The Economic and Commercial Office of the Chinese Embassy in Colombo has rolled back the move to blacklist the People’s Bank in Sri Lanka over the row concerning the payment for a consignment of organic fertilizer containing harmful bacteria shipped by a China-based company.

The People’s Bank was blacklisted on October 29, 2021, for failing to make the payment in compliance with the Letter of Credit and the contracts.

As per the terms of the contracts, the payment for the controversial organic fertilizer shipment was slated to be made through a Letter of Credit established via the People’s Bank.

Defending its move, the Chinese Embassy had stated that the People’s Bank has witnessed vicious event of Letter of Credit default, causing huge losses to the Chinese enterprises in international trade with Sri Lanka.

The Economic and Commercial Office urged all Chinese enterprises to strengthen risk control and avoid accepting Letters of Credit issued by People’s Bank of Sri Lanka in international trade with Sri Lanka.

In September last year, the National Plant Quarantine Service (NPQS), which tested the fertilizer samples sent by the Qingdao Seawin Biotech Group Co., Ltd., revealed the detection of the microorganism called ‘Erwinia’.
Several days later, Sri Lanka decided to suspend the importation of organic fertilizer from Seawin Biotech.

However, the Chinese firm retaliated, saying that the NPQS took only three days to draw a suspicious conclusion although it takes more than 6 days to identify Erwinia as per the ISPM27 rule in IPPC (International Plant Protection Convention).

The “unscientific detection method and conclusion of NPQ in Sri Lanka” are not in compliance with international animal and plant quarantine convention, Seawin Biotech claimed further, urging that Swiss SGS group, a top third-party testing organization, should re-test whether the samples contain Erwinia.

But Agriculture Minister Mahindananda Aluthgamage later insisted that the ship carrying the fertilizer consignment containing harmful bacteria will not be allowed into Sri Lanka. He also noted that the samples from this fertilizer shipment will not be re-tested, nor will any payment be made to the Chinese firm in question.

Against this backdrop, the Ceylon Fertilizer Company (CFC) had obtained two enjoining orders from the Colombo Commercial High Court against the Seawin Biotech, its local agent and the state-run People’s Bank, preventing the payment to the Chinese firm on Letter of Credit.

The CFC first obtained a court order on October 26 against the Chinese firm in question, preventing the People’s Bank from making any payment under a Letter of Credit opened in favour of the Chinese company.

However, on January 07, Sri Lanka paid USD 6.9 million to the Seawin Biotech Group, after the Colombo Commercial High Court dissolved the enjoining order preventing the payment on Letter of Credit.

On January 03, the enjoining order in question was dismissed as all parties had agreed for a settlement to ship a new stock of standardized fertilizer.