The EDB conducted a Forum on Entrepót Trade with the participation of a large number of traders/exporters and others engaged in the Entrepót trade. Sri Lanka Logistics & Freight Forwarders’ Association (SLFFA), Sri Lanka Shippers’ Council (SLSC), Shippers Academy Colombo and several public sector institutions relevant to the trade including Sri Lanka Customs, Ports Authority and BOI collaborated with EDB in organizing the Entrepót Traders’ Forum held at the EDB Auditorium on July 13.
Understand
The forum provided a platform for traders/exporters engaged and interested in Entrepót Trade to understand current Entrepot Trade Procedures in Sri Lanka and discuss issues that need to be addressed to develop the trade. Entrepot trade or the re-export trade involves importing goods from one country and re-exporting to another, with or without any additional processing or repackaging. Goods are exempt from duty at the point of import and re-export. Commercial Hub Regulations, introduced initially in Part IV of the Finance Act No 12 of 2012 of Sri Lanka was amended by Finance Act No 12 of 2013, cited as the “Finance Act – Commercial Hub Regulations” in Gazette Notification No. 1818/30 of July 11, 2013. The introduction of these regulations created a distinction between the entrepot traders as follows:
a) Entrepot Trade under the Commercial Hub Regulations (Foreign Investors falling under the purview of the BOI)
b) Entrepot Trade under the Customs Ordinance without entitlements to all of the benefits under Commercial Hub Regulations (Local Traders)
Commercial Hub Regulations demarcated six areas in close proximity or within the Ports and Airports as Free Ports or Bonded Areas (areas which are geographically inside Sri Lanka, but are legally considered outside its Customs territory and supervised by the BOI of Sri Lanka or the Director General, Customs or any other authority under the Commercial Hub Regulations) to facilitate trade. These are the Colombo Port, Hambantota Port, Mattala Airport, Katunayake EPZ, Koggala EPZ and Mirrijjawala EPZ. Though not under the Commercial Hub Regulations, the Colombo Airport Cargo Terminal is also a Customs supervised bonded area.
Superintendent of Customs, Thilak Arumapperuma Arachchi, CEO, Shippers’ Academy Colombo, Rohan Masakorala, Past Chairman, Sri Lanka Logistics & Freight Forwarders’ Association (SLFFA), Dushmantha Karannagoda, Acting Executive Director, BOI, Mahinda Ramanayake, Chairman, Sri Lanka Shippers’ Council, Chrisso De Mel, Director General of the Export Development Board, Ms. Jeevani Siriwardena, among others, graced the occasion. Thilak Arumapperuma Arachchi, confirmed that the import of goods and re-export to a third country with value addition would not be subject to fiscal levies. He explained the challenges faced by Entrepot Trade.
Mahinda Ramanayake, speaking at the Forum said, the Government has announced to set up Free Ports and Bonded Areas to create trade related infrastructure to facilitate import and export of goods and services with the freedom to carry out transactions in convertible foreign currency.
Dushmantha Karannagoda, spoke on several facts, namely: Customs documentation process, Locations for Entrepót handling, Entrepót Trade Activities, Registration process to handle Entrepót activity, Prohibited Items under Entrepót Trade and Exchange Control provisions governing Entrepót Trade, etc. He said, bottlenecks and red tape need to be ironed out before we start promoting Entrepót activity. Bad experiences could divert the traffic and winning them back would be an uphill task.
According to Rohan Masakorala, Sri Lanka’s location in the international maritime map has put it at a better advantage to be a major player in this field than it is for leaders in the Entrepot Trade, such as, Dubai and Singapore.
Ms. Jeevani Siriwardena, said, the EDB has identified the necessity of the Entrepot Trade and successfully conducted four round table meetings with Entrepót stakeholders to identify ways to develop the trade. Further, she said, the current Entrepót rules and regulations have been reviewed to make it conducive to Entrepót trade.
There was a session where participants put forward issues that they currently face when carrying out Entrepót exports. The first Entrepót trade Forum was a great opportunity for Entrepot traders/exporters entering the global market. In his concluding remarks, Director Export Services of EDB said, the EDB will continue these discussions with the industry to identify and solve the issues confronted by them and to obtain their views on developing the trade.
Major Entrepot trading hubs that excel at present
- Singapore – Bridging South Asia with the rest of the world
- Hong Kong – Gateway of China to the world
- Dubai – Connecting African countries with the rest of the world
Globally, the top three entrepots, (excluding the USA), consisting of Hong Kong, Singapore and Dubai have contributed 161%, 83 % and 26% from re-exports to their GDP respectively, in 2015.
Hong Kong, the world’s largest re-exporter, serves as the conduit to the Chinese mainland. Its main market segment is mainland China. Singapore serves as an entrepot, mainly for goods destined to regional markets such as, Hong Kong, China, Malaysia, Indonesia, Korea, Taiwan and Japan apart from the USA and the EU.
Landscape
Dubai is positioned as the gateway to the Middle East and also re-exports goods to many other countries including China, India, Saudi Arabia, Germany and the US.
These three entrepots combined commanded 75% of the global market in 2014 as per ITC statistics, with Hong Kong dominating the landscape with 44% of the global market share with Singapore, the second largest re-exporter.
These global giants are high income countries, characterized by political stability, high investments in superior infrastructure and warehousing facilities, high labour and utility costs, low taxes and duties, streamlined procedures and focused policies to take advantage of their location in the geographical map.
In 2016, Sri Lanka re-exported to 32 countries around the world. UAE (24%), India (23%), China (11%) and Singapore (11%) accounted for the majority share of 69% of the total FOB value. Similarly, 63% of the CIF value of imports classified under entrepot were from 4 nations, namely, China (25%), Canada (17%), UAE (11%) and the Netherlands (10%).
Interestingly, Sri Lanka’s entrepot trading partners seem to be the giant nations in the world via the top entrepots. In terms of products, 15 items accounted for over 80% of the import and export value in 2016 out of over 230 items traded. These mainly consisted of lentils, lead acid batteries, confectionery, liquor, cigarettes and baby products.
Approximately, 75% of the cargo arrive inthe country as ocean freight, while only 65% of the outgoing cargo is re-exported as ocean freight. This indicates that approximately 10% of the processed or consolidated cargo are sent out on air freight possibly to fulfil urgent requirements.
Sri Lanka possesses many, if not more comparative and competitive advantages relative to the global players, for the development of this trade. The current political and economic milieu and positive investor sentiment have prompted the government to introduce many measures to develop the entrepot trade.
In this process, to harness fully the potential of the geographical positioning of the island in the East-West maritime route, the Government initiated several steps to promote Sri Lanka as a Commercial Hub.