Sri Lanka - Trade BarriersSri Lanka - Trade Barriers
Import Restrictions
The newly developed Sri Lanka Trade Information Portal (https://srilankatradeportal.gov.lk/) is a one-stop point for information relating to import into and export from Sri Lanka. Implemented by the Department of Commerce, the portal provides an accessible, logical, helpful gateway for traders to access important regulatory and procedural information needed to export, import and transit. The initiative is also in line with the government's commitment to the requirements of World Trade Organization to comply with Article 1 of the Trade Facilitation Agreement.
In October 2018, in response to a fast depreciating rupee, the government introduced a raft of policy measures including margin deposit requirements for letters of credit opened for the importation of personal motor vehicles and selected non-essential consumer goods imports and the suspension of concessionary vehicle permits for politicians and government servants. These measures are expected to ease the excessive demand for foreign currency.
Sri Lanka enacted a new antidumping and countervailing duties law and a safeguard measures law in 2018 to provide protection to domestic industries from injurious dumping and subsidization, and for the application of safeguard measures where import surges cause or threaten to cause injury to the domestic industry. The laws are not enforced yet as the government has not published implementing regulations.
The Ministry of Defense controls the import of firearms and ammunition for use by the armed forces, police, and civil security. Certain military-related or dual-use items are prohibited or controlled. Radars, night-vision devices, beta lights, armored vehicles, explosion-detection equipment, digital-jamming equipment, infrared illuminators, GPS equipment, and laser designators are prohibited. Imports of laser/radar range finders and thermal-image devices are subject to Ministry of Defense approval. Remote-controlled toys are also under license control for public security reasons. There are restrictions on the import of toxic and hazardous chemicals and pesticides. Used and reconditioned air conditioners and refrigerators are under license control for environmental protection.
Import Licensing
Sri Lanka requires import licenses for more than 400 items at the six-digit level of the Harmonized Tariff Schedule, mostly for health, environment, and national security reasons. Importers must pay a fee to receive an import license. Import licenses for meat products may be required based on the health or disease status of livestock in the particular country or area.
Approval is at the discretion of the regulators; no standard practices are followed and requirements can vary. Regulators entrusted with evaluating products to be imported often lack the capacity to make scientific determinations, and a zero risk policy is followed in lieu of scientific rationale. Import of telecommunication equipment requires approval from the Telecommunications Regulatory Authority and a license issued by the import controller.
Tea
The Sri Lanka Tea Board regulates tea imports into Sri Lanka. Tea imports require a license, only bulk tea can be imported, and only registered tea exporters are allowed to import tea for value addition and re-export. Only certain varieties of tea can be imported for such purposes. When re-exporting, the packages should indicate, “Ceylon Tea blended with other origin teas.”
Customs Barriers and Trade Facilitation
Duties are calculated using the actual transaction value of the goods (as evidenced by the commercial invoice or other contract of sale document). If the value of the goods cannot be established by this method, Sri Lanka Customs will attempt to establish the value of the goods using methods in line with Article 7 of the GATT. When the customs authority does not accept the declared value and determines the value in accordance to the GATT, the importer has a right to appeal the decision to the Director General of Customs. The Customs Ordinance allows an importer to clear the imported goods provisionally from Customs custody pending a final determination on value. However, this option is not available to an importer where fraud is suspected. U.S. companies have expressed concern that the Sri Lanka Customs valuation system is susceptible to misuse and is not consistently applied.
In addition, Section 153(2)(b) of the Customs Ordinance authorizes customs officers to receive 50 percent of the monetary penalty imposed for various customs infractions. The money received from the sale of forfeited goods is credited to the Customs Officers Reward Fund. Several U.S. companies have reported that the existence of this scheme has created incentives for customs officers to take unwarranted actions.
The Government has taken steps to improve trade facilitation in line with the WTO Trade Facilitation Agreement. A National Trade Facilitation Committee (NTFC) was established in 2016. Sri Lanka launched an online trade information portal in July 2018. However, not all trade related information is available on the portal.
Other market access barriers
Price Controls
Sri Lanka's Consumer Affairs Authority (CAA) sets maximum retail prices (MRP) for essential consumer items. Items subject to MRP include lentils, chick peas, wheat flour, dried chili peppers, canned fish, milk powder, sugar, imported basic variety of rice, imported onions, and imported potatoes. Food importers have lobbied the government to remove MRP, arguing that standard prices are impractical in an environment of changing international markets and currency fluctuations. In 2018, the CAA introduced price controls on bottled water. The bottled water industry has over 120 suppliers in the market, and policy advocates have urged the government to reverse the decision to intervene in an already competitive market.
