Sri Lanka’s apparel sector has received a significant boost from the United Kingdom at a critical time, as the industry faces mounting pressure from a looming 30% US tariff.
With apparel being the island’s top export earner, the duty-free access granted by the UK under its new Developing Countries Trading Scheme (DCTS) offers much-needed relief.
This development provides a vital counterbalance to the potential negative impact of US trade actions, opening up a clearer path for the industry’s recovery and growth.
The UK announced on July 10 that Sri Lanka will enjoy duty-free access for apparel exports under its “Trade for Development” initiative.
The scheme introduces liberalized “rules of origin” starting in early 2026, allowing Sri Lankan manufacturers to source more inputs from a broader range of Asian and African countries while still qualifying for tariff-free exports to the UK.
This shift means that garments produced in Sri Lanka can now incorporate materials from more countries without losing duty-free status—an enormous advantage for a sector that depends heavily on imported fabrics and accessories.
The UK’s DCTS replaces the earlier GSP+ system post-Brexit and extends benefits beyond garments to a range of Sri Lankan exports, with over 99% of eligible products qualifying for zero tariffs.
British High Commission officials stressed that this move supports both trade and development. “This scheme is not just about boosting trade; it’s about supporting sustainable development,” said Mara Waters, Director of Trade at the British High Commission in Colombo. “For Sri Lanka, it’s about building economic resilience, creating jobs, and ensuring that the benefits of trade reach the entire community.”
Between July 2023 and May 2024, goods worth £571 million were exported from Sri Lanka to the UK, with £304 million benefiting directly from DCTS concessions—demonstrating the scheme’s immediate impact.
Yet, challenges remain. The Joint Apparel Association Forum (JAAF) has raised concerns that the current rules of origin under DCTS, though improved, still resemble the restrictive framework of GSP+, limiting full utilization of duty-free privileges.
JAAF advocates for “extended cumulation,” a mechanism that would allow more flexible sourcing of raw materials across multiple countries. Currently, only about 50% of Sri Lankan apparel exports qualify for zero tariffs. A shift in these rules, such as eliminating the “double transformation” requirement, could dramatically expand duty-free access.
Sri Lanka’s apparel sector, especially SMEs, also struggles with capital constraints and rising sustainability standards demanded by markets in the UK, EU, and US. These firms need support to modernize operations, invest in clean energy, and enhance supply chain transparency.
Nevertheless, the DCTS presents a timely opportunity. As Sri Lanka recovers from economic crisis, boosting apparel exports is vital. With strengths in ethical sourcing and design, the country is well-placed to meet shifting global demand—provided it can fully leverage schemes like the DCTS while navigating challenges posed by other markets like the US.
