fails to implement WTO deal
By Suren Gnanaraj
Sri Lanka has failed to implement the World Trade Organisation (WTO)
Customs Valuation agreement despite being given lengthy extensions,
Commerce Ministry and Customs officials said.
The Sunday Times
FT learns that the WTO is however unaware that the Sri Lanka Customs
has not implemented this agreement, despite its final dead-line
ending on October 31. The possible implications of failing to implement
this mandatory WTO agreement are still not known. Customs have claimed
that they are ready to implement the agreement as soon as the Customs
(Amendment) Act 2002 is passed in Parliament.
Bill has only gone through the first reading and is unlikely to
be passed before Parliament closes for its vacation on December
11, due to a few technical adjustments, which needs to be made to
the bill during the committee stage. The WTO valuation agreement,
which was ratified by Sri Lanka in 1995 and which was scheduled
to be implemented on November 1, has not been implemented despite
an extended grace period of seven years.
aims to provide a single system across the world that is fair, uniform
and neutral for the valuation of imported goods for Customs purposes,
conforming to commercial realities and outlawing the use of arbitrary
or fictitious Customs values.
The agreement recognises that Customs valuation should be charged
primarily on the transaction value of the imported goods.
The key feature
of this agreement is that it eliminates the arbitrary valuation
of imported goods, officials said. The previous system of valuation,
the BDV (Brussels Definition Value), gave absolute discretionary
powers to Customs officers in determining the value of goods on
a notional concept i.e. the normal value of the goods.
the Customs department to arrest and rectify under-valued goods,
when calculating the specified Customs duty. However, such probes
have often proved to be time consuming and the reason for considerable
delay in releasing cargo.
Director General of Sri Lanka Customs Sarath Jayatilake was unavailable
for comment about the failure to implement the WTO deal.
But, in an interview
with The Sunday Times FT prior to the official deadline, Jayatilake
said that the need to speed up cargo clearing became essential with
the global changes in trade.
the new agreement, we have to clear cargo within 10 days of arrival,
otherwise the exporters can take us to arbitration," he said.
There was now enormous pressure on the department to act swiftly
and efficiently, but the Customs was adequately prepared to meet
the challenge, following training provided by the WTO and the World
Customs Organisation. (WCO) "Ready or not, we have to implement
it", Jayatilake said.
Under the WTO
agreement, importers would be able to clear their goods providing
sufficient guarantee such as a bank or corporate guarantee, covering
the ultimate payment of customs duties for which the goods may be
liable, if it becomes necessary to delay a final valuation.
Customs is the
largest revenue collector, earning Rs. 123 billion in 2001.
Jayatilake denied that under the new system the government would
lose considerable revenue due to the possibility of under-valued
goods going undetected. "The difference would only be marginal,"
stressed that it did not mean that there was no procedure to rectify
such cases. "We have requested all importers and exporters
to keep their customs documents for three years, during which time
the customs would be carrying out post-audits and investigations
to determine whether goods that have already been cleared by the
customs, have been presented at a lesser amount than its actual
has set up a Post Clearance audit branch and a Valuation Investigation
unit to identify areas where a revenue loss could take place.
(Please see connected story)
war breaks out on Jaffna flights
By Rajika Chelvaratnam
Competition on the Jaffna flights is hotting up with the number
of domestic airlines offering shuttle services increasing, resulting
in a price war and fears that the market is not big enough to make
the run profitable for more than two operators.
Currently Lionair, Expo Aviation and Serendib offer domestic air
services to Jaffna, amid allegations of price undercutting as all
three operators find it difficult to fill up the flights.
chairman of Lionair, said that due to the increase in the number
of air services to Jaffna none of the operators are functioning
to its full potential.
Lionair is surviving by providing a superior service, he said.
have three airlines our policy is to offer better services and better
aircraft," he said. "We have British aircraft while the
others have Russian aircraft and there has been a lot of negative
publicity with regard to Russian aircraft recently."
Company officials said that a key advantage of operating Western
aircraft is that it could immediately 'Sri Lankanise' the aircrews.
operated Russian aircraft until recently when it acquired a British
HS-748. Rutnam said that there was definite price undercutting,
resulting in a need to standardise prices but there was no co-operation
Serendib brought down their prices to Rs. 4500 for a return ticket
from Rs.6950, followed by Expo Aviation.
introduced a two-class system, maintaining a price of Rs 6950 for
its luxury class while cutting the price of an economy class return
ticket to Rs.4550.
