An inventory of the Non Tariff Barriers Barriers in trade supply chain between India and Sri Lanka.

1. NON TARIFF BARRIERS BETWEEN
INDIA AND SRI LANKA
DR. BARUN DEB PAL
ASSISTANT PROFESSOR
INSTITUTE FOR SOCIAL AND ECONOMIC CHANGE (ISEC)
BANGALORE
bdpal@isec.ac.in

2. Introduction
 India and Sri Lanka are tied up historically in terms of culture and
geographical proximity.
 Economic relations between India and Sri Lanka picked up in
the1990s with the liberalization of the Indian economy.
 1998- Biggest boost in eco relations- ISFTA signed- Implemented-
2000.
 The ISFTA was formulated based on the negative list approach;
each country giving concessions to all commodities except those
indicated in its negative list.
 The two countries agreed for preferential treatment on 5112 tariff
lines & an 8-year time table was devised for phasing out tariffs.
 Asymmetry between the two countries was accommodated by
special & differential treatment (SDT)

3. Positive Outcomes of ISFTA
 An aggregate view of trade between India and Sri Lanka since the FTA
came into being thus suggests a very positive picture with overall trade
growing close to six fold.
Overall Growth in Trade
 Sri Lankan exports to India - 2000 -1% of their total exports to the world
while after the implementation of the FTA -5% in 2013.
 By 2005, Sri Lanka’s exports to India reached a peak of US$ 566.4, a
tenfold increase compared to 2000, and stood at US$ 543.3 million in
2013 (65% was through the FTA channel)
 Imports from India -8.2% of total imports of Sri Lanka. This reached a
peak of 24.5% of total imports in 2008. With the onset of the global
recession in 2009, imports declined to 17.6% in 2013.
 Imports from India which amounted to US$ 600.1 million in 2000
reached US$ 3092.6 million in 2013 (13% through FTA)
 There has also been a change in the composition of trade.

4. Under utilization of ISFTA
Despite the success, ISFTA utilization rates have been falling , a
possible indication that more trade takes place in the products in the
negative list or export are facing difficult in meeting ROOs or the
various NTBs are hampering trade.
0
20
40
60
80
100
120
Percentage
ISFTA utilization for Sri LankanExports
% under ISFTA
0
5
10
15
20
25
30
35
Percentage
ISFTA utilization for Indian Exports
% under ISFTA

5. Key Objectives of the Study
 To study the trade performance and structural
changes in trade between India and SL during the
ISFTA regime.
 Prepare an inventory of Non Tariff Barriers and
analyse how they affect trade relation between India
and SL.
 Recommend policy initiatives to eliminate the
NTB’s.

6. Approach: Decomposing the effects of non-
tariff measures
 Bottoms up approach.
 Study goods as they move
through supply chains.
 Exported good from its
location of production through
multiple steps in the process
of shipping and delivery.
 At each stage in the process
the price of the good
increases, as additional costs
are imposed.
 Different policies apply to
each part of the supply chain.
 Market distortions in
international shipping; import
customs procedures; and
restrictions on the size or
hours of retail operations
affect the difference between
the wholesale and retail price.

7. NTM NTB
Policy Makers Approach
 NTMs-Policy measures, other than ordinary customs tariffs,
that can potentially have an economic effect on international
trade in goods, changing quantities traded, or prices or both.
(UNCTAD,2010)
 Justified on the basis of various multilateral agreements
governing international trade.
Academic Approach
 NTB’s- Those that can’t be justified under any provision; or in
spite of being governed by multilateral agreements may lead
to increase in costs and difficulties to comply with for trade–
NTB.
 Any act of intervention in the economic process by which
foreign competitors are consciously discriminated against.
 All NTBs are also NTMs but not necessarily the other way
around.

