Nepal-China Transit & Transport Agreement (2016) and 2019 Protocol

The Agreement on Transit Transport between Nepal and the People's Republic of China, commonly called the Transit and Transport Agreement (TTA), is a bilateral treaty that gives landlocked Nepal a legal right of transit for third-country trade through Chinese territory and Chinese ports. It was signed in Beijing on 21 March 2016 (Chaitra 8, 2072 BS) during the first China visit of Prime Minister KP Sharma Oli, as one of a package of ten agreements and memoranda; the transit accord was inked by Nepal's Foreign Minister Kamal Thapa and China's Foreign Minister Wang Yi.

The timing was deliberate. The TTA was concluded only weeks after the end of the roughly five-month India-Nepal border obstruction of 2015-16 (often called the 'Indian blockade'), during which fuel, medicine and cooking gas supplies through Nepal's southern crossings were severely disrupted. For decades Nepal's entire third-country trade had passed through India, chiefly the port of Kolkata (and later Visakhapatnam), under the India-Nepal Transit Treaty. The China deal was presented in Kathmandu as a way to diversify transit routes and reduce dependence on a single neighbour.

It is important to distinguish this treaty from the Belt and Road Initiative (BRI) framework Memorandum of Understanding that Nepal and China signed later, in May 2017. The BRI MoU is a broad cooperation framework covering connectivity, infrastructure and investment; the TTA and its Protocol are a specific, operational transit-and-transport arrangement with a named list of usable ports and border points. The two are related strands of Nepal-China connectivity but are legally separate instruments.

The 2016 TTA established the principle of transit but was not self-executing. Like many transit treaties, it required a detailed implementing Protocol to specify which ports Nepal could use, which border crossings goods could move through, and the customs, documentation and procedural rules that would apply. Without that Protocol, no cargo could actually be routed for third-country trade, so for over two years the agreement remained largely symbolic.

Negotiations on the text advanced during the third bilateral consultative meeting held in Kathmandu in early September 2018, when officials led on the Nepali side by the Ministry of Industry, Commerce and Supplies finalised the draft Protocol. The Nepali Cabinet endorsed the Protocol in March 2019, clearing the way for formal signature.

The Protocol on Implementing the Agreement on Transit and Transport was signed in Beijing on 29-30 April 2019, during President Bidya Devi Bhandari's state visit to China, by Nepal's Foreign Minister Pradeep Gyawali and China's Minister of Transport Li Xiaopeng. Only with this Protocol in force did the four-seaport, three-dry-port list become operational commitments rather than aspirations.

The headline outcome of the Protocol is Nepal's right to use seven Chinese ports for third-country trade: four seaports and three inland dry ports. This is why the arrangement is popularly known as the 'four seaports deal.' Nepali importers and exporters can, in principle, route cargo between third countries and Nepal through any of these designated points.

The four seaports are Tianjin (near Beijing, on the Bohai Gulf), Shenzhen and Zhanjiang in the south, and Lianyungang on the Yellow Sea in Jiangsu province. The three land or dry ports are Lanzhou (Gansu), Lhasa and Shigatse (Xigatse) in the Tibet Autonomous Region. The Tibetan dry ports sit closest to the Nepal border and are the natural staging points for goods moving overland into Nepal.

Access to Chinese ports is only useful if goods can physically cross the Himalaya. The Protocol package identifies six dedicated Nepal-China transit points for trade: Rasuwa (Rasuwagadhi-Kyirong/Kerung), Tatopani in Sindhupalchowk (opposite Zhangmu/Khasa), Korala in Mustang, Kimathanka in Sankhuwasabha, Yari in Humla, and Olangchung Gola in Taplejung. On paper these give Nepal multiple corridors spread across the northern frontier.

In practice only a couple of these crossings have been reliably operational for commercial cargo. The Rasuwagadhi-Kyirong route and the Tatopani-Zhangmu route are the two main functioning corridors; Tatopani was heavily damaged in the 2015 Gorkha earthquake and its reopening was repeatedly delayed. The other points, such as Korala, Kimathanka, Yari and Olangchung Gola, largely lack the sealed roads, bridges and customs infrastructure needed for containerised trade.

This gap between the treaty's map and the physical reality on the ground is the central practical limitation of the agreement. Nepal's mountainous terrain, long distances to Chinese ports, and the need for upgraded roads, customs yards and dry-port facilities mean that even with full legal access, the Chinese routes have remained costlier and slower than the established Indian corridor for most goods.

For years after 2019 the agreement produced almost no actual cargo. Officials cited a combination of unfinished standard operating procedures (SOPs), the lack of a follow-up joint implementation meeting, COVID-19 border closures, weak infrastructure on the Nepali side, and hesitancy from the private sector, which found the Chinese routes longer and more expensive than shipping through Kolkata.

The symbolic breakthrough came in September 2023, when Nepal recorded its first third-country import through a Chinese seaport under the arrangement: a consignment of turmeric sourced from Vietnam was routed through the port of Tianjin and into Nepal. Traders reported that the Vietnam-via-China route delivered the goods roughly 20 days faster than the equivalent shipment via Kolkata, illustrating the potential time savings on some routes even as cost and volume questions remained.

Even so, this was a single, small proof-of-concept rather than a shift in trade patterns. As of the mid-2020s, the overwhelming majority of Nepal's third-country trade continued to flow through Indian ports, and the Chinese transit routes were used only marginally. The agreement is therefore best understood as an important legal option and bargaining tool for Nepal rather than an active mass-transit channel.

The political importance of the TTA and its Protocol is hard to overstate. By securing a treaty-based right of transit through China, Nepal formally ended the situation in which India was its only legally guaranteed gateway to the sea. Nepali commentators frequently describe the deal as breaking, at least on paper, India's transit monopoly and giving Kathmandu leverage that it lacked during the 2015-16 blockade.

The economic reality is more modest. Distance, altitude, weak roads, limited rail links on the Tibetan plateau, and the higher logistics cost of the Chinese routes mean that for bulk and price-sensitive goods, the Indian corridor remains dominant. The Chinese option is most attractive for specific trades where China itself is the source or where speed on a particular lane matters more than cost.

Realising the agreement's promise depends on infrastructure that is still being built: cross-border roads at Rasuwa and other points, dry ports and integrated check-posts inside Nepal, and potential rail connectivity such as the long-discussed Kerung-Kathmandu line. Until those are in place and reliable joint operating procedures are agreed with China, the four-seaports deal will remain more significant as a strategic hedge and diplomatic milestone than as a working trade artery.