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AGREEMENT ON SAARC PREFERENTIAL TRADING ARRANGEMENT (SAPTA)

Preamble:

The Government of the People's Republic of Bangladesh, the Kingdom of Bhutan, the
Republic of India, the Republic of Maldives, the Kingdom of Nepal, the Islamic Republic o f
Pakistan and the Democratic Socialist Republic of Sri Lanka hereinafter referred to as
"Contracting States",

Motivated by the commitment to promote regional cooperation for the benefit of their
peoples, in a spirit of mutual accommodation, with full respect for the principles o f
sovereign equality, independence and territorial integrity of all States;

Aware that the expansion of trade could act as a powerful stimulus to the development
of their national economies, by expanding investment and production, thus providing
greater opportunities of employment and help securing higher living standards for their
population;

Convinced of the need to establish and promote regional preferential trading

arrangement for strengthening intraregional economic cooperation and the development
of national economies; Bearing in mind the urgent need to promote the intraregional
trade which presently constitutes a negligible share in the total volume of the South
Asian trade;

Recalling the direction given at the Fourth SAARC Summit meeting held in Islamabad in
December 1988 that specific areas be identified where economic cooperation might be
feasible immediately;

Guided by the declared commitment of the Heads of State or Government o f the

Member Countries at the Sixth SAARC Summit held in Colombo in December 1991 to the
liberalisation of trade in the region through a step by step approach in such a manner
that countries in the region share the benefits of trade expansion equitably;

Cognizant of the mandate given by the Sixth SAARC Summit in Colombo to formulate
and seek agreement on an institutional framework under which specific measures for
trade liberalisation among SAARC Member States could be furthered and to examine the
Sri Lankan proposal to establish the SAARC Preferential Trading Arrangement (SAPTA)
by 1997;

Recognising that a preferential trading arrangement is the first step towards higher
levels of trade and economic cooperation in the region,
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Have agreed as follows:

Article 1 - Definitions for the purpose of this Agreement

(1) "Least Developed Country" means a country designated as such by the United
Nations.

(2) "Contracting State" means any Member State of the South Asian Association for
Regional Cooperation (SAARC) which has entered into this Agreement.

(3) "Serious injury" means significant damage to domestic producers, of like or similar
products resulting from a substantial increase of preferential imports in situations which
cause substantial losses in terms of earnings, production or employment unsustainable in
the short term. The examination of the impact on the domestic industry concerned shall
also include an evaluation of other relevant economic factors and indices having a
bearing on the state of the domestic industry of that product.

(4) "Threat of serious injury" means a situation in which a substantial increase o f

preferential imports is of a nature to cause "serious injury" to domestic producers, and
that such injury, although not yet existing, is clearly imminent. A determination of threat
of serious injury shall be based on facts and not on mere allegation, conjecture, or
remote or hypothetical possibility.

(5) "Critical circumstances" means the emergence of an exceptional situation where

massive preferential imports are causing or threatening to cause "serious injury" difficult
to repair and which calls for immediate action.

(6) "Sectoral basis" means agreements amongst Contracting States regarding the
removal or reduction of tariff, nontariff and paratariff barriers as well as other trade
promotion or cooperative measures for specified products or groups of products closely
related in enduse or in production.

(7) "Direct trade measures" means measures conducive to promoting mutual trade o f
Contracting States such as long and mediumterm contracts containing import and supply
commitments in respect of specific products, buyback arrangements, state trading
operations, and government and public procurement.

(8) "Tariffs" means customs duties included in the national tariff schedules of the
Contracting States.

(9) "Paratariffs" means border charges and fees, other than "tariffs", on foreign trade
transactions of a tarifflike effect which are levied solely on imports, but not those
indirect taxes and charges, which are levied in the same manner on like domestic
products. Import charges corresponding to specific services rendered are not considered
as paratariff measures.

(10) " Nontariffs" means any measure, regulation, or practice, other than "tariffs" and
" paratariffs", the effect of which is to restrict imports, or to significantly distort trade.

