Export certificates must for recon. vehicles

Compulsory export inspection certificates for all imported reconditioned vehicles will finally become effective from March 1 but with mixed feelings in the trade.

Some reconditioned vehicle dealers said they were disappointed while the Motor Traders' Association and the Vehicle Importers Association welcomed the move.

The regulations which initially came into effect in 1 August 2006 were postponed soon after due to concerns by dealers that the regulations would only lead to an increase in the cost of imported vehicles by approximately Rs.100,000 or more. Shortly thereafter, the Ministry of Trade, Commerce, Consumer Affairs and Marketing Developed heeded to the pressure of the vehicle dealers and postponed making a decision until now.

Neil Hapuhinna, Commissioner of Import & Export told The Sunday Times FT that the regulations will be implemented for all imported reconditioned vehicles. "We are implementing these regulations under the direction of the Ministry of Finance," he said. Most reconditioned automobiles in Sri Lanka are imported from Japan and will therefore require an inspection certificate from the Japan Auto Appraisal Institute (JAAI) and similar authorities from other countries. Previously, no certification was required by the country of export. Hapuhinna said the JAAI will have to certify 'body condition, engine condition, working condition of electronic equipment in the vehicle such as power shutters and mirror, condition of the interior as well as tire condition. "At least 75% of tires should be in workable condition," he said. Furthermore, lights also have to be certified that there are no cracks and damages.

The regulations are intended to curb the illegal importation of reconditioned vehicles into Sri Lanka with false information and forged documentation by some vehicle dealers who end up paying lower customs duty and excise duty.

Chairman of the Motor Traders' Association, Ranjan De Silva told The Sunday Times FT that he thinks the regulations are a good move which will finally benefit the customer. "It's better late than never," he said. "The main issue is whether you are buying a quality vehicle and whether there is a guarantee or some sort of comfort to the buyer so it is a peace of mind that is provided. Therefore, I think it is a good idea so that the customer will finally benefit in the long run." He said prices are unlikely to rise sharply.

According to a committee member of the Vehicle Importers' Association, these regulations will only serve to eliminate any and all illegal activities by vehicle importers. "These regulations have been drafted so well, there are no loopholes," he said. Before the regulations were drawn up, he said the auditor general highlighted severe malpractices and loss of revenue to the government due to manipulations and illegal activity by some vehicle importers.

He said a certificate has to be obtained from the country of export and a hard copy must be given to the exporter who will also submit it to the bank in the country of export. Eventually, the documents will come to a bank in Sri Lanka. The seal of both banks must be placed on the documents. "It's a document going from bank to bank and no one can interfere with it," he said. "Documents will be rejected if they are not in compliance with the requirement of this certificate. No forged documents will come."

The committee member said that previously, the auditor general had no way to identify the vehicle but with the new regulations, the duty can be calculated 'down to the very cent.'

He believes these regulations will decrease the cost of reconditioned vehicles. On 1 August 2006, the price in Japan of the highest selling car in Sri Lanka, the Suzuki Swift, was approximately 750,000 Japanese yen. In the three days immediately after 1 August, the price of a Suzuki Swift dropped by 340,000 yen. According to him, when there is no inspection criteria and no requirements on the condition of vehicles, accident vehicles were coming into the country unregulated. "Since the procedure was stopped, an exporter had to pick the proper vehicle and therefore, the number of units coming in dropped," he said. “Volumes dropped and prices also dropped."


Other vehicle importers feel differently. One importer explained that JAAI inspection certificates are only required by certain countries. "A few African countries require these because they import cars older than ten years,” one importer said adding that reconditioned vehicles can only be imported to Sri Lanka if they are 3 1/2 years old and does not see the necessity in imposing such strict regulations. "Foreign exchange is leaving the country and we cannot afford that," he said, adding that if all the repairs are done in Japan, there will be no work left for the Sri Lankans.

The vehicle importer also stated that if vehicles with forged documentation are to be prevented from entering the country, some responsibility must also lie with Customs Department officials to curb corruption and ensure that they will not collude with certain importers who engage in this illegal activity. "Because of customs officers’ who are willing to be corrupt, the trade has to suffer and the people have to suffer."

An official at the Department of Fiscal Policy at the Ministry of Finance and Planning confirmed to The Sunday Times FT that certificates will have to 'carry details of vehicle, engine capacity year of manufacture, condition of the tires and other specifications.' The certificate will have to be produced to customs officials in Sri Lanka and the auditor general as well as the Department of Motor Traffic will also get copies of the documents, adding that he hopes customs officials will not resort to tampering with the documents.