Tariff and Non-Tariff Barriers
Sri Lanka has a five-band import tariff schedule based on the Harmonized System of Classification. The five bands are zero, 5, 10, 30 and 35 percent. Agricultural products are at 35 percent. Most consumer goods, chemicals and other intermediate goods manufactured locally are subject to a 30- percent tariff. Parts and components used in local industry are subject to a 10-percent tariff. Ready-made garments are also subjected to a 10-percent tariff. With a few exceptions, raw materials and machinery and equipment are subject to a 5-  percent tariff. All imports of textile materials, yarn, and all related intermediate and capital goods required for the garment export industry are free of import duty. In addition, imports of gold, gems, computers and related equipment, software, telecommunications equipment, sports equipment, medical and dental equipment, agricultural seeds and a range of machinery and equipment needed for agriculture and fisheries industry are also duty-free.

Motor cars are subject to a 30 percent import tariff. Diesel cars are subject to a further 60 percent excise duty. Vehicle imports for most export-oriented industries either qualify for  duty-free entry or are entitled to duty rebates. Tobacco, cigarettes and liquor do not come under the five-band rate  structure. Sri Lanka has bound most agricultural tariffs and a few other non-agricultural tariffs at 50 percent under the World Trade Organization (WTO). Although most items are already subject to duties below the bound rates, the GSL has  not honored its WTO commitments on liquor and cigarettes, which remain subject to excessively high duties. As a result, the cigarette market remains effectively closed to significant  import competition. Other taxes include a 5.5 percent national security levy (0.5  percent for machinery and equipment), a 12.5 percent Goods and Services Tax (GST) which is a value-added tax and an excise tax on cigarettes, liquor, petrol, motor vehicles. All taxes   are also charged on locally manufactured goods. 

Customs Valuations
Most import duty rates are, calculated on the CIF value. Goods and Services Tax on imports is also calculated on the CIF value plus import duty. The national security levy on imports is determined after the CIF value, plus import duties, have been marked up by an additional 25 percent to reflect the approximate market price. Given the high effective level of taxation on many imported goods, smuggling  is, not surprisingly, a serious problem for products such as photographic film and cigarettes. 

If an item is sent abroad for repair, at the time it is "exported" the shipper should submit a reimportation form to the Customs Department to enable the repaired item to be reimported free of duty. However, if the cost of repair exceeds 50 percent of the item’s value, an import duty will be charged.

Import Licenses and Import Controls
Over the years the Government has liberalized most license  controls. Import licensing on potatoes, onions, and chilies was removed in July 1996. Imports of wheat, a major food commodity import, are controlled by the state-owned Cooperative Wholesale Establishment, better known as CWE. Only a few other items remain under license control, mostly for health and national security reasons. The import of drugs is subject to the approval of the Drugs and Cosmetic Devices Committee of the Ministry of Health. Similarly, the import of firearms and ammunition for use by the armed forces and police, as well as for civil security, is controlled by the Ministry of Defense. There are additional restrictions on the import of toxic and hazardous chemicals and pesticides. In 1996, used and reconditioned air conditioners and refrigerators came under license control for environmental
protection. Remote-controlled toys are under license control for public security reasons.

Export Controls
There are no export controls other than on the following four categories of exports: coral chunk and shells; wood and articles of wood; ivory; and over 50 year-old antiques, including antique motor vehicles. These exports are controlled for reasons of environmental protection and the preservation of antiquities.

Import/Export Documentation
International trade can be conducted on letters of credit  (LC), Documents against Payment (DP) or Documents against Acceptance (DA) terms or Advance Payment terms. Goods can also be imported to Sri Lanka on a consignment account basis, where the goods imported are books and periodicals or ornamental fish imported for re-export. LCs are valid for up to 180 days. Under DA terms, the supplier is expected to give credit for a maximum of ninety days. Trade on Advance Payment terms is allowed where the total value of the goods does not exceed $7,500. Payments for imports made on Advance Payment basis can be made through either bank draft, mail transfer or telegraphic transfer.

Import/export documentation required by commercial banks for imports includes an invoice, insurance certificate and bill of lading/airway bill. Depending on the product and the mode of payment, certificates such as certificates of origin, inspection certificates and packing lists may also be required. Shipments by air cargo require the same documentation as those arriving by sea. All shipping documents in relation to imports made on LC, DP or DA terms should be forwarded by supplier’s bank or by the supplier to a commercial bank in Sri Lanka for release to the importer of goods. In the event the original documents are not received on time, the importer at the discretion of the bank, may submit copies of those documents for certification by the bank for clearance of the goods and the importer should arrange the original shipping documents to be received by the bank concerned within 30 days from the date of certification of the copies.

To clear goods from customs, the importer should submit relevant shipping documents certified by a commercial bank and customs declaration forms to the Sri Lanka Department of Customs. In the case of an import made on Advance Payment basis, goods will be released on submission of satisfactory proof of payment such as bank memos. Goods for which advance payment has been made should be received by the importer within 30 days of effecting the remittance. In the case of an import made on consignment account basis, goods will be released by customs on the submission of clearance documents and the importer should make arrangements for remittances to be made within 60 days of clearing goods.

Temporary Entry
Temporary entry for exhibition material is allowed under the Carnet system of the International Chamber of Commerce. The exporter should ensure that required documents under the Carnet system are certified in the country of origin of the material. These documents should be presented at the time the goods are clearing Customs. Goods brought into the country under the Carnet system must be re-exported within six months.