Biratnagar: Replacing the long-criticized reference value list used in customs valuation and clearance, the government has successfully begun testing a new Customs Valuation Database System at the Biratnagar Customs Office as a pilot project since the first week of October.
For the first time in Nepal’s customs history, an electronic system based on self-declaration for customs valuation and clearance has been launched at the Biratnagar border. Customs officials say that this system has reduced trade costs, eliminated unnecessary transactions, compelled traders to be honest, controlled revenue leakage risks through an electronic risk engine, and ended the practice of stopping trucks on highways for inspection, as suspicious consignments can now be investigated directly at their destinations.
Officials say the database system has also solved the long-standing issues of under-invoicing and over-invoicing, improving transparency in customs valuation and clearance.
With the system’s successful trial in Biratnagar, the government now plans to expand it to other major customs offices across the country.
Previously, because of limitations in the reference value book and ASYCUDA system, customs officials struggled to identify real transaction values. They often relied on the fallback method to determine suitable prices. Biratnagar Customs Chief Umesh Shrestha said the new database system has made it easier to identify actual transaction values, simplifying the customs process.
“This system has not only solved the problem of determining accurate transaction values but has also ensured transparency in customs clearance,” Shrestha said.
He explained that importers used to submit Dubai bills for goods actually produced in Australia. Since ASYCUDA’s data could not be divided by origin, determining true transaction values was difficult. In such cases, officials had to estimate values, which often led to inconsistencies. “The database system has now ended that problem,” he added.
According to him, when goods produced in one country were priced based on documents from another, it became impossible to determine actual transaction values using reference lists. Previously, customs valuation relied on methods like transaction value of identical or similar goods, computed value, deductive value, and fallback methods — all based on ASYCUDA data.
Chief Customs Officer Shrestha said, “The earlier issue was that ASYCUDA data wasn’t segregated. Now, with real-time data available through the database, the problem has been resolved, and transparency has improved.”
The government has thus successfully tested the long-awaited valuation database system at the Biratnagar Customs Office. This new approach, based on the General Agreement on Tariffs and Trade (GATT) under the World Trade Organization (WTO) framework and used by most countries, replaces the traditional reference value booklet for the first time in Nepal.
The system was inaugurated on September 25 by Finance Minister Rameshore Khanal, who said the reform would address traders’ complaints about the biannual updates to the reference value book.
Private-sector organizations had long criticized the reference value system, saying it favoured dishonest traders and hurt honest ones.
Under the new database method, details of all cleared goods will be digitally stored. Because it allows comparison and analysis of imported goods’ values, the government believes this digital system will make identifying real transaction values easier.
The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) had been urging the government to adopt this system, arguing that online valuation based on GATT standards would ensure transparency and consistency.
Traders also demanded that customs valuation follow Article 7 of the WTO/GATT Valuation Agreement, which outlines globally accepted valuation methods.
Since the WTO recognizes the database system, the government believes it is a scientific method that can address the long-standing issues of informal trade, under-invoicing, and over-invoicing in Nepal.
During the system’s inauguration, Finance Minister Khanal said it would simplify customs inspections and promote legitimate trade. By replacing the reference value list with the valuation database, the government aims to ensure fair, transparent, and consistent customs valuation based on actual transaction values. He added that the system would make traders more accountable and reduce business costs.
“This system will curb dishonest practices,” Khanal said. “It will end the malpractice of declaring sugar imports as rice or other goods.”
He also noted that the Gen-Z movement’s demand for ethical conduct and an end to corruption applied not only to public institutions but also to private, cooperative, and community sectors.
Private-sector organizations had long criticized the reference value system, saying it favoured dishonest traders and hurt honest ones
The minister emphasized that the electronic, self-declaration-based valuation and clearance system launched at Biratnagar would lower trade costs, eliminate unnecessary dealings, and help traders maintain integrity.
“If traders cooperate to make this system successful at Biratnagar, it will soon be implemented across all customs offices,” Khanal said. “It will also introduce an electronic risk engine to monitor revenue leakage and end the practice of harassing traders by stopping trucks on highways.”
According to Customs Department Director General Shyam Prasad Bhandari, the system can detect under- or over-declared prices, easily identify valuation risks, increase customs revenue, and strengthen post-clearance audits.
He explained that the reference value list often created opportunities for illegal money transfers through hundi. When invoice prices were higher than listed reference prices, traders tended to declare imports based on the lower official list. Conversely, when invoices were lower, they declared values matching the reference list to avoid penalties — leading to capital flight. Therefore, replacing the reference system was necessary, he said.
Problems with the Reference Value Book
The reference value book, updated twice a year through customs management workshops, contained reference prices for 6,960 goods — 3,618 from India and 3,342 from third countries.
Although intended for reference only, it was widely used as the main basis for valuation, which increased opacity when other agencies also adopted it as an official guide.
Nepal, as a WTO member, is obliged under the customs valuation agreement to base customs values on transaction prices, not fixed reference prices. The repeated use of the reference list without clear justification had drawn criticism for years.
Because reference prices were set every six months, they often failed to reflect actual market prices, increasing the risk of capital flight. Officials also suspected that the difference between declared invoice prices and reference list prices encouraged hundi transactions.
The government concluded that the reference value book no longer represented actual import prices. Out of 6,361 customs tariff headings, 5,264 were actively used. Since hundreds of different types of goods fell under each subcategory, the government estimated that about 500,000 different products were imported under these headings — far more than the 7,000 listed in the reference book, which clearly could not represent them all.
Scope and concept of the database system
The valuation database system is designed to collect detailed information on goods’ transaction values, transportation, insurance, and other related costs. It records all data from cleared goods, allowing real-time digital analysis and comparison.
The system aims to facilitate faster and easier customs clearance, recognize transaction value as the official customs value, ensure fairness and uniformity in valuation, assist customs officers in accurate price determination, detect mispricing, support anti–money laundering efforts, prevent revenue leakage, control customs fraud, and strengthen post-clearance audits.
According to the government, this system marks a new chapter in making Nepal’s customs administration more transparent, efficient, and globally aligned.
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