WT/TPR/S/237/Rev.1 Trade Policy Review 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. Sri Lanka's trade reform efforts since its last Review have proceeded at a mixed pace.  Policy 
actions have included steps to enhance transparency , but have also resulted in the introduction of new 
border charges, which have, on average, increased border protection.  Sri Lanka's trade policy has 
relied mostly on price-based measures, which ar e more transparent, rather than on non-tariff 
measures.  Incentive programmes have been streamline d but continue to be complex and overlapping.  
Efforts have been undertaken to enhance intellect ual property protection, through the passage of new 
legislation stepping up enforcemen t, but further action still needs to be undertaken.  The end of the 
civil strife and the relatively high growth rates o ffer the opportunity to step up economic, trade, and 
institutional reform so as to enhance living standard s and spread more widely the gains of economic 
growth.  In June 2010, the Government announced an  overall reduction in tariffs, lowering many tariff 
rates to zero, and eliminating a 15% import surcha rge applied on most imports.  The Government is 
also envisaging unifying and further reforming its incentives regime and introducing comprehensive 
competition legislation. 
2. Tariff simplification has not proceeded quite as planned and, on average, tariffs are higher 
than in the previous Review.  The simple aver age applied MFN tariff was 11.5% in 2010, up from 
9.8% reported in Sri Lanka's last Review for 2003.  This is due mainly to the increase in one of the 
most widely used tariff rates from 25% to 30%, as a result of extensive rate changes introduced in 
August 2007 and June 2010, and despite the large numbe r of lines that are duty free.  In this respect, 
and despite the increase in the av erage rate, the proportion of du ty-free lines rose from 10% of the 
total in 2003 to 44.4% in 2010.  Although the orig inally planned two-band tariff system has not been 
attained, the tariff structure has been simplified, with the number of MFN applied rates falling from 11 in 2003 to 9 in 2010.  Only some 36.4% of all tariff lines are bound, at rates ranging from 0% to 75%.  In general, bound rates greatly exceed applie d rates, with an average bound tariff of 32.7%.  
However, at current applied levels, some 103 HS  eight-digit tariff lines exceed their bound rates, 
affecting mostly tobacco products, textiles, carpets, ploughs, and switc hes, among others.  
3. A number of import duty exemptions remain in place, although some effort has been 
undertaken to reduce them.  The overall value of the waivers on import duties and other taxes on 
imports in 2008, calculated as revenue forgone, is estimated at some 1.2% of GDP, with the main loss 
stemming from lower excise and import duty collection due to exemptions granted for the importation 
of automobiles.  Further reducing import duty ex emptions would add transparency to the import 
regime and increase tariff revenue.  Despite the general increase in tariffs during the period under 
review, import duty collection as a percentage of im ports declined from 5.1% in 2004 to 4.2% in 
2008, compared with an average applied tariff of 12%. 
4. Apart from tariffs, imports into Sri Lanka are subject to excise duty, a cess, VAT, and various 
levies and charges.  These charges in crease the cost of importing into Sri Lanka considerably, in some 
cases by over 100% of the value of the product.  Tobacco products and motor vehicles face the 
highest overall import charges.  Most imports, with  the exception of some basic goods, were subject 
to a 15% surcharge until June 2010, while an Export Development Board (EDB) Levy (Cess) is 
charged on imports under some 3,500 tariff subheadings  covering a relatively large range of products, 
including fruits, vegetables, processed and unprocessed  food, shoes, bags, rubber and plastic products, 
textile products, toiletry and perfumes.  The Cess is  applied on the customs value calculated in rupees 
adding a 10% margin, and ranges from 1% to 35%, with most goods at rates at or above 20%.  Excise 
duties are levied on tobacco products, oil products , aerated water, liquor, beer, motor vehicles, and 
certain household electrical items.  Although locally manufactured products are also subject to excise Sri Lanka WT/TPR/S/237/Rev.1 
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fees, when calculating the excise fee on imports, an  imputed profit margin of 15% is added to the 
import price including most other import duties.  Applied excise duty rates vary considerably;  they may be ad valorem  or specific and, in some cases, alternate.  The highest rates are applied on 
automobiles and some machinery.  Imports are also  subject to the Ports and Airports Development 
Levy (PAL) at a rate of 5%, and since early 2009 to a Nation Building Tax, currently at a rate of 3%.  
The VAT is applied at a general rate of 12%, with some exceptions. 
5. A Special Commodity Levy was introduced in 2007 on 11 essential food commodities, 
including milk powder, dhal, sugar, potatoes, and onions.  This single composite levy replaced the 
different duties and taxes applicable in resp ect of essential food commodities with a view to 
controlling the price escalation of these products.  Rat es are adjusted periodically to reflect price and 
demand and supply developments;  adjustments may be general or limited to specific products.  The 
levy has resulted in lower import duties for the products concerned. 
6. Despite increases in tariffs and other charges on imports, Sri Lanka has tried to make 
information available online regarding applied tariff levels and all other impor t charges.  However, 
and although orders modifying tari ff and other import tax rates are pub lished and available online, the 
constant change in rates adds discretion and cr eates confusion among importers.  Another important 
step toward transparency is the publication of figur es with respect to revenue forgone due to tariff and 
other tax exemptions.   
7. Although a major change since the last Review  has been the implementation of the WTO 
Customs Valuation Agreement (CVA), Sri Lankan legi slation grants the authorities the flexibility to 
depart from its principles when deemed necessary in the interest of the national economy or for any 
other reason, allowing for the use of minimum va lues.  During the period under review, minimum 
import prices have been applied on imports of used cars. 
8. The use of non-tariff barriers is relatively limited, mainly through the form of import licences.  
Sri Lanka maintains import prohibitions on a rang e of goods, mainly for health, safety, security, 
environment, and moral reasons.  The list of prohib ited imports may be amended by Parliament at any 
time.  Sri Lanka has a Special Import Licensing Sche me in place;  products under this scheme are 
subject to non-automatic licensing, as and when the country requires imports of these goods.  In June 2010, 512 items at the eight-digit HS leve l covering an array of goods including grains, 
chemicals, some textiles, petroleum, and motor vehicles were subject to non-automatic licences.  
Sri Lanka does not have any provisions in place to use contingency measures.  Two bills containing 
provisions on anti-dumping, countervailing dutie s, and safeguard measures were gazetted in 
October and November 2005, but are still awaiting the approval of Parlia ment (June 2010).   
9. Sri Lanka's national standards and technical regulations generally follow international 
guidelines.  Sri Lanka had notified 103 trade-relate d technical regulations to the WTO;  all were 
included in the Imports (Standardization and Qu ality Control) Regulations 2006, which specify 
products that must conform to a Sri Lanka Standa rd (SLS), to be allowed entry.  These goods are 
subject to inspection at the border.  Up to Marc h 2010, Sri Lanka had made 18 SPS notifications to 
the WTO.  Imports of certain plants, some liv e fish, soil, and living modified organisms are 
prohibited.  Imports of animals and animal pr oducts of ruminant origin are allowed only from 
countries that have been officially declared "BSE Provisional Free Status" by the OIE.  The importation of genetically modified (GM) food products requires prior approval from the Chief Food 
Authority. 
10. Sri Lanka imposes border charges on certain expor ts.  Export duties are levied on value-added 
vein quartz and raw vein quartz;  these duties replaced the system of minimum prices.  An export Cess WT/TPR/S/237/Rev.1 Trade Policy Review 
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is currently levied on cashew nuts, raw hides, meta l scrap, natural rubber, coconut products, and tea, 
for reasons varying from discouraging exports in raw form, ensuring local supplies, and generating 
funds for cultivation.  The use of these levies on exports of locally produced inputs may act as an 
incentive to domestic processing, as it diverts the su pply of inputs towards the domestic market and 
lowers domestic prices by penalizing exports. 
11. Several export incentive programmes are available.   Customs operates three schemes:  a duty 
rebate (drawback) scheme, a temporary importation for export processing scheme (TIEP), and the manufacture-in-bond scheme.  Sri Lanka also h as an export processing zones (EPZs) scheme;  the 
11 free-trade zones, also called export processing zones,  are administered by the Board of Investment 
(BOI).  Some 220 enterprises operate in the EPZs , employing over 75,000 persons.  Locating an 
enterprise in an EPZ entitles the company to tax holidays, duty-free imports, and concessionary land 
prices.  Exporters of non-traditional goods or service s also enjoy a number of tax concessions, such as 
a preferential income tax rate on profits from th ese exports and a full tax holiday for three to 
seven years for new investments.  These companies are required to export at least 80% of their goods 
production and 70% of services. 
12. There is no comprehensive single competition law in  Sri Lanka that outlaws practices per se;  
anti-competitive practices relating to monopolies, an d mergers and acquisitions are not covered by 
competition legislation.  Although the Consumer's Affairs Authority may investigate the effects on 
consumers of anti-competitive practices, Sri La nka's legislation does not allow it to conduct 
investigations on the existence of monopolies per se or to examine mergers or acquisitions that have 
already taken place.  Moreover, there are no provisio ns that make pre-merger notification mandatory.  
As a result, the only investigations on the effect s of mergers are for utilities, which are under the 
purview of the Public Utilities Commission.  The Government is in the process of drafting new 
competition legislation to address most of these issues, including the mandatory examination of mergers across the board (June 2010). 
13. Sri Lanka has not made any notifications to the WTO with respect to state-trading enterprises 
within the meaning of Article XVII of the GATT 1994.  Sri Lanka launched a programme of public 
enterprise reform and privatization in 1990, reinfor ced with the establishment, in 1996, of the Public 
Enterprises Reform Commission (PERC).  The PERC completed some 50 privatization operations, before it was closed in 2007 and the legal basis to  privatize was repealed.  The current policy on 
public enterprises is not to privatize, but to restru cture and improve their performance and to invite the 
private sector to invest in them and to make them  profitable, while keeping government ownership of 
at least 51%. 
14. Sri Lanka offers a wide range of tax incentives,  notably tax holidays, primarily for investment 
purposes.  The two main investment incentive regim es are under the Board of Investment (BOI) Act, 
and under the Inland Revenue Act.  Sri Lanka's curre nt system of tax incentives results in duplication 
and overlapping of beneficiaries if not  of benefits.  Effective tax rat es can vary substantially by firm 
and sector.  Although there is no estimate availa ble of revenue forgone due to these incentives 
schemes, income tax receipts, re main low (2.9% of GDP), and well below revenue from taxes on 
goods and services (7.4%).  Investment under the BOI Act scheme is subject to a number of 
requirements, including export performance and mini mum exports.  The duration of the tax holiday 
depends on the amount invested.  Under the Inland  Revenue Department (IRD) regime, income tax 
exemptions are provided usually for five years or for three years in some cases. 
15. Sri Lanka does not participate in the WT O Plurilateral Agreement on Government 
Procurement (GPA).  Procurement guidelines have been  streamlined and clarified to make the process 
more efficient and transparent.  However, govern ment procurement continues to be used as an 
instrument of economic policy, to promote domestic suppliers and products.  Sri Lanka grants price Sri Lanka WT/TPR/S/237/Rev.1 
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preferences for locally manufactured goods to prom ote value added of local raw materials and for 
domestic bidders.  The margins of preference for do mestic bidders for works and contracts are 7.5% 
for contracts funded by international donors, and 10% for contracts funded by the Government;  the 
margins for domestically manufactured goods are 15% and 20%, respectively.   
16. Sri Lanka introduced new, comprehensive intell ectual property legislation in 2003, aimed at 
ensuring compliance with the TRIPS Agreement.  The new Act covers:  copyright and related rights;  
industrial designs;  patents;  marks and trade names;   layout designs of integrated circuits;  unfair 
competition and undisclosed information;  and ge ographical indications.  The new Act has also 
extended the term of copyright protection, from life plus 50 years, to life plus 70 years.  Although 
enforcement of IPRs was reinforced during th e period under review, counterfeiting and piracy, 
particularly of computer software are still pervasive .  Tougher legal provisions to fight piracy have 
been introduced in recent years, but there is r oom for improvement with respect to enforcement. 
(2) MEASURES DIRECTLY AFFECTING IMPORTS  
(i) Procedures 
(a) Registration and documentation 
17. Sri Lanka Customs, which is under the remit of the Ministry of Finance, is responsible for 
customs procedures.  Details on customs procedures are contained in the Customs Ordinance, which 
is available online.1  The Ordinance was amended by Customs (Amendment) Act No. 2 of 2003, 
which, among other things, introduced WTO customs valuation rules (see below).2 
18. Importers and exporters must be registered with Customs to operate in Sri Lanka.  In order to 
register, importers must be registered with the Inland Revenue Department to obtain a tax 
identification number (TIN);  and must submit a completed customs declaration (CUSDEC) form to Customs, with all other relevant documents.  Th ese documents include:  a delivery order,  bill of 
lading;  invoice;  exchange documents;  packing list;  certificate of origin;  certificate of registration, 
with an English translation for used motor vehicles;  a load port survey certificate for food items;  and, 
if applicable, an import licence, a sanitary and p hytosanitary or quarantine certificate.  Sri Lanka 
Customs must ensure that the necessary approvals have been obtained from other relevant government 
authorities (e.g. Import and Export Control Departme nt, Sri Lanka Standard Institution, and Health, 
and Plant Quarantine) prior to releasing a cargo.  A hard copy of the CUSDEC is no longer required 
(since July 2010). 
19. Sri Lanka uses the Automatic System for Customs Data (ASYCUDA) for centralized, 
electronic implementation and control of customs procedures.  The system processes data, including 
transit and customs warehouses information, and manages the allocation of preferential quotas under 
FTAs.  The authorities indicated that 246,596 declarations were processed in 2009.  The average processing time is 16 hours. 
20. The Customs Department Imports Division secretar iat ("D" branch) is the final authority for 
classification disputes, exchange, and import contro l violations.  Duty waivers, concessions, and 
exemptions are also processed by "D" branch, whic h is responsible for the registration of Customs 
house agents, and for conducting investigations  and inquiries on matters related to imports. 
                                                     
 
1 Sri Lanka Customs online information.  Viewed  at:  http://www.customs.gov.lk/ordinance.htm. 
2 Customs Act No. 2.  Viewed at:  http://www.customs.gov.lk/docs/25325.pdf. WT/TPR/S/237/Rev.1 Trade Policy Review 
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21. With the aim of facilitating trade, the Imports Division gives pre-import classification rulings 
on commodities.  Importers who wish to obtain the HS Classification of a commodity must apply to the "D" branch;  there is a fee of Rs 300 (US$2.70).  The ruling is binding for a period of six months, but Customs has the right to change the HS clas sification before the end of this period if new 
information becomes available.  The new classifica tion would be applicable to all imports made on 
the basis of the earlier opinion and, if re quired, customs duties would be adjusted. 
22. No duties are levied on goods in transit or transshipped goods.  Goods re-imported into 
Sri Lanka after two years are subject to the same duties, regulations, and restriction as any import.  
Goods subject to any duty rebates or drawback at  the time of exportation would be subject to the 
appropriate duties, if re-imported. 
23. Payments for imports can be made under Letters of Credit (LC), Documents against Payment 
(DP), Documents against Acceptance (DA), or Advance Payment (AP) terms.  Letters of Credit are valid for up to 365 days.  AP terms are allowed where the total value of the goods does not exceed US$10,000;  goods must be received by th e importer within 90 days of payment. 
24. In March 2007, the Government lifted a require ment, introduced in October 2006, to keep a 
50% deposit on LC on more than 40 categories of non-essential imports of consumer items.  The 
Central Bank introduced in late 2008 temporary limits on forward contracts for the sale and purchase 
of foreign exchange, stopped prepayments on im port bills, and imposed a 100% deposit requirement 
on LC for the import of a range of items, includi ng confectionary, chocolates, personal care products, 
electrical items, tableware, apparel, footwear , lighting products, and watches.  The deposit 
requirement for motor vehicles is 200% of the im port value.  These limits were later withdrawn. 
25. Customs charges include seal charges at Rs 100/per container and container examination 
charges at Rs 400 for the first containe r and Rs 100 per additional container. 
26. According to the World Bank's 2010 Doing Busin ess report, an average of six documents are 
required for each import operation in Sri Lanka, belo w the South Asia average of nine.  The time 
needed to complete an import operation is 20 days ( 32 days for South Asia), and the cost to import is 
US$745 per container, considerably lower than the average for South Asia (US$1,509).
3 
(b) Preshipment inspection 27. Sri Lanka has notified to the WTO that it has no regulations on preshipment inspection.
4 
(ii) Customs valuation and rules of origin 
(a) Customs valuation 
28. As a developing country, Sri Lanka was schedul ed to start applying the provisions of the 
WTO Agreement on Customs Valuation on 1 January  2000, but was granted several extensions.5  The 
extensions were requested by Sri Lanka on the grounds that it required additional time to put in place the necessary legislation, administrative mechanisms  and procedures, train customs personnel, and 
modernize Sri Lanka Customs;  the latest extensi on was until 28 February 2003.  Sri Lanka completed 
                                                     
 
3 World Bank (2010). 
4 WTO documents G/VAL/W/41/Add.1, 3 March 2000, and G/PSI/N/1/Add.10, 19 July 2004. 
5 WTO documents G/VAL/W/41, 24 September 1999;  G/VAL/W/41/Add.1, 3 March 2000;  
G/VAL/W/41/Add.2, 11 October 2000;  G/VAL/W/90, 15 October 2001;  G/VAL/W/90/Add.1, 22 October 2001;  G/VAL/W/90/Corr.1, 25 October 2001; G/VAL/52, 8 January 2003. Sri Lanka WT/TPR/S/237/Rev.1 
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this process in late 2002 and implemented the required amendments to the Customs Ordinance 
through Customs (Amendment) Act No. 2 of 2003.6  As a result, Sri Lanka started applying the WTO 
Customs Valuation Agreement on 7 January 2003, before the end of the extension.7  Until that date, 
Sri Lanka used a valuation system based on the Brussels Definition of Value (BDV). 
29. Although the implementation of the CVA has been  a major change since Sri Lanka's last 
Review, its legislation grants the authorities the fl exibility to depart from its principles when deemed 
necessary.  While Schedule "E" of Customs (Amendm ent) Act No. 2 of 2003 by and large implements 
the WTO Customs Valuation Agreement, Article 10 of  the schedule grants the Minister (of Finance), 
with the approval of the Cabinet of Ministers, and in the interest of the national economy or for any 
other reason, the authority to apply minimum values for any goods and for a period to be specified in 
the Order implementing the measure.   
30. In accordance with this provision, Sri Lanka requested the WTO Committee on Customs 
Valuation in March 2003 to retain established minimum values on certain products for customs 
purposes, under the provisions of paragraph 2 of A nnex III.  Sri Lanka was granted an extension to 
delay its application of the rele vant provisions of the Agreement and to maintain a minimum value 
system on used motor vehicles and motor cycles cl assified under HS ex 87.01-87.04 and ex 87.11 
until 28 February 2005.8  In February 2005, Sri Lanka requ ested a further extension to apply 
minimum values on used motor vehicles and motor cycles until it could strengthen enforcement.  
Sri Lanka noted that it had explored alternate me thods to do away with the minimum value system, 
including the possibility of introducing specific duties instead of ad valorem  duties for motor vehicles, 
restricting imports of used motor vehicles for envi ronmental reasons, and had studied the experience 
of other countries as to how they dealt with valua tion fraud.  However, the studies had revealed that 
each system had its drawbacks.9   
31. Order No. 1,373/5 of 28 December 2004 under Cu stoms (Amendment) Act, No. 2, extended 
the use of minimum values for used motor vehicl es under HS headings 87.01, 87.02, 87.03, 87.04 and 
87.11 for two years starting from 7 January 2005.  The valuation method used is based on a  
"Depreciation Table for the Valuation of Used Mo tor Vehicles", valid since 15 October 2004.  Values 
are established as a percentage of the f.o.b. va lue and range from 25% for vehicles of more than 
six years to 90% for vehicles of more than six months but less than a year in the case of commercial vehicles, and from 40 to 95% in the case of non-comme rcial motor vehicles.  The authorities indicated 
in the course of this Review that minimu m prices are still applied for used cars.  
32. As at January 2010, Sri Lanka had not submitted its replies to the Checklist of Issues on 
Customs Valuation contained in WTO document G/VAL/5. 
(b) Rules of origin 33. Sri Lanka does not make use of non-preferential rules of origin, although it has not submitted 
a notification in this respect to th e WTO.  Preferential rules of or igin are applied under bilateral and 
regional trade agreements (Table III.1).  The criterion to confer origin is generally a change in tariff 
heading at the four- or six-digit level, and a per centage of local value added, which ranges between 
30% and 60% according to the agreement and tradi ng partner.  Goods that undergo no transformation 
must be fully originating in the preferential tr ading partner.  Accumulation is allowed under the 
various agreements. 
                                                     
 
6 See WTO document G/VAL/W/99, 25 April 2002. 
7 WTO document G/VAL/W/118, 10 January 2003. 
8 WTO documents G/VAL/W/118, 10 January 2003, and G/VAL/W/119, 26 February 2003. 
9 WTO document G/VAL/N/4/LKA/3, 21 March 2005. WT/TPR/S/237/Rev.1 Trade Policy Review 
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Table III.1 
Rules of origin 
Agreement Rules of origin 
Asia-Pacific Trade Agreement (APTA) Foreign content must not exceed 55% of f.o.b. valu e (65% for LDCs).  Cumulative rules of 
origin:  products that comply with origin requi rements and are used by a participating State 
as input for a finished product eligible for pr eferential treatment by another participating 
State are considered as a product originating in the territory of the participating State where 
working or processing of the finished product has taken place,  provided that the aggregate 
content originating in the territory of the participating States is not less than 60% of its f.o.b. 
value (50% for LDCs) 
South Asia Preferential Trading 
Agreement (SAPTA) Foreign content should not exceed 60% of the f. o.b. value of the finished good if produced 
in a single country, (70% for LDCs);  and 50%  if several members are involved (40% for 
LDCs).  Cumulative rules of origin:  products that comply with origin requirements and are 
used by a contracting State as input for a fini shed product eligible for preferential treatment 
by another contracting State are considered as  a product originating in the territory of the 
contracting State where work ing or processing of the fi nished product has taken place 
provided that the aggregate content originating in the territory of the cont racting States is not 
less than 60% of its f.o.b. value (50% for LDCs) 
South Asian Free Trade Area (SAFTA) Change in tariff heading at the HS 4-digit level.  Foreign content should not exceed 60% of  
the f.o.b. value of the finished good if produced in a single country, (70% for LDCs);  and 
50% if several members are involved (40% fo r LDCs).  Regional accumulation allowed if 
the aggregate content (value of inputs plus do mestic value added in further manufacture) is 
not less than 50% of the f.o.b. value;  and the domestic value content (value of inputs 
originating in the exporting contracting Stat e plus domestic value added in further 
manufacture in the exporting contracting State), is not less than 20% of the f.o.b. value;  and 
there is change of tariff heading 
Indo–Sri Lanka Free Trade Agreement Change in tariff heading at th e HS 4-digit level.  Minimum national content 35% of the f.o. b. 
value;  foreign content should not exceed 65% of  the f.o.b. value of the product.  Cumulative 
Rules of origin 
Pakistan Sri Lanka Free Trade 
Agreement (PSFTA) The domestic value added (DVA) in the exporting country must not be less than 35% of the 
f.o.b. value of the finished product and HS Codes of the imported raw materials and the 
finished products should be different at the 6- digit level (Change of Tariff Heading criteria) 
Global System of Trade Preferences 
(GSTP) No less than 50% of the f.o.b. value of the fi nal good if it originates from a single member 
State, (60% for LDCs);  60% if several members are involved (50% for LDCs) 
Source:  WTO document G/RO/W/129, 28 Septem ber 2009;  Sri Lanka Department of  Commerce online information.  
Viewed at:  http://www.doc.gov.lk/we b/indusrilanka_freetrade.php, and http ://www.doc.gov.lk/we b/pakissrilanka_ 
freetrade.php;  SAARC online information.   Viewed at:  http://www.saarc-sec. org;  UNESCAP online information.  
Viewed at:  http://www.unescap.o rg/tid/aptaro.pdf;  and GSTP onlin e information.  Viewed at: 
http://www.unctadxi.org/Secured/GSTP /LegalInstruments/gstp_en.pdf.  
(iii) Tariffs 
(a) Applied tariff 
34. The Sri Lankan 2010 applied tariff (HS2007 nomenclature) has 6,592 tariff lines at the 
eight-digit level, comprising rates ranging from 0% to 200%.  Over 96% of tariff lines are ad valorem,  
levied on the c.i.f. value of imports;  specific duties apply to 3.9% of all tariff lines, up from 1.3% in 2003 (Table AIII.1).  The simple average applie d MFN tariff was 11.5% in 2010, up from 9.8% 
reported in Sri Lanka's last Review for 2003.  This  is mostly due to the increase from 25% to 28% of 
the most widely used tariff rate, as a result of ex tensive rate changes intr oduced in August 2007 
through Revenue Protection Order (RPO) No. 03/2007 (Customs Duty Changes).
10  The 28% rate was 
increased to 30% in June 2 010, through RPO No. 01/2010.11 
                                                      