TECHNICAL BARRIERS TO TRADE
Soft Drinks
Sri Lanka issued the Food (Color Coding for Sugar levels) Regulations 2016, which requires labeling of carbonated beverages, ready-to-serve drinks other than milk-based products, and fruit juices. In November 2017, the government imposed an excise duty of Rs 12 per liter or Rs 0.50 per gram of sugar (approximately $2.85 per kilo of sugar) contained in beverages, whichever is higher, in support of the government’s anti-diabetes campaign. Both the labeling regulations and excise taxes were introduced with limited input from the beverage industry and with little time for industry to respond and implement changes. Since the implementation of the 2017 beverage excise tax, the Sri Lanka carbonated soft drink industry has lost approximately 35 percent of total sales volume while its tax burden has increased to almost 50 percent of gross revenue. The government has considered additional taxes on the beverage and soft drink industry. The labeling regulation and tax affects the sales of both U.S. companies and domestic producers.
SANITARY AND PHYTOSANITARY MEASURES
Biotechnology
Sri Lanka requires the approval of its Chief Food Authority for the importation or the sale of products derived from genetic engineering (GE) intended for human consumption. However, Sri Lanka does not have a functioning approval mechanism for GE products and thus in effect has a ban on seeds and other agricultural products derived from GE. Sri Lanka requires all agricultural commodity imports to be accompanied by a certification that the commodity is “non-GE.” The United States will continue to engage Sri Lanka on these issues, especially on establishing a biotechnology regulatory framework consistent with international standards.
Poultry Products
Sri Lanka permits imports of poultry products only from countries that have never reported outbreaks of Highly Pathogenic Avian Influenza (HPAI) or only after six months have passed since a country has notified the World Organization for Animal Health (OIE) that a particular area or state (in the case of the United States) is free of avian influenza. This is despite the fact that the OIE recommends that areas affected by avian influenza can resume trade three months after the last detection. However, beginning in 2018, Sri Lanka relaxed the regulations for U.S. poultry products to allow imports from areas with a three-month disease-free status, subject to a risk assessment for each consignment.
Meat Products
Sri Lankan animal health authorities take a long time to conduct microbiological tests of meat shipments. Additionally, these authorities occasionally reject imports based on testing methods that are not consistent with those set out in the country’s regulations or the import permit. The relevant authorities often only accept testing performed by the Medical Research Institute (MRI) based in Colombo, whose testing methods differ from those set out in Sri Lanka’s regulations and is not an accredited laboratory. Any negative results on the sample tests require the importer to re-export the shipment. The extended period taken to conclude testing of the shipment places the importer at risk of losing the right to file insurance claims as many insurers only insure for a limited period.
GOVERNMENT PROCUREMENT
Government procurement of most goods and services in Sri Lanka is primarily undertaken through a public tender process. Some tenders are open only to registered suppliers. Procurement has also occurred outside the normal competitive tender process. There are widespread concerns about the lack of transparency and accountability in the tender process. Tender specifications are often developed to suit a particular company. Even on occasions when a U.S. company wins a tender, the contract can be canceled on a technicality, often at the urging of a competitor. The practice of accepting unsolicited proposals without competing bids continues and there is a lack of clarity in the government procurement process which leads to reports of large-scale corruption.
Sri Lanka is not a signatory to the WTO Agreement on Government Procurement (GPA) but has been an observer of the GPA since April 2003.
SERVICES BARRIERS
Distribution Services (including logistical services) and Express Shipments
Sri Lanka does not provide de minimis treatment for the application of taxes on inbound shipments. Further, airport authorities do not provide preferential treatment to express cargo airlines. Rather, express shipments must undergo the routine examination procedure by security and the airport’s authority, which delays clearance.
Financial Services (including banking services)
At present, all foreign banks in Sri Lanka operate as branches. All banks operating in Sri Lanka, including foreign banks are required to establish two branches outside the Western Province for each new branch established in the Western Province. The Central Bank also requires all banks operating in Sri Lanka to direct a minimum 10 percent of lending for agriculture.
A 2.5 percent stamp duty applies to usage of credit cards issued by Sri Lankan banks for transactions entered into in foreign currency. Transactions in local currency are exempted from this duty.
As a result, U.S. e-Commerce firms, setting prices in dollars, face greater costs than local competitors when selling in the Sri Lankan market.