8. Our Approach
NTBs NTMs
NTBs – Increase in transaction time and
costs

9. Key Arguments against NTBs
 Average customs transactions involve 29-30
different parties, 40 documents and, 200 data
elements.
 Varying customs procedures and requirements
result in very high administrative costs. 7-10%
of the value of global trade.
 Average gains from trade facilitation in Asia-
Pacific region is 0.26% of the real GDP, while
gains from trade liberalization account only for
0.14% of the real GDP. (ADB, 2013)

10. Methodology
For the study the various steps involved in the data collection
process were:
 Exploratory Research- In depth information was collected
through secondary data sources on historical and cultural
ties, trade relations, political issues etc
 Expert Consultation- A consultation with experts on
international trade and those who have done extensive
research on FTAs and have observed bilateral trade between
the two countries in the long term was undertaken.
 Primary Survey- A combination of quantitative and qualitative
research methodologies was used for the survey.
 Qualitative Interviews- In depth interviews were conducted with
various stakeholders such as exporters/importers, chambers of
commerce,
 Quantitative Interviews- Mainly with exporters and importers.
 Questionnaire Design
 Database Formulation- Snowball sampling
 Appointments

11. Contd…
 Main Fieldwork- Mumbai, Chennai, Kochi, Kolkata,
Bangalore
Sri Lanka
 Stakeholder consultation Workshop - held at Colombo to
interact will all stakeholders together.
 Meetings- With Foreign Minister, DGFT, Chambers of
Commerce.
 Data Coding and Entry
 Analysis and Report Writing

12. - India and Sri
Lanka
NTB’s Encountered

13. Conformity Assessment Measures
• FSSAI Regulations- Import consignments: Labelling Quality Checking.
• Labelling rules too many to adhere to- No stickers permitted
• Standard packaging sizes are insisted upon- If not – ‘NON STANDARD FSSAI PACKAGING
SIZE’ to be printed.
• PFA Act- No proper rules for Tea Products.
• Sanitary Wear- Needs to be packed in 5-ply corrugated boxes only- But India does not
manufacture much of these.
Packaging and Labelling
• India does not except third party certification- Insists on drawing samples from same product
packed in different size bottles.
• SLSI- Entered into an unilateral agreement with EIC.
• EIC problems.
• 2 CoOs- Not required.
Certification
• 30-40 days taken to release goods after testing.
• Importers charged between US $4.60- US $ 70 as testing fees.
• Min. 500gms sample taken- High value products.
• SVB- Fees once collected not refunded even if everything is in order.
• Mango Pulp- Thread Bare analysis done- Rs. 5000-6000 per consignment- Added to the cost
of the product.
Testing

14. Import Policy Barriers
• Pepper-Cap of 2500 tonnes- No exports made to India under ISFTA since
April 2006 due to this.
• Anti Dumping duty on Medium Density Fiber Board- USD 352 / cu meter
• Minimum floor price on Marble- USD 60/ sq meter
Quantitative Restrictions and Additional Duties
0
1000
2000
3000
4000
5000
6000
7000
8000
1990
1991
1992
1993
1994
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Import of Pepper from Sri Lanka
Qty (Tonnes)

15. Contd…
• Quarantine clearance asked for- Strawberries, Wood Apple, Dragon Fruits,
Mangosteen, Mango, Ranbutan, Avocado, Guava. Given only for
Strawberries, Wood Apple, Dragon Fruits.
Quarantine Clearances
• Import permits renewed after a period of time- Documents required to
renew it keep changing- not notified.
• Ambiguity between OGL and SIL- Mainly meat products (Sausages)
Lack of clear procedures, processors and
documentation requirements
• No consideration given to goods in transit.
• Spices, Areca Nuts- Subject to checks by health authorities but no prior
notice and specification of standards given.
Changing of policies without any notice to exporters

16. Measures effecting Competition
• Indian advertisements are telecast In SL by way of cable TV and satellite telecasting.
• SL ads are telecast in India surcharges and other penalties are added if Indian models
are not used and commercial Is not of Indian origin.
The imbalance in level play in the marketing process
• Pharmaceutical Sector.
• When an Indian company which is registered with the mandatory bodies in Sri Lanka
the local agents details have to be provided.
• If there is to be any change in the appointment of a dealer then a NOC is required
from the existing agent who normally demands a large amount of money.
NOC required from existing dealer/agent
• Sri-Lanka has lower tariff for same commodity imported from Pakistan than from
India- Disadvantage to Indian exporters.
• Seller has to pay and recover the Destination Terminal Handling Charges for Sri-
Lankan imports at origin itself.
Differential Tariffs