10 Customs Department online information.  Vi ewed at:  http://www.customs.gov.lk/tariff/duty_ 
changes_2007_august.pdf. 
11 Customs Department online information.  Viewed at:  http://www.customs.gov.lk/news/ 
rpoweb10.pdf. Sri Lanka WT/TPR/S/237/Rev.1 
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35. As a result of these changes, although the aver age was increased, the tariff structure was 
simplified, with the number of MFN applied rates fa lling from 11 in 2003 to 9 in 2009 (0, 5, 6, 15, 16, 
30, 75, 100, and 250%).  The highest rates (100%  and 250%) are applied on a handful of products, 
mostly cigarettes and tobacco.  Some 44.4% of tota l tariff lines are duty free;  23.1% bear a tariff of 
15%;  and 21.3% are subject to a 30% rate (mostly  agricultural and food products, consumer goods, 
chemicals, and other intermediate goods manufactured locally).  In ge neral, most basic raw materials 
are duty free, semi-processed raw materials are subject to a rate of 5%, intermediate products to 15%, 
and many finished products to a 30% rate.  
36. Despite the increase in the average, the propor tion of duty-free lines increased significantly 
during the review period, from 10% of the total in  2003 to 44.4% in 2010 (Table III.2).  Specific 
duties affect mainly agricultural products (e.g. ri ce, chillies, onions, and potatoes), but goods subject 
to specific or alternate duties also include foot wear, screws, driers, tiles, wood, belts, table and 
kitchenware, coal, and perfume.  Sri Lanka does not  calculate AVEs.  As noted in the previous 
Review, in the absence of AVEs to indicate otherwis e, specific rates may well conceal tariff peaks. 
Table III.2 
Tariff structure, 2003, 2009, and 2010  
(%) 
    MFN 
applied 2003 MFN   
applied 2009 MFN  
applied 2010a Final 
boundb 
1. Bound tariff lines (% of all tariff lines) .. 35.8 36.4 36.4 
2. Simple average tariff rate 9.8 12.0 11.5 32.7 
    Agricultural products (HS01-24) 21.0 24.2 25.4 50.1 
    Industrial products (HS25-97) 7.9 9.9 9.1 19.8 
    WTO agricultural products 21.3 24.3 25.6 50.1 
    WTO non-agricultural products 8.0 10.1 9.2 21.1 
        Textiles a nd clothing 5.2 7.3 7.4 12.2 
    ISIC 1 - Agriculture, hunting, fishing 16.8 19.9 20.8 48.5 
    ISIC 2 - Mining 5.3 7.3 6.3 50.0 
    ISIC 3 - Manufacturing 9.3 11.5 10.9 29.2 
        Manufacturing excluding food processing 7.9 9.9 9.1 19.4 
    First stage of processing 12.5 14.9 15.7 45.9 
    Semi-processed products 4.4 5.4 4.1 16.9 
    Fully processed products 12.1 14.9 14.5 32.5 
3. Duty-free tariff lines (% of all tariff lines) 10.0 11.7 44.4 0.4 
4. Non- ad valorem  tariffs (% of all tariff lines) 1.3 3.9 3.9 1.8 
5. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 1.3 3.9 3.9 1.8 
6. Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0 
7. Domestic tariff "peaks" (% of all tariff lines)c 0.3 0.3 0.3 0.1 
8. International tariff "peaks" (% of all tariff lines)d 21.9 23.8 23.9 69.3 
9. Overall standard deviation of tariff rates 12.4 13.5 14.7 20.2 
10. Coefficient of variation of  tariff rates 1.3 1.1 1.3 0.6 
11. Nuisance applied rates (% of all tariff lines)e 27.1 0.0 0.0 0.0 
.. Not available. 
a As of June.  
b Implementation of the U.R. was achieved in  2001.  Calculations for final bound rates are taken from the CTS database, adjuste d 
to the 2010 tariff schedule.   Including partially bound rates. 
c Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate. 
d International tariff peaks are defined as those exceeding 15%. 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: Calculations exclude specific rates and include the ad valorem part of alternate rates.  The 2003 tariff schedule is based on HS02 
nomenclature, consisting of 6,225 tariff lines;  the 2009 and 2010 tariff schedules ar e based on HS07 nomenclature, consisting,  
respectively, of 6,509 and 6,592 tariff lines. 
Source : WTO calculations, based on data provided by the Sri Lankan authorities. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 40 
 
 
37. Sri Lanka's tariffs are higher for processed goods than for semi-manufactures or raw 
materials.  This responds in part to the strate gy of promoting the development of manufacturing 
activities, mainly textiles and clothing, and the furniture industry.  This strategy is also reflected in the 
policy of granting import duty concessions for certain specific ends (see below).  Imports of gold;  
jewellery;  telecommunications, sports, and medical and dental equipment;  agricultural seeds;  and a 
range of machinery and equi pment are also duty free. 
38. Since 2003, the simple average tariff for agri cultural goods (WTO definition) has increased 
from 21.3% to 25.4%, and remains substantially higher than for manufactured goods (Table III.3).  
Tobacco receives the highest protection, followed by beverages and spirits, fru its and vegetables, and 
live animals.  Although the average tariff applie d on tobacco products has remained the same, at 
152.9%, protection for fruits and vegetables, grains, dairy products , live animals, and coffee and teas, 
has increased.  Non-agricultural products face an av erage tariff of 9.1%, up from 7.9% in 2003.  The 
rise in the average rate reflects an  increase in the rates on all main industrial categories, particularly 
electrical machinery, transport equipment, wood,  pulp and paper, and footwear (Table III.3). 
Table III.3 
Summary analysis of the MFN tariff, 2003 and 2010 
 MFN 2003 MFN 2010a 
 No. of lines Average 
(%) Range (%) No. of lines Average 
(%) Range   
(%) 
Total 6,225 9.8 0-250 6,592 11.5 0-250 
HS 01-24 931 21.0 0-250 1,021 25.4 0-250 
HS 25-97 5,294 7.9 0-25 5,571 9.1 0-30 
By WTO definition       
Agricultural products 883 21.3 0-250 955 25.6 0-250 
   Live animals and products thereof 108 22.7 2-25 107 26.6 0-30 
   Dairy products 21 20.7 10-25 21 26.2 5-30 
   Coffee and tea, cocoa, sugar, etc. 180 21.6 2-25 239 26.9 0-30 
   Cut flowers and plants 49 9.8 0-25 47 12.2 0-30 
   Fruit and vegetables 213 23.9 0-25 225 28.5 0-30 
   Grains 18 13.0 0-25 18 18.2 0-30 
   Oils seeds, fats, oil and their products 86 16.1 0-25 88 22.5 0-30 
   Beverages and spirits 45 24.4 10-25 46 29.4 15-30 
   Tobacco 18 152. 9 50-250 18 152.9 50-250 
   Other agricultural products, n.e.s. 145 8.0 0-25 147 9.9 0-30 
Non-agricultural products (incl. petroleum) 5,342 8.0 0-25 5,637 9.2 0-30 
Non-agricultural products (excl. petroleum) 5,324 8.0 0-25 5,619 9.2 0-30 
   Fish and fishery products 139 10.3 2-25 152 14.4 0-30 
   Mineral products, precious stones, etc. 368 10.9 0-25 386 13.3 0-30 
   Metals 675 7.7 2-25 674 9.1 0-30 
   Chemicals and photographic supplies 988 5.1 0-25 1,108 4.2 0-30 
   Leather, rubber, footwear, travel goods 193 14.9 2-25 193 18.6 0-30 
   Wood, pulp, paper and furniture 329 12.3 2-25 366 14.4 0-30 
   Textiles and clothi ng 891 5.2 0-25 866 7.4 0-30 
   Transport equipment 306 10.5 2-25 291 15.4 0-30 
   Non-electrical machinery 650 6.4 2-25 765 5.5 0-30 
   Electrical machinery 288 10.0 2-25 358 10.3 0-30 
   Non-agricultural products, n.e.s. 497 9.8 2-25 460 13.3 0-30 
Petroleum 18 5.0 0-25 18 7.5 0-30 
Table III.3 (cont'd)  Sri Lanka WT/TPR/S/237/Rev.1 
 Page 41 
 
 
 MFN 2003 MFN 2010a 
 No. of lines Average 
(%) Range (%) No. of lines Average 
(%) Range   
(%) 
By sectorb       
Agriculture, forestry and fisheries 431 16.8 0-75 457 20.8 0-75 
Mining 107 5.3 0-25 112 6.3 0-30 
Manufacturing 5,686 9.3 0-250 6,022 10.9 0-250 
   Manufacturing excluding food processing 5,122 7.9 0-25 5,386 9.1 0-30 
By stage of processing       
First stage of processing 796 12.5 0-75 876 15.7 0-75 
Semi-processed products 1,941 4.4 0-25 2,021 4.1 0-30 
Fully processed products 3,488 12.1 0-250 3,695 14.5 0-250 
a As of June. 
b ISIC Rev.2 classification.  Electricity, gas, and water excluded (1 tariff line).  
Note: Excluding specific rates.  The ad valorem  part of alternate rates are taken into account  for the calculations.  2003 and 2010 tariffs 
are based on HS02 and HS07 nomenclatures, respectively. 
Source:  WTO calculations, based on data provided by the Sri Lankan authorities. 
39. Import duty revenue totalled some Rs 64 billio n (US$570 million) in 2008 and Rs 79.6 billion 
(US$710 million) in 2009.  Despite the general in crease in tariffs during the review period, import 
duty collection as a percentage of imports declined from 5.1% in 2004 to 4.2% in 2008 (Table III.4).  
However, they increased to 6.8% in 2009.  Sim ilarly, the share of import duty revenue to GDP 
decreased from 2% in 2004, to 1.5% in 2008, before  increasing somewhat, to 1.6% of GDP in 2009.  
This was due to a faster increase of imports of intermediate goods, which carry lower duty, than of 
final goods.  Also, there was a decline, particular ly in 2008, in motor vehicle imports and slower 
growth in imports of other consumer durables, wh ich carry higher duty rates.  The decline of this 
share also reflects the implementation of a co mposite levy on essential commodities (the Special 
Commodity Levy, see below), for which rates were maintained below tariff and other import charges 
rates to ease price pressures in the domestic market s.  Lower tariff collection also stems from the 
impact of the programme of concessionary vehicle imports by public servants;  and an increase in the use of tariff waivers for essential commodities such  as food items and petroleum products to control 
domestic price escalation.  In 2008, the import restri ctions imposed by Central Bank of Sri Lanka by 
way of required deposits had an impa ct on import duty revenue;  these r estrictions were eliminated in 
2009. 
Table III.4 
Import duties collected, 2004-09 
 2004 2005 2006 2007 2008 2009 
Import duty collected (Rs billi on) 41.1 45.4 52. 7 56.3 64.0 79.6 
Imports (Rs billion) 811.1 891. 4 1,066.7 1,250.4 1,516.7 1,163.0 
Import duties as a % of imports 5.1 5.1 4.9 4.5 4.2 6.8 
Import duties as a % of GDP 2.0 1.9 1.8 1.6 1.5 1.6 
Source:  WTO Secretariat, based on information pr ovided by the Sri Lankan authorities. 
(b) Bound tariff 
40. Some 36.4% of all tariff lines are bound.  Most bound rates are ad valorem :  there is 
one specific bound tariff rate (HS 24.11.002) and 38 alternate rates (1.7% of total bound rates).  
Bound rates range from 0% to 75%;  almost half of all bound tariffs are bound at 50%.  The average bound tariff is 32.7%, compared with an average MFN tariff of 11.5%.  The average bound tariff for 
agricultural products (WTO definition) is 50.1%, while the average bound rate for non-agricultural WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 42 
 
 
products is 21.1%.  Bound rates greatly exceed a pplied rates, and the difference between them 
provides the authorities with scope to raise applied ta riffs:  the average applied rate was 9.6% in 2004. 
41. At the current applied levels, 103 HS tariff lin es exceed their bound rates (Table AIII.2).  The 
products affected are mostly tobacco produc ts, textiles, carpets, ploughs, and switches. 
(c) Tariff quotas 
42. Sri Lanka does not apply tariff quotas.  
(d) Variable levies and seasonal tariff 
43. Sri Lanka does not apply variable levies or seas onal tariffs.  However, agricultural tariffs and 
Special Commodity Levy rates are modified (or waived) in certain instances according to domestic 
supply;  these tariff changes could have th e same results as a seasonal tariff.   
(e) Concessional entry and exemptions 
44. Imported goods may be stored in a bonded warehous e exempt of duties for up to two years.  If 
goods are taken out of the warehouse for domestic consumption, they are subject to duties.  
45. Under the RPO No. 01/2008, a number of impor ted inputs and capital goods were eligible for 
a concessional duty rate of 2.5%;  RPO No. 01/2010 reduced this to zero as of 1 June 2010.  Under 
the terms and conditions approved by the Secretar y of Treasury, export-oriented industries may 
import goods under concessional terms, contingent upon the quantity exported (section (3)(vii)).  
Import duty and tax exemptions may be granted under section 19(A) of the Customs Ordinance and 
the Excise Special Provisions Act.  This covered, for example, the excise tax reductions granted for the importation of vehicles by public servants in 2007 and 2008. 
46. Additionally, import duty waivers are granted throughout the year to specific products for 
specified periods, generally to face supply shortages.  For instance, in 2009, waivers were granted on 
imports of wheat grain, maize, P.V.C. leather cloth, petrol and diesel, malt extract, and milk. 
47. The overall value of the waivers on import duties and other import taxes in 2008, calculated 
as revenue forgone, is estimated at some Rs  52 billion (US$465 million) or 1.2% of GDP 
(Table III.5).  The total loss of taxes was Rs 83 b illion (US$740 million), or some 1.9% of GDP;  this 
loss was partly offset by revenue from the Special Commodity Levy (SCL) (see below).  The largest 
loss of revenue stems from lower excise duty collecti on due to exemptions granted for the importation 
of automobiles, and from the reduced import duty and other taxes collection for food items, in view of 
their replacement by the lower SCL. 
(f) Tariff preferences 
48. Preferential rates are granted for certain ar ticles under multilateral (GSTP), regional (SAFTA 
and APTA), and bilateral agreem ents (India-Sri Lanka FTA, and Pakistan-Sri Lanka FTA).  
Preferences are granted mainly to Bangladesh, Bhut an, India, Laos, Maldives, Nepal, Pakistan;  
preferences under the GSTP are granted to only a few countries, and margins with respect to MFN 
rates are small.  Only preferences under the I SFTA and the PSFTA, and to LDCs under SAFTA are 
significantly lower than the simple aver age applied MFN of 11.5% (Table III.6). 
 Sri Lanka WT/TPR/S/237/Rev.1 
 Page 43 
 
 
Table III.5 
Loss of revenue due to duty waivers on essential comm odities, petroleum products and motor vehicles, 2008 
(Rs million) 
Item  CD VAT PAL SRL Surcharge Cess Excise 
duty Total loss 
of taxes Revenue 
from 
SCL Revenue 
forgone 
Sprats 168 168 84 3 25 0 0 448 443 5 
Milk powder 4,578 915 68 0 0 0 0 5,561 406 5,155 
Potatoes 2,110 258 80 32 0 0 0 2,480 1,727 753 
B onion 2,966 351 106 44 0 0 0 3,467 2,965 502 
Peas 469 366 51 8 70 0 0 964 324 640 
Chick peas 287 125 57 5 43 0 0 517 294 223 
Green gram 68 70 35 1 10 0 0 184 176 8 
Lentils 235 1,590 276 3 0 0 0 2,104 378 1,726 
Chillies 1,058 312 138 16 0 0 0 1,524 1,059 465 
Canned fish 644 281 129 11 96 0 0 1,161 478 683 
Coconut oil 148 150 0 2 22 0 0 322 0 322 
Palm oil 1,360 1,428 24 213 0 0 0 3,025 0 3,025 
Sunflower oil 13 13 0 0 2 0 0 28 0 28 
Soya oil 5 6 0 0 1 0 0 12 0 12 
Rice 1,286 0 0 19 0 0 0 1,305 0 1,305 
Sugar 5,090 1,406 608 76 56   7,236 7,106 130 
Food items  20,485 6,524 2,479 312 482 56 0 30,338 15,356 14,982 
Petrol 5,499 0 0 0 0 0 0 5,499 0 5,499 
Motor vehicles 2,694 2,837 0.6 349 0.6 0 11,094 16,975 0 16,975 
Total 49,163 16,800 4,135.6 1,094 807.6 56 11,094 83,150 30,712 52,438 
Note: CD:  customs duties, VAT:  Value added tax;  PA:  Ports a nd Airports Development Levy;  SRL:  Social Responsibility Levy;   
SCL:  Special Commodity Levy. 
Source:  Ministry of Finance and Planning ( 2008), Department of Fiscal Policy, Annual Report 2008 .  Viewed at:  
http://www.treasury.gov.lk/FPPFM/fpd/pdfdocs/ annualreports/annua lReport2008-eng.pdf. 
49. Estimates by the Ministry of Finance indicate that Sri Lanka's major four FTAs resulted in a 
loss in revenue of Rs 5,137 million (US$46 million)  in 2008 and Rs 5,963 million (US$53 million) in 
2009.  ISFTA had, by far, the largest impact with  an estimated loss, due to tariff concessions, of 
Rs 4,663 million (US$42 million) in 2008 and Rs 5, 342 million (US$48 million) in 2009 (Table III.7). 
Table III.6 
Preferential rates, 2010 
Total WTO agriculture WTO non-
agriculture Textiles and clothing   
Number of 
preferential 
linesa Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) 
MFN  11.5 55.7 25.6 88.7 9.2 50.1 7.4 43.8 
GSTP 76 11.4 55.7 25.6 88.7 9.2 50.1 7.4 43.8 
APTAb 371 11.3 55.7 25.5 88.7 9.0 50.1 7.3 43.8 
LDCs under APTAc 70 11.5 55.7 25.6 88.7 9.2 50.1 7.3 43.8 
SAFTAd 2,022 10.2 55.7 24.4 88.7 7.9 50.1 6.2 43.8 
LDCs under SAFTAe 2,059 7.7 55.6 22.3 88.6 5.3 50.0 3.3 43.8 
SAARCf 6 11.5 55.7 25.5 88.7 9.2 50.1 7.4 43.8 
Bangladesh preferential 22 11.5 55.7 25.6 88.7 9.2 50.1 7.4 43.8 
Indo-Sri Lanka FTA 
(ISFTA) 1,850 6.9 27.6 22.7 74.3 4.3 19.7 1.6 6.0 
Table III.6 (cont'd) WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 44 
 
 
Total WTO agriculture WTO non-
agriculture Textiles and clothing   
Number of 
preferential 
linesa Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) Average 
(%) Dutiable 
rates 
(%) 
Pakistan-Sri Lanka FTA (PSFTA) 2,529 5.8 54.1 12.4 86.2 4.8 48.7 2.4 43.0 
Bangladeshg 2,184 7.6 55.6 22.3 88.6 5.2 50.0 3.3 43.8 
Indiah 2,189 6.6 27.6 22.3 74.3 4.1 19.7 1.6 6.0 
Laosi 432 11.3 55.7 25.5 88.7 9.0 50.1 7.2 43.8 
Pakistanj 2,677 5.7 54.1 12.4 86.2 4.6 48.7 2.4 43.0 
Bhutan, the Maldives, 
Nepalk 2,062 7.7 55.6 22.3 88.6 5.3 50.0 3.3 43.8 
a The 2010 MFN tariff consists of 6,592 tariff lines, of which 2, 923 lines are duty free.  The number of preferential lines inc ludes 
only lines on which the rates are lower th an the corresponding MFN applied rate.  
b Preferential rates under APTA are applicable to Banglad esh, China, India, Laos, and the Republic of Korea. 
c Preferential rates for least developed countries unde r APTA are applicable to Bangladesh and Laos.  
d Preferential rates under the SAFTA are applicable to Bangl adesh, Bhutan, India, Nepal, Pakistan, and the Maldives. 
e Preferential rates for LDCs under SAFTA are applicable  to Bangladesh, Bhutan, Nepal, and the Maldives. 
f Preferential rates under SAARC are applicable to Banglad esh, Bhutan, India, Nepal, Pakistan, and the Maldives. 
g Including APTA, LDCs under APTA, SAFTA, LDCs unde r SAFTA, SAARC, and GSTP preferential rates. 
h Including APTA, SAFTA, SAARC, ISFTA, and GSTP preferential rates. 
i Including APTA and LDCs under APTA preferential rates. 
j Including SAFTA, SAARC, PSFTA, and GSTP preferential rates. k Including SAFTA, SAARC, and LDCs  under SAFTA preferential rates. 
Note: Calculations of averages exclude specific rates and include the ad valorem  part of alternate rates. 
Source:  WTO Secretariat, based on data provided by the Sri Lankan authorities. 
Table III.7 
Estimated revenue losses due to tariff concessions under Sri Lanka's main trade agreements, 2008 and 2009 
(Rs million) 
CIF value of concessions   Estimated revenue loss  Free trade 
agreement 2008 2009  2008 2009 
ISFTA 55,329 40,983   4,663 5,342 
PSFTA 2,331 4,593   353 518 
SAFTA 2,721 2,619   78 71 
APTA 365 239  43 32 
Source: Sri Lanka Department of Customs. 
(iv) Other charges affecting imports  
50. Imports are subject to several additional le vies:  excise duty, Cess (Export Development 
Board levy), VAT, Social Responsibility Levy, the Ports and Airports Development Levy (PAL), the 
Nation Building Tax, and port handling charges (B ox III.1).  These increase the cost of importing 
considerably, and in some cases by more than 100% (Table AIII.3).  An import surcharge was applied 
until 1 June 2010.  Tobacco products and motor vehicles face the highest overall import charges. 
(a) Import surcharge  
51. Most imports, with the exception of some b asic goods, were subject to a 15% surcharge 
during the period under review, until 1 June 2010.12  The surcharge was applied on the customs duty.  
                                                      
12 Exempted goods include milk and cream (HS headings and subheadings:  0402.10, 0402.21, 
0402.29, 0402.91 and 0402.99.90);  potatoes (HS 0701. 90);  onions and shallots (HS 0703.10.10, 0703.10.20, Sri Lanka WT/TPR/S/237/Rev.1 
 Page 45 
 
 
The list of exceptions was reviewed most recently in early 2010, when Amendments to the Surcharge 
Exempted List Duty Changes eliminated the surcha rge for some plastics, and extended it for all other 
products except those contained in Gazette No tification No. 1,574/15 of 6 November 2008 until 
30 June 2010.  RPO 1/10 eliminated the import surcharge as of 1 June 2010. 
Box III.1:  Computation formulas for the different taxes affecting imports 
Computation formulas for the different taxes affecting imported goods are as follows:  
Customs Duty (d) = (c.i.f. value) x (Customs duty rate);   
Tariff surcharge (s) = (Customs duty) x (Surcharge rate);  
Cess Levy (c) = (c.i.f. value in rupees (v) + 10% of v)  x (Cess levy rate), or (quantity) x (unit rate of 
Cess levy);   
Port and Airport Development Levy (p) = (c.i.f. value) x (PAL rate); 
Value Added Tax (t) = (v + 10% of v + d + s + c + p + e) x VAT rate (rt); Excise (Special Provisions) Duty (e):  two alternative formulas: 
At value base:  Excise (Special Provisions) Duty (e) = (v+15% of v + d+ s+ c+ p+ t) x rate of excise 
duty, or: At quantity base:  Excise (Special Provisions) Duty  (e) = (quantity) x (amount rate of excise duty); 
Regional Infrastructure Development Levy (i) = (v + d + s + c + p + t + e + l) x RIDL rate; 
Social responsibility Levy (l) = (d + s + e) x SRL rate. 
The applicable formula for the NBT is:   
Nation Building Tax (n) = (v+0.10v+d+s+c+p+e) rn, where v = c.i.f. value in rupees 
rn = Rate of Nation Building Tax 
Source: Ministry of Finance and Planning online information.  Viewed at:  http://www.treasury. 
gov.lk/index.htm. 
(b) Export Development Board (EDB) Levy (Cess) 
52. Since November 2004, the Government has been  charging a Cess on imports of a relatively 
large range of products, including fruits, vegetables, processed and unprocessed food, shoes, bags, 
rubber and plastic products, textile products (both appa rel and fabric), consumer items such as toiletry 
and perfumes, ceramicware, glassware, pens, and electrical goods.  The list has been expanded and 
taxes increased since its incepti on.  In early 2010, the Cess w as applied on over 3,500 tariff 
subheadings at the eight-digit level.13 
53. The Cess tax is applied on the customs value calculated in rupees plus a 10% margin;  it 
ranges from 1% to 35%.  The Cess rate on autom obiles was increased from 5% to 10% in 2008 and 
eliminated on 1 June 2010.  Many items are subject to an ad valorem  or a specific duty and the rate 
with higher tax incidence is applied when calculating the tax.  The application of these taxes, together 
with other charges applicable on imports (see be low), have increased Sri Lanka's overall border 
protection considerably.  The authorities indi cated that this was done for revenue purposes 
                                                                                                                                                                     
0703.10.30 and 0703. 10.90);  dried leguminous vegetables (H S 0713.40.11, 07 13.40.12, 0713.40.21 and 
0713.40.22);  chillies (HS 0904.20.11, and 0904.20.12);   seeds (HS 0909.20, 0909.30 and 0909.50);  mathe 
seeds (HS 0910.99.10);  wheat or meslin flour (HS 10.01.10 and 10.01.90.10);  rice (HS 10.06);  sugar 
(HS 1701);  infants' milk foods (HS 1901.10.01);  infants' food (HS 2106.90.05);  cement (HS 2523.21, 2523.29.30, 2523.30, and 2523.90);  plastics, other plates, sheets, film, foil, and strip of (HS 3921.12 and 
3921.13);  paper and paper (HS 4802.54.90, 4802.55.90, 4802.56.90, and 4802.57.90;  auto trishaws 
(HS 8703.21.51, 8703.21.52, 87.03.21.53, and 8703.21.54.  Gazette  Notification No. 1,574/15, 
6 November 2008.  Viewed at:  http://documents.gov.lk/Extgzt/2008/pdf/Nov/1574_15/1574_15E.pdf. 
13 Including items from HS chapters 02 to 24, 26, 27 , 30, 32, 33, 34, 38, 39, 40, 42, 43, 44, 46, 48, 49, 
52, 54, 55, 57, 58, 59, 60-69, 70-76, 78, 79, 80, 83-85, 91, 92, and 94-97.  The authorities note that the Cess on items in HS chapter 26 is about to be removed. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 46 
 