Insurance services
Only companies incorporated in Sri Lanka may be registered to carry on the business as an insurer. Foreign insurance companies that provide health insurance services to Sri Lankans must sell through an insurance broker registered in Sri Lanka and are restricted to insurance products not sold by local insurance companies. The Sri Lankan government requires all general insurance companies to cede 20 percent of their reinsurance coverage to a state-run insurance fund.
Audiovisual Services
In 1999, Sri Lanka imposed restrictions on the number of foreign films that can be imported into the country and required all of the films to be imported by the State Owned National Film Corporation. In 2002, Sri Lanka changed the rules and created five different entities – “circuits” – that can import foreign films, four private and one state-run, but kept the quota limits. Current restrictions limit the number of imported English language films to 65 per year (13 per entity). In 2018, Sri Lankan importers came close to the 65 film total limit and resorted to “shopping around” different circuits for quota slots. The overall process for importing foreign films remains opaque. In addition, the Ministry of Culture does not allow foreign language films to be subtitled in Sinhala or Tamil, widely restricting the market appeal of English-language films to non-English-speakers.
Sri Lanka also imposes taxes on foreign films, programs, and commercials shown on television. In 2017, the government increased the tax on foreign films and television series dubbed into Sinhala and Tamil from Rs 90,000 per 30-minute episode (approximately $515) to Rs 150,000 (approximately $857) per 30-minute episode. Foreign television shows in their original form (without dubbing) are taxed at Rs 100,000 (approximately $571) per 30-minute episode. Foreign films in their original form are taxed at Rs 200,000 (approximately $1,142). Higher rates apply to repeat telecasts. Foreign commercials are taxed at Rs 500,000 (approximately $2,857) in the first 6 months and at Rs 1,000,000 (approximately $5,714) during the next six months. Government approval is required for all foreign films and programs shown on television.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
The newly developed Sri Lanka Trade Information Portal (https://srilankatradeportal.gov.lk/) is a one-stop point for information relating to import into and export from Sri Lanka. Implemented by the Department of Commerce, the portal provides an accessible, logical, helpful gateway for traders to access important regulatory and procedural information needed to export, import and transit. The initiative is also in line with the government's commitment to the requirements of World Trade Organization to comply with Article 1 of the Trade Facilitation Agreement.
In October 2018, in response to a fast depreciating rupee, the government introduced a raft of policy measures including margin deposit requirements for letters of credit opened for the importation of personal motor vehicles and selected non-essential consumer goods imports and the suspension of concessionary vehicle permits for politicians and government servants. These measures are expected to ease the excessive demand for foreign currency.
Sri Lanka enacted a new antidumping and countervailing duties law and a safeguard measures law in 2018 to provide protection to domestic industries from injurious dumping and subsidization, and for the application of safeguard measures where import surges cause or threaten to cause injury to the domestic industry. The laws are not enforced yet as the government has not published implementing regulations.
The Ministry of Defense controls the import of firearms and ammunition for use by the armed forces, police, and civil security. Certain military-related or dual-use items are prohibited or controlled. Radars, night-vision devices, beta lights, armored vehicles, explosion-detection equipment, digital-jamming equipment, infrared illuminators, GPS equipment, and laser designators are prohibited. Imports of laser/radar range finders and thermal-image devices are subject to Ministry of Defense approval. Remote-controlled toys are also under license control for public security reasons. There are restrictions on the import of toxic and hazardous chemicals and pesticides. Used and reconditioned air conditioners and refrigerators are under license control for environmental protection.
Import Licensing
Sri Lanka requires import licenses for more than 400 items at the six-digit level of the Harmonized Tariff Schedule, mostly for health, environment, and national security reasons. Importers must pay a fee to receive an import license. Import licenses for meat products may be required based on the health or disease status of livestock in the particular country or area.
Approval is at the discretion of the regulators; no standard practices are followed and requirements can vary. Regulators entrusted with evaluating products to be imported often lack the capacity to make scientific determinations, and a zero risk policy is followed in lieu of scientific rationale. Import of telecommunication equipment requires approval from the Telecommunications Regulatory Authority and a license issued by the import controller.
Tea
The Sri Lanka Tea Board regulates tea imports into Sri Lanka. Tea imports require a license, only bulk tea can be imported, and only registered tea exporters are allowed to import tea for value addition and re-export. Only certain varieties of tea can be imported for such purposes. When re-exporting, the packages should indicate, “Ceylon Tea blended with other origin teas.”
