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1,300-plus vehicles held at Ports due to LC dispute

Over 1,300 vehicles stranded at Colombo, Hambantota ports for over one year

More than 1,300 vehicles remain stranded at Colombo and Hambantota ports due to a prolonged dispute over cross-border Letters of Credit (LCs), with importers seeking urgent Government intervention to resolve the issue and mounting demurrage charges.

Customs House Agents and Traders Association of Sri Lanka Vice President Tuan Ghouse Arfin raised the issue following an inspection on 12 October. More than 300 vehicles are held at the North Guide Pier Vehicle Yard at Colombo Port, while a further 1,025 vehicles remain at Hambantota International Port (HIP), some since May 2025.

The dispute centers on the interpretation of regulations governing vehicle imports through cross-border LCs, under which letters of credit are opened to a third country rather than the country from which the vehicles are physically shipped. Importers have used banking arrangements in countries including Singapore, the United Arab Emirates, which are world-renowned trading hubs and in some instances the UK and Thailand.

Arfin said conflicting interpretations of the 2012 Payment Gazette regulations and 2013 Pre-shipment Inspection Gazette regulations had contributed to the impasse.

The regulations require LCs to be opened before shipment, and it is compulsory that shipping documents be forwarded through the supplier’s bank. Merely because of the 2013 Gazette requiring a bank stamp of the corresponding bank of the exporting country, the authorities have disregarded the regulation under the 2012 Gazette. He said the arrangements had been misinterpreted, resulting in vehicles being detained despite the banking arrangements complying with international banking standards under UCP 600.

The affected vehicles include 2023, 2024 and 2025 models of Lexus, Toyota Land Cruiser, Toyota Prado and Honda, with estimated values ranging from Rs 10 million to Rs 75 million each. Arfin estimated that demurrage charges imposed by the Sri Lanka Ports Authority could exceed Rs 1 million to Rs 1.5 million per vehicle, depending on the circumstances. He also highlighted the container demurrage collected by shipping lines for vehicles imported in containers.

While HIPG has reportedly reduced its demurrage charges to a reasonable amount, Arfin said the Sri Lanka Ports Authority had not offered similar relief at Colombo Port. The prolonged detention has also exposed importers to storage, financing and vehicle depreciation costs.

The issue gained prominence in 2025 when Sri Lanka Customs withheld clearance of vehicles imported through cross-border LC arrangements, citing regulatory concerns. Although subsequent regulatory measures introduced provisions to release vehicles subject to specified conditions, many vehicles remain stranded.

In July this year, the Treasury reportedly rejected a proposed settlement to facilitate the release of more than 1,000 vehicles held at the two ports. The proposal included a plan by HIPG to cap demurrage charges at Rs 1.5 million per vehicle. The Parliamentary Committee on Public Finance subsequently gave the Treasury three weeks to resolve the matter.