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Why Sri Lanka

Economic Overview / Sri Lanka Facts & Figures

South Asian Free Trade Area (SAFTA)

SAFTA is a regional co-operation agreement signed between the member countries of SAARC (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan), with the commitment to strengthen intra-SAARC economic cooperation to maximise the realization of the region's potential for trade and development for the benefit of their people, in a spirit of mutual accommodation, with full respect for the principles of sovereign equality, independence and territorial integrity of all States, in line with the charter objective of promoting economic co-operation.

The Agreement on South Asian Free Trade Area (SAFTA) was signed on 6 January 2004 during the Twelfth SAARC Summit in Islamabad and entered into force on 1st January 2006. The agreement outlines a 10 year schedule for trade liberalization, which aims at reducing and eliminating customs duties on cross-border trade

Rules of Origin is the mechanism which is used to determine whether products imported into the contracting country originate in the exporting country. These products listed in the respective countries Margin of Preferences (MOP) Lists are entitled to the preferential treatments within SAFTA rules of origin. Products wholly produced or obtained within the territory of the state of the exporting country, or which conforms to the required valued-added test are deemed to be regarded as originating from the respective country. The products in the No-concessions Lists are not entitled to any preferential treatment.


SAFTA - Summary of No-concession and MOP

Country No Concession List (No. of Tariff Lines) MOP List (No. of Tariff Lines)
To Non-LDC's To LDC's To Non-LDC's To LDC's
India 884 763 4,340 4,461
Bangladesh 1,249 1,254 3,975 3,970
Nepal 1,257 1,295 3,967 3,929
Pakistan 1,183 4,041
Sri Lanka 1,707 3,517
Maldives 681 4,543
Bhutan 157 5,067

Margin of Preference


1. Non – LDC's
  1. The tariff reduction by the Non-Least Developed Contracting States from existing tariff rates to 20% shall be done within a time frame of 2 years, from the date of coming into force of the Agreement. (ie. 1st January, 2006).

    Contracting States are encouraged to adopt reductions in equal annual installments. If actual tariff rates after the coming into force of the Agreement are below 20%, there shall be an annual reduction on a Margin of Preference basis of 10% on actual tariff rates for each of the two years.

  2. The subsequent tariff reduction by Non-Least Developed Contracting States from 20% or below to 0-5% shall be done within a second time frame of 5 years, beginning from the third year from the date of coming into force of the Agreement.

    However, the period of subsequent tariff reduction by Sri Lanka shall be six years. Contracting States are encouraged to adopt reductions in equal annual installments, but not less than 15% annually.


2. LDC's
  1. (A) The tariff reduction by the Least Developed Contracting States from existing tariff rates will be to 30% within the time frame of 2 years from the date of coming into force of the Agreement. If actual tariff rates on the date of coming into force of the Agreement are below 30%, there will be an annual reduction on a Margin of Preference basis of 5 % on actual tariff rates for each of the two years.
  2. The subsequent tariff reduction by the Least Developed Contracting States from 30% or below to 0-5% shall be done within a second time frame of 8 years beginning from the third year from the date of coming into force of the Agreement.

    The Least Developed Contracting States are encouraged to adopt reductions in equal annual installments, not less than 10% annually.

For all updated details or for any clarifications please visit the official website of the Department of Commerce