A Short Guide to Customs Risk

Category: Uncategorized

  • Rules of Origin (RoO) under the EU–UK TCA: 2025 Landscape

    HS2022 Update

    • In Nov 2024, the EU–UK Trade and Cooperation Agreement (TCA) was updated to align with the Harmonised System (HS) 2022 tariff schedule.
    • For traders, this means:
      • Product-specific rules of origin (PSRs) have been revised to reflect the new HS codes.
      • Goods that were previously classified under one heading may now fall under another, changing the applicable origin rules.
      • Any mismatch between classification, supplier declarations, and preference claims could result in invalid use of tariff preferences.

    Supplier Declarations & Long-Term Statements

    • Many UK/EU exporters rely on supplier declarations (especially for complex supply chains in automotive, chemicals, textiles).
    • The HS2022 update means existing long-term declarations may now be misaligned, and traders are being urged to:
      • Re-request updated supplier declarations.
      • Verify “originating” status against the new PSRs.
      • Audit their 2023–24 shipments to ensure backdated compliance in case of HMRC/EU audits.

    Common Risks & Pitfalls

    • Incorrect tariff classification: A shift in HS codes may cause exporters/importers to apply the wrong rule of origin.
    • Over-reliance on suppliers: Many SMEs accept supplier declarations at face value, without validating them against PSRs.
    • Mixed-origin consignments: Particularly risky in agri-food and textiles, where even small proportions of non-originating material can invalidate preference claims.
    • Audit exposure: Customs authorities on both sides are ramping up post-clearance checks, often years after import.

    Audit & Enforcement Climate

    • EU customs authorities are increasing post-clearance audits on TCA preference claims.
    • HMRC has signalled it will deny preferences retroactively if traders can’t evidence origin, potentially creating big duty reclaims.
    • Errors could cascade into supply chain disputes, with EU buyers demanding UK sellers absorb duty bills.

    Traders Concerns Raised:

    • “Do my long-term supplier declarations still stand after HS2022?”
    • “What happens if my EU customer gets audited and my RoO proof is rejected?”
    • “Can I retroactively amend preference claims for 2023–24 shipments?”

    Practical Steps

    • Mapping HS2022 changes: Reviewing products and ensuring classification aligns with updated RoO.
    • Reissuing supplier declarations: Many companies are proactively requesting new long-term origin statements from suppliers.
    • Internal audits: Checking whether past exports still qualify under TCA rules.
    • Customs representative engagement: Using customs representative to cross-check product-level origin eligibility.
    • Contract updates: Some exporters are adjusting terms of sale to clarify who bears the cost if preferences are denied later.

    Looking Ahead

    • Further TCA revisions are possible, as the EU and UK continue to review and refine origin rules sector by sector.
    • Cumulation opportunities (using EU + UK inputs together) remain underused, especially by SMEs who may be overpaying duty because they lack origin documentation.
    • The next 12 months will be critical for companies to ensure HS2022 alignment, as both EU and UK authorities will increasingly check compliance.

    Bottom line for traders:
    The HS2022 update is a silent disruptor. Even companies that were fully compliant under the old HS2017 rules may now be out of alignment without realising it. The key task in 2025 is to refresh supplier declarations, re-check PSRs, and prepare audit trails to defend tariff preference claims.

  • Why Rules of Origin Are the Hidden Risk in Trade Agreements

    By Catherine Truel

    When organisations think about customs compliance, they often focus on tariffs, duties, and documentation. Yet one of the most decisive, and frequently underestimated, elements of global trade is the rules of origin.

    These determine where a product is “from” in a legal and trade sense. In today’s world of globalised supply chains, that question is rarely straightforward.

    The Complexity Behind a Simple Question

    At first glance, rules of origin appear to be a technical detail. In practice, they decide:

    • Whether your product qualifies for reduced tariffs under a free trade agreement.
    • If your supply chain is aligned with trade regulations, or exposed to costly disruption.
    • How regulators interpret your compliance posture during audits or disputes.

    The complexity arises because global supply chains mean that a product may be designed in one country, assembled in another, and incorporate components from many more.

    Why This Matters to Business Leaders

    For CFOs, tax directors, and operations managers, the impact is direct:

    • Financial risk: Misapplication of rules of origin can lead to penalties, back duties, and loss of preferential treatment.
    • Operational risk: A single error in origin classification can delay shipments, disrupt customer commitments, or block market access.
    • Strategic risk: Trade agreements are negotiated at the highest levels, but their business value often rests on correct application of these rules.

    The Current Gap

    Despite their importance, rules of origin are often treated as a compliance afterthought. Many companies delegate responsibility to customs brokers or rely on incomplete guidance. This creates gaps between legal requirements and business practices, leaving organisations exposed.

    Towards Better Practice

    What is needed is a shift in how businesses approach rules of origin:

    • Integration into strategy: Treated not as paperwork but as a factor in sourcing, pricing, and trade negotiations.
    • Cross-functional knowledge: Finance, operations, and supply chain leaders should all understand the implications.
    • Independent expertise: In complex cases, external analysis ensures both regulatory soundness and practical feasibility.

    Conclusion

    Rules of origin are often invisible until something goes wrong. Yet for organisations that engage with them proactively, they can also be a source of competitive advantage enabling access to preferential trade routes, reducing costs, and building resilience.

    As global trade agreements continue to evolve, the ability to navigate rules of origin effectively is becoming not just a compliance issue, but a strategic necessity.

    About the Author
    Catherine Truel is the author of A Short Guide to Customs Risk and an independent expert on customs compliance. Her current work focuses on rules of origin and their impact on business strategy.