(11) "Products" means all products including manufactures and commodities in their
raw, semiprocessed and processed forms.
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Article 2 - Establishment and Aims

1. By the present Agreement, the Contracting States establish the SAARC Preferential
Trading Arrangement (SAPTA) to promote and sustain mutual trade and the economic
cooperation among the Contracting States, through exchanging concessions in
accordance with this Agreement.

2. SAPTA will be governed by the provisions of this Agreement and also by the rules,
regulations, decisions, understandings and protocols to be agreed upon within its
framework by the Contracting States.
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Article 3 - Principles

SAPTA shall be governed in accordance with the following principles

(a) SAPTA shall be based and applied on the principles of overall reciprocity and
mutuality of advantages in such a way as to benefit equitably all Contracting States,
taking into account their respective levels of economic and industrial development, the
pattern of their external trade, trade and tariff policies and systems;

(b) SAPTA shall be negotiated step by step, improved and extended in successive
stages with periodic reviews;

(c) The special needs of the Least Developed Contracting States shall be clearly
recognised and concrete preferential measures in their favour should be agreed upon;

(d) SAPTA shall include all products, manufactures and commodities in their raw,
semiprocessed and processed forms.
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Article 4 - Components

SAPTA may, interalia, consist of arrangements relating to:

(a) tariffs;
(b) paratariffs;
(c) nontariff measures;
(d) direct trade measures.

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Article 5 - Negotiations

1. The Contracting States may conduct their negotiations for trade liberalisation in
accordance with any or a combination of the following approaches and procedures:
(a) Product by product basis;
(b) Across the board tariff reductions;
(c) Sectoral basis;
(d) Direct trade measures.

2. Contracting States agreed to negotiate tariff preferences initially on a

productbyproduct basis.

3. The Contracting States shall enter into negotiations from time to time with a view t o
further expanding SAPTA and the fuller attainment of its aims.
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Article 6 - Additional Measures

1. Contracting States agree to consider, in addition to the measures set out in Article 4,
the adoption of trade facilitation and other measures to support and complement SAPTA
to mutual benefit.

2. Special consideration shall be given by Contracting States to requests from Least

Developed Contracting States for technical assistance and cooperation arrangements
designed to assist them in expanding their trade with other Contracting States and in
taking advantage of the potential benefits of SAPTA. The possible areas for such
technical assistance and cooperation are listed in Annex I.

Article 7 - Schedules of Concessions

The tariff, paratariff and nontariff concessions negotiated and exchanged amongst
Contracting States shall be incorporated in the National Schedules of Concessions. The
initial concessions agreed to by the Contracting States are attached as Annex II.

Article 8 - Extension of Negotiated Concessions

The concessions agreed to under SAPTA, except those made exclusively to the Least
Developed Contracting States in pursuance of Article 10 of this Agreement, shall be
extended unconditionally to all Contracting States.

Article 9 - Committee of Participants

A Committee of Participants, hereinafter referred to as the Committee, consisting o f

representatives of Contracting States, is hereby established. The Committee shall meet
at least once a year to review the progress made in the implementation of this
Agreement and to ensure that benefits of trade expansion emanating from this
Agreement accrue to all Contracting States equitably. The Committee shall also accord
adequate opportunities for consultation on representations made by any Contracting
State with respect to any matter affecting the implementation of the Agreement. The
Committee shall adopt appropriate measures for settling such representations. The
Committee shall determine its own rules of procedures.
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Article 10 - Special Treatment for the Least Developed Contracting States

1. In addition to other provisions of this Agreement, all Contracting States shall provide,
wherever possible, special and more favourable treatment exclusively to the Least
Developed Contracting States as set out in the following subparagraphs:

(a) Duty-free access, exclusive tariff preferences or deeper tariff preferences for the
export products,
(b) The removal of nontariff barriers,
(c) The removal, where appropriate, of paratariff barriers,
(d) The negotiations of longterm contracts with a view to assisting Least Developed
Contracting States to achieve reasonable levels of sustainable exports of their products,
(e) Special consideration of exports from Least Developed Contracting States in the
application of safeguard measures,
(f) Greater flexibility in the introduction and continuance of quantitative or other
restrictions provisionally and without discrimination in critical circumstances by the Least
Developed Contracting States on imports from other Contracting States.

