Isn’t there a mechanism to track the settlement of open accounts?

Current import regulation on payment terms is based on the Gazette of Democratic Republic of Sri Lanka Extraordinary No.1739/3 dated 02 January 2012 issued repealing Special Import Licence No.1 of 1977.

The above Gazette has not been repealed yet but has been subject to several amendments, especially concerning payment terms, the latest being Import Control Regulation on Payment Terms No 10 of 2022 issued on 23 June 2022, further restricting open accounts. Due to the prevailing foreign exchange crisis, it appears that SL Government Think Tank is trying to block every loophole that may lead to a drain of foreign exchange. Whilst introducing new regulations to curb the outflow of foreign exchange, the authorities seem to have paid less attention to the not repealed part of the gazette that regulated the misuse of payment terms to the minimum.

Having expressed in general my view on the ever-changing Sri Lanka import regulations on payment terms, I would like to answer the above concern of my colleague Shiran.

The answer to the above is YES. As I mentioned in the preceding paragraphs, the current import regulation on payment terms as per Gazette Extraordinary No.1739/3 which provides for tracking of settlement on an open account, limits the payment period to 365 days from the date of submission of CUSDEC (Customs Entry Form) - This further allowed return of unsold goods to the supplier provided no payment has been made on the respective goods to be returned.

If the following general rules provided for in the original gazette but still valid are meticulously followed, the authorities need not unnecessarily fear an increase in "Hawala” transactions due to open account settlements.

1.?????In respect of payment made for the import of goods for commercial purposes irrespective of the amounts or the payment methods, an importer has to produce CUSDEC to his bank with clearance documents. The invoices presented must bear the endorsement and the unique reference number from the importer's bank. This was not applicable for imports on NFE, Open account and Consignment basis as per the original gazette. However, Banks endorsements on proforma invoices have been made mandatory for all imports except for direct exports and Indirect exports as per Import Control Regulation on Payment Terms No.10 of 2022.

2.?????All banks are required to assign a unique number (Reference Number) to each transaction and notify the Sri Lanka Customs Department of all information regarding each transaction relating to, or made under, the number so assigned.

3.?????Every Importer is required to indicate the unique reference number given by the bank in the CUSDEC form when submitting for clearance of goods.

4.?????On clearance of goods, the CUSDEC Number shall be the unique number by which such transaction shall be identified. This applies to the goods imported on open account terms as well.

5.?????Sri Lanka Customs Department is required to upload and provide access to information such as Customs declaration Number, Name of Importer and Outstanding amount relating to these transactions on their website for the banks to refer to.

6.?????All Banks are required to verify the outstanding amount due on any transaction by accessing the Sri Lanka Customs Department website before making any payment in relation thereto.

7.?????The banks making payments are required to upload details of any payments to the Director General of Customs under the registered CUSDEC Number and the Banks' unique number relating to such payments, on the same day that such payments were made.

??What needs is a mechanism to monitor the procedure is implemented.

[email protected]