17. Other Barriers
• ChPT- Long haul trailer lines up for miles together to get into container terminals outside zero
gate.
• Shortage of customs officials for seal verification, reduced number of entry points and
stoppage of vehicles at different points by traffic police and other agencies.
• 20 kms before port entrance roads are in dire need of repair- Movement of overload trucks.
• Cochin Port- Past labour problems failed to gain investor confidence; Vicious cycle.
• Immigration counters- Half of them not in use.
• Frequent server breakdown and failures.
Infrastructure and Technological Barriers
• Collection of information related to trade was very time-consuming, and costly even though
there are designated official enquiry points for traders to obtain information- Websites
launched by govt agencies not updated.
• Time period between publication and implementation in India.
• Online filling of CoO- No awareness- Use agents paying high charges.
• India Customs doubt the CoO – demand detailed cost sheet reflecting 35% value addition.
Administrative Barriers

18. Other Barriers
• Sri Lankan nationals and patients need to register at the local police station
apart from registering as a foreign citizen- This needs to be renewed every
year. Substantial amount of money extracted/demanded;
• Bank of Ceylon, Sri Lankan Airlines offices attacked in the past.
• Sri Lankan High Commission in Chennai attacked- Main Entrance not in
operation since then.
• Goods imported into the country sold after ‘Made in Sri Lanka’ tag is removed-
Shops burnt down.
• Certain local leaders influence- Exporters do not declare trade with Sri Lanka.
Discrimination of Sri Lankan Nationals and Goods in
Tamil Nadu
• Some SL companies ask Indian companies to import- test market-set up
distribution.
• Then make their own arrangements without compensating the former.
• Improvement in ethics needed.
Ethical Issues

19. Contd…
Supplier
Bank of Buyer
On the basis of the
buyer
DA Supplier
Acceptance of DA
by the Supplier
Buyer gets control
of cargo before
payment
May Lead to Abuse
of Power or Breach
Of Contract
Lack of Trust and
Breach of
Contract
Perishable Goods- Onion Trade between
India and Sri Lanka

20. Case 2:
Supplier
Bank of Buyer
On the basis of
the buyer
Supplier DOES
NOT AGREE
Supplier tries to
find another
buyer TO CASH
cargo
Buyers form a
cartel to coerce
the supplier to
get into terms
Supplier under
pressure to
accept DA
May lead to
Abuse of Power
or Breach of
Contract

21. Inherent Weakness in the FTA
• The Domestic Value Addition (DVA) in the
exporting country should not be less than 35%
of the FOB value of the finished product and
• HS Codes of the imported raw materials and
the finished products should be different at 4-
digit level. (Change of Tariff Heading criteria)
• Complicated Jargon
• Understanding of CTC Rule opaque.
• Speckles
• M/s. C W Mackie & Co Ltd
Weakness in the FTA

22. General Barriers
• Considerable lack of awareness of the agreement
and the preferential lower import duties applicable-
Produce all documents to establish existence of the
FTA.
• No set time frames within which procedures need
to be completed.
• No grievance cell to address complaints.
• Trade Carried out in US $. Not INR or LKR.
• Bureaucratic Red Tapism .
• Inefficiency at various checking points.
General Barriers that impend trade

23. Recommendations
Panel Experts
Trade in LRK or INR Asian Clearance Union
Shortage of Asian
Currencies
India’s trade with Iran-
Take it as an example
Online grievance cell NTB Committee that
meets frequently
Address concerns by
taking it up with the resp
dept.
MRAs Can be product or
function specific.
CTC Rule Ignore if the imported
component is <5%
RoO too stringent-
denying export possibility.
Have product specific
rules (PSRs)
Take into account local
chambers while
negotiating FTAs.
Channels of Info
Dissemination
Since NTBs cant be
capped always- factor in
Update websites at
regular intervals and have

24. Contd…
Panel Experts
FSSAI Problems Take corrective actions by
taking into account
practical realities –
Perishable items
Make re-export of rejected
goods a simpler and faster
process.
Have a procedure in place
where there is bilateral
recognition of standards.
Harmonization of
standards is a lengthy
process and time-
consuming.
Accept certificates issued
by the competent
laboratories of partner
countries. Acceptance of
BSTI certificates for about
18 Bangladeshi products
by the Indian counterpart,
BIS.
Revoke packaging
requirement which is
stringent in some cases.
Change regulation
governing need of NOC in
Look into it on a priority basis

25. Way forward
Address concerns of stakeholders in both countries
Ensure new TAs have provisions to address NTBs
Move beyond trade in goods to cover other areas such as
services, investment, IPR on the guidelines of CEPA.
Commitment to set aside narrow protectionist interests in view
of long term benefits of strong trade linkages through TAs

26. Talk of the day
Integration & Cooperation within the
Boundary
Integration & Cooperation outside of the
Boundary