Sri Lanka Reforms Labor Laws to Avoid US Tariffs

The Government of Sri Lanka is overhauling its customs and labor regulations to avoid proposed United States trade tariffs of up to 12.5% scheduled for next month. The United States Trade Representative initiated this action under Section 301 of the Trade Act of 1974, targeting 60 economies over forced labor concerns. Sri Lanka is among 45 economies facing the maximum proposed duty because the U.S. determined the country lacks sufficient domestic laws to block the entry of forced labor goods.

To secure a downgrade to a lower tariff tier, Sri Lankan officials are amending domestic laws and auditing supply chains. Proposed measures include improving customs screening and adopting the International Labour Organization's C190 convention to eliminate violence and harassment in the workplace. Deputy Minister of Finance and Planning Anil Jayantha Fernando confirmed that the government is conducting ongoing strategy discussions with the Office of the United States Trade Representative.

The measures are critical for the apparel industry, which employs 300,000 workers and generates approximately US$3 billion in shipments to the U.S., its largest export market. The Ceylon Chamber of Commerce warned that the 12.5% rate would erode the competitiveness of local manufacturers compared to regional rivals like Bangladesh and Pakistan, who face a lower 10% tariff band.