1. Export valuation Errors

Sri Lanka Customs works with the powers vested under the Customs Ordinance, the Ordinance covers only the import valuation and not the export valuation, It shouldn’t come as a surprise since it is a 150+-year-old document with minimum amendments. This is a serious problem when dealing with free trade agreements and also creates some unnecessary hidden issues.

Both undervaluation and overvaluation take place in exports according to the requirement. Sometimes commodities such as tea is knowingly undervalued to protect the market share. In contrast commodities under the India–Sri Lanka, Free Trade Agreement (ISFTA) are overvalued in order to obtain the Free Trade Agreement (FTA) facilities.

ISFTA states that the Domestic Value addition (DVA) in the exporting country should not be less than 35 percent of the freight on board (FOB) value of the finished product.

Also, the exporters who do imports also are used to overvalue the goods and avoid the repatriation of the export earnings by compensating the value of imports. These malpractices are very common due to the lack of correct controls. Basically, Exporters can declare any value to the Customs for their exports. There are no clear legal provisions in the Sri Lankan law to stop them from doing so.

2. Monitoring of Repatriation of export proceeds

In February 2021 Central Bank of Sri Lanka issued regulations by gazette notification to oversee the export earning repatriation. Until then Export Proceeds Repatriation had not been monitored at all.

According to the gazette, every exporter of goods shall Receive the export proceeds in Sri Lanka in respect of all goods exported within hundred and eighty (180) days from the date of shipment, immediately upon all and every receipt/s of export proceeds being received, forthwith submit all related documentary evidence on each and every receipt of export proceeds, in respect of every export of goods and services to the respective licensed bank, that receives such proceeds, in Sri Lanka.

All licensed banks are supposed to submit reports about the Repatriation of export proceeds to the Director of the Foreign Exchange Department of the Central Bank.

Despite Central Bank receiving these reports, the total merchandize export value of Sri Lanka is still calculated based on the statistical value submitted to the Customs via Export CusDecs.

According to the Join Customs Union Alliance report submitted to the president in April 2021, the Customs officers Union says they don’t trust the Central Bank to monitor the Repatriation of export proceeds.

“During the past period, Sri Lanka Customs was in the understanding that Revenue Monitoring Unit of Central Bank is monitoring the export remittances with regard to the exports. But during the recent discussions had with Central Bank only it came to light Central Bank also not entrusted with such activity.” - Modernization of Sri Lanka Customs to maximize its contribution for economic development (Join Union Alliance - Sri Lanka Customs)

In the same report Customs Unions claims, Central Bank has not yet implemented the shipment-wise export remittance monitoring system already developed by the ICT Division of Customs through the Customs ASYCUDA system due to strong objections of “So-called Exporters”.

“It should be noted a system to monitor Export Remittance was developed by ICT Division of Sri Lanka Customs two years ago. But Central Bank has not yet been implemented it due to the strong objections of so-called exporters.” - Modernization of Sri Lanka Customs to maximize its contribution for economic development (Join Union Alliance - Sri Lanka Customs)