 
(Table III.8).  With the elimination of the import surcharge and the reduction in tariffs in June 2010, 
overall protection should be lower than for 2009 , albeit still significant for some products, in 
particular agricultural goods and transport equipment. 
Table III.8 
Summary analysis of import charges (excluding VAT), 2009 
 Custom duty (MFN)  Total duty rate,  
including extra chargesa 
 No. of lines 
Average (%) Range (%) Average (%) Range (%) 
Total 6,509 12.0 0-250 31.0 2-342.9 
HS 01-24 968 24.2 0-250 52.2 8.5-342.9 
HS 25-97 5,541 9.9 0-28 27.4 2-292.8 
By WTO definition      
Agricultural products 902 24.3 0-250 53.3 8.5-342.9 
Live animals and products thereof 107 25.4 0-28 60.6 8.5-76.2 
Dairy products 21 22.8 6-28 54.7 24.1-76.1 
Coffee and tea, cocoa, sugar, etc. 190 24.9 2.5-28 50.7 11.5-81.8 
Cut flowers and plants 47 12.7 2.5-28 29.4 11.5-76.1 
Fruit and vegetables 222 26.8 0-28 70.4 8.5-81.8 
Grains 18 17.0 2.5-28 36.6 11.1-81.8 
Oils seeds, fats, oil and their products 88 21.4 2.5-28 35.3 11.5-64.8 
Beverages and spirits 45 27.5 15-28 78.0 26.5-81.8 
Tobacco 18 152.9 50- 250 226.2 102.5-342.9 
Other agricultural products, n.e.s. 146 10.3 0-28 21.9 8.5-76.1 
Non-agricultural products (incl. petroleum) 5,607 10.1 0-28 27.6 2-292.8 
Non-agricultural products (excl. petroleum) 5,589 10.1 0-28 27.6 3.3-292.8 
Fish and fishery products 152 14.5 2.5-28 27.0 11.5-76.1 
Mineral products, precious stones, etc. 385 13.3 0-28 31.2 3.3-81.8 
Metals 671 10.1 0-28 22.2 8.5-70.4 
Chemicals and photographic supp lies 1,095 5.9 0-28 18.1 3.3-81.8 
Leather, rubber, footwear, travel goods 192 18.1 2.5-28 41.8 11.5-81.8 
Wood, pulp, paper and furniture 362 14.4 0-28 29.2 8.5-76.1 
Textiles and clothing 863 7.3 0-28 27. 4 8.5-81.8 
Transport equipment 290 15.7 0-28 68.2 8.5-292.8 
Non-electric machinery 762 6.8 0-28 20.7 8.4-169.9 
Electric machinery 357 12.2 0-28 30.5 8.5-79 
Non-agricultural products, n.e.s. 460 14.8 0-28 32.0 8.5-87.2 
Petroleum 18 7.5 0-28 16.2 2-37.7 
By sectorb      
Agriculture, forestry and fisheries 442 19.9 0-75 42.2 3.3-132.6 
Mining 112 7.3 0-28 16.9 2-42.1 
Manufacturing 5,954 11.5 0-250 30.4 3.3-342.9 
Manufacturing excluding food processing 5,356 9.9 0-28 27.7 3.3-292.8 
By stage of processing      
First stage of processing 837 14.9 0-75 32.4 2-132.6 
Semi-processed products 2,010 5.4 0-28 16.3 3.3-76.1 
Fully processed products 3,662 14.9 0-250 38.7 3.3-342.9 
a Calculation for averages with extra char ges include:  import surcharges, excise dutie s, Cess, the Ports and Airports Developm ent 
Levy, Social and Responsibility Levy, Regional Infrastructure Development Levy and the National Building Tax. 
b ISIC Rev.2 classification.  Electricity, gas, and water is excluded (1 tariff line). 
Note: Calculations exclude sp ecific rates and include the ad valorem part of alternate rates.  Calcul ations have been made by the 
Customs authorities and are based on the 2009 tariff, latest year for which the calculation was made (as at June 2010). 
Source :  WTO calculations, based on data provided by the Sr i Lankan authorities and Sri Lanka Customs online 
information.  Viewed at:  http: //www.customs.gov.lk/ [26 January 2010]. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 47 
 
 
54. The legal foundation of the EDB Cess on imports is Gazette  Nos. 1,586/26, 30 January 2009;  
1,589/31, 20 February 2009;  1,595/25, 2 April 2009;  1,609/07, 5 July 2009;  and 1,612/31, 31 July 2009.  The objectives of the Cess are to discourage imports of non-essential items, to protect 
local farmers and manufacturers, and to channel fund s for research and development.  The proceeds of 
the Cess are used as funds for the implementa tion of the Export Development Programme (see 
below).  The Cess is not applicable when the goods  are imported for the purpose of processing and re-
export, for the manufacture of goods for export, for the production of drugs registered under the Cosmetic Devices and Drugs Act, and for Ayurve dic, Siddha, Unani raw prepared drugs, and 
medicinal plants as specified by the Director-General  of Customs in consultation with the Ministry of 
Health.   
55. A Cess on edible oils (soy oil, ground nut, olive oil, sunflower o il, palm oil, etc. and their 
fractions) was applied between 2006 and 2009, unde r regulations in Gazette No. 1,453/4 of 
11 July 2006.  The objective of this tax (Rs 6/per kg on imported edible oils) wa s to generate funds for 
launching programmes for a sustainable developmen t of the coconut sector.  The cess was removed 
by Order No. 1,586/26, 30 January 2009.  
56. The Cess totalled Rs 23,383 million (US$209 m illion) in 2008, a 36% increase over 2007, 
and Rs 28,521 million (US$255 million) in 2009, 17 % more than in 2008.  Revenue from the Cess 
represented 0.6% of GDP and 2.4% of total imports in 2009, up from 0.2% of  GDP and 0.6% of total 
imports in 2006.  Over 60% of the Cess collected stems from vehicles, cement, alcoholic beverages, 
and ceramic tiles.  Since 2008, almost all textile a nd clothing products have been subject to the Cess.
14 
(c) Excise duties 
57. Excise duties are levied on tobacco products, oil products, aerated water, liquor, beer, motor 
vehicles, and certain household electrical items (Table AIII.4).  Although locally manufactured 
products are also subject to excise duties, an im puted profit margin of 15% is added to the import 
price before calculation of the duty, and the duty is applied on the value including most other import 
duties (see Box III.1).  Also, most goods incl uded in the list are mainly imported.   
58. Applied excise duty rates vary considerably;  they can be ad valorem  or specific or, in some 
cases, alternate.  The highest rates are applied on au tomobiles and some machinery.  The excise tax is 
up to 120% on certain types of vehicles (for exampl e, those classified under HS headings 8703.31.30, 
8703.32.30, 8703.33.30) and the rates on others range between 23% and 100%.  However, under 
some specific conditions, subject to a resolution by the Ministry of Finance, certain types of vehicles 
may be subject to lower duty rates, or exempt.  Television and radio receivers and other household 
electrical items are generally taxed at 15%, while cigarettes and tobacco are subject to specific duties.  The list of goods subject to excise taxes is considerably more extensive than in 2003. 
59. Mainly as a consequence of a contraction in proceeds from imported motor vehicles, due to a 
decline in the numbers imported, proceeds from excise taxes have declined as a share of fiscal receipts 
in recent years, falling from 3.2% of GDP in 2006 to 2.3% in 2008 and 2% in 2009 (Table III.9). 
(d) Ports and Airports Development Levy (PAL) 
60. Imports are also subject to the Ports and Airports Development Levy (PAL) at a rate of 5% or 
a concessionary rate for imports used solely fo r processing and re-export purposes.  The PAL rate was 
increased from 3% to 5% as of 1 January 2009, and the PAL levied on imports used solely for processing and re-export was reduced from 0.75% to  0.5%.  In addition, tobacco (HS 240110) 
                                                     
 
14 Ministry of Finance and Planning (2008). WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 48 
 
 
imported for processing and re-export has been ex empted from the PAL.  Revenue from the PAL 
totalled Rs 31,017 million (US$277 million)  in 2008, 20% a bove the 2007 level. 
Table III.9 
Excise tax performance, 2006-09 
Product Revenue Rs million   Growth (%)  
 2006 2007 2008 2009  2007 2008 2009 
Liquor 20,662 23,723 27,434 28,516  14.8 15.6 4.0 
Cigarettes 30,099 31,447 37,288 37,601  4.5 18.6 0.8 
Motor vehicles 20,731 17,415 11,067 3,192  -16.0 -36.5 -71.2 
Petroleum and other  21,353 24,099 25,182 28,295  12.8 4.5 12.3 
Total 92,845 96,684 100,971 97,604  4.1 4.4 -3.3 
GDP ratio (%) 3.2 2.7 2.3 2.0     
Source: Ministry of Finance and Pl anning online informa tion.  Viewed at:  http:// www.treasury.gov.lk/index.htm. 
(e) Nation Building Tax  
61. Since early 2009, imports must pay the Nation Building Tax (NBT), governed by the NBT 
Tax Act No. 9 of 7 January 2009, which entered into  effect on 1 February 2009.  The NBT is payable 
on a self-assessment basis by importers, manufactu rers, and service providers with a quarterly 
turnover exceeding Rs 650,000 (US$5,8 00).  Manufacturers and service providers must be registered 
with the Nation Building Tax (NBT) Unit of the Depa rtment of Inland Revenue of the Ministry of 
Finance.  Importers are not required to register, si nce the NBT is charged at the border and is payable 
to the Customs Department. 
62. The NBT rate was increased from 1%, charged from 1 February to 30 April 2009, to 3%.  
Sales of rice manufactured from locally procured paddy (but not from imported rice) is taxed at a 
reduced rate of 1.5%.  Exports and imported parts and inputs to be used in the manufacture of articles 
for export are exempt from the NBT (Table III.10).  The NBT on imports is applied on the customs 
value calculated in rupees plus a 10% margin, and including all other taxes applied on imports, except 
the VAT. 
Table III.10 
Nation Building Tax exceptions 
Any product exported by the manufacturer of such article  
Products, other than plants, machinery or fixtures imported excl usively for use in the manufacture of any article for export  
Products sold to any exporter showing a lette r of credit opened in any bank in Sri Lanka  in respect of the export of that produ ct or other 
documentary evidence that such article ha s in fact been exported from Sri Lanka 
Products imported for:   display at an exhi bition;  temporary use in Sri Lanka in any article to be produced in Sri Lanka;  for  the purposes 
of repairs to be carried out in Sri Lanka;  or to be re-shipped, within a one year from the date of importation 
Products imported, which prior to its im portation, were taken out of Sri Lanka for repairs, if proved to satisfaction 
Cinematographic or television fi lms produced in Sri Lanka for further processing or printing  
Spare parts imported by airlines or shipping companies  
Articles sold to the United Nations Organization or  any specialized agency or diplomatic mission 
Fertilizers;  petroleum and petroleum products;  LP ga s;  pharmaceuticals;  tea supplied by the manufacturers 
Articles used in any project approved by the Minister of Finance 
Imports made considering the ec onomic benefit to the country 
Temporary imports for the use of projects on the condition of re-export Articles imported for use in pharmaceutical manufacturing in Sr i Lanka and packing material not manufactured in Sri Lanka
  
Table III.10 (cont'd) Sri Lanka WT/TPR/S/237/Rev.1 
 Page 49 
 
 
 
Banking and financing;  supply of electricity;  medical services;  supply of water;  transport of goods or passengers;  leasing  of movable 
properties;  construction services of cont ractors (buildings, roads, bridges, water supply, drainage or sewerage, harbour, air port or any 
infrastructure project in telecommunication or electricity);  se rvices provided to exporters of any article directly related to  improve the 
quality and charter of such article;  servi ces provided for exporter of sewing garments;  services provide by  a freight forward er, shipping 
agent or courier in respect of the export  of any article from Sri Lanka;  services provided by a public corporation in respect of the export 
of any article from Sri Lanka;  operating a hotel, guest house, re staurant or other similar business registered with the Sri La nka Tourist 
Board;  services provide by an auctioneer, broker, insurance ag ent or commission agent of any local produce;  services provided  by a 
travel agent in respect of inbound tours regi stered with the Sri Lanka Tourist Board;  software developed for the use wholly ou tside 
Sri Lanka for which the payment is received in foreign currency through a bank;  services provided over the internet, using sof tware built 
by a person in Sri Lanka to a person abroad for payment in fore ign currency;  client support services provided over the interne t or 
telephone by an enterprise for the payment in foreign currency;   life insurance business;  distribution or production and suppl y of any 
cinematographic films primarily for exhibitio n in cinemas;  exhibiting films in a cine ma;  services provided to the U.N. Organi zations or 
any specialized agency or to th e diplomatic mission;  any service rendered in or outside Sri Lanka for foreign currency and if remitted to 
Sri Lanka through a bank;  services of any 'General Sales Agent'  registered under the Civil Aviation Authority of Sri Lanka;  i mportation 
of air crafts or ships on leases or outright purchases;  serv ices obtained from any foreign consultancy under any foreign funde d project 
Exemptions granted by the Cabinet of Ministers  
Importation of any article for use exclusively in manufacturing pharmaceuticals in Sri Lanka and for packing material used excl usively 
for pharmaceuticals manufactured in Sri Lanka; 
Leases or outright purchases of aircraft and ships brought to Sri Lanka; 
Articles subject to the Special Commodity Le vy as specified by the Special Commodity Levy Act No. 48 of 2007, when sold after a ny 
value added in Sri Lanka; 
Plant, machinery and equipment imported for the use of projects on temporary basis on the condition of re-export after the comp letion 
of work; 
Services obtained from foreign consulta ncies in respect of these projects; 
Importation of machinery and equipment by the Ceylon Electricity Bo ard (CEB) or by any other agency  that entered into agreement  
with the CEB for electricity generating projects impl emented to supply electricity to the national grid; 
Importation of gold.  
Source:  Sri Lanka Department of Fiscal Po licy and Sri Lanka Customs.  Viewed at:  http://www.customs.gov.lk/news/ 
nbtexcempt.pdf. 
63. Only manufacturers are entitled to an NBT cr edit;  service providers and importers are not 
eligible.  NBT collection reached Rs 27,203 million (US$243 million) in 2009, of which 
Rs 14,630 million (US$130 million) on imports. 
(f) Special Commodity Levy 
64. The Special Commodity Levy was introduced u nder the Special Commodities Act No. 48 of 
2007 on 11 essential food commodities, including milk  powder, dhal, sugar, potatoes, and onions.  
This single composite levy replaced the various duties and taxes applicable in respect of essential food 
commodities with a view to controlling price esc alations of these products.  Rates are adjusted 
periodically to reflect price and demand and suppl y development;  adjustments may be general or 
limited to some products.  Rates were adjusted  five times in 2009, and again in early 2010 
(Table III.11). 
65. In 2008, the Special Commodity Levy gene rated Rs 15.38 billion (US$137 million) in 
revenue, but the Government had to forego nearly  Rs 10 billion (US$89 million) as a result of the 
imposition of a single levy, in lieu of the regular taxes and duties that were applicable for the 
11 essential food commodities concerned (Table III.12).  In 2009, SCL receipts totalled 
Rs 18.06 billion (US$161 million), while revenue  forgone was Rs 5.13 billion (US$46 million). 
 WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 50 
 
 
Table III.11 
Special Commodity Levy, May 2010 
HS Heading Product Rate 
0305.59.20 Sprats, dried, not salted Rs 30/per kg 
0701.90  Other - Potatoes Rs 10/per kg 
0703.10.10  Red onions Rs 10/per kg 
0703.10.20  B' onions Rs 10/per kg 
0703.20  Garlic Rs 30/per kg 
0713.10  Peas (Pisum sativum) Rs 10/per kg 
0713.20  Chickpeas Rs 15/per kg 
0713.31.10 Green gram (Moong) Rs 15/per kg 
0713.40.11  Masoor dhal (red lentils) - Whole Rs 1/per kg 
0713.40.12  Masoor dhal (red lentils) - Spilt Rs 2/per kg 
0713.40.12  Masoor dhal (Yellow lentils) - Whole Rs 1/per kg 
0713.40.22  Masoor dhal (Yellow lentils) - Spilt Rs 2 /per kg 
0904.20.11  Chillies - Neither crus hed nor ground Rs 20 /per kg 
0904.20.12  Chillies - crushe d or ground Rs 25 /per kg 
1604.11  Salmon Rs 85/per kg 
1604.12  Herrings Rs 85/per kg 
1604.13  Sardines, sardinella  and brisling Rs 85/per kg 
1604.14  Tunas, skipjack and bonito Rs 85/per kg 
1604.15  Mackerel Rs 85/per kg 
1604.16  Anchovies Rs 85/per kg 
1604.19  Other Rs 85/per kg 
1604.20  Other prepared or preserved fish Rs 85/per kg 
Source : Sri Lanka Customs online information.  Viewed at:  http ://www.customs.gov.lk. 
Table III.12 
Revenue losses due to imposition of the SCL, 2008 and 2009 
(Rs million) 
c.i.f. value of imports  
SCL revenue  Revenue if regular 
taxes/duties were in 
force  
Revenue forgone Commodity 
2008 2009  2008 2009  2008 2009  2008 2009 
Sprats 2,796 3,724  443  795  448 861  5 66 
Milk powdera 30,581 n.a.  429 n.a.  5,561 n.a.  5,155 n.a. 
Potatoes 2,673 2,723  1,727 2,215  2,480 2,379  753 164 
B' onions 3,545 4,838  2,965 3,198  3,467 3,491  502 293 
Peas 1,676 1,801  324 780  964 881  640 101 
Chick peas 1,750 2,064  294 528  517 686  223 158 
Lentils 9,173 10,003  378 805  2,104 1,871  1,726 1,066 
Green gram 1,168 1,276  176 217  184 279  8 62 
Chillies 4,578 4,976  1,059 1,328  1,524 1,800  465 472 
Canned fish 4,301 3,829  478 1,058  1,161 1,274  683 216 
Sugar 20,258 28,579  7,106 7,136  7,236 9,687  130 2,531 
Total 82,499 63,813  15,379 18,060  25,646 23,209  10,290 5,129 
n.a. Not applicable. 
a Regular duties/taxes were imposed on milk powder with  effect from March 2009, removing it from the SCL. 
Source : Ministry of Finance and Planning. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 51 
 
 
(g) Value-Added Tax 
66. Sri Lanka applies a VAT on sales by manufacturer s, service providers, and importers.  The 
VAT was introduced on 1 August 2002 to repl ace the Goods and Services Tax (GST) and the 
National Security Levy (NSL).  The VAT is ch arged at 12% (standard rate), and 20% (luxury 
items).15  Exports are zero-rated.  Wholesale transactions are exempted from the VAT but are subject 
to a 1% Business Turnover Tax (BTT) imposed by Provincial Councils. 
67. The standard VAT rate was reduced from 15% to 12% with effect from 1 January 2009.  
Some 465 goods, including basic food, fertilizer s, and petroleum oil and gases, are exempt.16  VAT is 
levied on the customs value of imports plus 10% pl us the import duty, the import surcharge, the Cess, 
the PAL, and the excise duty.  On domestically manufactured goods, the VAT is charged on the sale 
price excluding the VAT component;  on services, it is  charged on the final consumer price excluding 
the VAT component. 
68. VAT is applicable on domestic manufacturers and service providers with a threshold 
equivalent to a turnover exceeding Rs 650,000 (U S$5,800) in any quarter or of Rs 2.5 million 
(US$22,300) in any four successive quarters.  Th ere is no threshold for imports, all of which are 
subject to the VAT.  Net revenue from VAT collect ion fell as a percentage of GDP between 2006 and 
2009, to 3.6% (Table III.13).  Some 47% of VAT co llected in 2008 was levied on imports, down from 
53% in 2006;  this percentage fell further in 20 09, to 43%, partly due to a decline in imports. 
Table III.13 
Collection of VAT, 2006-09 
 2006 2007 2008 2009 
Gross revenue (Rs million)     
Domestic 82,508 95,843 112,682 105,503 
Imports 93,221 101,813 100,831 73,997 
Total gross revenue 175,729 197,656 213,513 179,500 
Refunds  11,174 9,957 9,801 7,973 
Net revenue  164,555 187,699 203,712 171,527 
Net revenue (as a % of GDP) 5.6 5.2 4.6 3.6 
Source: Ministry of Finance and Pl anning online informa tion.  Viewed at:  http:// www.treasury.gov.lk/index.htm. 
(h) Other charges  
69. A Social Responsibility Levy is charged on impor ts.  The rate is 1.5% assessed on the value 
of imports including tariffs, import surcharge and excise duties.  The proceeds are used to fund the 
National Action Plan for Children. 
70. Sri Lanka charges a 5% Regional Infrastructure Fee on imports of some automobiles.   
                                                      
15 The luxury rate applies on:  air conditioning machines, refrigerators, dish washers, washing 
machines, vacuum cleaners, floor polishers, kitchen waste disposers, watches/clocks, musical instruments, equipment for games, food grinders and mixers, liquor, ovens and cookers, hair dryers/hair dressing equipments, 
video players, cameras, radios, casse ttes and music systems, televisions, jewellery, and aerated water.  The 
luxury rate also applies to: motor vehicles other than three wheelers, passenger tran sport buses, lorries, trucks, 
motor bicycles and any other vehicle us ed for the transport of goods;  the supply of services by hotels, guest 
houses, restaurants or similar institutions. 
16 For a complete list of these products at the HS eight-digit level see Sri Lanka Customs online 
information.  Viewed at:  http://www.customs.gov.lk/slcnew/Articles/NewVat.htm. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 52 
 
 
(v) Import restrictions and licensing 
(a) Import restrictions 
71. Sri Lanka maintains import restrictions on a range of goods, mainly for health, safety, 
security, environment, and moral reasons.  These incl ude:  appliances for discharging gas, crackers 
that contain explosives;  firearms;  toy pistols;  c ounterfeited coins;  fish, grain, and other articles unfit 
for human consumption;  meat (fresh or frozen) de rived from any warm-blooded  animal, if it consists 
of offal, scraps, trimmings and other pieces in su ch condition as to afford insufficient means of 
identification with a definite part of a carcass, or from which certain glands have been removed;  road vehicles, and agricultural and construction machinery, more than ten years old;  guns designed to be 
disguised;  weapons, ammunition, e xplosives, vehicles and equipment capable of being used by the 
armed forces, except by licence from the Ministry of Defence;  jewellery or articles made out of ivory, and some medicaments and chemicals.  The importation of articles and books that are obscene or may offend religious beliefs, and of narcotic drugs is prohibited. 
72. The list of restricted imports may be amended by Parliament at any time.  In October 2008, 
the Central Bank introduced limits on forward contracts for the sale and purchase of foreign 
exchange, prevented prepayments on import bills, and imposed a 100% deposit requirement on letters 
of credit for the import of non-essential items.  The list includes confectionary, chocolates, personal care products, electrical items, tableware, apparel, footwear, lighting products, and watches.  In the 
case of motor vehicle imports, the deposit require ment was 200% of the import value.  These 
restrictions were removed in 2009.
17 
(b) Import licensing 
73. Sri Lanka notified to the WTO its rules on import licensing procedures in May 2003.18  The 
licensing system is regulated by the Imports and Ex ports (Control) Act No. 1 of 1969 and by Special 
Import Licence Regulation No. 1 of 1977, as amended,  which establishes the list of goods subject to 
import licensing.  The Special Import Licensing Scheme was introduced on grounds of national security, health and environment, as well as "economic" reasons, and is administered by the 
Department of Imports and Export Control.  Pr oducts listed in the Regulation are subject to 
non-automatic licensing, as and when the country re quires such importation, which is considered on a 
case-by-case basis.  The system applies to goods originating in all countries.  There is no automatic import licensing system.  The authorities indicate that applications for licences are processed within two days.  Licences are granted 30 days prior to th e date of importation, if requested.  However, 
applications for a licence may be made up to a w eek before importation and licences may be obtained 
within a shorter time-limit for goods arriving at th e port without a licence.  Certain licences may be 
issued only on the basis of past  performance;  for instance, block licences, valid for one year, are 
issued for importers who have impor ted drugs during the previous three- year period.  In some cases, 
licences may be issued on condition that the goods ar e exported and not sold in the domestic market, 
for example used vehicles imported for reconditioni ng in Sri Lanka and sub sequently re-exported.  
Imports by enterprises that have an agreement with  the Board of Investment and are eligible to 
import/export goods free of restrictions, are not subject  to import licensing restrictions for materials 
related to the project. 
                                                     
 
17 The deposit requirement against the opening of letters of credit for the importation of motor vehicles 
was increased from 100% to 200% in October 2008.  Thes e monetary policy measures were imposed to curb the 
pressure exerted on the exchange rate and the balan ce of payments by the expa nsion of money and credit 
aggregates.  They were repealed in March and April 2009, in view of the reduction of inflation, the deceleration 
of monetary aggregate growth and a favourable outlook with respect to inflation expectations. 
18 WTO documents G/LIC/N/1/LKA/1, 20 May 2003 and G/LIC/N/3/LKA/1, 27 May 2003. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 53 
 
