SL rubber: Exports decline further due to US tariffs: PRISL

Sri Lanka’s further decline in rubber exports can be attributed to the unwillingness of global US-exporting machinery manufacturing nations who are facing component-origin tariffs, and lowered demand among US consumers, the Plastics & Rubber Institute of Sri Lanka (PRISL) President K.A.C. Vidyaratne told The Daily Morning Business on Monday (1).

“There have been concerns raised by our export-segment members. One such exporter who exports rubber components to a Latin American nation, which exports finished machinery to the US, said that clients are increasingly discouraged from using components which have to be imported—which are then liable for separate component-origin tariffs,” Vidyaratne said.

Based on the rules of origin and tariff classification system used by the United States Customs and Border Protection, the US Government’s tariff amount is typically based on the origin of components, in addition to the final country of export.

Tariffs of this kind are paid by the importer, when the shipment clears customs. In August, Sri Lanka was levelled a reduced 20% reciprocal tariff rate, in addition to a 10% universal baseline tariff.

Vidyaratne further added that US manufacturers and consumers, as a response to the increase in prices of imported machinery containing rubber components, have sought to recondition their existing machinery, rather than duly purchasing new machinery.

“According to the client, machinery is usually replaced every 5 to 10 years. However, increasingly, manufacturers and consumers in the US are reconditioning their existing machinery instead of buying new machinery.”

Sri Lanka’s export earnings for rubber and rubber-finished goods decreased by 5.92% in the first ten months of this year, compared to the same time period last year, raking in a total of $ 793.7 million. Last week, EDB Chairperson Mangala Wijesinghe noted the uncharacteristic drop in earnings below $ 950 million at this time of the year during a government press conference.

“We see that the rubber (export) sector in the past had export earnings that ranged between $ 1,300 million and $ 1,400 million on a yearly basis, which had declined to $ 950 million in the last few years. More recently that number has further declined below $ 950 million,” Wijesinghe said.

The Export Development Board (EDB) attributed the decrease to a drop in exports of pneumatic and retreated rubber tyres and tubes, with a sharp -15.21% decline in the export of goods from the previous year.

Export earnings from rubber and rubber-finished products decreased by 5.4% in year-on-year terms to US $ 80.12 million in earnings in October.

Read more: here.