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EU Council Stops Sri Lanka’s Duty Free Export Status

Laws & Regulations

It is now official; Sri Lanka’s duty free export status is dropped by the Council of the European Union. This was published in last Saturday’s, February 20 Official Journal of the European Union. In Regulation No. 143/2010 dated February 15 it is said that: “The regulation shall enter into force

EU Council Stops Sri Lanka’s Duty Free Export Status

BRUSSELS, Belgium – It is now official; Sri Lanka’s duty free export status is dropped by the Council of the European Union. This was published in last Saturday’s, February 20 Official Journal of the European Union.

In Regulation No. 143/2010 dated February 15 it is said that: “The regulation shall enter into force six months after its adaptation, unless the Council before then, on a proposal from the Commission, decides otherwise.”

The decision of the European Council means that from August 15, 2010 bicycles imported from Sri Lanka are subjected to the regular 14% import tax. Bike parts imported from Sri Lanka (mainly tyres) are from that date on subjected to the regular 4.7% import tax.

Sri Lanka was in 2008 the fourth largest bicycle supplier of the EU, with a 2008 exports totalling over 700,000 bikes. There is no data available on how many bike parts were imported from the country into the EU in recent years. However, it is a fact that Sri Lanka’s industry benefited from the country’ s duty free export status as its export to the EU (including bicycles, bicycles parts as well as lots of other products, mainly textiles) totalled € 1.24 billion.

Sri Lanka enjoyed the duty free export status because the country agreed to rules on human rights as stipulated in the new European Generalised System of Preferences (GSP). This trade agreement grants developing countries reduced import duties. Sri Lanka enjoyed a complete exemption of duties for its export into the EU as it committed itself to 27 conventions in the field of human and labour rights, sustainable development and good governance.

End October 2009 the European Commission received a first report in which Sri Lanka was accused of breaching GSP agreements on human rights. In the Council’s Regulation No. 143/2010 it is noticed that afterwards: “Sri Lanka decided not to cooperate with, or participate in, an investigation.”

It is further said by the EU Council that: “Sri Lanka was given the opportunity to comment during the investigation but did not do so. The Commission nevertheless considered Sri Lanka’s observations carefully and in particular those relevant in the context of a decision on temporary withdrawal. The Commission’s assessment, of which Sri Lanka was informed, led to the conclusion that none of Sri Lanka’s arguments would substantively alter the findings of the investigation.”

With respect to the period of application of the decision to stop the duty free export status, it is said that: “The European Commission, shall re-establish the special incentive arrangement for products originating in Sri Lanka, if the reasons justifying the temporary withdrawal no longer prevail.”

One of the major bike exporters of the country, Asiabike Industrial PVT Ltd. expects that despite the 14% import duty business is expected to stay as usual. MD Isthiark Farook of the company said: “Removal of the export duty free export status wouldn’t directly affect Asiabike’s client base, because even before the GSP was implemented Asiabike did business with most of its existing customers. Holding on clients will not be of any issue to Asiabike, as long as quality and price factors are taken into consideration.”

Countries that currently have GSP Plus (duty free export status) to the EU are (among others) Bangladesh, Cambodia, Tunisia and Turkey.

Click here for the complete text of the European Council decision as in Regulation No. 143/2010 dated February 15, 2010.

 

 

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