 
74. Any person, firm, or institution may apply for a licence, without registration.  Importers must 
pay a licence fee equivalent to 0.2% of the c.i.f. valu e of imports, with a minimum fee of Rs 1,000.  In 
case of refusal, the applicant has a right of appeal to the Minister concerned.  A licence is valid for 
six months from the date of issue.  The validity ma y be extended more than once, on request.  There is 
no penalty for the non-use of a licence or a porti on of it.  Licences are not transferable between 
importers. 
75. Products subject to non-automatic licences c over an array of goods including grains, 
chemicals, petroleum, and motor vehicles.  In March 2010, 512 items at the eight-digit level were 
subject to import licensing, compared with 474 reporte d in the last Review.  More than 25% of these 
lines corresponded to transport equipment, and a similar amount to chemicals. 
(vi) Contingency measures  
(a) Anti-dumping and countervailing measures 
76. Sri Lanka has no laws or regul ations governing anti-dumping or countervailing actions.  In 
December 2009, Sri Lanka submitted a new notifica tion to the WTO reaffirming that it had not 
established an authority competent to initiate and conduct an investigation within the meaning of 
Article 16.5 of the Agreement and thus had not, to  date, taken any anti-dumping actions within the 
meaning of Article 16.4.19  Sri Lanka also stated that it did not anticipate taking any anti-dumping 
actions for the foreseeable future.   
77. A similar notification was made in  respect to countervailing measures.20 
(b) Safeguard measures 
78. Sri Lanka currently has no laws or regulations  relevant to safeguard measures.  Two bills 
containing provisions on anti-dumping, countervailin g duties, and safeguard measures were gazetted 
in October and November 2005, but as at June 2 010, still awaited the approval of Parliament.  The 
Department of Commerce will be in charge of implementing this legislation once parliamentary 
approval is obtained.21 
(vii) Technical regulations and standards  
(a) Technical regulations 
79. The Sri Lanka Standards Institution (SLSI) is the National Standards Body of Sri Lanka, 
established under the Bureau of Ceylon Standard s Act No. 38 of 1964 and the Sri Lanka Standards 
Institution Act No. 6 of 1984.22  The SLSI is Sri Lanka's national authority for notifications and its 
National Enquiry Point.23  The SLSI, under the Ministry of Technology and Research, is also 
responsible for the elaboration and dissemination of  information on technical regulations (mandatory 
standards).  The SLSI is a member of the Interna tional Organization for Standardization (ISO).  The 
main piece of legislation is still the Sri La nka Standards Institution Act No. 6 of 1984.  
                                                      
19 WTO documents G/ADP/N/193/LKA, 23 D ecember 2009;  and G/ADP/N/1/LKA/1 – 
G/SCM/N/1/LKA/1, 26 April 1995. 
20 WTO document G/SCM/N/202/LKA, 23 December 2009. 
21 Sri Lanka Department of Commerce online informa tion.  Viewed at:  http://www.doc.gov.lk/web/ 
traderemedies.php. 
22 SLSI online information.  Viewed a t:  http://www.slsi.lk/about-us.php.   
23 WTO document G/TBT/ENQ/36, 5 February 2010.   WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 54 
 
 
80. Since 1996, Sri Lanka has made 32 notifications to the Committee on Technical Barriers to 
Trade, 16 of which since 2004.24  It has accepted the WTO TBT Code of Good Practice.25 
81. According to the notifications submitted to th e WTO, 103 trade-related technical regulations 
are in place (June 2010);  the authorities indicated that  all of these follow international standards.  
They are included in the Imports (Standardizati on and Quality Control) Regulations 2006, framed 
under the Imports and Exports (Control) Act, No. 1 of 1969 as amended by Act No. 28 of 1987, which 
specify a list of products that must conform to a Sri Lanka Standard (SLS) to be allowed to be 
imported.26  These goods are subject to the Import Inspecti on Scheme (IIS) to ensure their conformity 
with the relevant SLS.27  The authorities noted that, in the formulation of SLSs, the SLSI always takes 
into account the equivalent standards established by other countries as well as by international bodies 
such as the ISO, the IEC, the Codex Alimentarius .  For inspection purposes, goods are classified 
under five categories of consignments.  Goods classi fied under categories 1 to 4 carry some kind of 
certificate of compliance with the stipulated standa rd, issued by a body recognized by the Sri Lanka 
Standards Institution (SLSI).28  However, for Category 4 goods, if the two standards are fully 
compatible, a quality certificate need not be submitted.   The inspection of products in these categories 
is done through samples drawn from the consignments, which are subject  to testing either randomly or 
when there is a reasonable doubt regarding the qualit y of the consignment.  Category 5 consignments 
are sampled at the port, and will not be released until th e test report is available, or where facilities are 
available, the SLSI may release the goods to a customs bonded warehouse, until clearance.  
82. The categories of products specified in the 2006 Regulations include certain types of milk, 
milk powder, butter, certain vegetable oils, marg arine, canned fish, brown sugar, biscuits, noodles, 
jams, fruit concentrates, some sauce s, bottled water, cement, some to iletries, safety matches, some 
polyvinyl pipes, motor cycle and bicycle tyres, some types of thread, some steel products, aluminium utensils, some electrical appliances, batteries, fluorescent lamps, switches, plugs, cords, cables, 
umbrellas, tiles, and porcelain ware, among others (Table AIII.5).  The list has been expanded since 
the previous review, when it included 84 items.  Th e authorities notified this increase in the list to the 
WTO in 2006.
29  Most technical regulations notified to  the TBT Committee cover items included in 
the Regulations. 
83. The Sri Lanka Accreditation Board for Conformity Assessment (SLAB) is the National 
Accreditation Authority for Sri Lanka.  The SLA B was established under Act No. 32 of 2005.  The 
Board functions as an autonomous body under the purview of the Ministry of Technology and 
Research.30   
                                                      
24 WTO documents G/TBT/N/LKA- series. 
25 WTO document G/TBT/CS/N/76, 7 August 1997. 
26 For the complete list of these items and the technical regulations  applicable see:  http://www. 
customs.gov.lk/docs/25835.pdf. 
27 SLSI online information.  Viewed at:  http://www.slsi.lk/about-us.php. 
28 Category 1 consignments are accompanied by a quality certificate from an accredited overseas 
laboratory or an inspection agency with which SLSI has signed a Memorandum of Understanding.  Category 2 
consignments are accompanied by a quality certificate from the National Standards body of the exporting 
country.  Consignments in Category 3 are imported from a manufacturer registered with the SLSI, and are 
accompanied by a quality certificate from th e manufacturer.  Consignments unde r Category 4 comprise products 
carrying the "Certification Mark" of the National Standa rds Body of the exporting country where the national 
standard of the exporting country is compatible with th e corresponding Sri Lanka Standard.  Consignments that 
do not fall into categories 1-4 are classified under Category 5. 
29 WTO document G/TBT/N/LKA/31, 31 July 2006. 
30 SLAB online information.  Viewed at:  http://www.slab.lk/#-. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 55 
 
 
84. The SLAB conducts four accreditation schemes.  Th eir purpose is to allow public and private 
sector bodies, once they have been  assessed for competence and cred ibility by the SLAB, to perform 
the necessary conformity assessment for the diffe rent regulatory authorities.  The accreditation 
scheme for testing and calibration la boratories is based on ISO/IEC 170 25.  All types of laboratories 
covering chemical testing, biological testing, phys ical and mechanical testing, and calibration are 
included under this scheme.  The accreditation schem e for medical/clinical laboratories is based on 
ISO 15189, and covers clinical pathology, clini cal biochemistry, haematology, microbiology and 
serology, histopathology, immunology, molecular biol ogy, pharmacology and nuclear medicine.  The 
accreditation scheme for inspection bodies, based on ISO/IEC 17020, provides formal recognition to 
organizations required to conduc t various types of inspections for regulatory purposes.  
85. The scheme most relevant for international tr ade is the accreditation scheme for Certification 
Bodies (CBs), which covers systems and product certification, and is based on ISO/IEC 17021, and 
on ISO/IEC Guide 65.  The certification provided  by these CBs includes certification of Quality 
Management Systems (QMS), Environmental Management Systems (EMS), Food Safety 
Management Systems, and Occupational H ealth and Safety Management Systems. 
86. There are currently ten laboratories and institu tions accredited for chemical testing, two for 
mechanical testing, six for biological testing, and two for calibration, all operating from Sri Lanka.31 
87. Sri Lanka has not notified to the WTO any mu tual recognition agreements (MRAs) with 
third countries on issues related to technical regulations, standards, or conformity assessment procedures.  The authorities indicated that no such ag reements are in place but that they are in the 
process of renewing an agreement with the Bureau of Indian Standards and are envisaging entering 
into new agreements.   
88. The SLAB is a full member of the Asia Pacific Laboratory Accreditation Corporation 
(APLAC) and is a signatory to the APLAC's MRA (since December 2009), which covers testing 
laboratories (ISO 17025) and medical laboratori es (ISO 15189).  The APLAC is a cooperation of 
accreditation bodies in the Asia-Pacific region that accredit laboratories, inspection bodies, and 
reference material producers.  Accreditation b odies in 24 economies in the region are members of 
APLAC.  The SLAB is also a full member of th e International Laboratory Accreditation Cooperation 
(ILAC), and a signatory to ILAC's MRA (also sin ce December 2009).  The ILAC MRA covers testing 
laboratories including medical testing laboratories.  The SLAB also has full membership status in the Pacific Accreditation Council (PAC), an associati on of accreditation bodies whose objective is to 
facilitate trade and commerce among economies in  the Asia Pacific region by promoting the 
international acceptance of the accreditations gr anted by its members.  The SLAB is seeking 
membership of the International Accreditation Fo rum (IAF).  It also has a technical cooperation 
programme with the Swedish Board for Accredita tion and Conformity Assessment (SWEDAC).  
Technical assistance for development of SLAB accr editation activities is provided by SWEDAC and 
funded by the Swedish Internati onal Development Agency (Sida). 
                                                     
 
31 They are:  (a) chemical testing:  Geocycle Anal ytical Laboratory, Bamber and Bruece Ltd - Chemical 
Laboratory, SGS Lanka Labora tory Services - Chemical Laboratory, Industrial Technology Institute - Chemical 
and Microbiology Laboratory, Lindel Industrial Laboratories, Ceylon Tobacco Company, Sri Lanka Standards 
Institute (Chemical Laboratory), Atomic Energy Author ity, MJF Holdings (Pvt) Ltd, and Sri Lanka Standards 
Institution (Food Laboratory);   (b) mechanical testing:  Industrial  Technology Institute, Ceylon Tobacco 
Company;  (c) biological testing:  Bamber and Bruece Ltd - Chemical Laboratory, SGS Lanka Laboratory 
Services, Sri Lanka Standards Institute, Industrial Technology Institute, National Aquatic Resources Research 
and Development Agency (NARA), and Astron Limited;  (d) calibration:  Atomic Energy Authority Secondary 
Dosimetry Laboratory, and Sri Lanka Standards Institute - Metrology Division. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 56 
 
 
89. Technical regulations from trading partners ar e accepted as equivalent after evaluation of a 
declaration of conformity and a technical dossier.  The certificates, tests, and inspection reports issued by conformity assessment bodies that are not accredited by SLAB may be recognized based on the equivalence of accreditation procedures, and on the basis of the technical soundness and capability of 
the bodies issuing the certificates. 
90. Testing and/or inspection are carried out by SLSI or laboratories and institutions in 
accordance with national or international standards;  some of those laborator ies and institutions have 
been accredited by SLAB. 
(b) Standards and certification 
91. The Sri Lanka Standards Institution is in char ge of formulating national standards, and 
provides services such as certifying products and syst ems, inspection of imports and exports, and 
providing laboratory services such as industrial measurement and calibration and testing services.
32  
SLSI national standards are devel oped through a committee and consultative process;  interested 
parties representing consumers, producers, users,  public institutions, and independent technical 
organizations may be involved.  The SLSI genera lly appoints technical committees to advise in the 
preparation of standards.  The SLSI's policy is to foll ow international standards to the extent possible;  
international standards are adopted as Sr i Lanka Standards whenever feasible.33  The authorities noted 
that priority is given to standards that facilita te internal and external trade and enhance the 
international competitiveness of Sri Lanka. 
92. There are over 1,250 Sri Lanka standards relating to products, commodities, materials, 
processes and practices34;  the authorities indicate that the majority are in line with international 
standards.  Standards are revised periodically to ta ke into account the developments of new materials, 
processes, and technologies.  Sri Lanka Standards are voluntary unless made compulsory under the provisions of the Sri Lanka Standards Institution Act or  by specific reference to standards in other acts 
and regulations.   
93. The "SLS Marks Scheme", Sri Lanka's product certification scheme, enables the SLSI, under 
the provisions of the Sri Lanka Standards Institution Ac t, to grant permits to eligible local and foreign 
manufacturers to use the "SLS" mark on their products.
35  The SLS mark certifies that the product has 
been manufactured in accordance with the relevant Sri Lanka Standards specification and verified by 
regular inspections and tests by the SLSI.  Alth ough product certification is  essentially voluntary, the 
certification of 31 locally manufactured or produc ed products is mandatory under the Directions 
issued by the Consumer Affairs Authority.  Permits are valid for three years and may be renewed;  
they may be revoked if production stops, if fees are not paid or if the product does not conform.36 
94. Apart from the SLSI, the Telecommunication Regulatory Commission (TRC) sets quality 
regulations and technical specifications for equi pment and quality of service (QAS) standards.  
Telecommunications equipment, including imports , requires type approval from the TRC.  
Provisional type approval based on sample test results  is initially granted for six months and may be 
extended for another six months.  Subject to satis factory performance (including after-sales service), 
full type approval is issued, generally for five years. 
                                                      
32 SLSI online information.  Vi ewed at:  http://www.slsi.lk. 
33 SLSI online information.  Vi ewed at:  http://www.slsi.lk. 
34 SLSI online information.  Vi ewed at:  http://www.slsi.lk. 
35 SLSI online information.  Vi ewed at:  http://www.slsi.lk. 
36 A fee of Rs 100 plus 20% VAT is charged for each application form, as well as a processing fee of 
Rs 1,000 plus 20% VAT per application. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 57 
 
 
(viii) Sanitary and phytosanitary measures 
95. The Ministry of Healthcare and Nutrition is  Sri Lanka's enquiry point on SPS matters.37  
Sri Lanka is a member of the Codex Alimenta rius Commission and the World Organization for 
Animal Health (OIE), and a contracting party to th e International Plant Protection Convention (IPPC).   
96. Sri Lanka has made 18 notifications to th e Committee on Sanitary and Phytosanitary 
Measures, covering measures on foodstuffs covered by SLSI standards;  shelf-life of imported foods;  
wood packaging material;  food packaging materials and articles;  meat and meat products;  milk and 
milk products;  plants, plant products, organisms, soil, and other culture media;  food colouring 
substances;  tea, coffee, cocoa and their products;  vinegar;  irradiated foods;  bottled or packaged 
drinking water;  iodized salt;  melamine in food products;  and genetically modified food.  
One emergency measure was notified, concerning live  domestic and wild bird s, hatching eggs, table 
eggs, etc.  
97. Sri Lanka has not made any notifications to the WTO regarding the recognition of 
equivalence of other countries' SPS measures.  The authorities indicate that no such agreements have 
been reached.   
98. No specific trade concerns have been raised  against Sri Lanka in recent years in the 
Committee on Sanitary and Phytosanitary Measures, and Sri Lanka has raised only one specific trade 
concern against another WTO Member, which was subsequently resolved.38 
99. Food imports are regulated by the Food Control Act No. 2 of 1950 and the Food Act No. 26 
of 1980, and their amendments.  The SLSI operates a generalized hazard analysis critical control point 
(HACCP) certification scheme to ensure food safety.39  A certificate holder develops and maintains its 
food safety assurance programme based on the inte rnationally accepted principles of ISO 22000.  
Other legislation covering SPS issues include Plan t Protection Act No. 35 of 1999, and Animal 
Diseases Act No. 59 of 1992.  
100. Under Animal Diseases Act No. 59, the importation of any animal, animal product, veterinary 
drug or veterinary biological products, animal semen or embryo requires a permit issued by the 
Director-General of the Department of Animal Pr oduction and Health (DAPH), in the Ministry of 
Health.  To obtain a permit for animal products, the importer must produce a certificate from the Chief Veterinary Officer of the country of origin , stating that the product is free from any infective 
substance likely to cause disease in animals as well as zoonotic diseases.  For live animals, a 
certificate is required from the Chief Veterinary Su rgeon or authorized veterinary surgeon of the 
country of origin.  The certificate must set out:  the country of origin of the animal;  that the animal is 
and has been free from disease and has not been in  contact with diseased animals for three months 
prior to its exportation;  that the place of origin  of the animal has been  free from disease for 3-12 
months (depending on the type of animal) prior to the date of the departure of the vessel carrying the 
animal from the port of exit;  and that the animal has been immunized against the specified diseases.  
Imports of meat or meat products must be accompanied by a certificate issued by a competent 
authority in the country of origin warranting that they are fit for human consumption and free from any infective substance likely to cause disease in anim als.  Animal products to be imported into Sri 
Lanka must be slaughtered and processed in establishmen ts registered with the veterinary authority in 
the country of origin.  Imports of live animals for human consumption are prohibited. 
                                                     
 
37 WTO documents G/SPS/ENQ/25, 15 October 2009, and G/SPS/NNA/15, 15 October 2009. 
38 Restrictions on cinnamon by the European Union.  Raised in October 2005 and reported as solved in 
October 2006.  WTO online information at:  http://s psims.wto.org/web/pages/search/stc/Search.aspx. 
39 SLSI online information at:  http://www.s lsi.lk/systems-certification-haccp.php. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 58 
 
 
101. All animals imported into Sri Lanka are subject to quarantine for a minimum of 30 days.  The 
DAPH is responsible for enforcing Sri Lanka's quaran tine legislation with respect to live animals and 
related products, which has the stated purpose of  ensuring that exotic diseases are not introduced 
through the importation of livestock and livestock products.40   
102. Imports of veterinary drugs or veterinary biological products require a safety certificate from 
the Chief Veterinary Surgeon (or a veterinary surgeon authorized by him/her) in the country of origin.  
The manufacture of veterinary drugs and veterinary  biological products requires a licence valid for a 
period of one year from the date of issue. 
103. The National Plant Quarantine Service in the Depa rtment of Agriculture is the body in charge 
of plant health issues;  it is responsible for impl ementation of the Plant Protection Act No. 35 of 1999 
and its regulations in relation to plant quarantine activities.  Plant imports must be accompanied by a permit, granted by the Deputy Director of Plant Quar antine or the Director of Seed Certification and 
Plant Protection.  Permits are issued immediately fo r vegetable seeds that are included in an approved 
list, which is published in news papers periodically.  Consignments must be accompanied by:  a 
phytosanitary certificate issued within 14 days prio r to dispatch;  a declaration stating that the 
consignment is free of soil;  and a certificate of or igin.  Importers of fresh  fruits and vegetables for 
human consumption must produce a certificate from th e plant protection authority of the country of 
origin stating that the fruit has been in cold storage for more than two weeks;  no certificates are 
accepted from countries where there are fruit flies.  Upon arrival in Sri Lanka, the consignment is 
inspected by a Plant Quarantine Officer and/or a representative from the Seed Certification and Plant 
Protection Centre of the Department of Agriculture.    
104. The importation of certain plants is prohibited, except for research.
41  Imports of any plant, 
plant material, plant product or seed from "Tropical America" are prohibited to prevent the introduction of the "South American Leaf blight pathogen of rubber".  Imports of soil and living modified organisms (LMOs) are prohibited.  Imports of some live fish are also banned.   
105. Since 1999, imports of animals and animal produc ts of ruminant origin are allowed only from 
countries officially declared as "BSE Provisional Free Status" by the OIE.  Imports from a number of 
countries were specifically forbidden, under th e regulations gazetted under the Import and Export 
Control Act.
42 
106. In 2001, Sri Lanka notified the SPS Committee of  restrictions on imports of 21 genetically 
modified categories of products on the grounds th at safety for human consumption is not known.43  
Sri Lanka banned the importation of genetically  modified (GM) food products on 1 September  2001.  
However, this was amended in 2002 and currently, imports of GM foods require prior approval from 
the Chief Food Authority in the Ministry of Health;  a technical recommendation is provided by the Department of Animal Production and Health in that Ministry.  
                                                     
 
40 Animal Diseases Act No. 59 of 1992. 
41 Regulations made under the Plant Protection Act ( Gazette  Extraordinary of the Democratic Socialist 
Republic of Sri Lanka, No. 165/2, 20 November 1981) list prohibited and restricted plants.  This list was not 
provided to the Secretariat. 
42 Austria, Belgium, Canada, Czech Republic, Denmar k, Finland, France, Ge rmany, Greece, Ireland, 
Israel, Italy, Japan, Liechtenstein, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, 
Switzerland, United Kingdom, and United States. 
43 WTO document G/SPS/N/LKA/1, 19 July 2001. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 59 
 
 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Procedures 
107. Sri Lanka Customs has a division dealing exclusively with export activities.  Export 
regulations are contained in the Customs Ordinance, and a number of other laws.44   
108. Export documentation is processed electronically.  Exporters must submit a goods declaration 
to the Director-General of Customs for statistical  purposes, specifying the qua ntity, quality, and value 
of the goods.  The following documents are needed to  prepare an export goods declaration:  customs 
declaration (CUSDEC) in four copies;  licences and permits if required;  shipping note (containing 
details of the cargo) or airway bill;  invoice;  packing list and other supporting documents, as and 
when necessary.  Export control permits are require d for some items (see below).  Exported cargo 
may be put in the green or red channel.  The Ch ief Export Officer decides the type of examination 
required for cargo placed in the red channel.   
109. Exporters must be registered with Customs.  Quarantine or veterinary certificates, issued by 
the Department of Agriculture or the Department  of Animal Production and Health are necessary for 
plants and animals, respectively, if requested by th e buyer.  All consignments of animals and animal 
products exported from Sri Lanka are s ubjected to quarantine inspection.   
(ii) Export taxes and other charges 
110. Sri Lanka imposes border charges on certain exports.  Sri Lanka's legislation allows the use of 
export duties and cesses to ensure the availability of raw materials for hi gher-value-added industries 
and to promote further processing of local materials;   finance export promotion activities;  and protect 
national security, archaeological items, and the envi ronment.  It also allows imposition of export 
duties in case of variations in world market prices.  Section 10(a) of the Customs Ordinance provides for the levying of export duties, and Section 10(c)  provides for any royalty or cess leviable on the 
exportation of such goods under any writte n law other than Customs Ordinance. 
111. Currently, export duties are levied only on valu e-added vein quartz (HS 2506.10.90), and raw 
vein quartz (HS 2506.10.10).  Export duties applied on silica quartz are vary according to the price, 
from zero if the price exceeds US$300 per tonne, to 14% of the f.o.b. value if the price is below that 
threshold.  These duties have replaced the system of minimum prices of US$300 per tonne, applied previously, and reported in the previous Review.   
112. Under the Export Development Board (EDB) Act No. 4 of 1979 an export cess is currently 
levied on cashew nuts, raw hides, and metal scrap, at the rates specific to the relevant HS code 
(Table III.14).  The stated objective of these charg es varies according to the product, ranging from:  
discouraging exports in raw form (cashew nuts) ;  ensuring local supplies for manufacture and 
encouraging export of high-value-adde d products (raw hides);  and ensuring continuous supply for the 
local industry at competitive prices (metal scrap);  However, the use of these levies on exports of 
locally produced inputs may also act as an incen tive to the domestic industry, as it diverts supply 
towards the domestic market and lowers domestic prices by penalizing exports.  A cess falling outside 
the scope of the EDB Act is applied on exports of  a number of coconut products, natural rubber, and 
tea. 
                                                     
 
44 These include the Revenue Protec tion Act, the Export and Exchange Controls Act, the Rubber 
Control Act, The Tea Board Act, The Coconut Developmen t Authority Act, the Fauna and Flora Protection Act, 
the Animal Disease Act, the Antiquities Act, the Forest Ac t, the Wild Life Act, the Fire Arms Act, the Opium 
and Dangerous Drugs Act, the Export Development Boar d Act, the Sri Lanka Standards Institute Act, the 
Textiles Act, the Minerals and Mineral Sands Act, the Ex cise Act, and the Fisheries and Aquatic Resources Act. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 60 
 
