Chinese Embassy blacklists People’s Bank over fertilizer LC

Bank claims temporary delay due to a court order

Chinese companies warned about PB LCs

by Shyam Nuwan Ganewatte

The Economic and Commercial Office of the Chinese Embassy in Colombo on Friday blacklisted the People’s Bank accusing the bank of not honouring a Letter of Credit.

The Ceylon Fertilizer Company had secured a court order to block the payment of $4.9 million to Qingdao Seawin Biotech over a shipment of organic fertilizer which was found to be contaminated. The order prevented the People’s Bank from making payments under an LC opened in favour of the Chinese company.

A spokesman for the Chinese Embassy said that the People’s Bank did not make payment for the fertilizer exported by China under a contract between the two parties.

He said that the Economic and Commercial Office of the embassy has warned all Chinese enterprises against accepting any LC from the People’s Bank.

Central Bank Governor Ajith Nivard Cabraal said that the payment under the Letter of Credit had been suspended over a court order.

He said that the suspension was a temporary measure and the payments would be made once the legal barriers are cleared.

A spokesman for the People’s Bank too said that they were not in a position to make the payment due to the court order preventing such payment.

The bank clarified in a statement that that it was bound by a court order regarding the transaction at issue and its position was conveyed to the Chinese Embassy.

It describe the issues as a “temporary delay” in processing and that as a responsible corporate citizen it was bound by the court direction. Payment would be promptly made once the legal barriers are cleared, it said.