Sri Lanka Government is set to ban the use of open accounts for imports except the overall export sector including indirect exporters with effect from May despite protest from essential food commodity importers saying that the people will have to starve due to non importation of essential food.

Finance Minister Ali Sabry has issued a new Gazette effective 20 May banning use of Open Account for imports except by the overall export sector including indirect exporters.

Most established companies in Sri Lanka use open accounts to fund imports to the country based on their relationships with suppliers, as there is limited foreign exchange available to fund letters of credit (LCs),a leading importer said.

He noted that the CBSL governor will have to consider the practical situation in Sri Lanka and the manner in which local importers are continuing their business before banning open accounts completely cutting off imports.

Usually, open account transactions are used between a supplier and a buyer with a good trade relationship built over many years, where the supplier allows the buyer to make the payment for the imports whenever the buyer has money, without stipulating a particular time period.

Importers state that this mode of transaction is mainly used to import commodities whose prices keep changing, as opening LCs through banks takes time.

Another importer said that the suspension of open accounts will have a major impact on imports, as the supplier credit the country was getting, considering the shortage of forex in the country, was high.

He claimed that essential commodity imports will see a major impact, because if importers are required to wait for the banks to provide foreign exchange, it would not happen, as the banks have their priority lists.

Any licensed banks, which are settling any payments under the Open Account Payment terms or Consignment Account terms, should share a copy of details of such settlement of payment in the electronic format to the Director General of Sri Lanka Customs on every Customs declaration (CUSDEC) basis.

The Controller General of Imports and Exports will issue appropriate ‘Operational Instructions’ to the Director General of Customs and the licensed banks for effective implementation of these Regulations.

However there was no Controller General of Imports and Exports to issue ‘Operational Instructions’ or to sign the circular giving these instructions as former Controller General Damayanthi Karunarathne has been transferred and no replacement had been made so far , official sources said.

The Director General of Customs will act in accordance with the provisions of the Customs Ordinance on any importation made in violation of the above Regulations.

The Controller General of Imports and Exports should be consulted in the case of any issues related to interpretation of these Regulations.

The new ‘Import Control Regulations on Payment Terms No. 07 of 2022’ is applicable to goods arriving via sea and airports in Sri Lanka effective from 20 May.