 
Table III.14 
Export Cess and other export levies, 2010 
Product  Rate 
Export Cess  
Cess on Tea Exports  
Tea Board Cess Rs 4.50 per kg 
Coconu t Development Authority Cess   
Fresh coconut Rs 750 per 1,000 nuts 
Desiccated coconut Rs 2,000 per 1,000 nuts 
Copra Rs 900 per tonne 
Coconut oil Rs 400 per tonne 
Poonac, defatted coconut, coconut shell charcoal Rs 250 per tonne 
Coconut cream/milk powder, coconut sh ell activated carbon Rs 450 per tonne 
Coconut flour/pieces Rs 200 per tonne 
Coconut ekels Rs 100 per tonne 
Mattress/twisted/bristle fibres Rs 250 per tonne 
Coir yarn/rope Rs 100 per tonne 
Coir twine Rs 200 per tonne 
Coconut based liquor Rs 3 per litre 
Thawashi brushes Rs 50 per 1,000 pieces 
Other brushes Rs 100 per 1,000 pieces 
Coir mats/rugs Rs 250 per 1,000 pieces 
Coir matting Rs 500 per 1,000 square metres 
Pads/mattresses for bedding  Rs 5 per piece 
Rubberized coir pads (below 60 mm. thickness) Rs 0.50 per square meter 
Other  
Natural rubber  Rs 4 per kg 
EDB Cesses on exports  
Raw cashew nuts with shell 200% of f.o.b. value  
Raw hides and skins  
Bovine or equine animals (raw ) 50% of f.o.b. value or Rs 100 per kg, whichever is higher 
Other (raw) 50% of f.o.b. value or  Rs 300 per kg, whichever is higher 
Semi tanned  25% of f.o.b. value or Rs  40 per square foot, whichever is higher 
Metal Scrap  
Non ferrous metal scrap 25% of f.o. b. value (50% for copper waste) 
Ferrous scrap 10% of f.o.b. value 
Export taxes  
Quartz 20% of f.o.b. value 
HS 2506.10.90 value-added vein quartz 14% if pr ice US$140-190 f.o.b./tonne;  9% if US$191-240 
f.o.b./tonne;  3% if US$241-299 f.o.b./tonne;  zero if price exceeds 
US$300 f.o.b./tonne 
HS 2506.10.10 raw vein quartz 20% up to US$139 f.o.b. per tonne 
Source: Government of Sri Lanka. 
(iii) Export restrictions and licensing 
113. Export prohibitions are applied mainly for public  health reasons, and to protect endangered 
species or the environment.  Some export restricti ons are maintained in accordance with UN sanctions 
or international conventions (e.g. CITES).   
114. The exportation of explosives is prohibited unde r the Explosives Ordinance (Chap. 633).  
Exports of dangerous drugs (poppy plant, hemp plant or seeds, pods leaves, flowers or any part of Sri Lanka WT/TPR/S/237/Rev.1 
 Page 61 
 
 
such plants, raw or prepared opium) are forbi dden under the Poisons Opium and Dangerous Drugs 
Ordinance (Chap. 549).  The exportation of ivory or jewellery made with ivory is also forbidden.   
115. The exportation of protected plants specified in  Schedule V of the Fauna and Flora Protection 
Ordinance is allowed only for scientific purposes and requires a licence.  Exports of flora and fauna 
listed in Appendices I, II, and III of the CITES are restricted:  items in Appendix I are prohibited;  
items in Appendix II may be permitted on licence issued by the Director of Wild Life Conservation if 
the species is not threatened in Sri Lanka;  expo rt of items in Appendix III may be permitted on 
licence issued by the Director of Wild Life Conserva tion.  Exports of Cinchona bark in any form, are 
prohibited under Schedule "B" of the Customs Ordi nance.  The exportation of ebony in any form 
(except handicraft made with it) is prohibited.  E xports of tea need a Tea Permit issued by the Tea 
Controller under the Tea Board Act.   
116. Exports of any mammal, bird, reptile, amphibian, fish, coral or invertebrate whether dead or 
alive or the eggs, feathers, or plumage of any bi rd, horns, antlers, skin or hide of any mammal or 
reptile or any part of any mammal, bird, reptile am phibian, fish, coral or invertebrate, need a permit 
from the Wild Life Department.  A permit from the Ministry of Fisheries and Aquatic Resources is 
required for restricted domestic fish species.  Perm its are issued generally only to promote scientific 
knowledge.45 
117. Exports of antiques require an Archaeol ogical Certificate fro m the Archaeological 
Department;  exports of furniture, old or new, re quire a recommendation by the Department.  Exports 
of registered vehicles require a certificate from the Registrar of Motor Vehicles.  The exportation of 
firearms requires a licence issued by the Ministry of Defense.  Exporters of gems must obtain a Gem 
Dealers Licence (renewable yearly) from the National Gem and Jewellery Authority (NGJA);  all exports of gems must be channelled through the NGJA. 
118. Exports of certain minerals are prohibited under Mines and Minerals Act No. 33 of 1992.
46  
Under Mining (Licensing) Regulation No. 1 of 1993, the Geological Survey and Mines Bureau is the sole licensing authority for the exploration, mining, transport, trading, processing, and export of 
minerals. 
119. The following products require an export licence  issued by the Controller of Imports and 
Exports under Import and Export Control Act No. 1 of  1969:  timber (including  logs and sawn timber) 
classified under HS chapter 44, excluding coconut shell charcoal (HS 44.02), household utensils of 
wood (HS 44.24) and manufactured articles of wood (HS 44.27);  ivory and ivory products (HS 05.10, 
38.02, 95.03);  passenger motor vehicles first regi stered in Sri Lanka prior to 1 January 1945 
(HS 87.02);  and scrap metals listed under Extr aordinary Gazette Notification No. 1627/2 of 
9 November 2009.   
(iv) Export support 
(a) Export subsidies and assistance 
120. Sri Lanka notified the WTO that during 1995-97 it did not provide export subsidies to 
agricultural products.  Sri Lanka also notified that a scheme covered by Article 9.1(d) and (e) of the 
                                                     
 
45 Sri Lanka Export Development Board online inform ation.  Viewed at:  h ttp://www.srilankabusiness. 
com/tradepolicy/ products.htm. 
46 Brick/tile/cement-clay, sand, gravel, laterite, shale,  stone aggregate coral, shell, ball clay, kaolin, 
feldspar, sedimentary limestone, glass sand, calcite, dolom ite (marble), silica quartz (vein quartz), garnet, mica, 
fluorspar, serpent ignite, magnetite, gr een marble, radioactive minerals, apatite, dimension stone in raw form. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 62 
 
 
Agreement on Agriculture had been implemented with effect from 15 August 1997.  The programme 
was to subsidize the cost of international trans port/freight covering goods such as fresh fruit, fresh 
vegetables, foliage, live plants and preparatory materi als, gherkins, cut flowers, floricultural products, 
and betel leaves.47  Sri Lanka has not submitted any further notifications with respect to export 
subsidies in agriculture.  However, in the context of  the current review, the authorities noted that this 
programme is no longer in place.   
121. Sri Lanka notified in 1997, that the Export De velopment Board is authorized to provide 
subsidized loans and grants to direct, indirect , and potential exporters  for up to Rs 1 million 
(US$8,900) per project.  Funds may be used to deve lop viable export ventures or to increase export 
capacity and export volume or as working capital.48  However, in the context of the last Trade Policy 
Review of Sri Lanka, the authorities indicated that  the EDB was not granting any assistance, due to 
lack of funds.  The situation remains the same. 
(b) Duty and tax concessions 
122. Sri Lanka implements a number of incentive sch emes aimed at promoting exports through the 
enhanced competitiveness of export production.  At  present three main schemes are being handled by 
Sri Lanka Customs:  a drawback scheme, a temporary importation for export processing scheme 
(TIEP), and the manufacture-in-bond scheme.49   
Duty Rebate Scheme (drawback) 
123. Sri Lanka implements a duty rebate scheme,  through which duties paid on imported raw 
materials and intermediate inputs u sed in the manufacture of products  for export may be partially or 
fully rebated or refunded once the final good is expor ted.  The authorities consider that the Duty 
Rebate Scheme does not function as an incentive scheme.  Exporters who incur fiscal levies on 
imported inputs and use these items to manufacture products for export directly or indirectly are 
eligible.  Exporters who intend to use the scheme mu st register with the Duty Rebate Unit of the 
Sri Lanka Customs Export Division.  Registration is  required for each export shipment, and must be 
accompanied by an export invoice, receipt/airway b ill, and parties' copy of the export shipment. 
124. Under the duty rebate scheme, only customs du ties and the import surcharge are rebatable;  
the Cess, excise duties, the PAL, and other duties le vied on imports are not included.  Likewise, the 
VAT does not qualify for payment of duty rebate.  Locally purchased imported items that have been 
used for manufacture of export products are consid ered for duty rebate.  Exporters must submit a 
claim to the commercial bank that received the remittance for the exported products, along with 
relevant export documents.  The rate of rebate, a percentage of the f.o. b. value, is determined by the 
Director-General of Customs, based on the cost statements submitted and approved by the Deputy 
Secretary to the Treasury.  Products eligible for duty rebates approved by the Minister of Finance are 
gazetted periodically.  Exporters dissatisfied with a decision may appeal within 30 days.  The rebate 
can be claimed within six months from the date of export. 
Temporary Importation for Export Processing Scheme (TIEP) 
125. The Temporary Importation for Export Processing (T IEP) Scheme allows direct and indirect 
(manufacturers who produce inputs to produce export able goods) exporters to  import inputs without 
                                                      
47 WTO document G/AG/N/LKA/1, 20 May 1999. 
48 WTO document G/SCM/N/3/LKA, 17 January 1997. 
49 Sri Lanka Customs online information.  Viewed at:  http://w ww.customs.gov.lk/exp_ 
promo.htm#bond. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 63 
 
 
payment of fiscal levies.  The aim of the schem e is to enhance the competitiveness of export 
production and encourage the expansion of  production capacity and exports.   
126. The TIEP scheme has two sub-schemes:  TIEP1 and TIEP4.  TIEP1 allows for the 
importation of raw materials, compone nts, parts and packaging materials,  exempt of duties.  Exporters 
must apply to the Director-General of Customs fo r approval to operate under the scheme.  Exporters 
using the scheme to manufacture any product for ex port are not entitled to operate under the Scheme 
for Customs Duty Rebate, the Scheme for Manufactur er-in-Bond for Export or any other Scheme for 
the Temporary Importation of Inputs for manufacture and export in respect of an identical product.  Beneficiaries must make a declaration to that effect on the prescribed form TIEP1.   
127. The benefits under the TIEP1 are granted annua lly.  New exporters must furnish a bank 
guarantee to Customs, equal to the full value of th e duties and taxes payable for the approval period 
(one year).  Existing exporters, with 1 to 3 years of proven track record, may furnish a bank guarantee 
equal to 25% and a personal/company guarantee for the remaining 75%.  Exporters operating under 
the scheme for over three years, may submit a persona l/company guarantee equal to the full value of 
the duties and taxes payable. 
128. Exporters operating under this scheme can obtai n supplies from another beneficiary of the 
scheme or from manufacturers/e xporters benefiting from the Ma nufacturer-in-Bond Scheme.   
129. The TIEP4 scheme covers the importation of  capital goods, appliances, spare parts, 
intermediate materials (excluding raw materials) , transport and handling equipment, and breeding 
stock (for agricultural projects), which are eligible for whole or partial exemption of customs duties, 
import surcharge, EDB Cess, and excise tax.  Th e amount of the duty and tax exemption granted 
depends upon the amount exported:  100% for exporters who export 50% or more of their output, and 
indirect exporters who supply 50% or more of their output to direct exporters;  and 50% for exporters 
who export between 25% and 50% of their output, a nd indirect exporters who supply 25% to 50% of 
their output to direct exporters.
50 
130. General approval (for several importations within  one year) or specific approval (for a single 
importation) may be granted.  A guarantee for the full amount of the duties due is required in all 
cases;  the type of guarantee varies according to the proven track of the exporter, as in the case of 
TIEP1.  Exporters must give a written undertaking that the items imported under this scheme will not 
be sold, hired, leased, disposed of or used for any purpose other than that for which they were 
imported, within three years without the prior approval of the Ministry of Finance or the 
Director-General of Customs. 
Manufacture-in-bond scheme 
131. Any manufacturer who exports may apply to the Customs Department for approval to 
establish a manufacturing-in-bond warehouse.  Thro ugh this scheme, these manufacturers do not have 
to pay duties and taxes at the time of importation.  Any kind of production process, including mixing 
and assembling, may be undertaken in in-bond ware houses.  Imported goods may be stored for up to 
six months without payment of duties and taxes, exte ndable for up to two years.  Further extension is 
possible, under exceptional circumstances.  The manufacturer must furnish a bank guarantee equal to the full value of the duty and taxes payable.  The manufacturer must also obtain an annual licence for 
the bonded warehouse. 
                                                     
 
50 Sri Lanka Customs online information.  Viewed at:  http://w ww.customs.gov.lk/exp_ 
promo.htm#bond. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 64 
 
 
Export processing zones (EPZs) 
132. Sri Lanka has 13 free-trade zones (called export processing zones), administered by the Board 
of Investment (BOI).  There are some 268 enterprises operating in the EPZs, employing over 117,000 persons.
51  Data on exports are not complete, but their estimated value was some 
Rs 575 billion (US$5.1 billion) in 2009.52  The largest EPZ, Katunayake, is mainly devoted to the 
production of garments.  It employs over 40 ,000 people, has Sri Lanka, United States, 
United Kingdom, and Hong Kong, China inv estment, and exported over Rs 128 billion 
(US$1.1 billion) in 2009.  Other important EPZs are Biyagama (surgical gloves, knitted fabrics, 
electronic circuits, tobacco processing, garments, ty res, with investors from Australia, Sri Lanka, the 
United Kingdom, the United States, the Netherlands, Germany, and Hong Kong, China), and Horana 
(confectionery, polymers, with mo stly domestic investment). 
133. Enterprises located in an EPZ are entitled to ta x holidays and duty-free imports.  However, 
under current government policies, foreign investors ma y establish factories in almost any part of the 
country and receive tax incentives.  These schemes in clude duty exemptions and refunds of duties and 
other fiscal levies on imported inputs used in the manufacture of exports.  
Other export incentive schemes 
134. Exporters of non-traditional goods or services qualifying for concessions under Section 17 of 
the Board of Investment (BOI) Act enjoy a number of tax concessions.  These include a tax holiday based on the amount of the investment, and a preferential 10% income tax rate on profits for the first two years of operation following the tax holiday period, and of 15% thereafter.
53   
135. New investments in non-traditional export industries and export-oriented services benefit 
from a full tax holiday for three to seven year s, depending on the value of the investment 
(Table AIII.6);  they also enjoy import duty exem ptions on capital goods and raw materials.  These 
companies are required to export at least 80% of goods production or 70% in the case of services.   
136. Incentives are also available, under the Inland Re venue Act, to exporters not benefiting from 
Section 17 of the BOI Act.  These include a tax holid ay, a preferential 10% income tax rate on profits 
for the first two years of operation following the tax holiday period, and of 15% thereafter.  They are 
applicable until 1 April 2014.  Declared dividends ar e subject to 10% tax rate.  Enterprises that supply 
to export operations also benef it from a 15% tax on the profits of such sales until 1 April 2014, and 
their dividends are taxed at 15%.  Manufactured items supplied to an exporter are exempt from 
turnover tax. 
137. Agricultural and fisheries companies are entitled to a five-year tax holiday on profits and 
income, whether established under th e BOI Act or the Inland Revenue Act.  Tax incentives for the 
setting up of export trading houses for the rural sector c onsist of a preferential 10% income tax rate on 
profits for the first two years of operation and of 15% thereafter.   
                                                      
51 Information provided by the authorities;  and BOI online information.  Viewed at:  
http://www.boi.lk/2009/free_trad e_zones_industrial_parks.asp. 
52 BOI online information.  Viewed at:  http://www .boi.lk/2009/free_trade_zones_industrial_parks.asp. 
53 Under Section 17 of the BOI Act, the Board may enter into agreements with any enterprise to grant 
exemptions from any law referred to in Schedule B of the Act, or to modify its application;  the Inland Revenue 
Act is included in the Schedule.  An enterprise with which the BOI has reached an agreement is called a BOI 
enterprise or company. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 65 
 
 
138. Companies that export gems and jewellery recei ve an open-ended exemption from income tax 
on their profits and income.  Companies that ope rate and maintain facilities for the storage of 
specified goods brought into Sri Lanka for re-export or  operate yachts and pleasure craft registered 
with the Director of Merchant Shipping are exempt from taxes on profits and income.   
(v) Export finance, insurance, and guarantees 
(a) Export finance 
139. There is no state agency or bank that provides loans or equity finance to exporters;  the Export 
Development Board ceased to provide them in 1996 .  Until June 2006, the Sri Lanka Export Credit 
Insurance Corporation (SLECIC) provided post-ship ment financing to small exporters (with a 
turnover of less than Rs 5 million per year) unable to obtain a loan from a bank, through the SLECIC 
Export Finance scheme.  Loans were not product sp ecific and were provided at market rates. 
140. To assist exporters during the global financial crisis, the Government introduced an Export 
Development Reward Scheme (EDRS) for tea, rubbe r, cinnamon, garment, and leather exporters (see 
Chapter IV(2)).  The Government also implemen ted a Simplified Value Added Tax Scheme (SVAT) 
to help direct and indirect exporters overcome cash flow difficulties.  Sri Lanka has taken the 
initiative to establish an Exim Bank to provide fina ncial assistance to exporters and importers, and to 
promote international trade in goods, services, and capital, and thereby enhance growth, employment 
and real income.  The proposed Exim Bank is expected  to take on a product-oriented approach during 
the formative years and gradually evolve into a mo re customer-oriented approach.  The bank would 
also help exporters to develop export markets and to expand export production capacity through a 
variety of short-term financing products.54 
(b) Export insurance and guarantees 
141. The Sri Lanka Export Credit Insurance Cor poration (SLECIC), incorporated under Act 
No. 15 of 1978, is the accredited Export Credit Agency  of the Government of Sri Lanka;  it functions 
under the Ministry of Finance and Planning.  SLECIC is the only agency that insures exporters in Sri Lanka.  The SLECIC insures exporters of goo ds and services against non-receipt or delayed 
receipt of payments resulting from commercial and non- commercial risks.  It also issues guarantees to 
banks and other financial instituti ons to facilitate the granting of pre-shipment and post-shipment 
finance.  SLECIC also offers pre-shipment credit guarantees and export performance guarantees.
55   
142. There are several types of insurance:  the most used is the seller's risk policy, through which 
SLECIC covers both commercia l and non-commercial risks.56  The policy covers goods dispatched or 
services rendered by an exporter on credit terms.  However, SLECIC fixes a maximum liability limit 
under the policy.  Also, commercial risks are s ubject to a credit limit approved by SLECIC, which 
limits exposure to individual buyers;  the exporter must apply for a credit limit in respect of each buyer.  SLECIC establishes the credit limit based on  each buyer's creditworthiness.  Once approved, 
the credit limit is valid generally for one year, or unt il it is cancelled or auto suspended.  The policy is 
                                                     
 
54 Central Bank of Sri Lanka (2009a) 
55 See Sri Lanka Export Credit Insurance Corp oration online information.  Viewed at:  
http://www.slecic.lk/About_ slecic/Who_we_are.html. 
56 Commercial risks include:  risk of insolvency or payments default of the buyer, default, and  refusal 
or failure of the buyer to accept the goods or services.  Among non-commercial risks, it covers:  risk of war, 
civil war, natural disaster, moratorium, political event or  economic difficulties affecting the payment, changes in 
laws, import bans, failure or refusal to fulfil the terms of  contract by the buyer, increased shipping and handling 
costs due to interruption or diversion of voyage, etc. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 66 
 
 
issued against a minimum prepaid premium of Rs  10,000 (US$89), which is adjusted against the 
actual premium payable on the value of the goods dispatched or services rendered.  
143. Other types of insurance include the Seller's Risk for Services scheme, designed to protect 
Sri Lankan exporters against payment risks associated  with rendering services to foreign buyers;  it 
covers services such as software, tourism, freig ht forwarding, telecom and construction work 
undertaken abroad.  The Seller's Risk for Entrepot  Trade scheme is designed to facilitate entrepot 
trade. 
144. The Seller's Risk policy scheme has been operati ng at a surplus.  In the 2001-05, last period 
for which information is available, it ran a ne t surplus of Rs 228 million (US$2 million), posting 
profits in every year.  Insured exports under the scheme totalled Rs 31.7 billion.  They more than 
tripled between 2001 and 2005, from Rs 3 billion (US$27 million) to Rs 10.9 billion 
(US$97 million)57;  and rose to Rs 13.4 billion (US$120 million) in 2009.  
145. SLECIC's Pre-shipment Credit Guarantee helps e xporters to obtain pre-shipment finance to 
purchase raw materials, undertake manufacturing and processing of goods and packaging for export.  
It guarantees the lending bank/financial institution up to 66.6% of losses incurred in case of default by 
the borrower.  The Post-Shipment Credit Guarantee aims to help e xporters obtain financing at the 
post-shipment stage to continue their export activiti es;  it operates from the date of shipment until 
realization of export proceeds.  The Guarantee cove rs losses incurred by the bank/financial institution 
for up to 75% of the credit.  The Whole-turnov er Pre/Post Shipment Credit Guarantee covers 
advances by financial institutions to exporters and indirect exporte rs with a higher coverage.  The 
Export Production Credit Guarantee, for indirect exporters, guarantees up to 75% of a credit granted 
to them.  The Export Performance Guarantee c overs commercial banks issuing guarantees for 
exporters;  the bank/financial institution is c overed up to 75% of losses incurred.  The Export 
Performance Credit Guarantee for Freight Forwarders  covers banks that issue guarantees to airlines 
that extend credit facilities to freight forwarders.  The ATA Carnet System is a 100% guarantee issued 
directly by SLECIC to the International Chambe r of Commerce of Sri Lanka to enable exporters 
(especially of gems and jewellery) to obtain the ATA Carnet without collateral security.58  T h e  
scheme was recently modified to reduce the minimum guarantee period from one year to six months, to facilitate exporters' participa tion in international fairs.  
(vi) Export promotion and marketing assistance 
146. The Sri Lanka Export Development Board (EDB ), is the state body responsible for the 
promotion and development of exports.  Th e EDB was established under Sri Lanka Export 
Development Act No. 40 of 1979, and now functions  under the Ministry of Industry and Commerce.  
The EDB's role is to assist producers and exporters  of goods and services to identify and penetrate 
new markets, to enhance the competitiveness of their exports, as well as to develop goods and 
services that will meet market demands.  The EDB also offers export marketing support through 
market research identifying marketing opportunities as well as advice on international marketing and trade negotiations.  There is also a Special Project for Regional SME Development.
59 
147. The EDB is financed mainly by public funds, but also by the Export Development Cess.  
                                                      
57 SLECIC (2005). 
58 The ATA Carnet, a customs document, allows goo ds and commercial samples exported for use in 
trade fairs, exhibitions, and for trade promotional purposes, to be imported duty free. 
59 EDB online information.  Viewed at:  http ://www.srilankabusiness. com/aboutus/index.htm. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 67 
 
 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Business environment and taxation 
148. The Companies Act (No. 7 of 2007) contains the rules, procedures, accounting and reporting 
requirements for companies incorporated or registered in Sri Lanka.  Company registration, as well as 
the filing of accounts and annual returns are with th e Registrar of Companies.  Businesses require a 
business commencement certificate to start operating. 
149. Companies may be established as private or pu blic companies.  A private company must 
consist of at least two and not more than 50 me mbers, one director, and may not invite public 
subscription for its shares.  Public companies must have at least seven members (no upper limit) and 
at least two directors.  Public companies may invite public subscriptions for their shares or debentures and other securities, and may be listed on the stock ex change.  A company registered within or outside 
Sri Lanka may register in Sri Lanka as an offshore company to carry on any business outside Sri Lanka.  
150. Foreign companies may operate through subsidiari es or branches.  Following incorporation, a 
subsidiary in Sri Lanka must comply with a ll the statutory requirements imposed on domestic 
companies.  Branches must also be registered with  the Registrar of Companies;  the liability of a 
branch extends to its foreign assets.  A company in corporated abroad may maintain a presence in Sri 
Lanka through a representative office, which has a sim ilar status to that of a branch office, but is 
prohibited from engaging in any trading or investment  activity or accruing any turnover in Sri Lanka.  
Joint ventures may be established with other Sri La nkan companies or with foreign entities.  A joint 
venture may be incorporated or carried on as an  unincorporated business similar to that of a 
partnership.
60 
151. Sri Lanka has signed several doubl e taxation relief agreements.61  These provide for reduced 
tax rates on dividends, interest, and royalties.  Th e agreements signed more recently include special 
provisions to ensure foreign investors national treatment for tax incentives.   
152. Resident and non-resident companies, with the exception of BOI companies (see 
section iv(b)) and of enterprises that qualify for special concessions under the Inland Revenue Law, 
are liable to a corporate income tax of 35%.  Non-r esident companies pay an additional tax equivalent 
to 10% of their remittances abroad.  Remittances exclude dividends for this purpose.  BOI companies 
that meet specific criteria, such as size of tota l investment, type, and location of investment, qualify 
for tax holidays ranging from 3 to 15 years, and may benefit, after the tax holiday, from a concessionary income tax rate of 10% for two years and 15% thereafter, if applicable (otherwise the 
rate is 20%).  Dividends declared out of tax-exempt  profits during the tax holiday period and one year 
thereafter, are tax free for companies that en tered into an agreement with BOI prior to 
6 November 2002.  However, dividends paid after 1 April 2004 by companies whose agreement with 
the BOI was signed after 6 November 2002 are liable to a withholding dividend tax of 10%;  this tax 
applies to all companies other than  quoted public companies.    
153. Resident individuals pay personal income ta x on a sliding rate scale up to a maximum of 
35%.  The first Rs 300,000 (US$2,700) of income  per annum is exempt from income tax.  
                                                     
 
60 Board of Investment of Sri Lanka online info rmation.  Viewed at:  http://www.boi.lk/2009/ 
registration_of_a_company.asp. 
61 Australia, Bangladesh, Belgium, Canada, China, Denmark, Egypt, France, Finland, Germany, 
Hong Kong China, India, Italy, In donesia, Iran, Japan, Jordan, Korea,  Kuwait, Malaysia, Mauritius, Nepal, 
Netherlands, Norway, Oman, Pakistan, Poland, Philip pines, Romania, Russia, Saudi Arabia, Singapore, 
Sweden, Switzerland, Thailand, United Arab Emirates, United Kingdom, Un ited States, Yugoslavia (Serbia). WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 68 
 
 
Non-citizens of Sri Lanka who are employed in qualifying BOI companies paid tax at a concessionary 
rate of 15% of their Sri Lankan source income until 31  March 2008;  their income is now taxed at the 
normal rate.  However, employment income of ex patriates brought to Sri Lanka by a company that 
entered into an agreement with the BOI before 31 December 1994, is exempt from the tax during the 
holiday period granted to the company. 
154. Under Value Added Tax Act, No. 14 of 20 02 a VAT is applied on goods and services 
supplied in Sri Lanka or imported in to Sri Lanka.  The tax is levied at the time of supply, on every 
taxable supply of goods or services, made in a taxabl e period, by a registered person in the course of 
the carrying on, or carrying out of a taxable activ ity in Sri Lanka;  or upon importation of the goods 
into Sri Lanka (section (iii)(other duties)).  Most goods and services are taxed at 12%.  Direct exports of goods and designated services receiving payments in foreign currency are zero rated. A rate of 5% 
applied on sugar, rice, dhal, milk powder, dried fi sh, chillies, and onion was abolished with effect 
1 January 2009.  A rate of 20% is applied on a lis t of, mostly, luxury goods.  BOI companies are not 
specifically exempt from the VAT or other indirect taxes. 
155. Sri Lanka was ranked 105
th out of 181 in the World Bank's Ease of Doing Business ranking 
for 2010, down from 97th in 2009.  Sri Lanka fared relatively well with respect to ease of starting a 
business (41st);  ease of closing a business (45th);  trading across borders (65th);  getting credit (71st);  
and protecting investors (73rd).  It fared less well, however, with respect to dealing with construction 
permits (168th);  paying taxes (166th);  registering property (148th);  and enforcing contracts (137th).62  
(ii) Competition policy and price regulation 
(a) Competition policy 
156. There is no comprehensive single law on compet ition in Sri Lanka that outlaws practices 
per se ;  the competition body is geared mainly to d ealing with the effect of unfair practices on 
consumers.  Investigations on the effects of me rgers are done only for utilities, which are under the 
purview of the Public Utilities Commission.  Draft co mpetition legislation is currently being analysed.  
The new legislation would increase the powers of  the competition authority (Consumer Affairs 
Authority) and introduce rules to make pr e-merger notification analysis mandatory. 
157. The Consumer Affairs Authority Act (CAA Act No. 9 of 2003) is the main law regulating 
competition policy in Sri Lanka.63  The Act, which entered into force in March 2003, repealed the Fair 
Trading Commission Act No. 1 of 1987, the Consumer Protection Act No. 1 of 1979, and the Control 
of Prices Act (Cap 173).  It covers competition pol icy, price regulation, and consumer protection. 
158. The CAA Act created the Consumer Affairs Authority (CAA), which replaced the Fair 
Trading Commission (FTC) and the Department of Internal Trade (DIT) in their respective 
competences.  The CAA is under the Ministry of Trade, Commerce, Consumer Affairs and Marketing 
Development.  The law applies to all undertakings  dealing with goods and services, and to the sale 
and supply of public utilities (electricity, water, gas, and telecommunications).  Other competition 
aspects for public utilities are covered by their ow n specific legislation.  Although the CAA Act 
covers both competition and consumer affairs, it is more comprehensive with respect to the latter, and 
the competition provisions of the Act are limited. 
                                                      
