• Proposed additional tariffs could range from 10–12.5%, biz chambers warn

Sri Lanka is currently engaged in discussions with the United States regarding newly proposed labour-related tariffs, according to the Ministry of Trade, Commerce, Food Security, and Cooperative Development.

The United States Trade Representative (USTR) has completed a Section 301 review covering 60 economies, including Sri Lanka, highlighting gaps in legal frameworks governing imports made wholly or partly with forced labour. The findings indicate that 54 economies, including Sri Lanka, currently lack adequate prohibitions in this area.

When contacted by The Sunday Morning, Ministry of Trade, Commerce, Food Security, and Cooperative Development Secretary K.A. Vimalenthirarajah said that no such tariff had been imposed yet and that it was not possible to predict when a final decision would be made.

“We are discussing not only this matter, but also Regional Trade Agreements. We are engaged with the US regarding this issue, as well as the non-reciprocal tariff concerns,” he said.

Meanwhile, the Ceylon Chamber of Commerce (CCC), in a statement, said that the development came at a time when Sri Lanka was continuing discussions with the US following the suspension of previously announced reciprocal tariffs and was seeking to secure a more favourable trading arrangement.

According to the chamber, the imposition of an additional tariff on Sri Lankan exports could undermine the competitiveness of key export sectors, particularly when compared with countries facing lower proposed rates of around 10%.

The statement noted: “At a time when Sri Lanka is working to accelerate export growth, attract investment, and create employment opportunities, any increase in trade barriers presents a significant challenge. At present, key goods exports such as apparel and tea are down by 7% and 6%, respectively, during the first four months of 2026.”

The CCC highlighted that Sri Lanka had built a strong reputation as a responsible sourcing destination, with many industries adhering to high labour, environmental, and governance standards. The chamber also pointed to progress made in strengthening regulatory frameworks and promoting ethical business practices.

“Proposed measures under consideration include additional tariffs in the range of 10–12.5%, with Sri Lanka potentially falling within the 12.5% category at the proposal stage,” the statement said.

Speaking further on the matter, National Chamber of Exporters of Sri Lanka Secretary General/CEO Shiham Marikar said that discussions on the matter had been taking place with the Department of Commerce since the announcement was first made by the US.

He explained that the proposed tariff was centred on compliance requirements relating to forced labour.

“When you look at Sri Lankan exporters, most of our exports to the US come from the apparel sector and many of these exporters are certified as ethical trading companies. Within Sri Lanka, there are organisations that can demonstrate compliance through internationally recognised certifications proving that there is no forced labour and that they operate with ethical trading practices and good governance,” he said.

“However, what the US is saying is that it is looking at the complete value chain, including the imported inputs used in the goods we export. They want to ensure that the factories supplying those inputs are also compliant.”

According to Marikar, monitoring the entire export production chain remains challenging, particularly because only a limited number of countries have established legislative or regulatory frameworks to ensure such compliance.

He noted that countries such as Canada and Mexico already had such frameworks in place, while the European Union was currently working towards introducing similar legislation.

Marikar warned that any additional tariff would have a negative impact on Sri Lanka, particularly given that the US remains the largest market for the country’s apparel exports.

“We are working closely with stakeholders to explore how we can negotiate with our trade partners in the US and demonstrate that we are moving towards introducing a framework or legislation to safeguard compliance relating to forced labour,” he said.