In 2016, Nepal became one of the few countries in the world to benefit from a single-country trade preference programme with the United States

BY Krishna Raj Bajgain

Nepal and the United States established diplomatic relations in 1948, following a visit by a US delegation in 1947. The ultimate objective of the United States towards Nepal has been defined as assisting in the development of a peaceful, prosperous, resilient, and democratic society. Likewise, the key goals of the US foreign policy in Nepal include enhancing good governance, promoting democratic values, ensuring security and stability, supporting inclusive and equitable economic growth, fostering a clean and resilient energy future, and helping Nepal become more self-reliant, independent, and resilient in the face of global challenges.
Nepal's relationship with the United States aims to support Nepal in achieving its ultimate objectives of becoming a prosperous and affluent country while safeguarding its freedom, sovereignty, territorial integrity, and independence. 
Based on these principles, Nepal and the United States have fostered a strong relationship over the course of several decades. As part of this connection, both countries have signed a trade and investment framework agreement that serves as a platform for bilateral discussions to bolster trade and investment, address specific trade matters, and encourage more comprehensive trade agreements between them. In 2016, Nepal became one of the few countries in the world to benefit from a single-country trade preference programme with the United States, known as the Nepal Trade Preference Program (NTTP) established under the provisions of the Trade Facilitation and Trade Enforcement Act of 2015.
The primary objective of the NTPP is to stimulate economic growth in Nepal by granting duty-free entry to the United States for specific products. This programme, which remains in effect until December 31, 2025, provides favourable trade conditions for eligible Nepali goods. The designated products under the NTPP include various items such as carpets and rugs, shawls, scarves, luggage articles, handbags, pocket goods (such as wallets), travel bags and other containers, headbands, blankets, hats, and gloves. 
There are specific eligibility criteria for the NTPP. First, the products must be included on the list of eligible articles for the programme. Second, these products must be directly exported from Nepal to the United States without passing through the commerce of any third country. Third, the products must be grown, produced, or manufactured in Nepal, with the combined cost of Nepali materials and processing amounting to at least 35% of the product's sales price. Lastly, the products must qualify for duty-free treatment either through the NTPP or the Generalized System of Preference (GSP).
To effectively implement these preferential facilities, the US Government has provisioned the ‘Special’ rates column with a ‘NP’, ‘A’, or ‘A+’ for products eligible for special preferences in the United States Tariff Schedules. To utilise this facility, US importers must make a claim for either the NTTP or the GSP by placing an appropriate code, such as ‘A’, ‘A+’, or ‘NP’, in front of the corresponding US tariff line number that identifies the imported article on the entry documentation of the US Customs and Border Protection.
Likewise, Nepali producers and exporters have the responsibility to maintain records that detail the production process and production costs for each exported article under the Generalized System of Preference (GSP). The U.S. Customs and Border Protection holds the authority to request importers or producers to provide these records as evidence to confirm the eligibility of the export for GSP duty-free treatment. 
Despite the advantageous provisions of the NTPP, the export performance of these products has been relatively underwhelming. Although there has been a gradual increase in the import of these products since 2018, with some exceptions in 2020, Nepal has not fully capitalised on the opportunities available in the US market. Taking into account that the US import of these products amounted to $17.9 billion in 2022, tapping into even a small portion of this market would significantly transform Nepal's export trade.
Despite being granted duty-free access to the US market through the NTPP, Nepal has been unable to fully capitalise on the expected opportunities. The main reason behind this disappointing performance lies in the lack of proper preparation to overcome the supply-side constraints prevalent in Nepal's industrial sector. Proper attention should have been given to attracting investments, upgrading technology, ensuring quality assurance, enhancing the capacity of producers and exporters, and providing accurate information about the 77 eligible products and their potential in the US market. Furthermore, a proactive approach should have been taken to promote Nepali products in the US market. This could have included active participation in trade fairs, organising business-to-business (B2B) meetings, and conducting comprehensive market research. 
To address the challenges outlined above, US aid agencies in Nepal can play a vital role in assisting Nepali exporters and overcoming supply-side weaknesses. They can provide valuable support by facilitating effective participation of Nepali exporters in trade fairs, organising and coordinating business-to-business (B2B) meetings, creating a supportive environment to attract US investments in Nepali export industries, and enhancing the capacity of Nepali certifying agencies and Nepali exporters. 
(Bajgain is a Senior Officer with the Trade & Export Promotion Center. The views expressed here are his personal.)