SL exports still costly into the UK
Despite zero tariffs into the UK for Sri Lankan apparel products, Sri Lanka still stands out as the most expensive destination on the world map for manufacturing garments.
Under the current scheme countries like Bangladesh and Vietnam have an advantage over Sri Lanka, Joint Apparel Association Forum (JAAF) spokesman Yohan Lawrence told The Sunday Times Business.
He noted that what this does is that it allows Sri Lanka to be more competitive alongside other markets.
The UK announced the Liberalised Rules of Origin under the Developing Countries Trading Scheme (DCTS) which expected to come into effect in early 2026. Initially everyone including JAAF and the Ceylon Chamber of Commerce welcomed the move which helps tremendously since it is more expensive to ship to the US with the new 20 per cent tariff.
The UK reforms will allow Sri Lankan manufacturers to source up to 100 per cent of inputs for garments from any country worldwide while continuing to enjoy tariff-free access to the UK market.
This represents a significant upgrade to existing trade arrangements, reducing restrictions on processing and aligning Sri Lanka’s apparel sector with the same rules available countries enjoying “Comprehensive Preferences” under the DCTS.
Under the current rules Sri Lanka can source raw materials only from particular countries in the SAARC region.
The removal of the tariffs solves another problem that Sri Lanka was facing since it was disadvantaged in terms of pricing of garments into the UK. This new scheme will help Sri Lanka to also grow at a time when the US is making things difficult in terms of exports, Mr. Lawrence said.
However the key concern is that Sri Lanka will still remain one of the more, higher priced garments into the UK as a result of the high cost of production and operations within Sri Lanka.
Sri Lankan exporters will be charged higher income tax rates compared to other countries where concessions are offered to their exporters, Mr. Lawrence said. These concerns weigh heavily on marketing garments and remaining competitive. In this respect Sri Lanka is not the cheapest place to manufacture garments, he noted.
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