Dear Shri Prabhu,

        I have the honour to acknowledge the receipt of your letter of 2nd February, 2000 which reads as follows :

Quote :

Dear Dr. Jayasundera,

        Pursuant to Article XVI of the Free Trade Agreement between the Republic of India and the Democratic Socialist Republic of Sri Lanka, signed in New Delhi on 28th December 1998, and the agreement reached in subsequent discussions between the two Governments to continue negotiations on the Annexures to be finalised, notwithstanding the time-frame stipulated in the aforesaid Article, we have finalised and exchanged today the following Annexures which shall form an integral part of the Agreement:

(i) Annexure D(i)

Negative List of India

(ii) Annexure D(ii)

Negative List of Sri Lanka

(iii) Annexure E

Items on which India has undertaken to give 100% tariff concession on coming into force of the Agreement.

(iv) Annexure F(I)

Items on which Sri Lanka has undertaken to given 100% tariff concession on coming into force of the Agreement.

(v) Annexure F(II)

Items on which Sri Lanka shall give a 50% margin of preference upon coming into force of the Agreement,  with the margin subsequently being deepened to 70%, 90% and 100%, respectively, at the end of the first, second and third year of the entry into force of the Agreement.

(vi) Annexure A Para 1(b)

Items in Chapters 51 to 56, 58 to 60 and 63 of the ITC-HS Code on which India has undertaken to give 25% tariff concession on coming into force of the Agreement.

2. Pursuant to discussion between our two governments, the items related to tea are not in India's Negative List. However, import of tea from Sri Lanka to India on a preferential basis shall be subject to an annual maximum quota of upto 15 million Kg. On a fixed tariff concession of 50%.

3. Further, in the interest of expansion and diversification of Sri Lanka's exports to India, garments under ITC-HS Chapters 61 and 62, while remaining in the Negative List {Annexure D(I)}, will be given 50% tariff concession on a fixed basis by the Government of India subject to an annual restriction of eight million pieces, of which six million pieces shall be extended the concession only if made of Indian fabric, provided that no category of garments shall exceed one and a half million pieces per annum.

4. Also, pursuant to the discussion between our two governments, two items relating to cement (ITC-HS Codes 2523.21 and 2523.29) will remain on Sri Lanka's Negative List for the time being. The tariffs on these items would nevertheless be reduced progressively in such a manner, so that at the end of eight years from the date of entry into force of the Agreement, the items shall attract no duty and shall be phased out of the Negative List. It is noted that the present regime of there being no restrictions on the import of Indian cement into Sri Lanka would continue to be in effect.

5. These understandings shall be deemed to be a part of the Agreement and shall enter into effect on the coming into force of the Agreement.

6. It is also agreed that the Agreement will be notified to the WTO under the Enabling Clause (Decision of 28th November, 1979) which allows for such arrangements to be entered into among developing countries. We may decide on the timing of the notification to WTO after the Agreement enters into force.

7. I shall be grateful for an acknowledgement of this letter by the Government of the Democratic Socialist Republic of Sri Lanka. This letter and your acknowledgement thereto shall complete the process of finalisation of Annexures under Article XVI of the Agreement.

In reply, I have the honour to confirm that the proposal in your letter is acceptable to the Government of the Democratic Socialist Republic of Sri Lanka. I wish to further confirm that your letter under reference and this acknowledgement thereto, shall complete the process of finalization of Annexures under Article XVI of the Agreement and that these understandings shall be deemed to be part of the Agreement and shall enter into effect on the coming into force of the Agreement.

Shri P.P. Prabhu
Commerce Secretary
Ministry of Commerce and Industry
Government of India New Delhi.