Sri Lanka has tightened controls on imports linked to forced labour after coming under scrutiny in a US trade review, but officials warn that the new measures may provide only a temporary competitive advantage as other countries adopt similar safeguards.
The issue emerged during proceedings initiated by the Office of the US Trade Representative (USTR) under Section 301 of the Trade Act of 1974. The review covers 60 countries, including Sri Lanka, and examines controls designed to prevent goods produced using forced labour from entering domestic markets.
Sri Lanka initially fell into a 12.5% category because, although domestic laws addressed forced labour, the country lacked specific regulations and an enforcement mechanism targeting imports produced through such practices.
The Government responded by appointing a technical committee and submitting its case at a US public hearing on 9 July. Officials told Parliament’s Committee on Public Finance on 11 August that Sri Lanka’s submission was received positively.
Following the hearing, the Government introduced regulations aimed at preventing forced-labour products from entering Sri Lanka. Officials said US authorities accepted both the submission and regulatory measures, allowing Sri Lanka to move from the 12.5% category to the 10% treatment.
The change could help protect Sri Lanka’s access to the US market. Yet officials cautioned against viewing it as a permanent advantage.
Of the 60 countries covered by the US proceedings, 19 had received the 10% treatment, while others remained in the 12.5% category. Crucially for Sri Lankan exporters, most regional competitors were already in the 10% group.
That creates a fresh policy challenge. If forced-labour import controls become widespread among competing economies, Sri Lanka’s regulatory improvements will cease to distinguish it from its rivals.
The Cabinet has consequently instructed the same technical committee to develop a longer-term mechanism. Its mandate includes determining whether existing laws are adequate or whether amendments, new legislation or additional regulations are required.
Customs is expected to serve as the principal border enforcement agency. The proposed framework would also address a less visible risk: imported goods produced using forced labour entering Sri Lanka as inputs, undergoing value addition and subsequently being exported to the US.
This could be particularly significant for smaller businesses. Officials noted that many exporters supplying Western markets already conduct supply-chain verification. However, small and medium enterprises that depend heavily on third-party importers could face greater difficulty establishing the origin and labour conditions associated with imported inputs.
The Government’s response therefore goes beyond satisfying a US trade requirement. It is becoming a test of whether Sri Lanka can establish credible supply-chain controls without imposing disproportionate costs on smaller exporters.
The immediate outcome is favourable: Sri Lanka has moved into the 10% category. But maintaining that position will require enforcement, traceability and regulatory credibility.
The risk is that compliance becomes a box-ticking exercise while vulnerabilities remain deeper in supply chains. If that happens, the present tariff benefit could prove temporary—and Sri Lankan exporters may once again face tougher competition for access to the US market.
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