• India Considers Tough Nepal Tea Import Restrictions

    India Parliament Building in New Delhi

    Summary: India and Nepal want to review and revise their 1950 Friendship Treaty regulating trade.

    By Dan Bolton

    India’s Parliamentary Committee on Commerce is pressing for a review of the 1950 Indo-Nepal Treaty of Peace and Friendship that allows free movement of people and goods.

    The treaty permits Nepalese and Indian citizens to live, work, own property, and conduct business on either side of the border. Citizens cross the border without a passport or visa.  There are no tariffs on goods and services. Trains and commercial truckers carrying foods, including tea, are inspected for food hygiene by the FSSAI (Food Safety and Standards Authority of India), but hundreds of small trucks and scooters carrying tea cross daily unimpeded.

    The treaty is unpopular in Nepal because of issues of sovereignty that give wealthy Indians unfettered market access. In January 2021, during a three-day trip to India, Nepal Foreign Minister Pradeep Kumar Gyawali said that Nepal would also like to revise the 1950 Indo-Nepal Treaty to reflect “changes and new realities” and resolve a “few misunderstandings.”

    In June, Commerce Committee Chair V. Vijayasai Reddy asked the government to impose stringent “certificate of origin” requirements that would subject tea imports to a “quality standard,” expanding existing food safety regulations. The intent is to curb the flow of inexpensive tea that is blended and sold as higher-priced Darjeeling. The committee’s report calls for enacting an anti-dumping duty, ranging from 40-100%, that would negatively impact Nepal’s tea industry. 

    Nepal produces around 25,000 metric tons annually and exported 11,920 tons during the last fiscal year. Export earnings were NPRs3.79 billion rupees (about $30 million US dollars). India buys 80-90% of Nepal’s orthodox tea and 50% of the CTC (cut, tear, and curl) grades processed mainly at bought-leaf factories. Orthodox tea is priced much higher than CTC but yields only 334 kilos per hectare. CTC yields an average of 1,598 kg per ha and sells for about half that of comparable Indian-grown tea. 

    According to the Kathmandu Post, Darjeeling tea, in bulk, is priced anywhere between IRs 320 and IRs 360 rupees per kg. Orthodox varieties of Nepali tea sell for less than half that price. Orthodox teas, commonly known as Himalayan tea, are similar to the Darjeeling variety grown in West Bengal in taste, aroma, and flavor, writes the newspaper.

    According to the newspaper, Nepali tea producers say that if India goes ahead with the parliamentary’s committee’s recommendation, Nepal’s tea sector will collapse. The paper cited a steep decline in shipments post-COVID, India’s decision to delay the transit of 40,000 tons of Nepal tea for several weeks last year, and, in some instances, reject shipments transiting India but bound for other countries. 

    In November 2021, India announced it would cancel import licenses of unscrupulous domestic tea companies found to be blending Himalayan teas with those from Darjeeling. The Tea Board of India imposed new restrictions to prevent companies from importing inferior tea.

    Deepak Khanal, director of Nepal’s National Tea and Coffee Development Board, said that unfounded “rumors” questioning the quality of Nepali tea also contributed to the decline.

    He told the Post that “India has adopted a policy to discourage buyers from importing Nepali tea,” citing a tea shipment of 6,000 metric tons in 20 cargo trucks stopped at the Jhapa border crossing in June 2020. Inspectors demanded additional lab tests, which caused delays. “We were surprised by the change in policy overnight,” said Khanal. He said that the Indian side also halted the export of Nepali tea to third countries via India. Northern India borders northern Nepal in the east, west, and south. “Domestic traders and producers are obviously discouraged.”

    To obtain export certification, Nepali tea must be tested at the Central Food Laboratory in Kolkata, India. Discussions between the two countries have since resolved double verification and notification concerns. 

    BIZ INSIGHT – In 2016, Nepal and India, mutually seeking closer relations, agreed to review all bilateral agreements and treaties and, in 2018, issued a report described as a strong groundwork for furthering India-Nepal relations and “reset” ties.

    According to Nepalese diplomats, the negotiation of navigation rights for access to the 1,500-mile-long Ganges River is an example of how the treaty could be modified. Nepal is a landlocked nation with limited transport capability, but major tributaries in Nepal could one day connect Nepal to the Bay of Bengal in Bangladesh. 

