Sri Lanka caught in widening USA supply chain crackdown

• SL among 54 economies targeted under a sweeping trade investigation, identified to have failed to adequately prevent entry of goods produced through forced labour
• USTR has proposed an additional 12.5% duty on products from Sri Lanka
• Has invited written submissions until July 6 and will hold public hearings on July 7, before determining its final course of action

By Shabiya Ali Ahlam

Sri Lanka’s export sector could face a new challenge in the United States market after Washington proposed additional tariffs on imports from countries it says have failed to adequately prevent the entry of goods produced through forced labour.

This places the island nation among 54 economies targeted under a sweeping trade investigation.

The development has potential implications for Sri Lanka’s apparel industry, which has built much of its international reputation around ethical manufacturing practices and compliance standards. At present, it relies on the United States as its single largest export destination.

Accordingly, the Office of the United States Trade Representative (USTR) has proposed an additional 12.5 percent duty on products from Sri Lanka and dozens of other countries.

The proposed measures are subject to a public consultation process and have not yet been finalised.

The local exporters are already grappling with the weakening consumer demand in key markets, rising logistics costs and increasing trade policy uncertainty.

“The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. This creates a dynamic where the American workers are forced to compete globally on an unlevel playing field,” US Trade Representative Jamieson Greer said.

“We will no longer tolerate this disparity.  Some trading partners have taken initial steps to prevent the importation of forced labour goods, including through USMCA and commitments in Agreements on Reciprocal Trade.  However, each of our trading partners must do more to ensure that trade does not perversely encourage and entrench forced labour globally,” Greer added.

The investigation, initiated in March under Section 301 of the US Trade Act of 1974, examined whether the trading partners had introduced and enforced measures to prevent imports produced using forced labour. The USTR concluded that all 60 economies investigated had failed either to impose or effectively enforce such restrictions, making them subject to potential trade action.

Sri Lanka appears alongside several major manufacturing and export economies including China, India, Bangladesh, Vietnam, Thailand, Malaysia and South Korea in the list of countries facing proposed penalties.

The USTR has invited written submissions until July 6 and will hold public hearings on July 7, before determining its final course of action. 

It has also proposed a separate mechanism that would allow a specified volume of textile and apparel imports from certain economies to enter the US at a lower tariff rate.

The proposed measures form part of a broader US effort to strengthen labour-related trade enforcement and increase pressure on trading partners to tighten oversight of supply chains linked to forced labour practices.