Transit rights of landlocked countries are ensured by a number of international instruments like Barcelona Convention-1921, GATT-1947, New York Conventions-1965 and United Nations Conventions on Law of Sea-1982. However, these transit rights are not exclusive and are exercised under the framework of bilateral agreements between landlocked countries and their neighbors which have direct link to the sea. Nepal is enjoying transit facilities for its sea borne trade under the bilateral agreements with India, from time to time. [break]
The first such agreement was concluded with British India in 1923, which was replaced by subsequent agreements in 1950 and thereafter. The foundation of the current transit agreement goes back to 1978 when Nepal and India signed a separate treaty of transit with a departure from the conventional agreements encapsulating trade and transit in a single agreement.
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The treaty of transit signed between Nepal and India defines the term “traffic in transit” as the passage of goods including unaccompanied baggage across the territory of a Contracting Party when the passage is part of complete journey which begins or terminates within the territory of the other Contracting Party. The treaty includes transshipment, warehousing, breaking bulk and change in the mode of transport of goods, assembly, disassembly or reassembly of machinery and bulk goods within the definition of traffic-in-transit. Thus, transshipment is a part of the transit movement under the framework of bilateral treaty between Nepal and India.
Transshipment normally entails the transfer of a shipment from one carrier or commonly from one vessel to another when the goods are in transit. In other words, it is the shipment of goods or containers to an intermediate destination for onward transmission of goods while such transfer of goods generally takes place under the customs supervision.
The issue of facilitating transit movement through the use of transshipment facility has come to the fore of bilateral discussions in the last couple of years. This was basically induced by the proliferation of rail linked Inland Clearance Depots (ICDs) or dry ports in India and Nepal and the simplified procedures for the goods to pass through those dry ports before they reach the final destinations of exports or imports. Chapter VIII, Section 54-56 of the Indian Customs Act deals with the transshipment of goods that are intended for transit to other countries. The Act allows the movement of goods outside India under the Transshipment Declaration if the goods are being transshipped under bilateral or international agreement concluded by the government of India.
Such a movement is allowed without payment of customs duties. Indian customs manual has outlined the objectives of such movement as to reduce the congestion at the gateway ports/airports and allow importers and exporters to carry out customs clearances of imported and exported goods at their doorsteps. This arrangement recognizes the dry ports or Inland Clearances Depots (ICDs) as an extension of sea port and enables cargo clearances facilities similar to sea ports. The main procedures laid down in the manual relates to: issuance of transshipment permit (TP), sealing of cargo/containers, execution of bonds and guarantee for duties in case of movement by private carriers and verification of seals and documents by the destination customs on arrival of such goods. This is a further simplified arrangement than mentioned in the import-export procedures of the bilateral Treaty of Transit.
The onerous procedures to be followed by the Nepali importers and exporters in movement of transit cargo between Nepal and Kolkata port is taking a toll on the competitiveness of Nepali trade. Port congestions, inefficiency, documentary and procedural hassles and the arbitrary fee and charges levied by the customs house agents (CHA) and shipping lines add to the cost of overseas trade of Nepal. Switching to the arrangements of transshipment from the conventional transit procedures is very important to address the transit related problems.
Nepal has been proposing changes in the existing transit procedures in its agreement with India since early 2011. The rail link facilities between the gateway port and ICD Birgunj, growing use of ISO containers with one-time lock and the ongoing works on creating integrated check posts at four major border posts between Nepal and India provides infrastructural back-stopping in further simplifying transit procedures.
Lost opportunities
The transit regimes have undergone substantial transformation along with the development of new transport and trade infrastructures and adoption of information and communication technologies (ICTs), as evidenced from improved transit arrangements between various countries in South East Asia, Central Asia and Africa. Nepal has also attempted to improve the terms of transit with the introduction of One Time Lock in ISO contained since 1996 and the operation of rail connected Birgunj ICD in 2004 under separate but simplified transit formalities. Reducing the cost of transaction in transit transport is one of the measures to offset the growing inefficiency of Nepali trade. Diversification of ports and transit corridors, enhancing inter-modal competition of transport services, simplification of documents and procedural requirements and application and use of electronic data interchange for completing the customs and transit formalities were crucial to bring efficiency in international trade. Efforts made to address these issues through bilateral negotiations were supposed to be translated into action with incorporation of provisions in the treaty of transit between Nepal and India. This effort was unheeded as the renewal of the treaty of transit in January 2013 got through without any changes in the content and substance of the treaty, thus posing as continuing hitches in transit trade.
Antipathy approach
The recent news on requirement of country of origin on transit of goods to third countries is an aberration to the concept of universal transit right of landlocked countries. The preferential trade agreements normally require the provision of origin criteria for access to the market of preference giving countries but such provisions are not made in any bilateral transit agreements. Nepal-India treaty of transit provides for the list of sensitive items for traffic-in-transit that can be moved with prior intimation to the transit providing country, but limiting the transit rights only to the originating products is not the spirit of the treaty. Besides, the bilateral treaty of transit between Nepal and India does not mention the requirement of fulfilling the origin criteria, nor is it defined what constitutes the origin of goods. In the absence of such provisions in the treaty, it is obvious that any goods from Nepal that are transited through India are originated in Nepal for the purpose of transit. Origin is not a matter of concern for the transit country so long as the goods are on the safe passage to third country or the country of export. Lack of assiduousness to this common understanding may put the total transit movement in a precarious situation. This exhibits all too well the low capacity of government officials to negotiate with counterparts of neighboring countries and hence promote national interest.
Light at the end
The issue of transshipment as pursued by the Government of Nepal is showing gradual progress as has been reflected in the bilateral talk of DG customs in New Delhi back in May. The Nepali delegation seems to have been effective in convincing Indian officials of transshipment facilities as the Indian officials have agreed in principle to introduce transshipment procedures for Nepali cargo. The new system, if introduced, will allow direct movement of cargo from Kolkata to Birgunj ICD by the shipping lines without completing complex documents and procedures of customs transit declaration (CTD). Rather the movement will be done on the basis of transshipment permit and the duty undertaking by the transporters. If this happens, there will be substantial reduction in the transit cost to the great benefit of Nepali traders. But the onus lies with government officials to persuade their counterparts to make this happen, sooner than later.
The author is former
commerce secretary
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