The Pakistan-Sri Lanka
Free
Trade Agreement (PSLFTA), which was signed in 2002, is operational since
June 12, 2005. Under the Agreement both sides offer preferential market access to each other's exports by way of
tariff concessions.
Sri Lankan businessmen are currently enjoying duty free
market access on 206 products in the Pakistani market that include tea, rubber
and coconut. Pakistan, in return, has gained duty free access in the Sri
Lankan market on 102 products including oranges, basmati
rice and engineering goods.
The FTA has been consciously designed to benefit Sri Lanka more, initially.
By 2010 both countries agree to lay each other's markets virtually open to
thousands of their local products.
Thanks to the concessionary
duty rates under the FTA, almost the entire range of traditional Sri Lankan
exports to Pakistan including coconut, black tea, copra, betel leaves and
rubber registered 60-100% growth last year. New, better-performing Sri
Lankan products were plastics and chemicals.
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situation under the PSLFTA.
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The Agreement
The Free Trade Agreement consists of the following components:
-
The Framework
Agreement, and
-
Annexes A, B, C and
D
The Agreement contains Articles on objectives, definitions, elimination
of tariffs, para-tariffs and non-tariff barriers, rules of origin, safeguard
measures, settlement of disputes, amendments, annexes etc. Following signing of the Agreement
in August 2002, both sides conducted several
rounds of negotiations to finalize the annexes to the
Agreement in December 2004 and in February 2005. The two Governments
later exchanged Diplomatic Notes, confirming finalization of the Annexes.
Annexes
Annex 'A'
Annex A relates to the No-Concession
List (Negative List) and the tariff preferences to be granted by the
Government of Pakistan. These are embodied in four different Attachments.
Attachment I
- Annex – 'A' :
The Negative list of Pakistan consists of 540 HS tariff lines (products) at
six digit level. Being on the Negative List, these products will not be
entitled to enjoy any tariff concessions, when imported from Sri Lanka
Attachment II
-
Annex – 'A' :
The Immediate Concession List contains a total of 206 HS tariff lines
(products) at six digit level and Sri Lanka will receive 100% duty free
access for these products in the Pakistan market, immediately.
Attachment III
- Annex – 'A' :
Tariff Rate Quotas (TRQ) are specific quantities of products, on which
Pakistan has agreed to grant either duty-free access (10,000 m/t of Tea per
each calendar year, July-June) or
preferential duty (1200 m/t of Betel leaves annually + various apparel items
per each calendar year, July-June), when imported from Sri Lanka. The products imported in excess of the agreed TRQ will be subject
to normal tariffs applicable in Pakistan.
Attachment IV
- Annex – 'A' :
Products listed in the Attachment IV are entitled to receive a
preferential duty margin of 20% on the applied MFN duty rate with no
quantitative restrictions.
Annex 'B'
Annex B relates to the
No-Concession List (Negative List) and the tariff preferences to be granted
by the Government of Sri Lanka. Annex B is embodied in three different
Attachments.
Attachment I
-
Annex – 'B' :
The Negative list of Sri Lanka contains a total of 697 HS tariff lines
(products) at six digit level and these products will not be entitled to
enjoy any tariff concessions, when exported to Sri Lanka from Pakistan.
Attachment II
-
Annex – 'B' :
Sri Lanka has listed a total of 102 HS tariff lines at six-digit level, on
which Pakistan will receive 100% duty free access.
Attachment III
-
Annex – 'B' :
Sri Lanka has granted Pakistan Tariff Rate Quota for 6,000 m/t of Basmati
Rice and 1,000 m/t of Potatoes per each calendar year (January -December) on
duty-free basis. However, import of potatoes is permitted only during Sri
Lanka 's off season. (2/3 to be imported during June –July and 1/3 during
October –November each year).
Annex 'C'
Annex C deals with the
rules of
origin, which have to be complied with by the exporters of the two
countries in order to qualify their products for preferential duty benefits.
Based on the origin, the Rules of Origin categorize various products exported
under the PSLFTA into the following two main segments.
a. products wholly produced or obtained in the
territory of the exporting country such as agricultural, fishery and mineral
products.
b. products, not wholly produced or obtained in
the territory of the exporting country (manufactured products).
All manufactured products falling under the category (b) above should
contain a minimum of 35% of Domestic Value Addition of their FOB value in
order to qualify for preferential treatments. Further, it is also necessary
that all non-originating materials, used by the exporters change their HS
codes at six-digit level against that of the final product as a result of
the manufacturing process undertaken in the exporting country.
Ministry of Commerce has
notified 'Rules of Origin' vide
S.R.O.508(1)/2005 dated
6th June, 2005 and Operational Procedure for the issuance and verification
of the Certificate of Origin vide notification S.R.O.509(1)/2005) dated 6th
June, 2005.
Cumulative Rules of Origin:
The Cumulative Rules of Origin encourage exporters to source their inputs
from the other contracting country. However, Domestic Value Addition in
the territory of the exporting country shall not be less than 25% of the FOB
value of the final product, while the aggregate value addition in both
contracting parties should be minimum of 35% of the FOB value. In addition,
the respective products should also conform to the Change of HS code
requirement (at six digit level) as in the case of the manufactured goods,
referred to under category (b) above.
Provision for Change of HS Codes at six-digit level, has made the Rules of
Origin of the PSLFTA more flexible, compared to most of the other Free Trade
Agreements, which stipulate that Change of HS Code should take place at four
digit level.
The authority for issuing PSLFTA Certificates of Origin lies with the Export
Promotion Bureau as notified by Ministry of Commerce vide
S.R.O.510(1)/2005 dated
6ht June, 2005
Annex 'D'
Annex - D sets out the
time-frame for Pakistan and Sri Lanka to phase out tariffs on products other
than those in their No Concessions Lists (Negative Lists). It also indicates
the percentage of tariff reductions undertaken by each country at the
respective phasing out stages
......
Government of Pakistan has issued the following notifications
to enforce the Pak-Sri Lanka FTA:
