| Introduction |
The Framework Agreement was signed on 1st August 2002 in Colombo. The Pakistan-Sri Lanka Free Trade Agreement came into force with effect from 12th June 2005. |
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The Free Trade Agreement consists of the following components. |
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- The Framework Agreement and
- Annexes A, B, C and D
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| a) The Framework Agreement: |
The Framework Agreement contains the 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 the signing of the Framework Agreement, the two countries, having conducted several rounds of bilateral negotiations, were able to finalize the annexes to the Agreement in December 2004. |
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| b) Annexes |
| Annex A. |
Annex A relates to the No-Concession List (Negative List) and the tariff preferences granted by the Government of Pakistan. These are embodied in four different Attachments. Please visit the web site of the Department of Commerce: www.doc.gov.lk for details on all annexes to the Agreement. |
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| Attachment I: No Concession List (Negative List) |
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The Negative list of Pakistan consists of 541 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 exported to Pakistan. For all other products (i.e. 4683 products at six digit level of HS tariff classification) duty free access/duty concessions will be granted under the Agreement. |
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| Attachment II: 100% Immediate Concession List |
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The 100% Immediate Concession List contains a total of 206 HS tariff lines (products) at six digit level and import duty is not levied for all these products when imported into Pakistan from Sri Lanka. |
A wide range of products that are of export interest to Sri Lanka is included in this list. Some products are given below: |
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fish |
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products of polymers |
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vegetables |
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rubber |
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coconut & coconut products |
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leather articles |
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edible nuts |
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wood based articles |
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spices |
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articles of iron and steel |
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fruits and fruit juices |
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aluminum based articles |
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food preparations |
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electrical apparatus |
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graphite |
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furniture articles |
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essential oils |
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precious & semi-precious stones |
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Attachment III-Products subjected to Tariff Rate Quota (TRQ). |
Tariff Quotas (TRQ) are specific quantities of products, on which the importing country would agree to grant either duty-free access or preferential duty, when imported from the other contracting party to the Agreement. The products imported in excess of the agreed TRQ will be subjected to the normal tariffs applied by the importing country for such products. |
| Pakistan has granted Sri Lanka TRQ for export of tea, betel leaves and garments under the PSFTA |
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| Tea: |
Under the TRQ granted by Pakistan, Sri Lanka will receive duty-free access for a total of 10,000 metric tons of tea for each financial year (July/June). Sri Lanka will be able to enjoy duty free access for her exports of tea in bulk and in value added forms (tea in packets and bags) under this arrangement. |
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Betel leaves: |
| Tariff Rate Quota (TRQ) |
| (TRQ) for 1,200 MT of Betel Leaves per financial year with 35% of Margin of (MOP) on applied MFN rate. |
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| Notification on Implementation of MOP of 20% on Betel Leaves |
Notification (Customs) SRO No. 818(I)/2007 dated 11th August, 2007 issued by the Ministry of Finance, Economic Affairs and Revenue, Government of Pakistan on Implementation of 20% MOP on Betel Leaves. |
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| The Customs Notification can be obtained form the following website: |
| www.cbr.gov.pk |
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Steps to view: |
- Customs
- Customs Notification
- Notifications-Imports
- Customs SRO’s
- SRO No. 818(I)/2007
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Apparels |
Pakistan has offered to Sri Lanka TRQ of 3 Mn. Pieces per financial year (July-June) for 21 product categories of apparel with a preferential duty margin of 35%. It is pertinent to mention that, in order to enjoy this benefit, there is no binding on the part of the apparel manufacturers to source their raw materials from Pakistan. In other words, they would be able to source their input requirements from any country.
The main product categories, which could be exported under this arrangement include men’s and boy’s under pants and briefs, women and girls under pants and brief of cotton and other textile materials, women and girls night dresses and pyjamas, T-shirts, singlet and other vest of cotton, and other textiles materials, men’s & boy’s swimwear of synthetic fabrics and other textile materials, brassieres, gloves etc. However, the maximum quantity that can be exported under any of these categories is limited to 200,000 pieces. |
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| Attachment IV-Products entitled to Margin of Preferences (MOP) |
The products listed in the Attachment IV are entitled to receive a preferential duty margin of 20% on the applied import duty when imported to Pakistan from Sri Lanka. These products include ceramic tiles and similar articles, tableware and kitchenware, other ceramic articles of porcelain or China. There are no quantitative restrictions on export of these items. |
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Annex B. |
Annex B relates to the No-Concession List (Negative List) and the tariff preferences granted by the Government of Sri Lanka. Annex B is embodied in three different Attachments. |
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| Attachment I-No Concession List (Negative List) |
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 imported from Pakistan. For all other products i.e. (4,527 products at six digit level of HS customs classification) duty free access/duty concessions will be granted by Sri Lanka when imported form Pakistan.