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Article 11 - Nonapplication

Notwithstanding the measures as set out in Articles 4 and 6, the provisions of this
Agreement shall not apply in relation to preferences already granted or to be granted by
any Contracting State to other Contracting States outside the framework of this
Agreement, and to third countries through bilateral, plurilateral and multilateral trade
agreements, and similar arrangements. The Contracting States shall also not be obliged
to grant preferences in SAPTA which impair the concession extended under those
agreements.

Article 12 - Communication

Transport and Transit Contracting States agree to undertake appropriate steps and
measures for developing and improving communication system, transport infrastructure
and transit facilities for accelerating the growth of trade within the region.
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Article 13 - Balance of Payments Measures:

1. Notwithstanding the provisions of this Agreement, any Contracting State facing

serious economic problems including balance of payments difficulties may suspend
provisionally the concessions as to the quantity and value of merchandise permitted t o
be imported under the Agreement. When such action has taken place, the Contracting
State which initiates such action, shall simultaneously notify the other Contracting
States and the Committee.
2. Any Contracting State which takes action according to paragraph 1 of this Article
shall afford, upon request from any other Contracting State, adequate opportunities for
consultations with a view to preserving the stability of the concessions negotiated under
the SAPTA. If no satisfactory adjustment is effected between the Contracting States
concerned within 90 days of such notification, the matter may be referred to the
Committee for review.
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Article 14 - Safeguard Measures

If any product, which is a subject of a concession with respect to a preference under this
Agreement, is imported into the territory of a Contracting State in such a manner or in
such quantities as to cause or threaten to cause, serious injury in the importing
Contracting State, the importing Contracting State concerned may, with prior
consultations, except in critical circumstances, suspend provisionally without
discrimination, the concession accorded under the Agreement. When such action has
taken place the Contracting State which initiates such action shall simultaneously notify
the other Contracting State(s) concerned and the Committee shall enter into
consultations with the concerned Contracting State and endeavour to reach mutually
acceptable agreement to remedy the situation.
In the event of the failure of the Contracting States to resolve the issue within 90 days
of the receipt of original notification, the Committee of Participants shall meet within 3 0
days to review the situation and try to settle the issue amicably. Should the
consultations in the Committee of Participants fail to resolve the issue within 60 days,
the parties affected by such action shall have the right to withdraw equivalent
concession(s) or other obligation(s) which the Committee does not disapprove of.
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Article 15 - Maintenance of the Value of Concessions

Any of the concessions agreed upon under this Agreement shall not be diminished or
nullified, by the application of any measures restricting trade by the Contracting States
except under the provisions as spelt out in other Articles of this Agreement.
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Article 16 - Rules of Origin

Products contained in the National Schedules of Concessions annexed to this Agreement

shall be eligible for preferential treatment if they satisfy the rules of origin, including
special rules of origin, in respect of the Least Developed Contracting States, which are
set out in Annex III.
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Article 17 - Modification and Withdrawal of Concessions

1. Any Contracting State may, after a period of three years from the day the concession
was extended, notify the Committee of its intention to modify or withdraw any
concession included in its appropriate schedule.

2. The Contracting State intending to withdraw or modify a concession shall enter into
consultation and/or negotiations, with a view to reaching agreement on any necessary
and appropriate compensation, with Contracting States with which such concession was
initially negotiated and with any other Contracting States that have a principal or
substantial supplying interest as may be determined by the Committee.

