Going by the existing trading rules, exporters need not furnish CoO to the countries that have put generalized system in preferences (GSP) in place. The customs in those countries just demand a government-issued letter that certifies that the exporting agency is based in Nepal. [break]
Contrary to this convenient trading arrangement, the government has presently asked the exporters to take CoO from Federation of Nepalese Chambers of Commerce and Industry (FNCCI) or Confederation of Nepalese Industries (CNI) or Nepal Chamber of Commerce (NCCI) even if they do not need it.
For the entry under GSP facility, they are also acquiring letter from Trade and Exports Promotion Center (TEPC).
“The provision asking exporters to take CoO and pay extra royalty to the business bodies when just a letter from TEPC is enough for export makes no sense” said Uday Raj Pandey, vice president of Garment Association of Nepal (GAN).
GAN has argued that the provision has just added cost, document requirement and time to doing business and demanded the government to scrap the provision. Carpet, pashmina and handicrafts exporters -- the other three top exporters -- too expressed similar view.
CoO is mainly required for exports to India, China and other countries that have pledged special preferences to Nepal at the bilateral level.
Countries like the US, EU, Canada, Japan and South Korea, on the other hand, have GSP in place. While some of them like the US have included 75 percent of exports items in the GSP list, others like EU have incorporated up to 90 percent items Nepal exports in the list.
Effectively, if the government fulfilled commodity associations´ demand, they said the very volume of royalty earned through CoO issuance will go down by 25 percent. So far, FNCCI, which till recently was the sole agency designated to issue CoO, was mobilizing about Rs 40 million in royalty.
The royalty is collected at the rate of 12 paisa per Rs 100 worth of exports. Of that 2.25 paisa is taken by FNCCI and rests are shared among different business associations including 1.3 paisa to CNI. The sole purpose of levying the fees for CoO has been to generate capital for running trade promotional activities and other programs of different association.
However, controversy on it surfaced after different commodity associations blamed FNCCI of not distributing the royalty as committed. The problem further deepened after CNI demanded the government to treat it on par with FNCCI on split of royalty.
As the dispute deepened, the government on Tuesday had decided to form a committee to work out appropriate mechanism to issue CoO and distribute the royalty fairly.
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