Sri Lanka's health ministry has decided to release a batch of milk powder made by Fonterra, after tests for dicyandiamide contamination came back negative.
Customs withheld several batches after testing there found some products contained the agricultural chemical.
Fonterra had disputed the accuracy of the testing and the ministry now says fresh tests have confirmed there was no DCD in samples sent to them by customs.
Customs had already withheld Fonterra products containing whey proteins after the warning that products exported to China could contain a bacteria that can cause botulism.
The ministry said these products will be kept from sale until tests prove they are not contaminated.
The announcement may be cold comfort for Fonterra: a two week ban on the sale and advertising of all its milk products was imposed by a court, following a complaint by a health sector trade union.
Fonterra said on Tuesday it's not clear yet whether the cleared product includes powder that Sri Lanka claimed to be contaminated with DCD, which was said had been found in earlier testing.
Fonterra has disputed the accuracy of those tests.
As well, Customs is still holding Fonterra products containing whey proteins until tests are done to prove they are not contaminated with botulism-causing bacteria.