application form
Step 3: Locate Foreign Buyer and Negotiate Terms
- Identify potential markets and buyers
- Negotiate price, quantity, delivery terms
- Agree on INCOTERMS (FOB, CIF, etc.)
- Finalize payment method (L/C, advance payment, D/P, D/A)
Step 4: Receive Export Order
- Receive Purchase Order from buyer
- Issue Proforma Invoice
- Receive Letter of Credit or advance payment
- Sign export contract
Step 5: Obtain Required Certificates
- Get commercial invoice certified by FHAN
- Obtain Certificate of Origin from Chamber of Commerce
- Get product-specific certificates (Museum Pass, FHAN NOC, etc.)
- Obtain GSP Form A or register in REX system for EU exports
Step 6: Prepare Export Documentation
- Complete Customs Declaration Form
- Prepare packing list
- Complete Nepal Rastra Bank declaration
- Arrange transportation documents (Bill of Lading/Airway Bill)
Step 7: Customs Clearance
- Submit documents through ASYCUDA World system (Nepal's digital customs platform)
- Present goods for customs inspection (if required)
- Pay any applicable fees
- Receive customs clearance and export approval
Step 8: Shipment and Payment
- Ship goods via selected transport mode
- Submit shipping documents to bank for L/C negotiation
- Receive export payment through banking channels
- Repatriate foreign exchange as per NRB regulations
Certificate of Origin
The Certificate of Origin (CoO) is crucial for claiming preferential tariff treatment in destination countries.
Issuing Authorities
- Trade and Export Promotion Centre (TEPC): Pulchowk, Lalitpur
- Federation of Nepalese Chambers of Commerce and Industry (FNCCI)
- Nepal Chamber of Commerce (NCC)
- Regional District Chambers of Commerce
Types of Certificate of Origin
| Type | Purpose | Destination |
|---|---|---|
| Non-Preferential CoO | General origin certification | All countries |
| GSP Form A | Claiming GSP preferential tariffs | GSP donor countries |
| REX Statement on Origin | Self-certification for EU GSP | European Union |
| SAFTA Certificate | South Asian Free Trade Area preferences | SAARC countries |
REX System for EU Exports
Since January 1, 2017, the European Union introduced the Registered Exporter (REX) system for certification of origin. Nepali exporters must register in REX to claim EU GSP preferences.
REX Registration Process
- Apply at Trade and Export Promotion Centre (TEPC)
- Submit business registration documents
- Provide export history if available
- Receive REX number upon approval
- Include REX number in origin declarations on invoices
REX Statement on Origin
Registered exporters can make out a statement on origin on the invoice or any commercial document that identifies the exporter and the goods concerned. The statement includes:
- Exporter's REX number
- Description of originating products
- Country of origin (Nepal)
- Date and signature
Preferential Market Access for Nepali Exports
As a Least Developed Country (LDC), Nepal enjoys preferential tariff treatment from many developed countries:
European Union: Everything But Arms (EBA)
| Feature | Details |
|---|---|
| Access | Duty-free, quota-free for all products except arms and ammunition |
| Coverage | Over 7,000 tariff lines |
| Origin Certification | REX system registration required |
| Regional Cumulation | Raw materials from SAARC countries count as Nepali origin |
EU Rules of Origin Requirements
- Products wholly obtained in Nepal, OR
- Products sufficiently worked or processed in Nepal
- Direct shipment to EU (transit through third countries allowed under customs control)
United States: GSP and Nepal Trade Preference Program
| Program | Coverage | Validity |
|---|---|---|
| GSP | ~5,000 products duty-free | Subject to renewal |
| Nepal Trade Preference Program | 77 HS lines including carpets, rugs, shawls, scarves, luggage, handbags, headbands, blankets, hats, gloves | Until December 31, 2025 |
US Rules of Origin Requirements
- Must be on list of eligible articles
- Imported directly from Nepal
- Grown, produced, or manufactured in Nepal with Nepali materials + processing cost ≥ 35% of product's sales price
- Importer claims preference with "A", "A+", or "NP" code on customs documentation
Japan GSP
- Zero duty, quota-free treatment for LDCs
- Donor country content rule allows Japanese-origin materials to count toward origin
- Certificate of Origin Form A required
Canada: General Preferential Tariff (GPT) and LDCT
| Program | Import Content Limit | Originating Content Required |
|---|---|---|
| GPT | ≤ 40% of FOB price | ≥ 60% |
| LDCT (LDC Tariff) | ≤ 60% of FOB price | ≥ 40% |
Canada Handicraft Duty-Free Entry
Canada grants duty-free entry for handicraft products under Tariff Item No. 9987.00.00 if they:
- Qualify for GPT treatment
- Bear traditional shapes/decorations of indigenous people
- Are made by hand using hand-held tools or foot-powered looms
- Are non-utilitarian and not mass-produced
- Include Certificate of Handicraft Goods
Australia: ASTP
- 5 percentage point margin of preference
- Duty-free for handicraft items under Handicraft By-Law
- Final manufacture in Nepal + ≥ 50% labor/materials from developing countries
China: Zero-Tariff Treatment
- Zero-tariff for ~8,000 goods (95% of Nepal's exports to China)
- Wholly obtained products OR substantial transformation (≥ 40% value addition)
- Direct consignment or transit ≤ 3 months under customs control
Other GSP Donor Countries
Nepal also receives preferential access from: Switzerland, Norway, Iceland, Turkey, New Zealand, South Korea, Russian Federation, Belarus, Kazakhstan, Armenia.
