CHINA-SRI LANKA: SRI LANKA ACQUIESCES TO CHINESE DEMAND FOR PAYING 70 PER CENT OF CLAIM MADE BY CHINESE COMPANY

An article in the Diplomat (November 27) reported that a Sino-Sri Lankan dispute over fertilizer has ended in China’s favor with Sri Lanka agreeing to pay 70 percent of the claim made by a Chinese organic fertilizer company for a shipment that Colombo had rejected as it was found to be contaminated. According to Agriculture Minister Mahindananda Aluthgamage, Sri Lanka will pay $ 6.7 million to Qingdao Seawin Bio-tech Group for the shipment of 20,000 tons of fertilizer. In addition, Sunday Times reported the minister as saying Sri Lanka has agreed to buy fresh stocks from the company. Explaining the government’s volte face, Aluthgamage said “We cannot afford to damage diplomatic relations over this issue.” In September when the ship, Hippo Spirit, which carried the first consignment of 20,000 tons, was heading toward Colombo port, Sri Lankan soil scientists found plant pathogens like Erwinia in samples of the fertilizer. Since the application of such fertilizer to Sri Lankan soil would have serious implications for Sri Lankan biosecurity and impact agriculture for generations to come, the ship was not permitted to dock at Colombo. The dispute escalated and when a Sri Lankan commercial high court halted payment of $9 million for the fertilizer onboard the Hippo Spirit, the Chinese embassy in Colombo waded into the dispute. It blacklisted Sri Lanka’s state-owned People’s Bank for not making the payment to the company. In subsequent talks with Sri Lanka’s agriculture ministry, Qingdao Seawin, put forward several conditions for resolving the dispute. Sri Lanka would have to pay 70 percent of the agreed price in the original tender agreement and additional freight charges, it said. Moreover, the agriculture ministry would have to issue a statement that the shipment was rejected because of an import permit dispute and not because of the quality of the fertilizer. Clearly, Qingdao Seawin did not want the controversy over the quality of its shipment to Sri Lanka to impact its trade with over 50 countries, including the U.S. 





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