LMDtv 5
From the time US President Donald Trump implemented tariff hikes last year to his sudden escalation of global import duties in February, Sri Lanka’s apparel exporters have been navigating an unpredictable policy environment.
To this end, the Chairman of the Joint Apparel Association Forum (JAAF) Felix Fernando believes that discussions between the two governments are crucial.
There will be more talks between Sri Lanka and the US, and maintaining a strong relationship will be the driving force.
“We need to sustain this momentum because there will be more geopolitical decisions in the time to come. Considering how important the US market is for Sri Lankan apparel, even small tariff changes will have a big impact,” he observed.
Speaking on a recent airing of LMDtv, Fernando said: “Sri Lanka has to be serious and focussed on this situation. While we agree with the government about adopting a ‘wait and see’ approach, we need to run simulations based on the possible rates that may eventuate – and determine how best we can survive and thrive.”
He noted that US apparel label owners neither bear the cost of higher duties nor pass them on to consumers; instead, they expect manufacturers to absorb them.
Fernando explained that “previously, we were able to say that as manufacturers we’d bear half the additional duties while the buyer would take care of the other half. However, after US courts ruled that Trump’s sweeping tariffs are illegal, buyers have requested refunds of the excess duties that customs in the United States has collected.”
Fernando asserted that there could be millions of dollars in refunds due to buyers, though we don’t know how long the process will take. “Nor do we know whether the buyers will share any refunds with manufacturers. If they do, it will be a huge relief for Sri Lankan manufacturers,” he added.
Nevertheless, despite the turbulence, Sri Lanka has received positive news from the UK, which has granted tariff free access for local garment exports. Fernando described this as one of the best things to happen to Sri Lanka.
“The timing isn’t ideal but we need to make sure that we understand the market much better. Currently, we’re not working with many UK brands even though the United Kingdom is one of the largest importers of our apparel,” he revealed.
There’s plenty of potential in the UK and Fernando e outlined several strategies that Sri Lanka can pursue: “Firstly, we must increase orders from existing UK customers; secondly and more importantly, there are several brands that don’t currently source from Sri Lanka, and we need to attract them through export development tours, exhibitions and meetings.”
He emphasised that it’s important that Sri Lanka doesn’t view the potential in the UK merely in terms of tariff related opportunities.
“We need to focus on speed to market and supply chain management, and make our supply chains shorter so that lead times are less. The UK has a very positive perception of Sri Lanka, and we should leverage that to the maximum and aim to minimise the damage caused by US tariffs – now and in the future,” he urged.
Sri Lanka depends too much on a few markets – about 85 percent of our exports are to the US and UK. Although the country has been called the ‘lingerie capital of the world’ and enjoys a strong reputation for undergarments, beachwear and sleepwear, some players continue to manufacture less value added garments.
The country must ensure that its apparel industry grows more in value added garments, as quality and value per garment matter more than quantities alone, he explained: “We must invest in automating certain aspects of production – and also upgrade worker skills so that we can be more competitive and reduce our costs.”
Fernando concluded that if Sri Lanka is to achieve its ambitious export target of US$ 36 billion by 2030, the nation must get its act together – now!
