Open Accounts Payment methods suspended; importers in quandary
Importing goods under credit through an existing mechanism called Open Account Payment Terms is to be put on hold until further notice to ensure payment settlements are made via legal channels, according to a new circular issued by the General Treasury.
Under the new system, importers need to obtain an endorsement on the Commercial Invoice from their licensed bank stating that the importer has the foreign currency in his Business Foreign Currency Account or Offshore Foreign Currency Account to settle the payments.
The endorsed Commercial Invoice should be submitted to Sri Lanka Customs at the time of Customs clearance of such goods, according to the new circular issued by Finance Minister Ali Sabry on Friday.
The move came after comprehensive studies carried out by Sri Lanka Customs revealed that most of the Open Account transactions that were carried out in past turned out to be settled via illegal channels such as Undiyal and Hawala -- outside the banking system in the country, a senior official from Sri Lanka Customs said on condition of anonymity.
"When we checked documents with banks on importations in recent past, many were outstanding according to the bank records, but they were settled through other channels," the official said.
The new directive is aimed at preventing illegal methods of transactions and ensuring money circulation within the banking system as commercial banks are struggling to source foreign currency to support imports.
Those who intend to import goods under Documents against Acceptance (DA) terms or Documents against Payments (DP) are required to make prior arrangements with their licensed banks and obtain an endorsement on the Proforma Invoice prior to the shipped-on-board date of Bill of Lading and such endorsed documents need to be submitted to the Director General of Customs when clearing the goods.
Meanwhile, an Essential Food Commodities Importers and Traders Association spokesman said the new directive would discourage importers to bring goods to the country since they were struggling to source foreign currency.
"For those who import perishable items such as red onions, potatoes and chilies, this would make things even more difficult. They used to import under the Open Account facility on a credit basis. They cannot be expected to look for USD once the shipment arrived in the harbour. We have to wait and see what the repercussions of this directive are even though it is brought with good intentions," the spokesperson said.