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EU's withdrawal of derogation facility to hit RMG sector
Dec '10
Garment industry in Nepal which largely depends on the European markets is surely going to be badly hit by the European Union's (EU) decision to amend its law on the rules of origin (RoO) and to end the special exemption facility promised to Nepal. The new rules will become effective from January 1, 2011.

This change is seen to have a direct effect on the garment exports from the country to the EU nations. Nepal now exports around three billion rupees worth of garments to the EU each year.

Nepal was conferred with a derogation facility by the EU, whereby the Nepali producers enjoyed zero-duty access to EU markets, even for the products prepared without using raw material from EU. Further, Cambodia and Laos too enjoyed similar facility.

The EU had made the announcement about its decision to amend its law and end the facility on November 19, but the government officers and other stakeholders in Nepal learnt about this change only when a high level delegation from EU paid a visit to Nepal, a few days back.

However, these amendments to the EU's RoO did not come up all of a sudden, and the government officials in Nepal were well aware about these changes taking place, for at least a year now.

The MoCS and GAN officials, particularly in view of the changing political structure of the country and the extra time that the traders would require to get adapted to the new system in an upholding pattern, were pressing their case for extension of the derogation facility further for two years.

As the facility is planned to be withdrawn in December, and the MoCS and GAN officials have been carrying out talks with the officials in charge at the EU headquarters through Nepali Embassy, to convince them to extend the facility for the last three months.

Nepal each year exports some $40 million worth of RMG products to EU markets which constitutes around two-third of country's overall garment exports.

Fibre2fashion News Desk - India

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