  • Timely Tea Delivery

    Early harvests in China, India, and Kenya sent new teas to market early this year – a fortunate head-start. Unlike last year, labor availability is good despite COVID-19 restraints, tea regions report fine weather, and orderly processing is raising expectations of a bountiful crop. In this segment Jason Walker, spokesperson for Firsd Tea, the US division of the largest green tea supplier in the world, discusses two remaining challenges impeding timely tea delivery.

    Jason Walker on obstacles to timely tea delivery.
    Map shows ships idled for days waiting a berth at ports in Long Beach and Los Angeles, Calif.

    Finally Under Way

    Early harvests in China, India, and Kenya sent new teas to market early this year – a fortunate head-start. Unlike last year, labor availability is good despite COVID-19 restraints, tea regions report fine weather, and orderly processing is raising expectations of a bountiful crop. Two hurdles remain. Transport is stretched to the breaking point as reinvigorated economies stir from pandemic weariness. The second hurdle is cost. Wholesalers, retailers, and importers that last year bore the weight of spiking prices must now make up for lost earnings. Expect significant price increases for both specialty and commodity teas for the foreseeable future.

    Tea Biz: COVID-19 and the chaos of lockdowns this time last year presented unique delivery challenges. Describe how the logistical hurdles differ for the 2021 harvest.

    Jason Walker: We did see locations and origins that either could not get any tea out at all, or we saw that they could not get anything out on their regular schedule. There were multiple variations of disruption that were happening last year.

    For example: Some growing areas in China saw a shortage of workers to harvest the spring crop. Then you may have packing or processing facilities that were locked down or running a skeleton crew. On top of that- even if your workforce could pluck, process, and pack on schedule, shipments could still be hindered

    This year we are seeing a more steady flow. We are seeing harvests started earlier. Compared to last year things look like they’re much more on track. Especially in terms of harvest and processing/packing

    In October the dollar costs of shipping really started to ratchet up.

    Things were behind schedule.Then we started to see there was an inadequate supply of either ships or containers.  Things were piled up because of ports that had been closed. Port closures caused shipping routes to get rearranged, and it took time to re-position and resume normal flow.

    Then you had increased demand for online retail. Lots of new equipment and personal items were getting shipped. People who used to spend their money on a on a dinner out now buying exercise equipment and things like that. You just have more stuff trying to get on the water at the same time. 

    It takes months for all that to shift back into what it was. Containers were not even available for weeks sit at ports waiting for days or weeks just to get loaded onto a ship. 

    I tracked one of our ship’s on Vessel Finder just to see where it was day by day.

    I had heard the stories of logjams at LA and Long Beach ports, the online vessel tracking service let me see just how our shipments might be impacted. By taking a screenshot daily, I saw how our shipment waited in a line of ships offshore for about 7-8 days before being cleared to dock and unload.

    Every single day we saw it just sitting there waiting its turn to get unloaded.

    Then we began hearing stories that some of those ships were returning empty because the rates for East Asia into Western US were four times the going rate.

    We are seeing still seeing some of that.

    We had to share some of that burden of costs with our customers. 

    Tea Biz: In 2020 importers, wholesalers, and retailers eased the price shock for consumers by absorbing some of the sharp increase in transportation costs. This year prices are expected to rise with retailers promoting pre-orders and fewer free shipping offers. What advice can you offer to reduce the cost of transporting tea.

    Jason Walker: We have been trying to encourage our customers and everyone out there to make their best projections that we can know roughly when you need it. That helps everybody along the line prioritizing the order. It also average out. You may pay higher rates now, but may be able to offset that later as the cost of things goes down and we all can adjust our prices.

    Projections essentially help ease the strain on the logistics chain. Container shipments, warehouses, and truckers are better equipped to send and receive the right amounts of product while compensating for delays caused by a strained system. The alternatives are to either overprepare (potentially overwhelming the system), or under-prepare and risk being left without. We recognize it can be tough to make projections in these unparalleled circumstances but the benefits outweigh the costs. Depending on the size of the customer and their orders, clients are providing 6-month or quarterly projections. As a result we have seen fewer interruptions due to better planning. Observers in ocean freight, major ports, and domestic trucking all indicate the overall instability may continue until late spring or early summer.

    Firsd Tea has been tracking and sharing updates we receive from logistics partners and sharing that via our newsletter and blog:

    Shipageddon: Plan Ahead
    Shipageddon: Continues Through Chinese New Year
    Shipageddon: November Update

    Link to share this post with your colleagues.

    Signup and receive Tea Biz weekly in your inbox.

    Never miss an episode

    Subscribe wherever you enjoy podcasts: