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Traders reject import credit diktat, while hundreds of vehicles idle in ports
Vehicle importers say they are concerned about the decision to extend the imports ban for another six months from July, calling the conditions “unfair’’.
Cabinet spokesman Minister Bandula Gunawardana told the Sunday Times that restrictions will be gazetted next week.
The chairman of the Vehicle Importers Association of Sri Lanka (VIASL), Ranjan Peiris, told the Sunday Times the regulations are unreasonable.
On the March 19, the government issued a gazette notice which stated that letters of credit will not be issued for vehicles until further notice, but imports for which LCs had been opened, were allowed.
Then on the 22nd of last month, the government said vehicles cannot be imported and instructions were issued to banks on 29th.
According to Mr. Peiris, a committee headed by the Secretary to the President, P.B. Jayasundara, put forward certain conditions, including establishing a 365-day credit facility on a shipment.
He added, “For those of us who have already opted and signed our agreements for a LC at sight; where immediate payment is made to the supplier, and now the government’s condition is that the importers change it to a usance LC where the importer requests for a credit facility’’.
But usance LC in Sri Lanka was suspended two to three years ago.
“The disadvantage in opting for a 365 day credit facility is that the payment amount is uncertain, it depends on the currency rate, after a year we might go in for a loss as importers, as the prediction of the US dollar rate is impossible,” he explained.
Mr. Peiris is concerned about the ad hoc changes.
The biggest issue being that the supplier can refuse the usance LC. This will also create a lack of trust to the extent that the country and the companies could be treated with caution.
“Suppliers wouldn’t know about the sudden gazettes issued by the Sri Lankan government. They don’t keep a track and every shipment follows a process where despite the containers being loaded before the said date of the gazette, the date in which the shipment leaves is not in the hands of the suppliers. It’s a process, it takes about three to five days to reach Sri Lanka,” Mr Peiris explained.
A gazette notice was issued on the June 16 which stated that it approves the release of motor vehicles already shipped on or after May 22 until June 16 2020 (on board date) subject to the condition that payment is made after 365 days from the on board date, while charging appropriate penalty by Sri Lanka Customs for violating Import Control Regulations.
The same gazette requested banks to amend the payment terms of valid LCs already established on or before May 22 and whose latest shipment date on board was on or before June 16 to enable the above decision and shall release documents to clear vehicles from customs when above conditions are fulfilled.
“Our only question is why do we have to pay a penalty when we have not done anything wrong is beyond my understanding,” he said.
According to Mr Peiris they were asked to make an appeal.
Besides, importers have to pay demurrage, an added expense that is also unfair.
According to the chairman of the Sri Lanka Ports Authority and former army commander Daya Rathnayake, there are 53 vehicles in the Port of Colombo and 643 vehicles in the Hambantota Port all of which have been uncleared.
And out of the 643 vehicles, 104 vehicles in the Hambantota Port had not been cleared for a long time.
“There are no issues in clearing vehicles from our end. The importers have not come to collect the vehicles. We have requested the importers to collect their vehicles,” he said.
The chairman of the Ceylon Motor Traders Association (CMTA) Sheran Fernando, said that they are awaiting a response from the government to the appeals on unfair restrictions.
“All our trade agreements are confirmed irrevocable letters of trade and it is important that we honour the LC. We cannot make ad hoc changes to the terms of trade,” he said.
Mr. Fernando raised concerns that motor vehicle spare parts imports are also banned.
He suggests that the government allow imports that have already been ordered before the date of ban and allow importers to honour the LCs as decided with the manufacturer in the initial instance, that is an LC at sight.
“We understand that the country needs foreign exchange and we have no issues with that, but the vehicles already ordered before the ban must be allowed into the country as it is not technically illegal,” he said.
Mr Gunawardana however, said that a concession cannot be given to vehicle importers as the foreign exchange management is very difficult.
“We are concerned about the rupee value and we do not want rupees going out of the country during this kind of situation. Certain sectors will have to bear the brunt, but it is only until matters get back to normal,” he said.