Sri Lanka gazettes a forced labour import ban to avert US tariffs, but exporters demand clear guidelines to avoid disrupting vital supply chains and raising costs for the apparel sector.

In a rapid policy response to US pressure, Sri Lanka has prohibited imports of goods produced with forced labour, aiming to protect its crucial export market amid threats of punitive tariffs. The move highlights the island nation’s delicate balancing act in global trade.

US Tariff Threat Prompts Swift Action

On July 10, 2026, President Anura Kumara Dissanayake gazetted regulations banning the importation of any goods wholly or partially produced using forced labour. Importers must now provide certified documentation to Sri Lankan Customs proving compliance.

This decision directly addresses a June 2026 determination by the US Trade Representative (USTR) under Section 301 of the Trade Act of 1974. The USTR identified Sri Lanka among 60 economies failing to impose and enforce prohibitions on forced labour imports, proposing additional duties of up to 12.5 per cent on Sri Lankan exports to the US.

The US, Sri Lanka’s largest single export market absorbing around $3 billion annually – primarily apparel – views forced labour as an unfair competitive practice that distorts global markets. Washington’s strategy also counters China’s influence in supply chains, particularly concerns over Xinjiang.

By acting proactively, Sri Lanka has demonstrated commitment to international norms, potentially mitigating or avoiding the full tariff impact while supporting its ongoing economic recovery and IMF-backed reforms.

Exporters Call for Risk-Based Guidelines

While welcoming the ban’s intent, the Exporters Association of Sri Lanka (EASL) has urged the government to issue clear, operational guidelines without delay. Chairman Nalaka Ratnayake emphasised the need for a transparent, risk-based approach aligned with international best practices.

“Without a clearly defined and internationally aligned implementation framework, there is a risk of uncertainty, increased compliance costs, shipment delays, administrative burdens and disruption to legitimate trade,” the EASL stated.

The association recommends focusing enforcement on high-risk goods, supply chains, and jurisdictions rather than blanket requirements for all imports. It calls for stakeholder consultations with exporters, importers, chambers of commerce, and logistics providers, plus published guidelines on documentation, verification, and transition periods before full enforcement.

Ratnayake said that EASL fully supports ethical trade and eliminating forced labour. But, he stresses that practical implementation is essential to preserve Sri Lanka’s competitiveness. “It is vital that we protect our supply chains whilst also ensuring expeditious clearing of cargo at the ports of Colombo,” Ratnayake added.

Apparel Sector: Opportunities and Challenges

Sri Lanka’s apparel and textile industry, a cornerstone of the economy employing around 300,000 workers and generating about $5 billion in annual exports, stands at the forefront of these changes. The sector prides itself on strong domestic labour standards, with no widespread forced or child labour in formal manufacturing, as affirmed by officials and the ILO.

However, complex global supply chains pose risks. Raw materials and components imported from countries like China, India, or Bangladesh could inadvertently introduce forced labour concerns, Ratnayake said. He said this could affect finished goods destined for the US. Exporters must now implement robust due diligence, traceability, and certification processes, he said.

This could raise manufacturing costs through higher input prices, auditing, and legal compliance. Small and medium enterprises (SMEs) may face disproportionate burdens, potentially leading to short-term disruptions or job impacts if costs cannot be absorbed.

On the positive side, enhanced ethical standards could bolster Sri Lanka’s reputation as a responsible sourcing destination. Premium buyers in Western markets increasingly favour “clean” supply chains, potentially opening doors to higher-value contracts and greater investor confidence.

Broader Economic and Geopolitical Implications

Sri Lanka’s policy reflects the challenges of a small, export-oriented economy navigating major power dynamics. Compliance supports access to the US market and aligns with IMF expectations during debt restructuring. Yet, it must balance this with ties to China, a key creditor and investor.

The US approach forms part of a wider “friend-shoring” and de-risking strategy to build resilient, values-aligned supply chains. For Sri Lanka, success hinges on effective implementation, government support for capacity building – especially for SMEs – and transparent enforcement that minimizes trade friction.

Earlier engagements, including plans to strengthen customs screening and adopt ILO conventions like C190 on violence and harassment at work, signal proactive steps. Officials continue dialogues with the USTR to demonstrate robust measures.

Path Forward: Stakeholder Collaboration Essential

As enforcement details emerge, structured consultations will be critical. The Department of Customs plays a pivotal role in publishing practical guidelines and ensuring smooth port operations. A risk-based model, drawing from global examples like US CBP practices, could achieve labour goals without undue burden.

Long-term, the ban may accelerate Sri Lanka’s shift toward higher-value, transparent manufacturing. While short-term costs loom, alignment with global ethical standards positions the country favourably in an era of heightened scrutiny on supply chains, Ratnayake said, adding that the EASL looks forward to ongoing dialogue, underscoring that ethical trade and economic competitiveness can – and must – go hand in hand.