New EU laws after 2027 set to pose fresh hurdles for Sri Lanka’s exports

Deforestation regulation EU will ban goods grown or  produced on land recently cleared of forest; exporters must provide  geo-location data and documentation
 

​EU authorities can investigate supply chains on  suspicion of forced labour; companies must present credible evidence of  compliance
 

Sri Lanka’s strong labour laws offer an advantage, but  exporters must build human-rights due-diligence systems and monitor  high-risk suppliers 
 

Sri Lanka remains attractive in textiles, apparel,  rubber and agricultural goods benefiting from GSP+ low tariffs, and has  growing potential in IT and business services despite no GSP+ cover
 

Many of these don’t apply to Sri Lanka and are not so  important, but at least two of them do. It is important to take this  into account. It’s still a while. It’s not so long until this comes  into force. What the EU deforestation regulation actually demands is  that companies can only place goods on the EU market if they have not  been the cause of deforestation
 

Companies are expected to show credible evidence that no  forced labour is involved. What’s important about this law is that it  applies to all sectors and all countries. There are no exceptions. Anyone  importing into the EU or selling goods inside the EU is in the scope of  this law
 

EU imports from Sri Lanka amounted to 2.6 billion Euros in  2023. Sri Lanka is now under watch by the European Union for the  extension of the GSP+ under the revised criterion to be effective after  2027

By Kelum Bandara 

In the wake of Sri Lanka facing headwinds in its export  growth because of U.S. tariffs and GSP+, it is now poised to encounter  further challenges to overcome in accessing the European Union market  because of new laws that will come into effect after 2027, according to a  German expert.   

In a virtual address to the Sri Lankan stakeholders from  Berlin last week, Markus Loning, an expert on human rights and  responsible business, said one of them is the EU deforestation  regulation, which is relevant to the import of the items - wood, cocoa,  coffee, palm oil, leather and beef, soy and rubber.   

“Many of these don’t apply to Sri Lanka and are not so  important, but at least two of them do. It is important to take this  into account. It’s still a while. It’s not so long until this comes  into force. What the EU deforestation regulation actually demands is  that companies can only place goods on the EU market if they have not  been the cause of deforestation,” he said.   

Elaborating on the reason for the enforcement of such a  regulation, he said the European Union does not want to incentivise  further deforestation in any way.   

“We want to refrain from buying products grown on plots of  land where trees have been cut recently. They (European Union) are  taking a baseline, which is a couple of years back. Then, they are  looking at what is the plot of land, where this material comes from.  That is why you will need to collect geo-location data and documents.  They will ask whether this plot of land has been deforested recently.  So any product that is linked to forest destruction will not be able to  enter the European single market,” he said.

He said the next would be theEU forced labour  regulation. Once this law comes into effect, the European Union  authorities will investigate into supply chains if there is a suspicion  of forced labour, but the burden of proof is different from the  deforestation regulation.   

The burden of proof is with the authorities in this case.  The authorities must have suspicion and evidence. They will then go for  an investigation, and the supplier will be able to demonstrate that this  is true or not,” he said.   
He said that it should be ensured that the goods imported are not made with the help of forced labour.   

“Companies are expected to show credible evidence that no  forced labour is involved. What’s important about this law is that it  applies to all sectors and all countries. There are no exceptions. Anyone  importing into the EU or selling goods inside the EU is in the scope of  this law. This is something that has been heavily discussed back and  forth, but at the end of the day, there was quite a strong consensus  here that this is something that the EU is going to stick to,” he said     

However, he said that Sri Lanka has very good labour laws in place and the standards are strong.   
Key questions will target high-risk supply chains,  including Sri Lankan factory suppliers. Companies must set up a  human-rights due-diligence system to show their own operations meet  legal standards—health, safety, wages and working conditions—and that  they monitor high-risk suppliers. Relevant certificates support and  document these efforts, according to him.   

There’s a clear business opportunity for Sri Lankan  companies as an alternative production base—especially in textiles and  apparel, rubber-based and agricultural goods, which benefit from GSP+  low tariffs. In addition, IT and business services have strong potential  to grow in the EU market, even though they are not covered by GSP+, as  this applies to all business with Europe, he said.   

EU imports from Sri Lanka amounted to 2.6 billion Euros in  2023. Sri Lanka is now under watch by the European Union for the  extension of the GSP+ under the revised criterion to be effective after  2027.