Nepal fails to capitalize on duty-free access as US ends trade preference for 77 domestic products

KATHMANDU: Nepal has failed to effectively utilize a decade-long duty-free export facility provided by the United States, with the preferential treatment for 77 Nepali products officially expiring this week. The zero-tariff facility, granted under the Nepal Trade Preference Program (NTPP), ended on Wednesday.

The United States had extended the duty-free access from 2015 to 2025 to support Nepal’s economic recovery following the devastating 2015 earthquake. However, official data show that Nepal was unable to fully leverage the opportunity, with exports remaining limited throughout the period.

According to the Trade and Export Promotion Centre (TEPC), out of the 77 eligible products, only 29 items were exported to the US market over the past 10 years, while exports of the remaining 48 products remained completely zero. The facility had been enacted through US congressional legislation in February 2016 (Falgun 2072 BS), underscoring Washington’s long-term commitment to Nepal’s post-earthquake recovery.

Compounding the setback, US President Donald Trump’s administration has imposed an additional 10 percent customs duty on Nepali exports to the US starting April, replacing the earlier duty-free access enjoyed by the eligible products.

Export Performance Remained Weak

TEPC data show that Nepal’s exports to the US have fluctuated over the years but remained modest overall. In fiscal year (FY) 2016/17 (2073/74 BS), Nepal exported goods worth Rs 874.4 million to the US. Exports declined to Rs 766.9 million in FY 2017/18 and further dropped to Rs 671.2 million in FY 2018/19.

Although exports marginally increased to Rs 684.8 million in FY 2019/20, they fell again to Rs 606.2 million in FY 2020/21. A notable recovery was seen in the last three years, with exports rising to Rs 1.13 billion in FY 2021/22 and further to Rs 1.6 billion in FY 2022/23.

However, exports slipped again to Rs 1.25 billion in FY 2023/24 before edging up slightly to Rs 1.26 billion in FY 2024/25 (2081/82 BS), highlighting the absence of sustained growth even under preferential market access.

Products Eligible for Duty-Free Access

The US had provided duty-free entry for 77 products grouped under nine broad categories. These included leather and cotton goods, luggage made from vegetable fibers, suitcases, headbands, needlecraft products, gloves, shawls and scarves, carpets, travel bags, purses, blankets, food-carrying bags, fiber-based products, and headwear.

Despite the incentives, several products failed to record any exports at all. These included commercial bags, leather and plastic purses, handbags, eggs, head caps, floor mats, travel bags, gloves, golf bags, certain textile materials, and hats.

Products that did manage to enter the US market included leather and cotton-based items, vegetable-fiber luggage, baggage-related products, floor coverings, handwoven shawls and scarves, traditional rady-pakhi, sports bags, food-carrying bags, shawl blankets, fiber-based products, and headwear.

Structural Weaknesses Behind Missed Opportunity

Trade analysts attribute Nepal’s failure to capitalize on the US facility to multiple structural and institutional shortcomings. These include poor selection of exportable products, inability to produce goods at scale, lack of awareness among businesses about the duty-free scheme, confusion over applicable HS codes, difficulties in meeting documentation requirements, and limited access for small and medium enterprises.

Stakeholders note that even products handmade by women in rural areas—many of which were included in the preference list—failed to reach the US market due to weak market linkages and an underdeveloped export ecosystem.

With the expiry of the Nepal Trade Preference Program and the imposition of additional US tariffs, exporters warn that Nepal now faces a more challenging environment in the American market, raising concerns about the country’s ability to expand high-value exports without deeper policy, production, and trade facilitation reforms.