Oct 27, 2017

Russia & Sri Lanka begin efforts to end Ceylon Tea impasse

After a marathon three day bilateral trade session in Colombo that ended on 26 October, both Russia and Sri Lanka achieved a greater understanding on breaking the Ceylon Tea impasse that has been dogging their trade cooperation efforts lately. Secretary of Ministry of Industry and Commerce led Sri Lankan side representing the Minister of industry and Commerce Rishad Bathiudeen. The Russian side was led by the Deputy Minister of Agriculture and Head of the Federal Agency for Fishery of the Russian Federation, (HE) I.V. Shestakov.

The total trade between the two countries in 2016 was at US $ 363 Mn, a decline of 17% over 2015. During the first eight months of 2017 however, trade returned to the growth trend –increasing by 5.6% to US$ 247.2 million in comparison with the US$ 234 million in the same period in 2016.

Sri Lankan side continuously pressed for the reduction of import duty by Moscow on its Ceylon Tea exports. Sri Lanka’s complaint was that the duties were based on gross weight of value added teas -that includes packaging material such as ceramic and wooden tea containers-rather than only the weight of net teas. The Russian Side stated that currently, in accordance with the Customs Code of the Customs Union, the basis for calculation of Customs Duties (subject to type of goods and applicable duties) is customs value of goods and/ or its physical characteristics in physical terms (quantity, mass with original packaging which is inseparable from the goods and in which the goods are due for retail, volume of goods or other characteristics). More importantly, the Russian side stressed that “it would take part in this regard within the limits of its competence in working out this issue with all the member states of Eurasian Economic Union.”

At present, Ceylon Tea is the leading Lankan export to Russia, and last year tea claimed 78% (at US $ 143 Mn) of Sri Lanka’s total exports ($ 182 Mn) to Russia. Other key Lankan exports to Russia last year were apparel, textile fibres, apparel accessories, and activated carbon.