Export Incentives from Government of Nepal
1. Cash Incentive Scheme
Nepal Government provides cash subsidies for select export products:
5% Cash Incentive (with >30% domestic value addition)
- Processed tea and coffee
- Handicraft and woodcraft items
- Processed leather and leather products
- Processed herbs and essential oils
- Processed semi-precious stones and jewelry
- Allo (nettle) products
- Processed water/mineral water
- Processed turmeric, ginger, honey, black cardamom
- Vegetables
3% Cash Incentive (up to 5% with higher value addition)
- Domestically produced textiles
- Readymade garments
- Carpets and wool products
- Chyangra Pashmina items
- Jute and jute products
- Gold and silver jewelry
- Semi-processed leather
- Medicines
- Felt products
- Yarns (polyester, viscose, acrylic, cotton)
- Bronze items
Higher Incentives: Products with >50% value addition can receive up to 5% cash incentive. Products with >40% value addition exported under collective trademark receive 4% cash back.
Requirements for Cash Incentive
- Obtain value addition certificate from Department of Commerce, Supplies and Consumer Protection at beginning of fiscal year
- Export through banking channels
- Submit to bank: EXIM code, PAN/VAT certificates, commercial invoice, customs declaration, advance payment certificate/bank statement, tax clearance certificate
2. Duty Drawback Facility
Refund of customs duties paid on imported raw materials and auxiliary materials (including packing materials not produced in Nepal) for products manufactured for export.
Requirements
- Apply to customs office within 12 months of import
- Submit: Certificate of export or sale against convertible foreign currency
- Foreign currency earning certificate from bank
- Consumption ratio document from Department of Industry
Prohibited and Restricted Export Items
Certain items are banned or restricted from export:
Banned Items
- Wild animals and their parts
- Musk
- Skins of snakes, lizards, and other protected animals
- Narcotic drugs and psychotropic substances
- National and foreign coins of archaeological value
- Articles of archaeological importance
- Antique idols of gods and goddesses
- Ancient scroll (Thangka) paintings
- Palm-leaf inscriptions
- Timber, logs, and raw mammal products
Restricted Items (Require Special Permission)
- Items resembling antiques (require Museum Pass)
- Products from domestic animal parts (require FHAN NOC)
- Forest-based products (require Department of Forestry recommendation)
- Mineral products (require Department of Mines recommendation)
- CITES-listed species products
Warning: Attempting to export banned items results in seizure, penalties, and potential criminal prosecution under the Customs Act and other prevailing laws.
Customs Valuation for Exports
Under the Customs Act 2064, the customs value of exported goods is generally determined based on:
- Invoice Value: The value declared by the exporter
- Government-Fixed Value: For specific goods where Government of Nepal has established separate customs values
If a separate customs value is established, it supersedes the invoice value if higher. Export values are determined in foreign currency.