3. Should no agreement be reached between the Contracting States concerned within

six months of the receipt of notification and should the notifying Contracting State
proceed with its modification or withdrawal of such concessions, the affected
Contracting States as determined by the Committee may withdraw or modify equivalent
concessions in their appropriate schedules. Any such modification or withdrawal shall be
notified to the Committee.
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Article 18 - Withholding or Withdrawal of Concessions

A Contracting State shall at any time be free to withhold or to withdraw in whole or in

part any item in its schedule of concessions in respect of which it determines that it was
initially negotiated with a State which has ceased to be a Contracting State in this
Agreement. A Contracting State taking such action shall notify the Committee, and upon
request, consult with Contracting States that have a substantial interest in the product
concerned.
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Article 19 Consultations:

1. Each Contracting State shall accord sympathetic consideration to and shall afford
adequate opportunity for consultations regarding such representations as may be made
by another Contracting State with respect to any matter affecting the operation of this
Agreement.

2. The Committee may, at the request of a Contracting State, consult with any
Contracting State in respect of any matter for which it has not been possible to find a
satisfactory solution through such consultation under paragraph 1 above.
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Article 20 - Settlement of Disputes

Any dispute that may arise among the Contracting States regarding the interpretation
and application of the provisions of this Agreement or any instrument adopted within its
framework shall be amicably settled by agreement between the parties concerned. In the
event of failure to settle a dispute, it may be referred to the Committee by a party t o
the dispute. The Committee shall review the matter and make a recommendation
thereon within 120 days from the date on which the dispute was submitted to it. The
Committee shall adopt appropriate rules for this purpose.
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Article 21 - Withdrawal from SAPTA:

1. Any Contracting State may withdraw from this Agreement at any time after its entry
into force. Such withdrawal shall be effective six months from the day on which written
notice thereof is received by the SAARC Secretariat, the depositary of this Agreement.
That Contracting State shall simultaneously inform the Committee of the action it has
taken.

2. The rights and obligations of a Contracting State which has withdrawn from this
Agreement shall cease to apply as of that effective date.

3. Following the withdrawal by any Contracting State, the Committee shall meet within
30 days to consider action subsequent to withdrawal.
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Article 22 - Entry into Force

This Agreement shall enter into force on the thirtieth day after the notification issued by
the SAARC Secretariat regarding completion of the formalities by all Contracting States.
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Article 23 - Reservations

This Agreement may not be signed with reservations nor shall reservations be admitted
at the time of notification to the SAARC Secretariat of the completion of formalities.
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Article 24 - Amendments

This Agreement may be modified through amendments to this Agreement. All

amendments shall become effective upon acceptance by all Contracting States.
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Article 25 - Depositary

This Agreement shall be deposited with the Secretary General of SAARC who shall
promptly furnish a certified copy thereof to each Contracting State.
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IN WITNESS WHEREOF the undersigned being duly authorized thereto by their respective
Governments have signed this Agreement on the SAARC Preferential Trading
Arrangement.
Done at DHAKA this ELEVENTH day of APRIL One Thousand Nine Hundred Ninety Three
in eight originals in the English language.

A.S.M. MOSTAFIZUR RAHMAN, Minister of Foreign Affairs Minister of Foreign Affairs

People's Republic of Bangladesh

DAWA TSERING, Minister of Foreign Affairs, Kingdom of Bhutan

DINESH SINGH, Minister of External Affairs, Republic of India

FATHULLA JAMEEL, Minister of Foreign Affairs, Republic of Maldives

MAHESH ACHARYA, State Minister of Finance, His Majesty's Government of Nepal

MOHAMMAD SIDDIQUE KHAN KANJU, Minister of State f or Foreign Affairs, Islamic

Republic of Pakistan

HAROLD HERAT, Minister of Foreign Affairs, Democratic Socialist Republic of Sri Lanka
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Annex I
ADDITIONAL MEASURES IN FAVOUR OF LEAST DEVELOPED CONTRACTING STATES

(a) The identification, preparation and establishment of industrial and agricultural

projects in the territories of Least Developed Contracting States which could provide the
production base for the expansion of exports of Least Developed Contracting States t o
other Contracting States, possibly linked to cooperative financing and buyback
arrangements;

(b) the setting up of manufacturing and other facilities in Least Developed Contracting
States to meet intra-regional demand under cooperative arrangements;

(c) the formulation of export promotion policies and the establishment of training
facilities in the field of trade to assist Least Developed Contracting States in expanding
their exports and in maximising their benefits from SAPTA;

(d) the provision of support to export marketing of products of Least Developed

Contracting States by enabling these countries to share existing facilities (for example,
with respect to export credit insurance, access to market information) and by
institutional and other positive measures to facilitate imports from Least Developed
Contracting States into their own markets;

(e) bringing together of enterprises in other Contracting States with project sponsors in
the Least Developed Contracting States (both public and private) with a view t o
promoting joint ventures in projects designed to lead to the expansion of trade;

(f) the provision of special facilities and rates in respect to shipping.