Customs Barriers and Trade Facilitation
Duties are calculated using the actual transaction value of the goods (as evidenced by the commercial invoice or other contract of sale document). If the value of the goods cannot be established by this method, Sri Lanka Customs will attempt to establish the value of the goods using methods in line with Article 7 of the GATT. When the customs authority does not accept the declared value and determines the value in accordance to the GATT, the importer has a right to appeal the decision to the Director General of Customs. The Customs Ordinance allows an importer to clear the imported goods provisionally from Customs custody pending a final determination on value. However, this option is not available to an importer where fraud is suspected. U.S. companies have expressed concern that the Sri Lanka Customs valuation system is susceptible to misuse and is not consistently applied.
In addition, Section 153(2)(b) of the Customs Ordinance authorizes customs officers to receive 50 percent of the monetary penalty imposed for various customs infractions. The money received from the sale of forfeited goods is credited to the Customs Officers Reward Fund. Several U.S. companies have reported that the existence of this scheme has created incentives for customs officers to take unwarranted actions.
The Government has taken steps to improve trade facilitation in line with the WTO Trade Facilitation Agreement. A National Trade Facilitation Committee (NTFC) was established in 2016. Sri Lanka launched an online trade information portal in July 2018. However, not all trade related information is available on the portal.
Other market access barriers
Price Controls
Sri Lanka's Consumer Affairs Authority (CAA) sets maximum retail prices (MRP) for essential consumer items. Items subject to MRP include lentils, chick peas, wheat flour, dried chili peppers, canned fish, milk powder, sugar, imported basic variety of rice, imported onions, and imported potatoes. Food importers have lobbied the government to remove MRP, arguing that standard prices are impractical in an environment of changing international markets and currency fluctuations. In 2018, the CAA introduced price controls on bottled water. The bottled water industry has over 120 suppliers in the market, and policy advocates have urged the government to reverse the decision to intervene in an already competitive market.
Pharmaceuticals
Lack of a proper quality assurance mechanism and a price mechanism is making it difficult for global pharmaceutical companies to operate in the Sri Lankan market. In October 2016, the National Medicine Regulatory Authority (NMRA), under the Ministry of Health, instituted MRP for 48 essential drugs. The government also introduced price control on Intra-ocular lenses in February 2017 and on stents in August 2017. In August 2018, the NMRA introduced price control on an additional 15 drugs, resulting in a substantial reduction in prices of the 15 drugs including prices for bio-similars. Sri Lanka imports about 85 percent of its medicinal drug requirement. The government has not taken action to increase MRP of drugs to compensate for rupee depreciation. The pharmaceutical industry has urged the government to formulate currency depreciation linked price controls for drugs and medical devices. According to industry sources, global pharmaceutical companies have said they would withdraw some products from Sri Lanka due to a lack of an effective price setting mechanism. The Sri Lankan government promotes local manufacture of pharmaceuticals through buy-back guarantees.TECHNICAL BARRIERS TO TRADE
Soft Drinks
Sri Lanka issued the Food (Color Coding for Sugar levels) Regulations 2016, which requires labeling of carbonated beverages, ready-to-serve drinks other than milk-based products, and fruit juices. In November 2017, the government imposed an excise duty of Rs 12 per liter or Rs 0.50 per gram of sugar (approximately $2.85 per kilo of sugar) contained in beverages, whichever is higher, in support of the government’s anti-diabetes campaign. Both the labeling regulations and excise taxes were introduced with limited input from the beverage industry and with little time for industry to respond and implement changes. Since the implementation of the 2017 beverage excise tax, the Sri Lanka carbonated soft drink industry has lost approximately 35 percent of total sales volume while its tax burden has increased to almost 50 percent of gross revenue. The government has considered additional taxes on the beverage and soft drink industry. The labeling regulation and tax affects the sales of both U.S. companies and domestic producers.
SANITARY AND PHYTOSANITARY MEASURES
Biotechnology
Sri Lanka requires the approval of its Chief Food Authority for the importation or the sale of products derived from genetic engineering (GE) intended for human consumption. However, Sri Lanka does not have a functioning approval mechanism for GE products and thus in effect has a ban on seeds and other agricultural products derived from GE. Sri Lanka requires all agricultural commodity imports to be accompanied by a certification that the commodity is “non-GE.” The United States will continue to engage Sri Lanka on these issues, especially on establishing a biotechnology regulatory framework consistent with international standards.