Sri Lanka has granted Pakistan Tariff Rate Quota for 6,000 metric tons of Basmati Rice and 1,000 metric tons 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). |
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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 for preferential duty benefits. Based on the origin, the Rules of Origin categorize the products exported under the PSFTA into the following two main segments. |
- products wholly produced or obtained in the territory of the exporting country such as agricultural, fishery and mineral products
- products, not wholly produced or obtained in the territory of the exporting country (manufactured products).
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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, (materials imported from other countries) 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. |
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| Cumulative Rules of Origin: |
The Cumulative Rules of Origin encourage exporters to source their inputs from the other contracting country. However, the Domestic Value Addition in the territory of the exporting country shall not be less than 25% or the FOB value of the final product, while the aggregate value addition in both contracting parties should be a minimum of 35% of the FOB value. In addition, the respective products should also conform to the Change of HS code requirement (at six digil 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 PSFTA 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.
(It is important to note that all products exported are subject to the conditions of non-qualifying operations under rules of origin) |
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| Annex-D |
The Annex-D sets out the time-frame for Pakistan and Sri Lanka to phase out tariffs on products other than those in their No Concession Lists (Negative Lists). It also indicates the percentage of tariff reduction undertaken by each country at the respective phasing out stages. |
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| Accordingly, Pakistan will phase-out its tariffs on the respective products as per the schedule appended below: |
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| -Upon entering into force not less than |
34% |
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| -At the end of the second year not less than |
67% |
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| -At the end of the third year not less than |
100% |
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| (At the end of the third year (12th June 2008), the applicable tariffs will be zero) |
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| In the case of Sri Lanka, the Tariff phasing-out schedule is as follows: |
| -Upon entering into force not less than |
20% |
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| -At the end of first year not less than |
30% |
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| -At the end of the second year not less than |
40% |
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| -At the end of the third year not less than |
60% |
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| -At the end of the fourth year not less than |
80% |
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| -At the end of the fifth year not less than |
100% |
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| (At the end of the fifth year (12th June, 2010), the applicable tariffs will be zero) |
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Review of Annexes |
The PSFTA also includes provisions for reviewing all its Annexes every two years from the date of entry into force of the Agreement.
Opportunities available for businessmen under the Agreement specially for Pakistan businessmen |
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Pakistan businessmen are able to manufacture products in Sri Lanka, which are having high demand in the Pakistan market and export to Pakistan availing the duty free benefits/duty concessions granted under the Agreement. This process will enable them to market their products in Pakistan at very competitive prices against the products imported form other countries. |
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Under the Agreement, when the raw materials are sourced from Pakistan the domestic value addition percentage is at a very lower level. This will enable manufacturers to source raw materials into Sri Lanka from Pakistan on a duty free basis and export manufactured products to Pakistan under duty free/duty concessions offered under the Agreement. |
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Pakistan businessmen also can explore diverse opportunities available for them in Sri Lanka to manufacture products for exports to India under the Indo – Lanka Free Trade Agreement. There are 4500 products at six digit level of HS classification under this Agreement which can be exported to India on duty free basis when originated from Sri Lanka. |
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Sri Lanka has secured duty free access for as many as 7200 products to the European Union Market under the EU’s GSP plus’ scheme. Main product categories which have vast potential in Sri Lanka under the GSP Plus Scheme include apparel and textiles, clothing accessories, sea foods, activated carbon, artificial flowers, foliage plants, rubber based products, tableware and bicycles. This scheme is an ideal opportunity for manufacturers to exploit the European market. This will be more opportune for Pakistan businessmen as European Union has already accepted the regional cumulation under SAARC. |
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Sri Lanka has the most liberalized investment regime in the South East Asian Region. Incentives, investment environment and investment opportunities available are summarized below: |
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Inventives: |
Tax holidays
Liberal exchange policy mechanism including repatriation of profits
Duty free import of raw materials and machinery |
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Why invest in Sri Lanka? |
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Investment opportunities: |
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Electrical Items |
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Textile and garments |
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Fashion accessories |
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Light engineering products |
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Rubber based products |
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Mining and processing |
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Ceramic industry |
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Gems and jewellery |
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Tourism, recreation and leisure |
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Services |
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Infrastructure |
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IT industry |
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Healthcare and pharmaceuticals |
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