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Annex I I
National Schedules of Concessions (circulated separately)
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Annex III
RULES OF ORIGIN

RULE 1: Originating products - Products covered by preferential trading arrangements

within the framework of the SAPTA imported into the territory of a Contracting State
from another Contracting State which are consigned directly within the meaning of Rule
5 hereof, shall be eligible for preferential concessions if they conform to the origin
requirement under any one of the following conditions:

(a) Products wholly produced or obtained in the exporting Contracting State as defined
in Rule 2; or

(b) Products not wholly produced or obtained in the exporting Contracting State,
provided that the said products are eligible under Rule 3 or Rule 4.

RULE 2: Wholly produced or obtained - Within the meaning of Rule 1 (a) the following
shall be considered as wholly produced or obtained in the exporting Contracting State:

(a) raw or mineral products extracted from its soil, its water or its seabeds:1

(b) agricultural products harvested there;2

(c) animals born and raised there;

(d) products obtained from animals referred to in paragraph (c) above;

(e) products obtained by hunting or fishing conducted there;

(f) products of sea fishing and other marine products taken from the high seas by its
vessels; 3 / 4

(g) products processed and/or made on boards its factory ships 4/5 exclusively from
products referred to in paragraph (f) above;

(h) used articles collected there, fit only for the recovery of raw materials;

(i) waste and scrap resulting from manufacturing operations conducted there;

(j) goods produced there exclusively from the products referred to in paragraph (a) t o
(i) above.
RULE 3 : Not wholly produced or obtained

(a) Within the meaning of Rule 1(b), products worked on or processed as a result o f
which the total value of the materials, parts or produce originating from nonContracting
States or of undetermined origin used does not exceed 50 per cent of the f.o.b. value o f
the products produced or obtained and the final process of manufacture is performed
within the territory of the exporting Contracting State shall be eligible for preferential
concessions subject to the provisions of Rule 3(c) and Rule 4 .

(b) Sectoral agreements 6

(c) The value of the nonoriginating materials, parts or produce shall be:

(i) The c.i.f. value at the time of importation of materials parts or produce where this
can be proven: or

(ii) The earliest ascertainable price paid for the materials, prices or produce o f
undetermined origin in the territory of the Contracting State where the working or
processing takes place.

RULE 4: Cumulative rules of origin - Products which comply with origin requirements
provided for in Rule 1 and which are used by a Contracting State as input for a finished
product eligible for preferential treatment by another Contracting State shall be
considered as a product originating in the territory of the Contracting State where
working or processing of the finished product has taken place provided that the
aggregate content originating in the territory of the Contracting State is not less than
60 percent of its f.o.b. value7.

RULE 5 : Direct consignment - The following shall be considered as directly consigned

from the exporting Contracting State to the importing Contracting State:

(a) if the products are transported without passing through the territory of any non-
Contracting State:

(b) the products whose transport involves transit through one or more intermediate
nonContracting States with or without transhipment or temporary storage in such
countries, provided that:

(i) the transit entry is justified for geographical reason or by considerations related
exclusively to transport requirements;

(ii) the products have not entered into trade or consumption there; and

(iii) the products have not undergone any operation there other than unloading and
reloading or any operation required to keep them in good condition.
RULE 6: Treatment of packing - When determining the origin of products, packing should
be considered as forming a whole with the product it contains. However, packing may be
treated separately if the national legislation so required.

