Merchanting trade classification clarified: consignments to Nepal and Bhutan may qualify as traffic in transit if treaty compliant. Goods acquired for merchanting trade must not enter the Domestic Tariff Area or be transformed, must be permitted under the prevailing Foreign Trade Policy, and must comply with export leg and import leg regulatory requirements (excluding Export Declaration Form and Bill of Entry). Where such goods are consigned to importers in Nepal and Bhutan from third countries through India under Customs Transit Declarations, they will qualify as traffic in transit if compliant with the India Nepal and Indo Bhutan Treaties of Transit.