Customs Agent for Export
Exporters may appoint a licensed customs agent to handle customs clearance:
Customs Agent License Requirements
- Minimum age: 21 years
- Minimum qualification: Certificate level or 12th grade pass
- No outstanding government dues
- No criminal conviction
- Pass written examination and interview
- License fee: NPR 3,000
- Deposit: NPR 300,000 (cash or bank guarantee)
- Annual renewal: NPR 3,000
Appointing a Customs Agent
Submit appointment letter with:
- Renewed customs agent license
- Proof of exporter's business registration
- PAN certificate
- Details of consignment (L/C number, invoice number)
Export Timeline
| Stage | Estimated Time |
|---|---|
| Business registration and EXIM code | 1-2 weeks |
| Finding buyer and negotiating terms | Variable |
| Receiving L/C or advance payment | 1-2 weeks |
| Obtaining certificates (CoO, FHAN, etc.) | 2-5 days |
| Document preparation | 1-2 days |
| Customs clearance | 1-3 days |
| Total (first-time export setup) | 3-4 weeks |
| Subsequent exports | 5-10 days |
Common Mistakes to Avoid
- Incorrect HS Codes: Wrong product classification leads to delays and potential penalties
- Missing signatures: Incomplete or unsigned documents cause rejection
- Mismatched invoice values: Discrepancies between invoice and declaration
- Exporting restricted items without permission: Missing Museum Pass, FHAN NOC, or department recommendations
- Late REX registration: Not registering before EU shipment
- Incorrect origin documentation: Claiming GSP without proper CoO or REX statement
- Banking channel violations: Not repatriating foreign exchange through proper channels
- Missing value addition certificate: Cannot claim cash incentive without it
Benefits of Legal Export Compliance
- Market Access: Access to preferential tariff treatment in major markets
- Cash Incentives: Eligibility for 3-5% government cash subsidies
- Duty Drawback: Recovery of import duties on raw materials
- Banking Support: Access to export financing and letter of credit facilities
- Business Reputation: Credibility with international buyers
- Legal Protection: Avoid penalties, seizure, and criminal prosecution
- Sustainability: Long-term business viability in export markets
Need Legal Assistance?
Our legal team provides comprehensive services for handicraft exporters including business registration, EXIM code assistance, customs documentation, Certificate of Origin guidance, and compliance advisory. Contact us for professional consultation on exporting from Nepal.
Frequently Asked Questions
To export handicrafts from Nepal, you need:
- Registration of firm/company/industry
- Registration with local Inland Revenue Office (PAN/VAT)
- Current account with a commercial bank
- EXIM Code from Department of Customs
- REX system registration for European Union exports
Additionally, exports generally require either a Letter of Credit opened in the exporter's name or advance payment deposited in convertible currency. Samples up to US$150 can be exported without these payment requirements.
Standard documents required:
| Document | Issuing Authority |
|---|---|
| Commercial Invoice (FHAN certified) | Exporter |
| Packing List | Exporter |
| Certificate of Origin | FNCCI, NCC, or Chamber of Commerce |
| Nepal Rastra Bank Declaration Form | Exporter |
| Advance Payment/Letter of Credit | Bank |
| Letter of Authorization | Exporter |
| Firm Registration/PAN Certificate | OCR/IRD (once annually) |
Product-specific documents (if applicable): Museum Pass Certificate, GSP Form A, FHAN NOC for animal products, Department of Mines recommendation, Department of Forestry recommendation.
EXIM Code (Exporter-Importer Code) is a unique identification number issued by the Department of Customs that is mandatory for all export activities in Nepal. To obtain an EXIM Code, apply at the Department of Customs with your business registration certificate, PAN/VAT certificate, bank account details, and completed application form. This code tracks your export transactions and is required for customs clearance.
The Registered Exporter (REX) system is the European Union's method for certification of origin since January 1, 2017. Nepali exporters must register in REX through Trade and Export Promotion Centre (TEPC) to claim EU GSP preferential tariff treatment (duty-free, quota-free access under Everything But Arms). Once registered, exporters can make origin declarations on invoices using their REX number instead of obtaining GSP Form A certificates.
