Nepal Rolls Out Database-Based Customs Valuation System Nationwide, Ending Decades-Old Reference Pricing

Kathmandu — In a major step toward modernizing trade administration, Nepal has implemented a database-based online customs valuation system across all customs offices in the country. The reform, introduced to enhance transparency, efficiency, and predictability in international trade, replaces the long-standing reference price mechanism that had been in use for more than two decades.

The nationwide rollout was formally announced during a Customs Management Seminar held in Kathmandu, where Department of Customs confirmed that the new system has now become mandatory at every customs office. The initiative is aimed at reducing trade-related costs, minimizing disputes, and aligning Nepal’s customs practices with global standards.

The system was virtually inaugurated in the remaining customs offices by Rameshwar Khanal, marking the completion of a phased implementation process. Earlier, the Department of Customs had piloted the system at the Biratnagar Customs Office following Khanal’s appointment as finance minister. It was subsequently expanded to Birgunj Customs, the country’s largest revenue-generating customs point, before being extended nationwide.

Shift from Reference Pricing to Transaction Value

Customs valuation determines the value of imported goods on which taxes and duties are levied. Until now, Nepal relied on a reference price-based valuation system, under which customs values were assessed using pre-set benchmark prices. While intended to prevent undervaluation, the system often failed to reflect real-time market conditions, as reference prices were not updated frequently despite rapid fluctuations in global commodity prices.

As a result, importers sometimes faced higher tax liabilities than warranted by actual purchase prices, while in other cases undervaluation led to revenue leakage and disputes between traders and customs officials. These inconsistencies also affected financial audits when declared customs values did not match sales records.

The newly introduced online customs valuation database system is grounded in the principles of the World Trade Organization’s General Agreement on Tariffs and Trade (GATT). Under this framework, the transaction value—the actual price paid for goods—will serve as the primary basis for customs valuation, effectively ending the reference pricing system that had been in place since 1998 (2055 BS).

Data-Driven and Transparent Approach

To address concerns over undervaluation, the system maintains a structured database of global market prices and historical transaction data. When an importer declares an unusually low value, customs officials can cross-check it against the database to assess whether the declared price reflects market reality. This data-driven approach is expected to reduce arbitrary decision-making and bring greater consistency to customs assessments.

According to the Department of Customs, the fully online process will also help speed up customs clearance, reduce delays at border points, and limit the discretionary powers of individual officials by shifting valuation decisions toward a standardized, system-based model.

Finance Minister Khanal described the full adoption of the GATT-based valuation system as a historic milestone for Nepal’s trade administration. He noted that the reform would ease compliance for honest traders and reduce the compulsion to rely on fake invoices or informal practices. Khanal added that the government envisions customs administration as a key pillar in building a production- and export-oriented economy in the coming years.

Private Sector Welcomes Reform, Seeks Further Changes

The reform has received a largely positive response from the private sector. Representatives of Federation of Nepalese Chambers of Commerce and Industry, Nepal Chamber of Commerce, and Confederation of Nepalese Industries have welcomed the new system, citing its potential to reduce uncertainty, improve transparency, and foster trust between traders and customs authorities.

At the same time, business groups have urged the government to review certain penalty and fine provisions in the Customs Act, arguing that some of them are impractical in real-world trade operations. They have also called for stronger policies to curb smuggling and for targeted measures to support domestic industries.

Director General of the Department of Customs Shyam Prasad Bhandari said the expansion of the system would not only facilitate trade but also improve the accuracy and credibility of revenue collection. He emphasized that greater use of technology would make Nepal’s customs administration more professional, predictable, and aligned with international best practices.

With the nationwide implementation of the database-based valuation system, Nepal has taken a significant step toward reforming its customs framework—one that could reshape the trading environment by promoting fairness, efficiency, and confidence among businesses engaged in cross-border trade.