In the latest development in the row over a consignment of organic fertilizer containing harmful bacteria shipped from China, the People’s Bank in Sri Lanka has been blacklisted by the Economic and Commercial Office of the Chinese Embassy in Colombo.

The move is attributed to the failure of People’s Bank to make the payment in compliance with the Letter of Credit and the contracts.

In a statement, the Chinese Embassy stressed the People’s Bank of Sri Lanka has recently witnessed vicious event of Letter of Credit default, causing huge losses to the Chinese enterprises in international trade with Sri Lanka. 

“The Office solemnly reminds all Chinese enterprises to strengthen risk control and avoid accepting L/C issued by People’s Bank of Sri Lanka in international trade with Sri Lanka, the embassy said further.

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.

However, in September, 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.

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). After the supplier raised doubts, NPQ Sri Lanka updated the report on October 11th and had used seven days to test, but it still did not indicate the test standards and methods, the company alleged.

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.

The Chinese firm urged 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) 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.

Meanwhile, the People’s Bank, in response to the Chinese Embassy’s move, said the payment for the organic fertilizer consignment shipped by Qingdao Seawin Biotech Group Co. Ltd. was halted due to an interim injunction issued by the court.

Action pertaining to the payments will accordingly be taken based on the future court decisions, the People’s Bank stated further.