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Import Regulations - Sri Lanka

Background

The Sri Lankan economy is very reliant on the country's agricultural production. For this reason there are strict controls on the import of any goods or live animals or plants that may be detrimental to primary production. The primary enforcement agency with respect to cross border trade is Sri Lanka Customs (Customs). The Import Division of Customs is in charge of ascertaining whether commodities are correctly classified and valued for collection of the correct customs duty and other levies as well as for statistical purposes.

Sri Lanka adopted the customs valuation rules provided in the General Agreement on Tariffs and Trade in 2003 and therefore uses transaction value as the primary basis for the appraisement of imported goods for customs purposes.

Sri Lanka also relies upon the identification of goods via reference to the Harmonized Commodity Description and Coding System (six digits) and by reference to the National Sub- Commodity Codes (eight digits).

Basis of Duties and Taxes

Customs duty is levied in Sri Lanka upon all goods, wares and merchandise imported to or exported from Sri Lanka. Imports are subject to a plethora of levies and duties which are collectable at the point of importation, with each levy having its own applicable rate. Nevertheless, there are numerous preferential rates, concessions and exemptions available for goods not all of which are apparent at the outset.

The primary mode of customs valuation in Sri Lanka is transaction value subject to specific adjustments mandated under Article 8 of Schedule E of the Customs (Amendment) Act No 2 of 2003. Customs duty ranges from zero to 30 percent under a four band tariff structure with rates being 0 percent, 5 percent, 15 percent and 30 percent.

In addition, an importer is also liable to pay:

  • VAT - zero to 12 percent of the sum of the Cost Insurance and Freight (CIF) value x 110 percent, customs duty, surcharge, cess, excise duty and PAL
  • Excise Duty (special provisions) - A percentage of the sum of CIF value + x % (CIF value + import taxes)
  • Cess - zero to 35 percent of 110 percent of CIF value
  • Ports and Airports Development Levy - five percent of the CIF value
  • Nation Building Tax - two percent of the sum of the CIF value x 110 percent, customs duty, cess, excise duty and PAL

However, the Special Commodity Levy may be imposed on certain commodity items as a composite levy in lieu of all other tax, duty, levy, cess or charge.

Filing an import entry

Customs declarations are required to be lodged with Customs for all consignments, regardless of whether the imported articles are subject to duties or not. A false or untrue declaration will result in a forfeiture of the goods and the imposition of a penalty of thrice the value of the goods.

Registration and Paperwork

Importers (and exporters) must register with the Inland Revenue Department to obtain a tax identification number (TIN). Once they have obtained the TIN, they can automatically register with Customs and operate in Sri Lanka.

Documents may vary by case; they include a delivery order, bill of lading, invoice, packing list, certificate of origin, certificate of registration with an English translation for used motor vehicles, and, if applicable, an import licence. Sri Lanka Customs ensures that the necessary approvals have been obtained from the relevant government authorities (e.g. Import and Export Control Department, Sri Lanka Standard Institution, and Health, and Plant Quarantine) prior to releasing a cargo.

Conditionally duty free importations

Subject to certain conditions, and in accordance with the numerous international treaties to which Sri Lanka is a signatory, a number of items may be imported free of duty. For example, exhibit pieces, demonstration units, and articles for repair to be re-exported thereafter. Articles previously exported from Sri Lanka that have not undergone any processing overseas may also be imported free of duty, subject to certain conditions.

Duty drawback and bonded warehousing

If customs duty has been paid on imported goods and the goods are subsequently re-exported, a sum not exceeding 90 percent of the duty maybe repaid as drawback subsequent to certain conditions being fulfilled.

Customs bonded warehouses are available as a means of deferring import duty and the Director General Customs or an authorized officer may from time to time allow importation of articles which are intended for re-export without payment of import duty.

Free Trade Agreements (FTAs)

Sri Lanka is signatory to a number of bilateral and multilateral trade agreements. Sri Lanka is a member of the United Nations (UN) and the World Trade Organization (WTO). The former includes imports from India, Pakistan and Bangladesh, with the latter including imports from SAARC, SAPTA, SAFTA and GSP. These openings are sought to be extended further through a bilateral Comprehensive Economic Partnership Agreement (CEPA).

Investment Incentives

Certain imports are exempt from customs duty provided that the Director General of Customs is satisfied that they are imported for the specifically exempted purposes and approval has been obtained from the Secretary to the Treasury. These are specified from time to time by parliament. Board of Investment (BOI) projects related imports are also exempt from import duty.

Concessionary rates of duty are also afforded solely at the discretion of the Director General of Customs so long as they have been prescribed by parliament. These include plant, machinery and equipment related to the agricultural, textile and other export industries.

Standards, technical requirements, and certification

The Sri Lanka Standards Institution (SLSI) is the national standards body operating under the Ministry of Science & Technology. It is in charge of formulating standards, certifying products and systems, inspecting imports and exports, and providing laboratory services such as industrial measurement and calibration services.

Sri Lanka has a quarantine system in place to ensure that exotic diseases are not introduced through the importation of livestock and livestock products. A pre-export permit, which needs to be approved by the Director General of the Department of Animal Protection and Health (DAPH), is required to import livestock and livestock products. Food imports require an export certificate from the country of origin. Imports of live animals for human consumption are prohibited, except for breeding purposes. Consignments of live animals must be accompanied by a zoo-sanitary certificate issued by the government veterinary authority in the country of origin. At the port of entry, the Animal Quarantine and Inspection Officer (AQ&IO) inspects these consignments, and irrespective of the outcome of the inspection, they are put into quarantine.

Restricted Articles

Import prohibitions, which apply to a range of goods, are maintained for health, safety, security, environment, and moral reasons. Among these are articles considered offensive to a particular religion, appliances for discharging gas, articles that may be converted into lethal firearms, pornographic material, weapons, ammunitions, explosives etc. The complete list can be found in Schedule B to the Customs Ordinance. Certain restricted articles may be imported with a license from the respective Minister. The list of prohibited imports may be amended by Parliament at any time. If prohibited imports enter Sri Lanka they will be forfeited and destroyed and the importer is subject to a fine.

Sources

  • KPMG
  • Department of Import & Export Control
  • Sri Lanka Customs

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