By: Staff Writer
September 06, Colombo (LNW): Sri Lanka’s apparel industry is facing a quieter but potentially more damaging threat than tariffs themselves: American buyers are shortening their commitments, forcing manufacturers to operate with less visibility while carrying the same fixed production pressures.
The United States accounts for approximately 40 percent of Sri Lanka’s apparel exports, making changes in American purchasing behaviour particularly important to factories, fabric mills and thousands of workers connected to the industry.
JAAF Secretary General Yohan Lawrence said US buyers that once committed to six or eight months of orders are increasingly limiting commitments to around three months. The underlying reason is uncertainty surrounding US tariff classifications and the desire of brands to preserve flexibility.
On the surface, the change may not indicate that total apparel purchases will collapse. Buyers could ultimately purchase similar volumes. But the shortened commitment period transfers a significant portion of commercial risk from brands to manufacturers.
Sri Lankan factories and textile producers such as Teejay Lanka PLC and Hayleys Fabric PLC depend on forward visibility to purchase raw materials, arrange production schedules and manage capacity efficiently. When orders are confirmed only three months ahead, manufacturers have less certainty about what they will need to produce later.
That uncertainty can make bulk purchasing more difficult and undermine economies of scale.
The problem is particularly acute because Sri Lanka’s apparel manufacturers operate within an open-costing model. Lawrence said the cost per standard minute is generally around six to eight US cents, with pricing largely established by brands rather than freely negotiated by factories.
This leaves manufacturers with little space to create financial buffers when costs rise or orders become uncertain.
Capacity utilisation becomes crucial. Factories need sufficient production volumes to spread fixed costs across more units. But shorter commitments make long-term capacity planning increasingly difficult. Manufacturers may therefore accept lower margins simply to keep production lines operating.
This creates a dangerous cycle. Lower certainty encourages cautious production planning, while lower capacity utilisation raises unit costs. Higher unit costs then weaken Sri Lanka’s competitiveness against rival manufacturing countries.
Sri Lanka has gained some relief after negotiations with Washington. Following the Supreme Court ruling, the United States introduced a temporary 10 percent tariff under Section 122 and subsequently launched Section 301 investigations relating to forced-labour prevention measures. Negotiations eventually secured Sri Lanka’s placement in the lower 10 percent tariff tier.
That restored parity with competitors including Bangladesh, Cambodia and Pakistan. But Lawrence warned that the advantage remains provisional until Sri Lanka establishes a comprehensive bilateral trade framework with the United States.
The warning extends beyond Washington. Sri Lanka must also tackle domestic competitiveness issues, including commercial energy pricing, power wheeling regulations and trade facilitation.
The deeper concern is that tariff stability alone will not protect the apparel sector if buyers simultaneously reduce their commitments. Sri Lanka may retain market access while losing the production certainty needed to compete.
For an industry built on scale, speed and predictable orders, the shrinking order horizon could become the next major threat to Sri Lanka’s export engine.
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