Nepal enjoys preferential access as a Least Developed Country:
| Market | Program | Benefits |
|---|---|---|
| European Union | Everything But Arms | Duty-free, quota-free (7,000+ tariff lines) |
| USA | GSP + Nepal Trade Preference | ~5,000 products duty-free + 77 HS lines including carpets, shawls |
| Japan | GSP for LDCs | Zero duty, quota-free |
| Canada | GPT/LDCT | Duty-free with 40-60% originating content |
| Australia | ASTP | 5% margin preference, handicraft duty-free |
| China | Zero-tariff | ~8,000 goods (95% of exports) |
Certificate of Origin (CoO) proves that products originate in Nepal and is essential for claiming preferential tariffs. It can be obtained from:
- Trade and Export Promotion Centre (TEPC), Pulchowk, Lalitpur
- Federation of Nepalese Chambers of Commerce and Industry (FNCCI)
- Nepal Chamber of Commerce (NCC)
- Regional District Chambers of Commerce
Types include Non-Preferential CoO, GSP Form A, REX Statement on Origin, and SAFTA Certificate.
Government provides cash subsidies: 5% Cash Incentive (with >30% domestic value addition): Handicraft and woodcraft items, allo products, processed semi-precious stones and jewelry. 3-5% Cash Incentive: Carpets and wool products, Chyangra Pashmina items, gold and silver jewelry, felt products, bronze items, textiles, readymade garments.
Additionally, Duty Drawback facility provides refund of customs duties paid on imported raw materials used in exported products.
Banned items:
- Wild animals and their parts
- Musk and protected animal skins
- Archaeological artifacts and antique idols
- Ancient Thangka paintings and palm-leaf inscriptions
- Timber, logs, raw mammal products
- Narcotic drugs
Restricted items (require special permission):
- Antique-style items (require Museum Pass)
- Products from domestic animal parts (require FHAN NOC)
- Forest-based products (require Department of Forestry recommendation)
- Mineral products (require Department of Mines recommendation)
For EU EBA (Everything But Arms) eligibility:
- Products wholly obtained in Nepal, OR
- Products sufficiently worked or processed in Nepal
- Direct shipment (transit allowed under customs control)
- SAARC regional cumulation allowed (raw materials from SAARC countries count as Nepali origin)
Exporters must be registered in REX system and include origin declaration with REX number on commercial documents.
The program provides duty-free entry for 77 Harmonized Tariff Schedule items including carpets, rugs, shawls, scarves, luggage, handbags, wallets, headbands, blankets, hats, and gloves until December 31, 2025. Requirements:
- Must be on eligible articles list
- Imported directly from Nepal
- Grown, produced, or manufactured in Nepal with Nepali materials + processing ≥ 35% of sales price
- Importer claims preference with "NP" code on customs documentation
The Museum Pass Certificate is issued by the Department of Archaeology for items that appear antique or resemble archaeological artifacts. It certifies that the item is not a genuine antique and can be legally exported. Required for:
- Old-looking deity statues
- Antique-style Thangka paintings
- Items resembling archaeological artifacts
- Reproductions of historical pieces
Without this certificate, such items may be seized at customs as suspected archaeological artifacts.
To claim duty drawback (refund of import duties on raw materials):
- Apply to customs office within 12 months of import
- Submit certificate of export or evidence of sale against convertible foreign currency
- Provide foreign currency earning certificate from bank (or export/import documents for barter transactions)
- Submit consumption ratio document from Department of Industry
The facility covers customs duties paid on raw materials and auxiliary materials including packing materials not produced in Nepal.
- Prepare all required documents (invoice, packing list, CoO, NRB form, etc.)
- Complete Customs Declaration Form
- Submit documents through ASYCUDA World system (digital customs platform)
- Present goods at customs office
- Undergo customs inspection (if required)
- Pay any applicable fees (exports are generally duty-free)
- Receive customs clearance and export approval
- Ship goods via selected transport mode
Timeline: 1-3 days for established exporters
Yes, samples up to the value of US$150 can be exported without opening a Letter of Credit or receiving advance payment. Additionally, exports to India and Tibet enjoy waiver of L/C and advance payment requirements. Some specific products may also be exported without these payment conditions as determined by regulations.
Customs agents must have:
- Minimum age: 21 years
- Education: Certificate level or 12th grade pass
- No outstanding government dues
- No criminal conviction
- Passed written examination and interview
- License fee: NPR 3,000
- Deposit: NPR 300,000 (cash or bank guarantee)
To appoint an agent, submit appointment letter with renewed customs agent license, exporter's business registration proof, PAN certificate, and consignment details (L/C number, invoice number). The customs agent becomes legally responsible for customs-related activities on behalf of the exporter.
