Tea is Sri Lanka's main export to Iran, the island's sixth largest trading partner with total two-way trade between the two being nearly a billion US dollars in 2009.
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Sri Lanka imports mainly crude oil from Iran.
"Iran agreed to study the inclusion of preferential tariff quota on an annual basis for our tea," said a note released at a news conference after the weekly Cabinet meeting.
The move stems from talks at the ninth Joint Commission for Economic Co-operation between Sri Lanka and Iran in September 2010 in Colombo.
"Iran has agreed that part of the quota could be used for packaging of Sri Lankan tea in Free Trade Zones in Iran by Sri Lankan companies or as joint ventures formed with Iranian and Sri Lankan companies," the statement said.
Sri Lanka has been lobbying for better access to Iran's tea market which prefers the island's low grown teas, which make up over half the national production.
Most of Sri Lanka's tea exports to Iran, which also grows tea, go in bulk form as im