Rutnam said that their load factor has presently exceeded 50 percent
and was improving even though they had been in operation only for
about six weeks.
Seraj Mohammed, managing director of Expo Aviation, said that they
offer flights that are stable and reliable and that they were one
of the first airlines to be certified in Sri Lanka under international
Despite a flight
load of about 80 percent, Mohammed said that this was a lull period
for domestic air services but they expect the loads to double in
December and January.
Due to this
lull, he said, they have only one flight at the moment. Expo Aviation
had a 97-seater IL-18 aircraft, which they replaced with an An-24
in order to facilitate their expansion of flights to Trincomalee,
Koggala and Wirawila, as the former could not land at these airfields.
chairman of Serendib Express, said that they were aware of the competition
when they entered the business. Serendib hopes to survive in this
increasingly competitive business by keeping its prices low, he
Russian aircraft used now will be replaced by an American Fairchild
Metro III, which can carry up to nineteen passengers. "The
aim is to increase the number of flights to Jaffna for the convenience
of our passengers by reducing the number of passengers per flight,"
all accusations of undercutting and said that the prices had been
brought down by the previous management of Serendib and everyone
else had brought down the prices with them. "We are not going
to get into the price war, we are going to keep our prices"
said that at the moment they were losing around $30,000 a month
despite a passenger load of almost 80 percent, but as soon as the
new aircraft is ready for operation they expect an improvement.
They also hope to survive by expanding their services to include
door-to-door air ambulance services and flights to Trincomalee and
Ampara in addition to cargo services.
is losing money in the Jaffna route and everyone is trying to see
who will lose first," he added. Money lost in this business
is not recoverable, said Sivanathan, adding: "We are going
to stay in the business no matter what happens."
Industry officials spoke of a "very difficult environment"
in which there is "severe pressure on pricing". They said
they believe all three operators were losing money on the Jaffna
Giving an example
of the cut-throat competition, one source said that in 1994 when
two domestic carriers, Lionair and Monara, were operating flights
to Jaffna a return ticket cost Rs 5,000 or $104 at that time while
the same ticket now costs $47.
"It is not profitable," one industry official said. "Something
has to be done soon."
on imports might violate UN agreement
added tax imposed on imports could be a violation of an international
United Nations agreement to encourage the free flow of ideas and
should be withdrawn, according to business and education analysts
The VAT on imports
introduced by Finance Minister K. N. Choksy in the government's
budget covers imports of educational material with a 10 percent
tax on magazines and journals and 20 percent for other items.
the Choksy team has missed a very important Agreement known as the
Florence Agreement of 1950 on the importation of educational, scientific
and cultural materials of which Sri Lanka became the 4th signatory
in 1952 - just two years after it was signed," one analyst
should waive the customs duty on all educational and cultural material
that are included in the Florence Agreement, extending it towards
electronic carrier media as well, she said.
Under the Florence
Agreement, the contracting States undertake not to apply customs
duties or other charges on the importation of books, publications
and documents other than stationary and those used for advertising.
It also eliminates
customs duty on films and scientific equipment, and educational,
scientific and cultural materials, such as works of art and collectors'
pieces of an educational, scientific or cultural character including
from education officials, the Finance Ministry issued a fresh Revenue
Protection Order (Customs Tariff) withdrawing the 1.6 percent Customs
Duty imposed on imports of books and documents as well as software
from India and the two percent duty on such items from elsewhere.
But the VAT on these items still remains.
it was amazing that Ministers Choksy and Gunawardena were unaware
of international clauses and agreements or were not told of these
by officials before introducing a budget to Parliament.
should lead to the withdrawal of any clauses introduced by the Minister
of Finance presenting the budget," the analyst noted. "Why?
Because careful study should have gone into its preparation."
Agreement led to an increase in the international circulation of
cultural goods. This is due not only to the role that these products
play in spreading knowledge of a world which is more and more technologically
inter-linked, but also to their growing share of international trade
at a time of economic globalisation.
of the present World Trade Organisation, which replaced the GATT
and which also covers international trade in objects protected under
intellectual property agreements, have given new life to the Florence
to inspect 'green' companies
Bank intends to carry out an inspection of the books of some of
the companies that accept cash deposits from the public for investments
in trees and land.
"At a glance
these companies are not financial institutes. Therefore we would
have to inspect and see whether they fall into that category or
not," a senior bank official said.
At least two
firms are in the business - Touchwood and Green Rewards. A senior
Touchwood Ltd official said: "It is clear that we are not a
financial institute. We sell trees and the customers pay money for