How to Save Money on SL Customs Tariff in 2023

Are you looking for ways to reduce your import costs in Sri Lanka? If so, you need to know about the SL customs tariff and how it affects your business. The SL customs tariff is the tax that you have to pay when you import goods into Sri Lanka. It is based on the Harmonized System of Classification, which is a global standard for identifying and categorizing products. The SL customs tariff has three main bands: 0%, 15%, and 30%. Generally, raw materials are at zero percent, intermediate goods are at 15 percent, and finished goods are at 30 percent. However, there are some exceptions and special rates for certain items, such as rice, sugar, and petroleum products. In this article, we will explain how the SL customs tariff works, what changes are expected in 2023, and how you can save money on your imports.

The SL Customs Tariff: How It Works

The SL customs tariff is calculated based on the CIF (cost, insurance, and freight) value of the imported goods. The CIF value is the total cost of the goods plus the cost of transportation and insurance to the port of entry in Sri Lanka. The SL customs tariff is applied to the CIF value according to the tariff band of the product. For example, if you import a product that has a CIF value of $100 and belongs to the 15% tariff band, you will have to pay $15 as customs duty. In addition to the customs duty, you may also have to pay other taxes and levies, such as:

Value Added Tax (VAT)

This is a tax on the consumption of goods and services in Sri Lanka. It is applied to the sum of the CIF value and the customs duty. The standard VAT rate is 8%, but some items are exempt or subject to a reduced rate of 0% or 5%.

Port and Airport Development Levy (PAL)

This is a levy imposed on imports and exports to fund the development of ports and airports in Sri Lanka. It is applied to the sum of the CIF value and the customs duty. The standard PAL rate is 7.5%, but some items are exempt or subject to a reduced rate of 2.5% or 5%.

Special Commodity Levy (SCL)

This is a levy imposed on selected items that are considered essential or sensitive for the domestic market, such as rice, sugar, milk powder, onions, potatoes, etc. It is applied instead of the customs duty, VAT, PAL, and other taxes. The SCL rates vary depending on the item and are revised periodically by the government.

Cess

This is a levy imposed on certain items that are subject to export or import control regulations, such as tea, rubber, coconut, textiles, etc. It is applied in addition to the customs duty and other taxes. The cess rates vary depending on the item and are revised periodically by the government.

Surcharge

This is a temporary levy imposed on imports to address balance of payments issues or revenue shortfalls. It is applied in addition to the customs duty and other taxes. The surcharge rate is currently 15%, but it is expected to be reduced or removed by June 2023.

The SL Customs Tariff: What Changes Are Expected in 2023

The SL customs tariff is subject to change every year based on the government’s budget proposals and policy decisions. The latest tariff changes were announced in July 2023 and will take effect from January 1st, 2023. Some of the main changes are:

The introduction of a new tariff band of 5% for certain items that are considered beneficial for the economy or the environment, such as renewable energy equipment, electric vehicles, organic fertilizers, etc.
The reduction of the tariff band from 30% to 25% for certain items that are considered important for industrial development or consumer welfare, such as machinery, equipment, raw materials, intermediate goods, etc.
The increase of the tariff band from 15% to 20% for certain items that are considered non-essential or luxury goods, such as cosmetics, perfumes, jewelry, etc.
The revision of the SCL rates for certain items that are subject to market fluctuations or domestic production issues, such as rice, sugar, milk powder, etc.
The revision of the cess rates for certain items that are subject to export or import control regulations, such as tea, rubber, coconut, etc.

The SL Customs Tariff: How to Save Money on Your Imports

If you want to save money on your imports in Sri Lanka, you need to be aware of the SL customs tariff and how it affects your products. Here are some tips that can help you reduce your import costs:

Choose products that belong to the lower tariff bands or are exempt from customs duty. You can check the tariff rates and exemptions for your products on the Sri Lanka Customs website or the World Trade Organization website.
Choose products that are subject to lower VAT, PAL, SCL, cess, or surcharge rates. You can check the tax and levy rates and exemptions for your products on the Sri Lanka Customs website or the Department of Inland Revenue website.
Choose products that have a lower CIF value or negotiate with your suppliers to reduce the CIF value of your products. This will reduce the base amount on which the customs duty and other taxes are calculated.
Choose products that have a lower weight or volume or optimize your packaging and shipping methods to reduce the weight or volume of your products. This will reduce the transportation and insurance costs that are included in the CIF value of your products.
Choose products that have a lower risk of damage or loss or insure your products adequately to reduce the insurance costs that are included in the CIF value of your products.
Choose products that have a lower lead time or plan your orders and shipments well in advance to avoid delays and penalties that may increase the CIF value of your products.
Choose products that have a lower environmental impact or comply with the environmental standards and regulations in Sri Lanka. This will help you avoid fines and fees that may increase the CIF value of your products.
Choose products that have a lower social impact or comply with the social standards and regulations in Sri Lanka. This will help you avoid disputes and lawsuits that may increase the CIF value of your products.