Poultry Products
Sri Lanka permits imports of poultry products only from countries that have never reported outbreaks of Highly Pathogenic Avian Influenza (HPAI) or only after six months have passed since a country has notified the World Organization for Animal Health (OIE) that a particular area or state (in the case of the United States) is free of avian influenza. This is despite the fact that the OIE recommends that areas affected by avian influenza can resume trade three months after the last detection. However, beginning in 2018, Sri Lanka relaxed the regulations for U.S. poultry products to allow imports from areas with a three-month disease-free status, subject to a risk assessment for each consignment.
Meat Products
Sri Lankan animal health authorities take a long time to conduct microbiological tests of meat shipments. Additionally, these authorities occasionally reject imports based on testing methods that are not consistent with those set out in the country’s regulations or the import permit. The relevant authorities often only accept testing performed by the Medical Research Institute (MRI) based in Colombo, whose testing methods differ from those set out in Sri Lanka’s regulations and is not an accredited laboratory. Any negative results on the sample tests require the importer to re-export the shipment. The extended period taken to conclude testing of the shipment places the importer at risk of losing the right to file insurance claims as many insurers only insure for a limited period.
GOVERNMENT PROCUREMENT
Government procurement of most goods and services in Sri Lanka is primarily undertaken through a public tender process. Some tenders are open only to registered suppliers. Procurement has also occurred outside the normal competitive tender process. There are widespread concerns about the lack of transparency and accountability in the tender process. Tender specifications are often developed to suit a particular company. Even on occasions when a U.S. company wins a tender, the contract can be canceled on a technicality, often at the urging of a competitor. The practice of accepting unsolicited proposals without competing bids continues and there is a lack of clarity in the government procurement process which leads to reports of large-scale corruption.
Sri Lanka is not a signatory to the WTO Agreement on Government Procurement (GPA) but has been an observer of the GPA since April 2003.
SERVICES BARRIERS
Distribution Services (including logistical services) and Express Shipments
Sri Lanka does not provide de minimis treatment for the application of taxes on inbound shipments. Further, airport authorities do not provide preferential treatment to express cargo airlines. Rather, express shipments must undergo the routine examination procedure by security and the airport’s authority, which delays clearance.
Financial Services (including banking services)
At present, all foreign banks in Sri Lanka operate as branches. All banks operating in Sri Lanka, including foreign banks are required to establish two branches outside the Western Province for each new branch established in the Western Province. The Central Bank also requires all banks operating in Sri Lanka to direct a minimum 10 percent of lending for agriculture.
A 2.5 percent stamp duty applies to usage of credit cards issued by Sri Lankan banks for transactions entered into in foreign currency. Transactions in local currency are exempted from this duty.
As a result, U.S. e-Commerce firms, setting prices in dollars, face greater costs than local competitors when selling in the Sri Lankan market.
Insurance services
Only companies incorporated in Sri Lanka may be registered to carry on the business as an insurer. Foreign insurance companies that provide health insurance services to Sri Lankans must sell through an insurance broker registered in Sri Lanka and are restricted to insurance products not sold by local insurance companies. The Sri Lankan government requires all general insurance companies to cede 20 percent of their reinsurance coverage to a state-run insurance fund.
Audiovisual Services
In 1999, Sri Lanka imposed restrictions on the number of foreign films that can be imported into the country and required all of the films to be imported by the State Owned National Film Corporation. In 2002, Sri Lanka changed the rules and created five different entities – “circuits” – that can import foreign films, four private and one state-run, but kept the quota limits. Current restrictions limit the number of imported English language films to 65 per year (13 per entity). In 2018, Sri Lankan importers came close to the 65 film total limit and resorted to “shopping around” different circuits for quota slots. The overall process for importing foreign films remains opaque. In addition, the Ministry of Culture does not allow foreign language films to be subtitled in Sinhala or Tamil, widely restricting the market appeal of English-language films to non-English-speakers.
Sri Lanka also imposes taxes on foreign films, programs, and commercials shown on television. In 2017, the government increased the tax on foreign films and television series dubbed into Sinhala and Tamil from Rs 90,000 per 30-minute episode (approximately $515) to Rs 150,000 (approximately $857) per 30-minute episode. Foreign television shows in their original form (without dubbing) are taxed at Rs 100,000 (approximately $571) per 30-minute episode. Foreign films in their original form are taxed at Rs 200,000 (approximately $1,142). Higher rates apply to repeat telecasts. Foreign commercials are taxed at Rs 500,000 (approximately $2,857) in the first 6 months and at Rs 1,000,000 (approximately $5,714) during the next six months. Government approval is required for all foreign films and programs shown on television.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.