Finance Minister issues Gazette banning Open Account for imports except export sector

Finance Minister Ali Sabry has issued a new Gazette effective 20 May banning use of Open Account for imports except by the overall export sector including indirect exporters. 

As per the new Gazette, Open Account Payment Terms or Consignment Account Terms will only be allowed to:

 (a) Exporters, who are settling the payments for importation of goods, which are necessary for their export purposes, from the export proceeds in their Business Foreign Currency Account or Offshore Foreign Currency Account, and (b) Local suppliers, who supply goods for those exporters, receiving payments in the foreign currency and making payment for importation of goods for such supply using the Foreign Currency so received to his Business Foreign Currency Account or Offshore Foreign Currency Account.

An importer from 20 May will have to adhere to following procedures when clearing imported goods from the Sri Lanka Customs;

a)The Importer shall obtain an endorsement on the Commercial Invoice from his licensed bank stating that the importer has the foreign currency in his Business Foreign Currency Account or Offshore Foreign Currency Account to settle that payment

b)The endorsed Commercial Invoice should be submitted to the Sri Lanka Customs at the time of Customs clearance of such goods

In addition to the Regulation No. 10 of the Special Import License and Payment Regulations, No. I of 20 II, published in the Gazette Extraordinary No. 1739/3 dated 2 January 2012, in the case of Documents against Payment (DP) terms and Documents against Acceptance (DA) terms, any importers, except those who have been referred in Regulation No. 4 above, who are intending to import goods under the DP or DA terms, shall make prior arrangements with his licensed bank and obtain endorsement on his Proforma Invoice prior' to the shipped on board date of Bill of Lading and such endorsed Proforma Invoice shall be submitted to the Director General, Sri Lanka Customs at the time of Customs clearance of the said goods together with other documents.

Any licensed banks, which are settling any payments under the Open Account Payment terms or Consignment Account terms, should share a copy of details of such settlement of payment in the electronic format to the Director General of Sri Lanka Customs on every Customs declaration (CUSDEC) basis.

The Controller General of Imports and Exports will issue appropriate ‘Operational Instructions’ to the Director General of Customs and the licensed banks for effective implementation of these Regulations.

The Director General of Customs will act in accordance with the provisions of the Customs Ordinance on any importation made in violation of the above Regulations.

The Controller General of Imports and Exports should be consulted in the case of any issues related to interpretation of these Regulations.

The new ‘Import Control Regulations on Payment Terms No. 07 of 2022’ is applicable to goods arriving via sea and airports in Sri Lanka effective from 20 May.

The impending move was first announced by Central Bank Governor Dr. Nandalal Weerasinghe on 29 April.

He said that new regulations will help curtail the grey forex market as well as unofficial remittance channels such as Hawala or Undiyal which are a source to finance imports made in Open Account method. It was pointed out that given the demand for forex by those engaged in Open Account imports, the grey market thrived with help from Hawala/Undiyal channels. This also encourages a higher premium for foreign currency via this option.