The Impact of SL Customs Tariff on the Global Demand for Sri Lankan Products

Sri Lanka is a small island nation in the Indian Ocean that has a diverse and vibrant economy. The country exports a range of products, such as tea, apparel, rubber, gems, spices, and coconut products, to various markets around the world. The SL customs tariff is the system of taxes and duties that Sri Lanka imposes on the imports and exports of goods and services. The SL customs tariff affects the global demand for Sri Lankan products in several ways.

First, the SL customs tariff influences the price competitiveness of Sri Lankan products in the global market. According to the International Trade Administration (ITA), Sri Lanka has three import tariff bands: 0%, 15%, and 30%. Generally, raw materials are at zero percent, intermediate goods are at 15 percent, and finished goods are at 30 percent . This means that Sri Lankan products that use imported raw materials or intermediate goods have a lower cost of production than those that use domestic inputs. This gives them an advantage over their competitors in terms of price. However, Sri Lankan products that are classified as finished goods face a higher import tariff than those of other countries that have lower or zero tariffs. This makes them less attractive to foreign buyers who can find cheaper alternatives elsewhere.

Second, the SL customs tariff affects the quality and diversity of Sri Lankan products in the global market. According to the Sri Lanka Customs website, the country adopted the WTO’s new Harmonized Commodity Description and Coding System in its tariff schedule in November 2017 . This system is designed to facilitate international trade by providing a common classification of goods and services based on their characteristics and uses. The SL customs tariff also provides various exemptions and concessions for certain products or sectors that are deemed to be of national interest or strategic importance. For example, the country imposes a Special Commodity Levy (SCL) on some agricultural products to protect local farmers and consumers from fluctuations in world prices . The SL customs tariff also grants preferential treatment to some products or sectors under bilateral or multilateral trade agreements, such as the South Asian Free Trade Area (SAFTA) or the Generalized System of Preferences (GSP) . These measures help to improve the quality and diversity of Sri Lankan products by encouraging innovation, value addition, and market access.

Third, the SL customs tariff impacts the social and environmental aspects of Sri Lankan products in the global market. The SL customs tariff reflects the country’s commitment to sustainable development and social responsibility. The country imposes a surcharge on customs duty on some products that are considered to be harmful to health or environment, such as tobacco, alcohol, plastic, or asbestos. The country also exempts some products that are considered to be beneficial to health or environment, such as medical equipment, renewable energy sources, or organic products. The SL customs tariff also supports the social welfare and empowerment of vulnerable groups, such as women, youth, disabled persons, or war victims. These factors enhance the reputation and appeal of Sri Lankan products among global consumers who value ethical and eco-friendly consumption.

The SL customs tariff plays a significant role in shaping the global demand for Sri Lankan products. The SL customs tariff affects the price competitiveness, quality and diversity, and social and environmental aspects of Sri Lankan products in the global market. The SL customs tariff is not static but dynamic, as it responds to changing economic conditions and policy objectives. Therefore, it is important for Sri Lankan exporters and importers to keep abreast of the latest developments and trends in the SL customs tariff system.

References:

https://core.ac.uk/download/pdf/6958854.pdf

https://www.treasury.gov.lk/web/budget-estimates/section/budget%20estimates%20-2023

https://economynext.com/sri-lanka-appoints-new-heads-for-inland-revenue-customs-dept-97896/

https://www.customs.gov.lk/customs-tariff/import-tariff/
https://www.customs.gov.lk/customs-tariff/
https://legacy.export.gov/article?id=Sri-Lanka-Import-Tariffs
https://www.trade.gov/country-commercial-guides/sri-lanka-import-tariffs-and-taxes

https://www.customs.gov.lk/international-customs-day-2022/

https://legacy.export.gov/article?id=Sri-Lanka-Import-Tariffs

https://www.trade.gov/country-commercial-guides/sri-lanka-import-tariffs-and-taxes