62 World Bank online information.  Viewed at:  http://www.doingbusiness.org/ExploreEconomies/ 
?economyid=174. 
63 Consumer Affairs Authority Act No. 9 of 2003.  Viewed at:  http://www.consumeraffairs.gov.lk/ 
images/ACT.pdf. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 69 
 
 
159. The CAA comprises an investigative authorit y and an adjudicative body, the Consumer 
Affairs Council (CAC).  The CAA is  mandated to protect consumers against unfair trade practices and 
against the marketing of goods or the provision of services that are hazardous to the life and property of consumers.  The CAA is also mandated to protect consumers' interest, and to ensure that wherever 
possible consumers have adequate access to goods and services at competitive prices.  The CAA's 
functions include controlling or eliminating:  restrictive trade agreements among enterprises;  
arrangements amongst enterprises with regard to prices;   abuse of a dominant position;  or any other 
restraint of competition adversely affecting domestic or international trade or  economic development.  
The CAA has investigative powers into anti-compe titive practices and abuse of a dominant position.
64  
It hears and determines all applications made unde r the law, and may issue orders to, among other 
things, cease the anti-competitive practice, if it is sa tisfied that the practice operates against the public 
interest.  It has the authority to issue an orde r in response to a complaint of an anti-competitive 
practice received from the Authority, any other person, or asso ciation of traders.  It also has the power 
to issue notices to witnesses, and to procure evidence.   
160. Although the CAA may investigate the effects of anti-competitive practices, Sri Lanka's 
legislation does not confer on either the CAA or the CAC power to conduct investigations on the 
existence of monopolies per se  or to examine mergers or acquisitions.   Anti-competitive practices 
relating to monopolies and mergers,  and acquisitions are not covere d by the CAA Act.  Moreover, 
section 71 of the CAA Act exempts any "institution or body that has been granted the exclusive right 
to supply such goods or services" from the provisions of the law relating to anti-competitive practices.  Also, adequate monitoring and enforcement mechanisms  seem to be somewhat lacking in Sri Lanka.  
In its policy implementation, the CAA must coordina te with regulatory authorities such as the Public 
Utilities Commission, the Telecommunication Re gulatory Commission (TRC) and the National 
Transport Commission (NTC).  The authorities note that the CAA has proposed certain amendments 
to the existing Act where it has been proposed to  extend the CAA's powers to conduct investigations 
and to issue orders on the prevalence of any monopoly and on merger situations, if the monopoly situation or merger operates against the public interest. 
161. Important elements of competition policy are contained in the Public Utilities Commission of 
Sri Lanka Act (No. 35 of 2002), which applies only to  regulated industries (electricity, petroleum, and 
water).  Section 24 of this Act grants the Public Utilities Commission competition enforcement 
powers, as well as power to authorize mergers of en tities within its jurisdiction.  The Act authorizes 
the Commission to carry out merger investigations.  If the Commission finds that an anti-competitive 
practice or merger situation exists but does not opera te or is not likely to operate against the public 
interest, the Commission must authorize the practice or merger situation, subject to the conditions it 
may consider necessary.  The Commission may conduc t investigations with respect to abuse of a 
dominant position;  and may order the termination of the practice or allow continuation of the activity 
subject to supervision.  Sri Lankan legisla tion does not prohibit holding a dominant position per se , 
only the abuse of this position.  In investigati ons with respect to mergers, the Commission may 
prohibit the merger only if it has not yet taken place, and when the merger is likely to operate against 
the public interest.
65  However, pre-merger notification is not mandatory, so, in practice, this situation 
is very unlikely to arise.  If the Commission prov es that a merger operates against the public interest, 
it may order a de-merger.  Under the Securities and Exchange Commission Act No. 36 of 1987, the 
                                                      
64 Consumer Affairs online information.  Viewed at:  http://www.consumeraffairs.gov.lk/aboutus.php. 
65 The law mandates that, in determining whether an anti-competitive practice or merger situation 
operates or is likely to operate against the public interest, the Commission take into account the desirability of:   
(a) maintaining and promoting effective competition between  regulated entities;  and (b) promoting the interests 
of consumers in relation to the market in which the anti-competitive practice or merger situation operates, or is likely to operate. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 70 
 
 
Securities and Exchange Commission may investigate mergers with respect to companies listed in the 
Colombo Stock Exchange. 
162. The CAA has the right to take necessary acti on to protect consumers against manufacturers 
and traders in respect of labelling, price marking,  packaging, sale or manufacture of any goods, and 
may issue general directions on these areas.  The CAA may also determine standards and specifications relating to the production, manufacture, supply, transport, and sale of any goods and to 
the supply of any services, for the purpose of protecting consumers and ensuring the quality of the goods or services provided.  In this respect, th e CAA may adopt standards and specifications 
prescribed by the Sri Lanka Standard Institution (SLS I) as standards and specifications determined 
under the CAA Act.  It may also determine the "sp ecific goods" that are essential for the living, and 
place such goods under price regulation for the wellbeing of consumers (see below). 
163. The CAA may carry out investigations with re gard to the prevalence of any anti-competitive 
practices that prevent, restrict or distort competiti on, in the sale of goods or provision of any services.  
In this regard, it has the powers of a District Court.   Between July 2003 and December 2009, the 
Authority conducted 29 investigations on complaints  of anti-competitive practices.  It also conducted 
and concluded investigations on price fixing, abuse of dominant position, unfair trade practices, 
misleading advertisements, and fa lse representations, among others. 
164. The denial of goods in possession and impos ing conditions on the consumer upon purchase 
are considered offences under the CAA Act, as well  as:  refusing to sell goods;  manufacturing and 
selling goods that fail to comply with the stipulat ed standards and quality;  sale of goods above the 
maximum price where prices have been fixed or ma rked;  altering, obliterating, erasing or defacing a 
label or description of any goods and producing such a good for sale;  the violation of the directives 
relative to manufacturing, importing, marketing, sorting, selling and stocking goods;  engaging in a 
conduct that is misleading or deceptive;  failure to  produce documents or records or to answer any 
question asked by the CAA relating to a matter under investigation. 
165. The CAA may issue general and special directions  under the section 10 of the Act.  General 
directions may address labelling, price marking, or sale or manufacture of any goods, while special 
directions are apply to specified manufacturers or  traders with specifications on time and place of 
sale, and conditions on manufacturing, importing, ma rketing, storing, selling, and stocking goods.  
The CAA may issue Orders under Section 20(5) of th e Act, fixing the maximum retail price (MRP) of 
any goods or services.  Every order or direction is published in the Gazette  and in newspapers in 
Sinhala, Tamil, and English.  As at Februa ry 2010, the CAA had issued four orders and 
18 directions.
66  The Authority is mandated to enter into written agreements with any manufacturer or 
trader or associations of manufacturers or trad ers on the maximum price for goods, on the standards 
and specifications of any goods, or in respect of co nditions of import, supply, storage, distribution, 
transportation, marketing, labelling or sale of goods.  These agreements concern mostly wholesale 
prices.  The authorities indicated that seven such ag reements have been entered, for example, on milk 
powder. 
(b) Price regulation  
166. In accordance with Section 18 of the CAA Act, any item of goods or services may be 
"specified" as an essential commodity by the Mi nister of Cooperatives and Internal Trade in 
consultation with the Consumer Affairs Author ity.  Once an item is specified no importer, 
manufacturer or trader may increase the price of the product without the CAA's prior written 
                                                      
66 The directions relate to standards for LPG, pr ice marking of certain foodstuffs and toiletries, 
warranty periods for electrical appliances;  labelling of ma nufactured goods;  and mandatory use of certification 
marks. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 71 
 
 
approval.  The Authority has 30 days to examine an application and convey the decision to the 
manufacturer or trader.  The objective is to ensure  that prices are not increased indiscriminately and 
that every increase is reasonable and justifiable.  Th e authorities do not consider that their regulation 
of prices is a form of price control, which was te rminated when the Control of Prices Act (Cap 173) 
was repealed.   
167. The CAA examines the cost structure pertaini ng to an application for a price revision by 
making reference to supportive documentary evid ence furnished by the applicant, and makes 
recommendations to the CAA Board for the approval of prices.  Prices approved by the CAA may 
vary from brand to brand depending on the cost incurred  by each applicant.  These prices are fixed on 
the recommendations of the CAC subsequent to investigations being conducted by the CAC on 
references made to it by the CAA that goods are be ing sold or services are being provided at an 
excessive prices, or in the case of the existen ce of any market manipulation or other market 
imperfection in respect of such goods or services.  As mentioned above, the CAA has also from time 
to time entered into written agreements with trader s and trader associations on the maximum retail 
and wholesale prices of goods prescribed as specified goods. 
168. The Ministry of Cooperatives and Internal Tr ade is consulted prior to introducing fiscal 
measures, such as import duty changes, subsidies, re bates, etc. so that these changes in taxation do not 
lead to an escalation in prices.  However, the CAA may obtain certain fiscal concessions on certain 
products.  For example, it was instrumental in obtaining a waiver of the VAT on liquefied petroleum gas (LPG) after LPG became a specified item under Section 18 of the Act to facilitate its sale to 
consumers at a reasonable price.   
169. Products currently subject to price regulation in cluded:  chicken meat, some dairy products, 
rice, chicken, wheat flour, white sugar, dried chilli es, some types of onions, dhal, dried sprats, gram, 
green moong, canned fish, cement, and LPG (Table  III.15).  These products are subject to price 
regulation indefinitely.  The authorities indicated that  the 15 specified products are not all subject to 
price regulation. 
170. The Tea Board has statutory authority to regulat e the price of green leaf paid by factories 
(since 1968);  bus fares are also set using a formula. 
Table III.15 
Products subject to price regulation, May 2010 
Product description or district Maximum retail price (Rs) 
Description  
Chicken meat, frozen;  broiler chic ken meat with skin  35.00 per 100 g 
Ordinary portland cement SLS 107  750.00 
Portland limestone cement SLS 1253  750.00 
Masonry cement SLS 515  700.00 
Full cream milk powder 400 g  225.00 
Full cream milk powder 1 kg  550.00 
All other pack sizes of full cream milk powder  56.25 per 100 g 
Samba rice, cleared (excluding Keeri Samba and 
Suduru Samba) 1 kg  70.00 
Nadu rice 1 kg  60.00 
Red and white raw rice 1 kg  60.00 
LP gas  .. 
Table III.15 (cont'd) WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 72 
 
 
Product description or district Maximum retail price (Rs) 
Laugfs gas Shell gas District 
12.5 kg cylinder 12.5 kg cylinder 2.3 kg cylinder 
Colombo  1,744 1,769  325 
Gampaha  1,752  1,777 337 
Kalutara 1,757 1,781  337 
Putlam  1,781 1,794  339 
Kegalle  1,775 1,796 340 
Kurunegala  1,771 1,796  340 
Galle  1,772 1,797  340 
Ratnapura  1,774 1,799  340 
Kandy  1,781 1,806  341 
Matara  1,781 1,805 341 
Matale  1,784 1,808  342 
Trincomalee  1,807 1,820  343 
Anuradhapura 1,797 1,821  343 
Polonnaruwa  1,797 1,821  343 
Vavuniya  1,842 1,836  344 
Mannar  1,852 1,856  345 
Hambantota  1,801 1,825  345 
Monaragala  1,820 1,843  345 
Badulla  1,816 1,837  345 
Ampara  1,822 1,845 345 
Nuwaraeliya  1,816 1,837  345 
Batticaloa  1,832 1,845  304 
Jaffna  1,950 1,930  348 
.. Not available. 
Source:  Consumer Affairs Authority online information.  Viewed at:  http ://www.consumeraffa irs.gov.lk/Price_ 
Regulation.php. 
(iii) Incentives 
(a) Tax incentives 
171. Sri Lanka offers a wide range of tax incentives,  notably tax holidays, primarily for investment 
purposes.  In 2002, Sri Lanka notified a list of tax in centives available equally to national and foreign 
enterprises investing in Sri Lanka.67  Most of these are still in place.  The 2002 notification highlights 
two main investment incentive regi mes:  (a) granted to Board of Investment (BOI) companies (under 
Section 17 of the Board of Investment (BOI) Act) , which enjoy tax benefits under BOI Regulation 
No. 2 of 2006;  and (b) granted under the Inland Re venue Act No. 10 of 2006, and amendments up to 
the Inland Revenue (Amendment) Act No. 19 of 2009.  The first regime of incentives is managed by 
the BOI, while the second is run by the Inland Revenue  Department (IRD) of the Ministry of Finance.  
In the last Review, it was mentioned that there appear  to be moves to eliminate this distinction, but 
this has not happened. 
172. Sri Lanka's current system of tax incentives may result in duplication and overlap of 
beneficiaries if not of benefits.  This hinders tran sparency and causes confusion, which may effect the 
desired outcome.  Effective tax rates may therefor e vary substantially by firm and sector, and on 
average fall short of the statutory corporate tax rate of 20%.  Also, very substantial use of investment 
schemes risks distorting the allocation of resource s and creating competition for rent appropriation, 
                                                      
67 WTO document G/SCM/N/74/LKA, 7 January 2002. Sri Lanka WT/TPR/S/237/Rev.1 
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since in many cases, the incentive ma y not be needed to allow the in vestor to operate profitably.  
There is no estimate available of revenue forgone  due to these incentives sch emes;  however, income 
tax receipts, although they have increased in recent years, remain low.  At 2.9% of GDP, they account 
for a much lower percentage than taxes on goods and services (7.4%), and are lower even that taxes 
on international trade (3.1%).68 
173. Investments under the BOI Act scheme are subj ect to a number of requirements, including 
export performance and minimum export requirement s.  Manufacturers of non-traditional goods for 
export, including deemed exports, with an inv estment of at least US$250,000 and a minimum export 
content of 80%, are granted a full tax holiday of three to seven years, depending on the amount 
invested.  The income tax rate is at 10% fo r two years following the fiscal holiday, and 15% 
thereafter.  Export-oriented services industries with investment of at least US$500,000, and exporting at least 70% of turnover enjoy a five-year full tax ho liday and an income tax rate of 10% for two years 
following the fiscal holiday, and 15% thereafter.  The same treatment is granted to manufacturers of 
industrial tools and/or machinery investing at leas t US$150,000, except that after two years they are 
subject to the normal income tax rate of 20%.  Tw o-year full tax holidays are extended to IT-related 
industries, and a three-year tax break is gran ted for the establishment of companies' regional 
headquarters is Sri Lanka;  in the latter case, there is also a permanent income tax rebate to a rate of 
15% (Table AIII.6). 
174. Tax advantages are also offered to investors for expanding a company in the hotel industry 
(3 star and above).  Investors in research and de velopment with an investment of at least US$100,000 
are granted a five-year full tax holiday, and are ta xed at 15% thereafter if the resulting activity is 
export oriented;  similar benefits are granted to i nvestors in agriculture and/or agri-processing with an 
investment of at least US$150,000;  these are also granted a lifetime exemption on import duties on capital goods if export oriented, and in raw materials if exports are equal to or more than 70% of 
production.  Tax breaks for the establishment of  industrial estates (developing and managing 
industrial estates/special economic zones) depend on the size of the investment, ranging from 3 years 
for investment of US$500,000 to 15 years fo r investments of US$75 million and more.  
175. Under the IRD incentives regime, income tax exemp tions are provided usually for five years;  
in some cases for three years (T able AIII.7).  Companies engaged in agriculture, agri-processing;  
industrial and machine tool manufacturing;  electronics;  the exportation of non-traditional goods;  and information technology and allied services with a minimum invest ment of Rs 10 million 
(US$97,000) if incorporated on or after 1 April 2 002, and Rs 50 million (US$48 5,000) if incorporated 
before that date, may benefit from income tax exem ption for five years from the year in which the 
company starts making profits or no later than two years from the date that the company starts 
operations, whichever is earlier.  Be nefits are for three years for companies for which the period starts 
after 31 March 2008.  Agricultural undertakings may choose to be exempt from income tax for 
five years commencing on 1 April 2006, instead.  Companies engaged in infrastructure development 
projects carrying on "specified" undertakings with a minimum investment of Rs 1 billion 
(US$9.7 million) are tax-exempted for not less than  6 years, but no more than 12 years from 
31 March 2009, or the start of the year of assessment in which the undertaking starts to make profits.  
Certain small-scale infrastructure facilities with investment of Rs 10-50 million within one year of commencement of the undertaking, may enjoy a tax exemption of up to five years. 
176. Also under the Inland Revenue Act, investments in "pioneer" industries enjoy tax exemption 
for five to ten years, depending on the amount of  the investment, and a 15% rate of income tax 
thereafter.  The Act also offers tax incentives to new industrial undertakings, for research and 
                                                     
 
68 Ministry of Finance and Planning (2008). WT/TPR/S/237/Rev.1 Trade Policy Review 
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development and for regional purposes, to foster investment in areas other than the administrative 
districts of Colombo and Gampaha and in the Eastern part of the island.  
177. Incentives are available, under the Inland Revenue  Law, to exporters who do not qualify for 
concessions under Section 17 of the BOI Act.  These include a preferential 15% income tax rate on 
profits sourced from the export of non-traditional goo ds.  These concessions are currently applicable 
until 1 April 2014.  Also, declared dividends are subj ect to 10% tax rate.  Enterprises that supply to 
export operations also benefit from a 10% tax on the pr ofits of such sales, and their dividends are also 
taxed at 15%.   
178. In 1997, Sri Lanka notified a list of subsidies,  granted by the Sri Lanka Export Development 
Board (EDB) and the Board of Investment of Sri La nka, most of which were tax incentives contingent 
on export performance.69  Most of these schemes are still in place, with the exception of those 
provided by the EDB (e.g. the assistance scheme for manufactured exports of rubber and the 
"200 Garment Factory Programme"). 
(b) Non-tax incentives 
179. The National Development Bank (NDB) grants cred it at preferential conditions to small and 
medium-size enterprises (SMEs) under several schemes:  the Small and Micro Industries Leader and 
Entrepreneur Promotion Project (SMILE II), implem ented in 2001;  the SMILE III,  the Dasuna 
Revolving scheme;  and the E - Friends (Revolvi ng) Fund scheme.  These schemes are funded mostly 
by international donors. 
180. The SMILE II Revolving scheme provides financial facilities to SMEs in industrial 
manufacturing and in all service subsectors;  the scheme may also finance the construction of 
commercial buildings, but these must be located out side of the municipal and urban limits of the 
Colombo and Gampaha districts.  The project size, excluding land and buildings, may not exceed Rs 20 million (US$194,000).  The maximum amount  of loans under the scheme is Rs 10 million 
(US$97,000).  The interest rate is the Average We ighted Deposit Rate (AWDR) + 5%;  the repayment 
period is up to six years, includi ng a grace period of 24 months.
70  The programme is funded by the 
Japanese International Cooperation Agency (JICA).  The SMILE III is also geared towards financing 
industrial manufacturing and service subsectors, an d commercial buildings with the exception of 
hotels and guest houses.  The project must not exceed Rs 20 million;  loans are up to Rs 10 million, at an interest rate of 9%, and a repayment peri od of up to 10 years including a grace period of 
24 months.  The programme is funded by the Asian Development Bank (ADB).   
181. The DASUNA Revolving scheme provides financ ial facilities to micro-industries under the 
Southern Province Rural Economic Advancement Proj ect (SPREAP).  The objective is to promote the 
development of industries in the Southern Provin ce;  all manufacturing industries and selected service 
subsectors are eligible.  The projects must be small:  the total investment in fixed assets, excluding the 
land and buildings, should not exceed Rs 3 million (US$27,000) on completion of the project;  the 
maximum loan amount is Rs 1 million.  Credits are gr anted at an interest rate of 10.5% per annum, 
which is below the market rate for comparable cred it in other banks;  the repayment period is up to 
seven years including a grace period of two years.   The scheme is run with funds from the ADB. 
182. The Small and Medium Enterprise Regional De velopment Project (SMERDP) scheme offers 
credits to SMEs outside the Western Province, with  between 5 and 150 employees, an annual turnover 
of not more than Rs 300 million (US$2.7 million), and fixed assets (excludi ng land and building) not 
                                                     
 
69 WTO document G/SCM/N/3/LKA, 17 January 1997. 
70 NDB online information.  Viewed at:  ht tp://www.ndbbank.com/sme_serv/smile_ii.jsp. Sri Lanka WT/TPR/S/237/Rev.1 
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exceeding Rs 100 million (US$890,000) before the start of the project.  The maximum amount of the 
loan is Rs 20 million (US$179,000);  the interest rate  charged is the market rate, but with a repayment 
period of four to ten years with a maximum grace pe riod of three years.  The scheme is funded by the 
ADB.  The E-Friends (Revolving) Fund aims at providi ng low cost loans to help industrial enterprises 
find solutions to their environmental problems, such as industrial pollution, waste minimization, 
resource recovery and savings, and pollution contro l and abatement.  Loans are also for up to 
Rs 20 million, at an interest rate of 8.5% per annum, a nd with a repayment period of up to five years 
including a maximum grace period of two years.  The scheme is funded by JICA. 
(iv) State-trading, state-owned enterprises, and privatization  
183. Sri Lanka has made no notifications to the WT O with respect to state-trading enterprises 
within the meaning of Article XVII of the GATT 1994. 
184. Sri Lanka launched a programme of public enterp rise reform and privatization in 1990, as part 
of the process of liberalization and deregulation of the economy.  The process was reinforced with the 
establishment, in 1996, of the Public Enterp rises Reform Commission (PERC), a statutory body 
responsible for implementing of the privatiza tion programme and restructuring loss-making 
state-owned enterprises.  The PERC completed some  50 privatization operations transactions for a 
total of Rs 57 billion (US$508 million). 
185. The Government's current policy is not to priv atize public enterprises, but to restructure and 
improve their performance.  In July 2007, the Cabi net of Ministers decided to close down the PERC, 
repealing the Public Enterprises Reform Co mmission Act No. 1 of 1996.  Hence, no new 
privatizations will be carried out.  The current polic y is to invite the private sector to invest in 
non-functional public enterprises to make them prof itable, while retaining government ownership of 
at least 51%. 
186. The Department of Public Enterprises (PED) in the Ministry of Finance is in charge of 
monitoring public enterprises, and devising the polic ies to manage them.  In 2007, the Government 
assigned all the work handled by the PERC, including post privatization monitoring, to the PED.  All 
state-owned enterprises (SOEs) are expected to be pr ofitable or not rely on the Treasury for funding;  
to monitor this, they are required to enter in to performance contracts with the Treasury.  The 
Government's development strategy therefore fo cuses on increasing productivity and efficiency of 
public enterprises.  Public enterpri ses are also expected to provide competition to their counterparts in 
the private sector while safeguarding the national interest and consumer welfare.71 
187. In line with this policy, the PED issued instruc tions to all public enterprises to improve their 
performance through management reforms by concen trating on the core business activities to become 
commercially viable entities.  They are required to  emphasize procurement efficiency, while ensuring 
transparency and accountability, as well as impl ementing the required pricing reforms and 
management improvement.  The PED conducts a year ly performance review of public enterprises to 
ensure efficiency and effective utilization of resources. 
188. The Government also established new public ente rprises in 2007 to meet specific gaps in the 
economy:  the State Trading (Cooperative Wholesale) Company Limited, the Paddy Marketing Board, 
the Sri Lanka Savings Bank, the Lankaputhra Deve lopment Bank, the National Insurance Trust Fund 
and Mihin Lanka (Pvt) Limited. 
                                                      
