Temu imports linked to Rs. 35–50mn daily duty fraud

By Nishel Fernando

A significant duty fraud scheme involving courier imports from popular e-commerce platforms like Temu is causing a daily loss of between Rs. 35 to 50 million in tax revenue to the Sri Lankan government, industry leaders claimed at a press conference held in Colombo this week.

The allegations point to a flawed “per kg clearance” system that has allowed commercial-scale importers to bypass proper duties, devastating local industries and creating an uneven playing field.
At the heart of the controversy is a system that, according to industry sources, was being practised illicitly allowing goods to be cleared based on weight rather than their actual value and classification. This, they argue, has been exploited by businesses importing goods under the guise of individual consumer-to-consumer (B2C) purchases.

Sanjay Samarasinghe, Country Manager and Director of Aramex, a global courier and logistics company, launched a scathing attack on the practice, labelling it a “blatant lie” to suggest the government had introduced a new tax. 

“The issue was that a set of private parties, together with some parties in Sri Lanka and someone at Customs, got together and created a process that suited them. What is this process? The ‘per kg clearance,’” he stated.

Samarasinghe explained that legitimate businesses are required to follow a stringent process, declaring each item with a specific Harmonised System (HS) code, upon which the relevant duties are levied. In contrast, the “per kg” system allegedly allowed goods, including commercial items, to enter the country with minimal and improperly documented charges.

“A finished T-shirt is landing in Sri Lanka for less than the price of the fabric needed to produce one locally,” Samarasinghe said, illustrating the dire impact on local manufacturers. He challenged those defending the old system to produce a valid Customs declaration for goods brought in under the per-kilogram rate, arguing that the charges levied were “fake” and the money was lost to corruption.

Recent reports from various media outlets have highlighted that Sri Lanka Customs has indeed reverted to a stricter enforcement of tax regulations for e-commerce shipments, leading to delays and public outcry. Government officials have acknowledged the absence of a formal policy for cross-border e-commerce, which has contributed to the current impasse.

The industry representatives lauded the recent move by senior Customs officials to standardize the clearance process for all importers. 

“For the first time, we saw Customs officers take a stand to stop corruption and get rid of this ‘per kg’ system,” Samarasinghe added.

The impact of this alleged duty evasion has been particularly severe on the local apparel industry. 

P. Yasotharan, former President of the Sri Lanka Brands Association revealed that the local apparel market is valued at Rs. 700 billion, yet the contribution from domestic entrepreneurs is less than 35 percent.

“Out of the 20,000 parcels arriving daily (from platforms like Temu), 60 percent are apparel,” Yasotharan stated. He argued that the majority of these are not genuine B2C transactions but are B2B (Business-to-Business) imports masquerading as personal purchases to exploit the flawed clearance system.

“A garment from a factory in China has landed in Sri Lanka with a tax that isn’t even 4 percent and is dumped on the market at a low price. Is this fair?” he questioned. “Because of their impact, if we calculate it, the government has lost between Rs.35 to 50 million per day in tax revenue.”

Yasotharan described the perpetrators as “blatant racketeers” and a “mafia” that is crippling local small and medium-sized enterprises (SMEs). 

“In the past few months, how many small factories in the villages closed down? Why? Because they couldn’t withstand the products being dumped into Sri Lanka through these online channels,” he said.

Both speakers emphasised that their stance is not against e-commerce or imports but a call for a fair and legal marketplace. They urged the government to establish a proper regulatory framework for e-commerce, similar to international standards where a de minimum value is set for duty exemptions on personal imports, while ensuring all applicable local taxes are paid.

Pix by Kushan Pathiraja