RULE 7: Certificate of Origin - Products eligible for preferential concessions shall be

supported by a Certificate of Origin8 issued by an authority designated by the
government of the exporting Contracting State and notified to the other Contracting
States in accordance with the Certification Procedures appearing on pages 15 and 16 o f
this Annex.

RULE 8:

(a) In conformity with Article 15 of the Agreement on SAPTA and national legislations,
any Contracting State may prohibit importation of products containing any inputs
originating from States with which it does not have economic and commercial relations.

(b) Contracting States will do their best to cooperate in order to specify origin of inputs
in the Certificate of Origin.

RULE 9: Review - These Rules may be reviewed as and when necessary upon request o f
one-third of the Contracting States and may be open to such modifications as may be
agreed upon.

RULE 10: Special criteria percentage- Products originating in Least Developed

Contracting States can be allowed a favourable 10 percentage points applied to the
percentage established in Rules 3 and 4. Thus, for Rule 3, the percentage would not
exceed 60 per cent, and for Rule 4, the percentage would not be less than 50 per cent.
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1 Include mineral fuels, lubricants and related materials as well as mineral of metal ores.

2 Include forestry products.

3 "Vessels" shall refer to fishing vessels engaged in commercial fishing, registered in a

Contracting State's country and operated by a citizen or citizens or governments o f
Contracting State or partnership, corporation or association, duly registered in such
Contracting State's country, at cost 60 per cent of equity of which is owned by a citizen
or citizens and/or government of such Contracting State or 75 percent by citizens
and/or governments of the Contracting States. However, the products taken from
vessels engaged in commercial fishing under bilateral agreements which provide for
chartering/leasing of such vessels and/or sharing of catch between Contracting States
will also be eligible for preferential concessions.

4 In respect of vessels or factory ships operated by government agencies the

requirement of flying the flag of a Contracting State does not apply.
5 For the purpose of this Agreement, the term "factory ship" means any vessels, as
defined, used for processing and/or making on board products exclusively from those
products referred to in paragraph (f) above.

6 In respect o f products traded within the framework of sectoral agreements negotiated

under SAPTA, provision may need to be made for special criteria to apply. Consideration
may be given to these criteria as and when the sectoral agreements are negotiated.

7 "Partial" cumulation as implied by Rule 4 above means that only products which have
acquired originating status in the territory of one Contracting State may be taken into
account when used as inputs for a finished product eligible for preferential treatment in
the territory of another Contracting State.

8 A standard Certificate of Origin to be used by all Contracting States is annexed and

approved by the Contracting States.
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CERTIFICATE OF ORIGIN
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ADDENDUM

Amendment to SAPTA Rules of Origin

The SAARC Council of Ministers at its Twenty-first Session held in Nuwara Eliya, Sri
Lanka, on 18-19 March 1999, approved the amendments to the Rules 3(a), 4 and 1 0
relating to the Rules of Origin (Annex-II) of the SAARC Preferential Trading Arrangement
(SAPTA) with immediate effect.

The new amended rules now read as follows:

Rule 3(a): Not wholly produced or obtained –
Within the meaning of Rule 1(b), products worked on or processed as a result of which
the total value of the materials, parts or produce originating from non-Contracting
States or of undetermined origin used does not exceed 60 per cent of the f.o.b. value o f
the products produced or obtained and the final process of manufacture is performed
within the territory of the exporting Contracting State shall be eligible for preferential
concessions subject to the provisions of Rule 3(c) and Rule 4.
Rule 4: Cumulative rules of origin –

Products which comply with origin requirements provided for in Rule 1 and which are
used by a Contracting State as input for a finished product eligible for preferential
treatment by another Contracting State shall be considered as a product originating in
the territory of the Contracting State where working or processing of the finished
product has taken place provided that the aggregate content originating in the territory
of the Contracting State is not less than 50 percent of its f.o.b. value.
Rule 10: Special criteria percentage –
Products originating in Least Developed Contracting States can be allowed a favourable
10 percentage points applied to the percentage established in Rules 3 and 4. Thus, for
Rule 3, the percentage would not exceed 70 per cent, and for Rule 4, the percentage
would not be less than 40 per cent.