71 Department of Public Enterprises (2007). WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 76 
 
 
189. The authorities noted that the Government has b een successful in attracting private investors 
for Higurana Sugar Industries Ltd (HSIL) and Kant ale Sugar Industries Ltd (KSIL).  The authorities 
have also put in place a policy of concessions for in frastructure-related activities.  In this respect, the 
development and operation of the Queen Elizabeth Quay  of the Colombo Port was granted to a private 
consortium under a build-operate-transfer (BOT) ag reement.  The authorities indicated that the 
Government is currently working on a similar arra ngement for the construction and management of 
the Colombo South Harbour terminal (Chapter IV). 
190. Public enterprises are categorized by shar e of government ownership:  fully owned 
government companies;  companies in which the G overnment owns more than 50% of shares and has 
controlling power;  companies with less than 50%  government holding;  and plantation companies 
with less than 50% government holding.  Public  enterprises collectively make a significant 
contribution to Sri Lanka's economy, since Government  ownership is present in most economic areas.  
There are 218 commercial public enterprises, includi ng 107 that are fully government-owned in which 
the Government has the controlling interest, 23 regional plantation companies, 19 minority 
shareholding companies, 52 subsidiary companies a nd 20 associate companies.  Due to recent reforms 
to make them more profitable and market-ori ented, public enterprises have shown improved 
performance in terms of dividends and levies paid towards the consolidated fund.  Total levy and 
dividend income from public enterprises was Rs 4. 71 billion (US$42 million) in 2007, compared with 
Rs 4.77 billion (US$43 million) in 2006.72  It rose to Rs 7.3 billion (US$65 million) in 2008 and, to 
Rs 11.9 billion (US$110 million) in 2009.  Outsta nding on-lending to public enterprises by the 
Government amounted to Rs 231 billion (US$2.1 b illion) at end 2008, of which Rs 26.4 billion 
(US$236 million) in 2008.   
191. Public enterprises in the banking sector include two licensed commercial banks:  the Bank of 
Ceylon (BOC), and People's Bank (PB);  and sev en specialized banks:  the National Savings Bank 
(NSB), the State Mortgage & Investment Ba nk (SMIB), HDFC Bank, Lankaputhra Development 
Bank (LDB), Regional Development Banks (RDBs) and the Sri Lanka Savings Bank Ltd (SLSBL).  
These institutions have a total of 1,325 main  branches and 21,777 employees.  At end 2008, 
state-owned banks had assets totalling Rs 1.24 bill ion (US$11 million), and outstanding loans and 
advances of Rs 616 million (US$5.5 million). 
192. Public enterprises play a significant role in  providing infrastruct ure facilities such as 
electricity, transport, port services, water supply,  and communications services.  The Government's 
policy in this area has been to mobilize foreign funds to on-lend to public enterprises to undertake 
earmarked investment activities.  The main state- owned infrastructure companies include:  the Ceylon 
Electricity Board, the Sri Lanka Ports Authority, the Ceylon Petroleum Corporation (CPC), the National Water Supply and Drainage Board, Airp ort and Aviation Services (Sri Lanka) Limited 
(AASL), and the Sri Lanka Transport Board (SLTB). 
                                                     
 
72 Levies are charged on companies established unde r a specific Act of Parliament, while dividends are 
produced by companies established commercially under the Companies Act.  In accordance with Section 9(2) of 
the Finance Act No. 38 of 1971, a levy may be imposed based on the surplus/profit after tax, while under the 
Companies Act, a dividend is based on the estimated profit before tax.  The level of estimated dividend/levy is set by the Treasury.  In determining the levy/dividend, the Treasury also takes into account the profitability as 
well as the liquidity of the public enterprise.  Special consideration is given if the public enterprises have made a 
commitment to invest in any development project in line with their corporate plans and the Government's public 
investment strategy. Sri Lanka WT/TPR/S/237/Rev.1 
 Page 77 
 
 
193. Major public enterprises involved in trading include the State Timber Corporation (STC), 
Lanka Sathosa Limited (LSL) and Cey-Nor Foundation Ltd.73  The main public enterprises in 
agriculture are the Ceylon Fertilizer Co. Ltd (CFC),  the Colombo Commercial Fertilizer Co. Ltd, Milk 
Industries Lanka Company (Pvt) Ltd. (MILCO), and the National Livestock Development Board 
(NLDB).74  In the plantation subsector, public enterp rises comprise 23 regional plantation companies 
(RPCs), the Sri Lanka State Plantation Corporatio n, the Janatha Estate Development Board, the 
Kantale Sugar Industries Ltd., the Hingurana Sugar Industries Ltd., the Cashew Corporation, and the 
Palmyra Development Board.75   
194. In 2010, there were 12 public enterprises carrying out industrial functions;  their net worth in 
2008 (latest year available) was Rs 4.64 billion (U S$41 million).  Eight were profitable while four 
incurred in losses in 2008.  Public services en terprises include the Sri Lanka Broadcasting 
Corporation (SLBC), with a turnover of Rs 712 million (US$6.4 million) in 2008, the Sri Lanka 
Rupavahini Corporation, with Rs 1.64 billion (US $14.6 million), and the State Printing Corporation 
(SPC) with Rs 966 million (US$8.6 million).  Public enterprises in the health  care sector engage in 
manufacturing and trading pharmaceutical drugs and Ay urvedic medicines.  Their total net worth at 
end 2008 was Rs 7.77 billion (US$69 .4 million).  Most of these enterprises were profitable in 2008. 
(v) Government procurement 
195. There are no specific figures for government procurement, as this is done by decentralized 
agencies, but the value of government expenditure  in goods, services, and works represented some 9% 
of GDP in 2008.  Some Rs 121.2 billion (US$1.08 bi llion) or 2.7% of GDP was expenditure on goods 
and services and Rs 263.9 billion (US$2.36 billion) or 6% of GDP on public infrastructure works.76 
196. Government procurement in Sri Lanka continues to be an important instrument of economic 
policy, to promote domestic suppliers and produc ts.  However, procurement guidelines have been 
streamlined and clarified to make the process more  efficient and transparent.  Sri Lanka does not 
participate in the WTO Plurilateral Agreement on Government Procurement (GPA);  and, in the 
context of this Review, the authorities indicated that  they are not currently considering participating. 
197. From 2004 to March 2008, the National Proc urement Agency (NPA) was the principal 
authority for formulating and amending the proc urement guidelines;  issuing manuals, evaluation 
methodologies, standard contracts, and specifications.77  Since March 2008, th ese functions have been 
assumed by the Department of Public Finance in the Ministry of Finance and Planning.78  T h e  
                                                      
73 STC's turnover was Rs 2.7 billion in 2008, throu gh the extraction, export, and purchase of timber, 
and production of sawn timber and furniture.  LSL's tu rnover was Rs 3.6 billion, and the Cey-Nor Foundation 
Ltd recorded a turnover of Rs 277 million through production and sales of fiberglass fishing boats and nylon 
fishing nets. 
74 In 2008, CFC's turnover was Rs 1.9 billion;  its main business is importing, blending, and 
distributing fertilizers.  The Colombo Commercial Fertilizer Co. Ltd had a turnover of Rs 950 million.  MILCO, 
with core businesses of milk collection, processing, and marketing, and which purchases about 48% of all milk 
collected recorded a turnover of Rs 3.2 billion in 2008.  The NLDB, which engages in breeding of livestock, 
establishment and maintenance of marketing outlets, and sale of fresh cow milk to the public, recorded a 
turnover of Rs 957 million in 2008. 
75 The Janatha Estate Development Board (JEDB) and the Sri Lanka State Plantation Corporation 
(SLSPC) made losses for several years.  They were both subject to restructuring in 2008.  The JEDB posted a 
loss of Rs 19 million in 2008, while the SLSPC made a loss of Rs 4.3 million. 
76 Ministry of Finance and Planning of Sri Lanka (2008). 
77 The NPA replaced the Procurement Support Bureau (PSB) established in 1999 in the Ministry of 
Finance and Planning.   
78 NPA online information.  Viewed at:  http://www.npa.gov.lk/circulars/PF429.pdf. WT/TPR/S/237/Rev.1 Trade Policy Review 
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Department of Public Finance also acts as a refere nce point for providing procurement information, 
technical expertise, and training to streamline and improve procurement procedures, and is in charge 
of monitoring the tendering process.  The Department oversees and services all government entities;  however, it is a facilitating body not a central procurement agency.  Procurement has been 
decentralized since 1996 when the central proc urement office was closed.  Responsibility for 
procurement is vested in the Secretaries and Head s of Departments of the respective line ministries, 
who act as their Chief Accounting Officers/Accounting Officers.  For each procurement, the Department of Public Finance appoint a Procur ement Committee (PC) and a Technical Evaluation 
Committees (TEC), as well as Cabinet level committ ees;  other committees are appointed by the line 
ministries.  These different committees are responsible for the procurement process.  Procuring 
entities are requested to carry out initial an e nvironmental examination (IEE), an environmental 
impact assessment (EIA), and a social impact as sessment (SIA) before appointing a procurement 
committee.  
198. The main regulations on the procurement process are contained in the Procurement 
Guidelines and the Procurement Manual, which must be followed by ministries and departments, as 
well as by state-owned enterprises, statutory boa rds, and all other govern ment institutions and 
agencies, including provincial councils and local authorities.
79  The Government issued new 
procurement guidelines for goods and works in January  2006, with the approval of the Cabinet of 
Ministers.  The stated aim of these guidelin es, is to enhance transparency, speed up the 
implementation of development pr ogrammes, both with public and foreign financing, and to obtain 
the most financially advantageous and best quality services and supplies.80  The new guidelines, 
which were drafted in consultati on with the World Bank, the Asian Development Bank, and the Japan 
Bank for International Cooperation, and a manual became effective on 1 February 2006 for all 
procurements of goods, works and services, other th an the selection and employment of consultants, 
for which a separate manual and guidelines were is sued in 2007 but are still in the draft form. 
199. The guidelines contain provisions to ensure confidentiality, prevent corruption and deal with 
situations where there may be conflicts of inte rest.  They explicitly mandate:  (a) maximizing 
economy, timeliness and quality, resulting in least cost together with high quality;  (b) adhering to prescribed standards, specifications, rules, re gulations, and good governan ce;  (c) providing fair, 
equal, and maximum opportunity for eligible interested  parties to participate in procurement;  (d) the 
expeditious execution of works and delivery of good s and services;  (e) compliance with local laws 
and regulations and international obligations;  (f) ensuring transparency and consistency in the 
evaluation and selection procedure;  and (g) retain ing confidentiality of information provided by 
bidders.  The guidelines are applicable to all proc urement, irrespective of the source of funding.  
However, in the case of a foreign-funded project, if the funding agency mandates the use of its own 
procurement guidelines, these will prevail over the national guidelines to the extent applicable. 
200. The officer-in-charge of a procurement action is  responsible for:  maintaining communication 
with stakeholders;  preparing an invitation for pr e-qualification and its submission to the TEC for 
review and approval;  preparation of the draft bi dding documents, including the specifications, and the 
submission of these to the TECs for review and approva l;  preparation of data and information prior to 
the evaluation report.  PCs and TECs make the proc urement decisions, with respect to documentation, 
review, and choice and approval of bids.  TECs consist of specialists in the area and are appointed by 
the Head of Department/Project Director.  Procuring Committees may be appointed at the project 
                                                     
 
79 Procurement Guidelines viewed at:  http ://www.treasury.gov.lk/FPPFM/pfd/publications/ 
ProcurementGuidelines2006_amded12June.pdf;  and Procur ement Manual viewed at:  http://www.treasury.gov. 
lk/FPPFM/pfd/publications/guidelin es.html#ProcurementManual. 
80 National Procurement Agency (2006). Sri Lanka WT/TPR/S/237/Rev.1 
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(PPC), department (DPC) or ministry (MPC) le vel, according to the value of the procurement.81  In 
the case of high-value procurement, a Cabinet Appointed Procurement Committee (CAPC) may be 
appointed.  A Standing Cabinet Appointed Procur ement Committee (SCAPC) may be appointed in 
the case of high value procurement that needs expeditious action.82  In the latter case, the procurement 
procedures may be simplified.  Mixed infrastruct ure projects where both the Government and the 
private sector are involved are regulated by the Government Tender Procedures. 
201. The tendering evaluation process starts with the determination of bidder compliance with the 
qualifications laid down in the bid documents.  Sub sequently, the TEC examines the bid and prepares 
a bid evaluation report and submit it to the relevant  PC.  The PC recommends the lowest evaluated 
bid.  Awards are published on the Department of Public Finance's website .  Once the award is 
announced, other bidders may appeal the decision.  Appeals should be lodged within a week of the award determination (see below).   
202. Sri Lanka grants price preferences to loca lly manufactured goods as determined by the 
Treasury and included in the procurement guidelines .  The stated goal of these preferences is to 
promote value added to local raw materials and do mestic bidders, thereby pr omoting national industry 
and enterprise.  The preference is granted when eval uating the bid.  In the case of works and contracts, 
the margin of preference is 7.5% for contracts funded by the World Bank and the Asian Development 
Bank, and 10% for contracts funded by the Govern ment of Sri Lanka.  The margins of preference 
apply to:  (a) Sri Lankan individuals/sole proprietors ;  (b) partnerships where more than 50% of the 
members are Sri Lankans;  (c) individual firms regi stered in Sri Lanka, that have more than 50% 
ownership by Sri Lankans and do not sub-contract  more than 10% of the contract price.   
203. Preferences for domestically manufactured goods are granted at 15% for contracts funded by 
the World Bank and the Asian Development Bank, and 20% for contracts funded by the Government.  
To benefit from the preferential margin, the bidder mu st satisfy the PC that labour, raw materials, and 
components from within Sri Lanka account for 30% of the ex-works price of the product offered, and 
that their production facility has been manufacturi ng/assembling such goods at least since the time of 
bid submission.  In addition, in government-f unded projects, the bidder must satisfy national 
proprietorship requirements. 
204. In accordance with the procurement guidelines, calls for tenders must be given the widest 
possible publicity.  The tender notice must be publishe d in an abridged form in local newspapers and 
at least once in the Government Gazette.   In the case of international te nders, the procuring entity (PE) 
is required to give international publicity to th e procurement notice in various media to ensure 
maximum competition.  This includes advertising in  one widely circulated national newspaper and 
relevant websites where possible, as well as in international procurement gateways.  The PE is also expected to transmit invitations to tender to emba ssies and trade representatives of countries from 
which suppliers and contractors are likely to partic ipate, and post them on the relevant websites.   
                                                     
 
81 In accordance with Supplement 16 to the Procurement Manual, DPCs and PPCs may decide on 
projects of up to Rs 25 million;  MPCs on tendering up to Rs 100 million;  and a Cabinet-appointed Tender 
Board on projects with a value above Rs 100 million.  See Ministry of Finance and Planning (2008), Department 
of Public Finance, Supplement – 16 to the Procurement Manual, 11 Ap ril.  Viewed at:  
http://www.treasury.gov.lk. 
82 According to the guidelines, the use of a SCAPC may be justified where:  (a) expeditious processing 
of procurement is necessary;  (b) extraordinary speedy decisions have to be taken;  (c) supplies are immediately required to avoid acute shortages in the market;  (d) bids have a very short validity period;  (e) the prices of 
goods fluctuate frequently;  (f) items need to be purch ased very frequently without significant changes in 
specifications;  (g) security consideration warrants;  and (h) a project contains a large number of bid packages over a long time span. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 80 
 
 
205. The Government has started implementing a system for electronic tendering (e-procurement).  
In early 2010, certain aspects of the procurement process were being carried out online, such as, the 
general advertising process, the publication of procurement invitations, or the inspection of 
pre-qualification applications and bidding documents.  However, the electronic submission of bids is 
not allowed. 
206. The procurement guidelines specify 13 types of procurement method, depending on the 
threshold and the type of goods/service or work procured (Table III.16).  Works, services, and 
supplies must, as far as possible, be procured th rough the open competitive procedure.  However, 
exceptions from this procedure may occur under specif ic circumstances.  Exceptions, as specified in 
the procurement methods listed below, include:  entrusting contracts to "approved societies";  
emergency purchases;  or procurement below certain thresholds. 
Table III.16 
Government procurement methods, 2010 
Method  
International 
Competitive Bidding 
(ICB) ICB is used:  (a) when the capacity of  the domestic contractors, suppliers and service providers is limited and 
the advantage of ICB is evident;  (b) for foreign-funde d projects, when the foreign funding agency agreement 
requires the PE to resort to ICB procedures.  
However, in the case of works contract, to promote the development of the domestic construction industry, 
there is the possibility of slicing the contract and fo llowing a slice and package a pproach to suit domestic 
contractors.  
- Domestic preference criteria apply. - All other conditions including currencies, taxes, a nd other statutory levies, except domestic preference 
consideration, are applicable equa lly to foreign and domestic bidders. 
- International publicity is required to ensure maximum competition.  The PE is required to: 
 (i) advertise in one widely circulated nationa l newspaper and relevant websites where possible; 
 (ii) internationally, such as in UNDB and Development Gateway's Market;  and 
 (iii) transmit invitations to embassies and trade re presentatives of countries from which suppliers and 
contractors are likely to participate, and post them on the relevant websites. 
National Competitive 
Bidding (NCB) NCB is used for most government-funded projects.  
- It must be advertised at least in one widely ci rculated national newspaper,  the NPA website, and other 
relevant websites where possible. 
- It is open to all bidders. - Contractors/suppliers/service providers are allowed to  purchase the bidding document up to a day prior to 
the bid. 
- In the case of contract for  works,  to be eligible for contract award,  the domestic contractors must have 
valid and appropriate registration at the time of su bmitting the bid, under the National Registration System 
of Institute for Construction, Training and Development (ICTAD).   
- NCB use in foreign-funded projects requires the agreem ent of the foreign funding agency;  in this case, 
foreign contractors or suppliers are allowed to bid on the same terms with the domestic contractors or 
suppliers, and no domestic preference is granted. 
Limited / Restricted International Competitive Bidding 
(LIB) The invitation to bid is addressed directly to a pre-se lected list of international suppliers or contractors. 
- The procedure is chosen when only a few sources are available. 
- All procedures followed under ICB apply except the requ irements for advertising and domestic preference. 
Limited/Restricted 
National Competitive 
Bidding (LNB) The invitation to bid is addressed directly to a pre- selected list of national suppliers or contractors. 
- The procedure is chosen when only a few sources are available. 
- Procedures followed under NCB apply except the requi rements for advertising and domestic preference. 
Shopping Method used for procuring:  (i) readily available off- the-shelf goods of small value;  (ii) small value 
commodities for which specifications are standard ;  and (iii) small value works or services. 
- The selection is based on comparison of price quotations obtained from several invited bidders. 
- Limits of Rs 5 million (US$44,600) for works, a nd Rs 2 million (US$17,800) for goods and services in 
government-funded projects, or Rs 3 million (US$26,700) if funded by an international agency.   
- Requests for quotations are addresse d only to individuals/firms on a re gister of suppliers/contractors  
- The comparison of quotations follows NCB principles wherever applicable. 
Table III.16 (cont'd) Sri Lanka WT/TPR/S/237/Rev.1 
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Method  
Registration of suppliers The issue of tender notices may be conf ined to a list of suppliers registered  with a specific Department.  This 
procedure is used for procurement of items of small valu e or for purchases of items of items used frequently, 
for which advertising may be un economical on a continuous basis. 
- The PE may:  (i) publish a notice for registration of suppliers;  and (ii) prepare a list comprising names of 
suppliers who are able to supply particular categorie s of goods and services (e.g. stationery, electrical 
items, periodicals, and publications). 
- The PE must confine shopping to names appearing on th e list, which must be updated at least once a year. 
Direct Contracting Procurement of goods or services or  works from  a single supplier source is used only under exceptional 
circumstances, including when:  (i) the prices or rates are fixed pursuant to legislation by regulatory bodies;  
(ii) standardization of equipment, for compatibility with existing equipmen t, may justify additional purchases 
of the same type of goods;  (iii) the required equipm ent is proprietary and obtai nable only from one source 
(e.g. software, text books, spare parts, defence items);  and (iv) the process design requires the purchase of 
critical items from a particular supplier as a condition of a performance guarantee. 
- In purchases under (ii):  (a) the number of items to be procured must generally be less than 50% of the 
existing number;  (b) the price must be reasonable, a nd (c) the advantages of another make or source of 
equipment must have been considered. 
- The upper limit is Rs 250,000 (US$2,200) for works,  and Rs 100,000 (US$890) for goods and services. 
Repeat Orders Repeat orders (placed with the original supplier over a short period for the supply of the same goods) may be 
authorized only in exceptional circumst ances, up to a limit of 50% of the original contract value, provided 
that no more than six months have lapsed from the date of award of the original contract, and the PE certifies 
that:  (a) the necessity for additional requirement was not foreseen and when the original invitation to bid 
was issued;  (b) it is not economical to follow the bidding  procedure again;  (c) the price of the goods has not 
dropped since the original order;  and (d) the appr opriate PC has no objection to such repeat order. 
- Prior to the placement of repeat orders, the PC is ma ndated to use its best endeavours to negotiate with the 
supplier to obtain more favourable terms and conditions. 
Force Account Force Account implies the execution of works by using the procuri ng entity's own personnel and equipment. 
- This method is used if the PE determines that it has the required workforce to execute of such works, and:  
(a) when quantities are difficult to define in advance;   (b) contractors are unlikely to bid at reasonable 
prices;  (c) work should be carried out without interrupting the ongoing work;  and (d) in emergency 
situations that need urgent attention. 
Emergency Procurement May be used (i) in exceptional circumst ances, such as man-made or natural di sasters;  (ii) to meet unforeseen 
social obligations and other similar situations declared  by the Government as bei ng an emergency situation. 
- To initiate procurements exceeding the shopping method  thresholds, a formal approval must be obtained 
from the relevant authorities. 
- For works not exceeding Rs 25 million (US$220,000), th e PE may use any of the following provisions to 
meet the emergency requirements:  (a) the bidding document will contain an itemized, priced, Bill of Quantity based on the Engineer's/Consultant's estimate;  (b) bidders are allowed to bid a percentage above 
or below the Engineer's/Consultant's estima te.  The lowest bid price is selected. 
- The bidding period may be reduced to three days in  the case of limited biddi ng by invitation and seven 
days when open advertisement is used. 
- Purchases from government institu tions must be given preference. 
Community Participation 
in Procurement This method is applied in the interest of project sustai nability, or to achieve certain  specific social objectives, 
such as creating employment opportunities in an identif ied geographical area, it consists in calling for the 
participation of local-community-based organizations (CBO). 
- Direct contracting may be awarded to communitie s on government or foreign-funded projects.   
- The value of the contract must not exceed Rs 2 million (US$17,800).   
- CBOs must be registered as a society at least two years prior to the date of contract award;  they must be 
registered with ICTAD under the National Registration system, and included in the Procurement Manual.  
The works should be within the area of authority and purview of  the society, and must not be 
subcontracted. 
Two-Stage Bidding This method is used for turnkey contracts or contr acts for large complex plant/equipment or information 
technology systems or works of a special nature, all of which require innovative approaches, or where the 
problem of technically unequal bids are likely to be encountered. 
- Use of this method requires Cabinet approval. - In the first stage un-priced technical proposals ar e invited on the basis of a conceptual design or 
performance specifications.  Subject to clarification on technical and commercial issues and adjustments, if 
any, amended bidding documents are prepared for the second stage. 
- During the second stage, there is an invitation for final technical proposals a nd priced bids.  Any of 
previous methods may then be selected. 
Table III.16 (cont'd) WT/TPR/S/237/Rev.1 Trade Policy Review 
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Method  
Two Envelope System This method may be used in circumstances such as :  (i) "turnkey", "design and build" or "supply and 
installation" contracts, and (ii) where altern ate types of technical proposals are possible. 
- Bidders are required to submit their technical and fi nancial proposals simultaneously, but in two separate 
envelopes. 
- Technical proposals are opened first and reviewed to  determine their response to specifications, and the 
financial proposal is opened in public. 
Pre-qualification of bidders Pre-qualification is generally required where the high co st of preparing detailed bids by potential bidders 
could discourage competition, such as  procurements involving large or  complex works contracts, i.e. 
turnkey, design and build, or manage ment contracts; or  custom-desi gned equipment, industrial plant, 
specialized services. 
- Invitations to bid are confined to those who have adequate capacity and resources.   
- Pre-qualification must be carried out giving wide publ icity and calling for information in a given format. 
- A clear statement of the scope of the contract and the criteria for selection must be sent to all firms who 
have expressed an interest in bei ng considered for pre-qualification. 
- All applicants who fulfil the pre-qualifica tion requirements specified are pre-qualified. 
Pre-qualification criteria include:  (i) experience and past  performance on similar contracts;  (ii) resources 
available in regard to personnel, equipment, and c onstruction or manuf acturing facilities;  and (iii) the 
necessary financial resources. 
Source:  Guidelines for Government Proc urement, Procurement Manual,  and Supplement – 16 to the Procurement Manual . 
207. In accordance with the procurement guidelines, th e basic principle for selection is the lowest 
evaluated bid.  However, bids may be evaluated on th e basis of other factors, which must be specified 
in the bid documentation.  These include:  technical fact ors such as the efficiency and reliability of the 
equipment;  the construction method to be used;  the time of completion or delivery;  and the 
availability of after-sales service and spare parts.  The operating cost may also be taken into account.  
Preferences are applied to domestic enterprises and products (see below).  Procurement procedures 
leave some room for discretion. 
208. The guidelines stipulate that national competitiv e bidding (NCB) should be used for most 
government-funded tendering;  under this method, tendering is open to all parties, including 
foreigners, and no preferences apply for domestic s uppliers and products.  Ho wever, the procurement 
notice is advertised only locally, in at least one widely circulated national newspaper, although it is 
also posted on the Department of Public Finance we bsite and other relevant websites.  International 
competitive bidding (ICB) is used only when domest ic providers may not have the capacity required 
and the advantage of ICB is evident;  for foreign-fu nded projects;  or for works contracts.  Domestic 
preference criteria are applicable in ICB procurement.   
209. A number of selective tendering procedures may be used in different circumstances, and 
under certain thresholds.  The shopping  method is used mainly for procuring readily available 
off-the-shelf goods of small value, small value co mmodities for which specifications are standard, and 
small value works or services.  Selection is based  on comparison of price quotations obtained from 
several invited bidders.  The selection criteria s hould be the lowest cost, when feasible.  The 
registration of suppliers procedure may also be used  for low value procurement, where advertising is 
deemed uneconomical.  Quotations are invited from a list of registered suppliers, and selection is 
generally based on the lowest cost.  Direct contrac ting, from a single supplier, is used where prices or 
rates are fixed pursuant to legislation by regulator y bodies;  or additional standardized equipment or 
equipment obtainable only from one source, needs to be purchased.  In this case, the price must be "reasonable" (compared to the previous price paid or  a comparable market price), and the advantages 
of using another supplier must have  been considered.  Repeat orders may be authorized in exceptional 
circumstances, for exampl e when it is not economical to follow the bidding procedure again;  other 
conditions also apply (Table III.16). Sri Lanka WT/TPR/S/237/Rev.1 
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210. Emergency procurement, with a shorter bi dding period, may be used in exceptional 
circumstances for works not exceeding Rs 25 million (US$220,000).  It may take the form of open 
tendering or limited bidding by invitation.  The bi dding period may be reduced to three days for 
limited bidding by invitation and seven days when open advertisement is used.  According to the 
guidelines, the lowest bid price must be selected.  Lump-sum contracts must be used wherever 
possible, and purchases from government institutions must be given preference. 
211. Sri Lankan procurement regulations allow for some set-aside schemes, such as the 
Community Participation in Procurement scheme to achieve specific soci al objectives, such as 
creating employment opportunities in an identified geogr aphical area.  It is considered desirable to 
call for the participation of local community-based or ganizations (CBOs), to which direct contracting 
is granted.  The limit for this type of pr ocurement scheme is Rs  2 million (US$17,800). 
212. In the case of turnkey or large or complex projects, the Guidelines recommend the use of 
two-stage bidding, the two-envelope system, or pr e-qualification of contractors.  The idea is to 
separate technical from price considerations.  Once th e PC is satisfied that the technical qualifications 
are met by the bidder, it examines the bid from an economic or cost-effective point of view. 
213. Special procurement procedures may apply for goods like commodities, pharmaceutical 
products, and information technolog y equipment.  For procuremen t of commodities that require 
multiple purchases of partial quantities, a list of pr e-qualified bidders may be drawn up and periodic 
invitations issued.  Bidders may be invited to quote prices linked to the market price at the time of or 
prior to the shipments.  To take advantage of favourable market conditions, bid validities are as short 
as possible, and a single currency, in which the comm odity is usually priced in the market, may be 
used for bidding and payment.  Bidding documents ma y permit electronic, telexed or faxed bids.  
Special guidelines are used for procurement of pha rmaceuticals (Guidelines for the Procurement of 
Pharmaceuticals).  Specialized bidding documents ma y be used for the procurement of information 
technology equipment.  No statistical information was available on the use of  the different kinds of 
procurement methods for 2004-09. 
214. A performance security of not less than 5% of th e estimated contract sum is required in works 
procurement, to safeguard the PE in case of breach of contract by the contractor.  The need for 
performance security for supply of goods depends on the market conditions and commercial practice 
for the particular goods;  it is normally not less than  10% of the estimated contract sum and may also 
cover warranty obligations. 
215. Complaints with respect to procurement are dealt with by the Procurement Appeal Board 
(PAB), established in August 2005 under the Presidentia l Secretariat.  The PAB is mandated to review 
complaints regarding awards recommended by the CAPC  or PCs.  The Secretary of the line ministry 
must inform the unsuccessful bidders in writing within one week of being informed of the 
recommendation of the CAPC.  These bidders may then, within one week, appeal against the 
recommendation of the CAPC to the PAB.  The bidde rs are requested to deposit a non-refundable fee 
of Rs 50,000 (US$4,400) in a deposit account maintained at the Presidential Secretariat.83  The PAB 
conducts an investigation and submits its report to the Cabinet of Ministers, with copy to the Secretary 
of the line ministry.  The authorities indicate that nine appeals had been received up to end of 2009 
concerning procurement at Cabinet level.  
216. A study conducted by the World Bank in 2003 noted that although Sri Lanka's procurement 
system seemed to have served its purposes, a strengt hening of the rules would be desirable.  The study 
noted that, although the Guidelines prescribed th e procedures, which have the force of Law on 
                                                      
83 NPA online information.  Viewed at:  http://www.npa.gov.lk/guidelines/AppealBoardAppoint.pdf. WT/TPR/S/237/Rev.1 Trade Policy Review 
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Procurement Issues, they were easily amendable by the Ministry of Finance without going through 
Parliament.  The study considered that since the Guidelines have some  inbuilt flexibility and 
discretionary provisions, which may result in abu ses, a Procurement Act and Rules to govern public 
procurement would substantially improve transparency, reduce possible abuses and malpractices, and 
enhance public confidence in the system.84  
217. The report made a number of other recommendati ons for the improvement of the procurement 
system, including the progressive introduction of electronic tendering procedures to increase transparency and efficiency;  the termination of the repeat orders system, which could lead to 
unhealthy practices;  and the introduction of a computerized monitoring system to track the various 
procurement actions, and an up-to-date com puterized contractor performance database. 
(vi) Intellectual property rights 
(a) Overview 
218. Sri Lanka is a party to the Convention Es tablishing the World Intellectual Property 
Organization (WIPO) and to other interna tional conventions on intellectual property.
85  It has not 
acceded to the WIPO Performances and Phonograms Treaty (WPPT);  the WIPO Copyright Treaty 
(WCT);  or the WTO Information Technology Agre ement.  In 1991, Sri Lanka signed a bilateral 
agreement with the United States to pr otect intellectual property rights.   
219. Sri Lanka introduced new intellectual property legislation through the Intellectual Property 
Act, No. 36 of 2003, which was certified on 12 November 2003.  The new law introduced important changes to Sri Lanka's regime, aimed, in partic ular, at ensuring compliance with the WTO TRIPS 
Agreement.  The Act covers:  copy right and related rights;  industria l designs;  patents;  marks and 
trade names;  layout designs of integrated circu its;  unfair competition and undisclosed information;  
and geographical indications.
86  The Act's regulations, Intellectua l Property Regulations No. 1 of 2006 
entered into force in May 2006. 
220. Sri Lanka's intellectual property legislation was reviewed by the Council for TRIPS in 
November 2001.  Sri Lanka's contact point for intelle ctual property purposes is the Registry of Patents 
and Trade Marks of Sri Lanka.87  The authorities indicated that legislation on plant varieties is in the 
process of being drafted. 
221. The National Intellectual Property Office (NIPO)  of Sri Lanka, established under Intellectual 
Property Act No. 36 of 2003, administers the intelle ctual property system in Sri Lanka.  The NIPO's 
administrative duties include registration and post re gistration of marks, patents, industrial designs, 
layout designs of integrated circuits, and collectiv e societies.  The NIPO is also responsible for 
collecting and disseminating intellectual property in formation;  fulfiling Sri Lanka's international 
obligations relating to intellectual property;  promoting international and regional cooperation on 
intellectual property;  proposing IP policies;  f acilitating the enforcement of IP rights, including 
dispute resolution in copyright and related rights. 
                                                      
84 World Bank (2003). 
85 These include:  the Patent Cooperation Treaty;  the Berne Convention for the Protection of Literary 
and Artistic Work;  the Paris Convention for the Protectio n of Industrial Property;  the Madrid Agreement for 
the Repression of False or Deceptive Indications of Source on Goods;  the Nairobi Treaty;  the Universal 
Copyright Convention;  the Convention establishing the World Intellectual Property Organization (WIPO);  and 
the International Convention for the Protection of Performers (WIPO). 
86 NIPO online information.  Viewed at:  http://www.nipo.gov.lk/act.htm. 
87 WTO document IP/N/3/Rev.10, 16 May 2008. Sri Lanka WT/TPR/S/237/Rev.1 
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222. The NIPO, the Customs Department, the police, and the Attorney General's Department are 
responsible for enforcing intellectua l property rights in Sri Lanka.  
223. Intellectual Property Act No. 36 of 2003 create d an Advisory Commission for matters relating 
to copyright, industrial designs, marks, patents, unfair competition and any other area or subject of 
intellectual property. 
(b) Copyright and related rights  
224. Copyright and related rights are protected by th e Intellectual Property Act and its regulations.  
Copyright protection is provided fo r original literary, artistic, and scientific works.  These include, 
inter alia,  books, pamphlets, articles, dramatic, musical, choreographic and audiovisual works, stage 
productions, computer programs, drawings, paintings , sculptures, works of architecture, works of 
applied art, expressions of folklore  and photography.  Translations a nd other adaptations of the work 
are also protected, as well as collections of works and databases.  The law grants the owner of the 
copyright of a work exclusive rights with respect to  the reproduction, translation, adaptation, public 
distribution (sale, rental, or export), importation,  public display, broadcasting or public performance 
of the work.  In the case of an audiovisual work , a sound recording, a computer program, a database 
or a musical work, the right includes the rental of th e original or a copy.  The "fair use" of a work, 
including by reproduction in copies for purposes such as criticism, comment, news reporting, 
teaching, scholarship or research, is not considered an infringement of copyright.  This right does not 
extend to works of architecture, databases or computer programs.88  The expression of folklore is 
protected under a sui generis  set of provisions. 
225. The Act extended copyright protection from life of the author plus 50 years to life plus 
70 years.  In the case of work of applied art, th e economic and moral rights are protected for 25 years 
from the date of the making of the work.  The owne r of a copyright may grant a licence to a physical 
person or legal entity to carry out all or any of the acts relating to his/her econom ic rights, or assign or 
transfer in whole or any part of an economic right. 
226. The Act also contains provisions for the protecti on of related rights, in particular with respect 
to the protection of rights of performers, producers of sound recordings, and broadcasting 
organizations.  
227. Copyrights do not need to be registered to be protected.   
(c) Patents 
228. Patents are protected by the 2003 Intellectual Pr operty Act and its regulations.  An invention 
is patentable if it is new, involves an inventive st ep and is industrially applicable.  An invention is 
considered to be new if it is not anticipated by prior art.  Inventions may be or relate to a product or a 
process.  Patent applications must be accompanied by a novelty search report.  Certain inventions are 
not patentable in Sri Lanka.89 
                                                      
88 The Act allows the reproduction in a single copy  or the adaptation of a computer program by the 
lawful owner of a copy of that computer program without the authorization of the owner of copyright, provided 
that the copy or adaptation is necessary:  (i) for use of the computer program for the purpose and extent for 
which the computer program has been obtained;  (ii) for archival purposes and for replacement of the lawfully owned copy of the computer program in the event that th e said copy of the computer  program is lost, destroyed 
or rendered unusable. 
89 These include:  discoveries, scientific theories, and mathematical methods;  plants, animals, and 
other micro-organisms other than transgenic ones;  essentially biological process for the production of plants WT/TPR/S/237/Rev.1 Trade Policy Review 
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229. The right to the patent belongs to the inventor.  The owner of a patent has the exclusive right 
to exploit the patented invention;  assign or tran smit the patent;  and conclude licence contracts.90  
Patents are recorded in the Register of Patents and published in the Gazette  once the Director-General 
of Intellectual Property considers that the necessa ry conditions for granting a patent have been 
satisfied;  the Register also contains any change in the ownership of a patent application or patent, the 
amendment or division of a patent application, th e assignment or transmission of a patent application 
or patent, any valid claim to priority, the surrender or revocation of a patent and other matters relating 
to patents.  The Register is public. 
230. Patents are valid for 20 years after the date of application for registrati on but must be renewed 
annually through the payment of a fee.  The term ma y not be extended beyond 20 years.  The patent 
will expire if, after a grace period of six months, the corresponding annual fee has not been paid.  An 
application for invalidation of a pate nt may be made in the court if, for instance, the invention is not 
considered to be new, the invention is not pate ntable, or if it is industrially not applicable. 
231. The law allows the Government to grant com pulsory licences to manufacture certain patented 
products in situations such as a national emergency.   A compulsory licence may also be granted in 
case of lack of commercial exploitation of the patent .  Applications must be made to the Director-
General of the NIPO with evidence that the app licant has made efforts to obtain approval from the 
right holder on reasonable commercial terms and c onditions and that such efforts have not been 
successful within a reasonable period of time.  Th e issuance of a licence is non-exclusive and subject 
to the payment of adequate remuneration to the ow ner of the patent taking into consideration the 
economic value as determined by the NIPO, and where applicable, the need to correct anti-
competitive practices.  Licences for the exploitation of a patent (the second patent) that cannot be 
exploited without infringing another patent (the firs t patent) may be granted if:  (i) the invention 
claimed in the second patent involves an important  technical advance of considerable economic 
significance in relation to the invention claimed in the fi rst patent;  (ii) the owner of the first patent is 
entitled to a cross licence on reasonable terms to expl oit the invention claimed in the second patent;  
and (iii) the exploitation authorized in respect of  the first patent may only occur with the assignment 
of the second patent. 
232. Licences may also be granted voluntarily, through contracts, which must be recorded in the 
Register.  This licence may be exclusive or not.  Licences may not include restrictions concerning the 
scope, extent or duration of exploitation of the pa tented invention, or on geographical area or the 
quality or quantity resulting products. 
233. If a judicial or administrative body has determin ed that the manner of exploitation of a patent 
by its owner or its licensee is anti-competitive, th e Director-General may au thorize any person, body 
of persons, government departments or statutory body  to exploit the patent without a licence of the 
owner of the patent.  The Act also contemplates rights derived from the previous manufacture of the 
product.  If, at the filing date or where applicable th e priority date of the patent application, a person 
was in good faith making the product in Sri Lanka or  using the process that is the subject of the 
invention claimed in the application, or making pr eparations in this respect, she/he has the right, 
despite the grant of the patent, to exploit the patented invention. 
                                                                                                                                                                     
and animals other than non-biological and microbiological processes;  schemes, rules, or methods for doing 
business, performing purely mental acts or playing games;  methods for the treatment of the human or animal 
body by surgery or therapy, and diagnostic methods practiced on the human or animal body;  inventions used in 
the utilization of special nuclear material or atomic energy in an atomic weapon;  any invention attempting against public order, morality, the protection of human, animal or plant life or health, or the environment. 
90 Exploitation of a patent granted in respect of a product means making, importing, stocking, selling, 
and using the product.  Exploitation of a process means using it;  and importing, stocking, selling, and using a product manufactured by use of the patented process. Sri Lanka WT/TPR/S/237/Rev.1 
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234. The Act also allows parallel imports of pha rmaceutical products;  parallel imports will allow 
the import of a branded drug from an alternative source. 
235. According to the authorities, obtaining a patent in Sri Lanka takes a few weeks;  a longer 
period might be needed if the application is not properly prepared.  Some 1,256 patents were granted 
between 2003 and 2009 (Table III.17).   
Table III.17 
Industrial property statistics, 2003-09 
Applications  Registrations Year Resident Non-resident Total  Resident Non-resident Total 
M a r k s         
2003  3,623 2,139 5,762  359 601 960 
2004  2,343 3,600 5,943  853 975 1,828 
2005 4,587 1,900 6,487  544 992 1,536 
2006  4,821 2,392 7,213  741 901 1,642 
2007 3,382 2,835 6,217  212 499 711 
2008  2,895 3,012 5,907  907 1,001 1,908 
2009 3,018 1,909 4,927  1,004 1,189 2,293 
Patents        
2003  95 189 284  63 52 115 
2004  120 195 315  103 85 188 
2005 149 211 360  64 116 180 
2006  153 270 423  68 69 137 
2007 151 279 430  54 37 91 
2008 209 241 450  89 70 159 
2009 203 200 403  111 255 366 
Industrial 
designs        
2003  386 42 428  365 23 388 
2004  254 50 304  224 40 264 
2005 257 47 304  269 88 357 
2006 477 39 516  422 45 467 
2007 328 24 352  8 6 14 
2008  333 56 389  85 4 89 
2009 273 40 313  234 30 264 
Source:  NIPO online information.  Viewed at:  http://www.nipo. gov.lk/satistic.htm. 
(d) Industrial designs 
236. Industrial designs are protected under Intellectual Property Act No. 36 of 2003.  Before that, 
they could be protected as a copyright with no registration required.  Since protection under the previous copyright law was life plus 50 years, d esigns granted this protection may still enjoy this 
protection period.  Under the Intellectual Prope rty Act, the period of registration (and hence 
protection) of an industrial design is five years from the date of receipt of the application for registration, renewable for two consecutive periods of five years each, on payment of the prescribed 
fee.  The new law provides protection to new industr ial designs with the exception of anything in the 
industrial design that serves only to obtain a technical result.
91   
                                                      
91 An industrial design is defined in Intellectual Property Act No. 36 of 2003 as any composition of 
lines or colours or any three dimensional form that gi ves a special appearance to an industrial product or 
handicraft and may be used as pattern. WT/TPR/S/237/Rev.1 Trade Policy Review 
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237. An industrial design is new if it has not been  made available to the public (through 
description, use or in any other way) prior to the date  of application for registration or before the valid 
priority date claimed.  The creator (the person w ho makes the first application for registration or who 
first claims the earliest priority for registration), ow ns the right to protection.  Certain exceptions to 
this rule are set out in the Act, including the ri ght to obtain protection when two or more persons 
jointly created the design, or when the creation happened during the performance of a contract of 
employment.  Also, the ownership of an industrial design created under any contract of employment or for the execution of work accrues to the employ er, or the person who commissioned the work.  If 
the industrial design acquires an economic value much  greater than the parties could reasonably have 
foreseen at the time of concluding the contract of employment or for the execution of work, the 
creator is entitled to equitable remune ration, which may be fixed in court. 
238. Registration is required for protection.  The re gistered owner of an industrial design has the 
exclusive rights to:  (a) reproduce and embody such industrial design in making a product;  (b) import, 
offer for sale, sell or use a product embodying such industrial design;  (c) stock for the purpose of offering for sale, selling or using, a product embody ing such industrial design;  (d) assign or transmit 
the registration of the industrial design;  and (e ) conclude licence contracts.  Licences are not 
exclusive, unless so provided in the contract, and must be registered.  There are no provisions for 
compulsory licensing.  The Director-General of the NIPO, following consultation with the Governor 
of the Central Bank, may cancel the registration of a licence if he has cause to believe that any licence 
contract that involves the payment of royalties abro ad is detrimental to the economic development of 
Sri Lanka.  The authorities indicated that  no such event has so far occurred. 
239. Design applications are published for opposition before registration.   Any person is entitled to 
apply to the Commercial High Court to have the registration declared null and void on grounds 
specified in the Act.     
(e) Trade marks 
240. Under the 2003 Intellectual Property Act, mark s and trade names are protected through 
registration.  Protection is also extended to cer tification marks and collective marks and to well 
known marks not registered in Sri Lanka.  Registrati on of a mark may be granted to the person who is 
the first to fulfil the conditions of a valid application or  is the first to make a valid claim of priority for 
his application.  A mark may consist of, inter alia , designations, names, pseudonyms, geographical 
names, slogans, letters, numbers, em blems, and combinations or arrangements of colours, and shapes 
of goods or containers.   
241. Registration of a mark is granted to the pers on who has first provided a valid application or 
who is the first to claim priority for his applica tion.  The Registrar examines the application for 
registration and if the mark is considered admissi ble the applicant is notified.  All marks to be 
registered are published in the Gazette;   any person may oppose the registration within three months 
of its publication.  If no notice of opposition is received by the Regist rar, he will register the mark.  
Registration expires after ten years but may be re newed for consecutive periods of ten years each on 
payment of the prescribed fee.  Renewal of registra tion of a mark may not be subject to any further 
examination of the mark.  The owner of a mark has th e exclusive right to use it;  to assign or transmit 
the registration of the mark;  and to conclude licence contracts. 
242. A registration may be cancelled if the owner has failed to use the mark within Sri Lanka 
without valid grounds, for five consecutive years, or has transformed the mark into a generic name so 
that in the eyes of the public the significance of th e mark has been lost.  No  marks have been removed 
from the Register during the period under review.  Sri Lanka WT/TPR/S/237/Rev.1 
 Page 89 
 
 
(f) Geographical indications 
243. The Intellectual Property Act introduced specifi c legislation on geographical indications 
(GIs).  Any interested party may prevent the use of any means in the designation or presentation of 
goods that indicates or suggests that the goods, including an agricultural product, food, wine or spirit 
originate in a geographical area other than the true pl ace of origin in a manner that misleads the public 
as to the geographical origin of goods.  The Act also  precludes the use of a GI that constitutes an act 
of unfair competition, and the use of a GI identif ying goods not originating in the place indicated, 
even where the true origin of the goods is indicated or the GI is used in translation or accompanied by 
expression such as kind, type, style or imitation or the like. 
244. In the case of homonymous GIs, protection is accorded to each indication.  The Act gives 
courts the power and jurisdiction to grant an inj unction and any other relief deemed appropriate to 
prevent any inappropriate use of a GI.  Sri Lanka  is an advocate of extending the protection of 
geographical indications to products  other than wines and spirits.92 
(g) Unfair competition and undisclosed information 
245. Intellectual Property Act, No. 36 of 2003 has a chapter on unfair competition and undisclosed 
information.  The Act defines unfair competition as any act or practice carried out or engaged in, in 
the course of industrial or commercial activities, that is contrary to honest practices, and/or causes, or 
is likely to cause, confusion with respect to anothe r's enterprise or its activities or the products or 
services offered by such enterprise, or that may dama ge its reputation.  This may include confusion or 
damage resulting from the dilution of the reputation of a mark, a trade name or any other business 
identifier, the appearance of a product, or the presentation of products or services. 
246. Acts or practices that mislead the public or di scredit an enterprise or its activities or its 
products or services, are also considered an unfair practice.  Misleading practices may arise out of advertising and may occur with respect to the ma nufacturing process of a product, or the quality, 
quantity, suitability, GI, price, or offering conditions of a product or service.  
247. The Act also forbids any act or practice that r esults in the disclosure, acquisition or use by 
others of undisclosed information without the con sent of the person lawfully in control of that 
information and in a manner contrary to honest comm ercial practices.  These acts are also considered 
acts of unfair competition.  The disclosure, acquisition or use of undisclosed information by others without the consent of the rightful holder may, in pa rticular, result from:  (i) industrial or commercial 
espionage;  (ii) breach of contract;  (iii) breach of  confidence;  (iv) inducement to commit any of the 
acts referred to before;  (v) acquisition of undisclo sed information by a third party who knew or was 
negligent in failing to know that acts referred to  previously were involved in the acquisition. 
248. The Act defines "undisclosed info rmation" as information that:  (a) is not, wholly or partly, 
generally known among, or readily accessible to, persons  within the circles that normally deal with 
the kind of information in question;  (b) has actual  or potential commercial value because it is secret;  
and (c) has been subject to reasonable steps under th e circumstances by the rightful holder to keep it 
secret.  The Act considers that an unfair commercial u se of secret test or other data, the origination of 
which involves considerable effort is an act of unfai r competition;  so is the disclosure of such data, 
except where necessary to protect the public.  Th e undisclosed information specifically protected 
under the Act includes technical information related to the manufacture of goods or the provision of 
services, and business information, which includes th e internal information that an enterprise has 
developed so as to be used  within the enterprise. 
                                                     
 
92 WTO document IP/C/W/353, 24 June 2002. WT/TPR/S/237/Rev.1 Trade Policy Review 
Page 90 
 
 
249. Parties affected by unfair competition or undisclo sed information may institute proceedings in 
court to prohibit the continuance of the act or practice and obtain damages for losses.  The wilful 
disclosure of any undisclosed information without lawful authority is an offence under the Act, liable to a fine of up to Rs 500,000 (U S$4,400) and/or to imprisonment for a term not exceeding six months. 
(h) Layout designs of integrated circuits 
250. The Intellectual Property Act of 2003 deals with  protection of layout designs of integrated 
circuits.  The right to protection of a layout design belongs to the creator.  To be protected, designs must be original.  The owner of a design has the exclusive right to authorize its reproduction, importation, sale, and distribution.  However, la yout designs may be reproduced to be used for 
evaluations, analysis, research or teaching.  Protect ion of a layout design lasts for ten years, non-
renewable, starting on the date of the first commerc ial exploitation in or ou tside Sri Lanka or on the 
filing date accorded to the application for the regist ration of the layout design filed by the right holder 
if the design has not been previously exploited co mmercially.  Any application for registration must 
be made within two years from the starting date of  exploitation.  Registrations are published in the 
Gazette .  The right holder may grant a licence to another person or enterprise authorizing it to exploit 
the design;  the licence contract must be registered to be valid. 
(i) Enforcement 
251. Infringement of IPRs is punishable under both criminal and civil law.  Penalties include 
prison of up to six months and fines of up to Rs 500,000.  Penalties can be doubled for a second offence.  Aggrieved parties may seek redress through the courts.  The Sri Lanka Custom is authorized 
to prohibit the exportation and importation of goods in  violation of intellectual property rights.  The 
Director-General of the NIPO conducts dispute r esolutions involving copyright and related rights. 
252. The NIPO has no data regarding infringement  of intellectual property rights and related 
losses.  However, according to some reports, enfo rcement remains a problem, although there has been 
some improvement during the review period.  For example, it has been reported that, Sri Lanka has 
slowly begun to enforce its provisions of the 2003 law.  It has also been reported that counterfeit 
goods continue to be widely available in Sri Lanka;  several offenders have been charged or convicted 
by courts, but the small damages and suspended sentences imposed suggest that the court system still fails to recognize the significance of intellectual property rights.
93 
253. Enforcement against piracy, in particular of co mputer software, has been reinforced through 
the provisions in the Intellectual Property Act of  2003, the Computer Crimes Act of 2007 and the 
Companies Act of 2007.  In August 2008, the Busi ness Software Alliance (BSA), an institution that 
fights piracy against computer software and addresse s intellectual property rights issues, appointed an 
attorney-at-law to support action against piracy in the software market in Sri Lanka, where it 
estimated that 90% of programs were unlicensed.  Software piracy in Sri Lanka was rated sixth highest in the world in 2007 and, accord ing to BSA estimates, cost US$93 million in 2008.
94  
The Sri Lankan authorities challenge the correctness of this evaluation.  They also noted that they are 
making every effort to enforce intellectual propert y rights by strengthening enforcement agencies, 
training officers, and building public awareness.  
 
                                                      
93 U.S. Department of Commerce (2010). 
94 Lanka Business online information.  Viewed at:  http://www.lankabusinessonline.com/ 
fullstory.php?nid=961363446.