Written by Heidi Toms, Operations Manager, at ChamberCustoms
Free Trade Agreements are becoming an increasingly important part of the UK’s trade growth story – but for businesses, the real value is not in the agreement itself. It is in whether they can use that agreement correctly to reduce costs, improve competitiveness and support international growth.
For businesses that import, export or operate across international supply chains, FTAs can offer clear commercial advantages: lower duties, improved market access, stronger supplier relationships and more competitive pricing.
Recent developments, including the UK-India Free Trade Agreement and the newly announced UK-GCC agreement, show that the FTA landscape is continuing to evolve. However, the existence of a Free Trade Agreement does not automatically reduce costs. Businesses only benefit where they understand the agreement, apply the correct rules and hold the evidence needed to support a preferential duty claim.
The commercial opportunity is significant
The UK-India Free Trade Agreement is expected to increase UK GDP by £4.8 billion per year in the long run. It is also expected to increase bilateral trade between the UK and India by nearly 39%, equivalent to £25.5 billion a year when compared with projected 2040 trade levels in the absence of an agreement. UK exports to India are also expected to increase by nearly 60% in the long run, equivalent to an additional £15.7 billion.
The UK-GCC agreement is another significant development. Once fully implemented, the deal is expected to remove an estimated £580 million in duties a year, based on current UK exports to the GCC, with £360 million of these estimated duties removed on day one of the agreement entering into force. The UK Government has also stated that tariffs will be removed on around 93% of UK exports to the GCC, based on existing trade.
These figures demonstrate the scale of the opportunity. For individual businesses, they also point to a wider direction of travel: preferential trade agreements are becoming a more important factor in pricing, sourcing and market-entry decisions.
But these benefits are only realised where businesses actively use the agreement and apply the correct customs and origin requirements.
Why businesses still miss out
Many businesses are aware that Free Trade Agreements exist, but fewer have the internal processes needed to use them consistently.
To access preferential rates, businesses need to classify their goods correctly, confirm that a trade agreement applies, check whether the specific goods are covered, apply the relevant Rules of Origin, hold valid proof of origin and declare preference correctly on the customs entry.
If any of these steps are missed, the goods may default to standard duty rates – even where an FTA exists.
Rules of Origin are often the biggest barrier. These rules determine whether goods qualify for preferential tariff treatment under a specific trade agreement. To claim reduced or zero duty, businesses must be able to demonstrate that the goods originate in the UK or partner country and meet the relevant processing, value or product-specific requirements.
There is also risk in assuming preference applies without checking the evidence. Incorrectly claiming preferential origin can result in underpaid duty, post-import adjustments, HMRC queries and additional administration.
For example, a business may assume that reduced duty applies because goods are purchased from a partner country. However, if those goods contain materials from outside that country, or have not undergone sufficient processing, they may not qualify for preference. In this situation, claiming preference without the correct evidence could create compliance risk rather than a saving.
From trade policy to practical business benefit
Trade agreements are negotiated at government level, but the benefit is only realised at business level.
A business may know that an agreement exists, but still need to answer practical questions such as:
· Do our goods qualify under the specific Rules of Origin?
· Is the commodity code correct?
· What evidence do we need from our suppliers?
· Can we issue a valid origin statement?
· Are we claiming preference correctly on the customs declaration?
· Are our records strong enough to withstand audit?
These are not simply administrative points. They affect landed cost, pricing, supplier selection, customer confidence and compliance risk.
The UK-India and UK-GCC agreements also show why businesses should not wait until an agreement is already in force before reviewing their customs position. For exporters, new agreements may create opportunities to become more competitive in overseas markets. For importers, they may create opportunities to reduce duty exposure and improve landed costs. For businesses operating through complex supply chains, they may influence supplier selection, sourcing decisions and customer pricing.
With new agreements continuing to emerge, businesses that review their position early will be better placed to identify savings, manage risk and respond confidently when new opportunities become available.
Understand where FTAs could reduce your costs and risk
ChamberCustoms supports businesses in turning trade agreement opportunities into practical commercial benefit.
Our team can help businesses to:
· Identify where Free Trade Agreements may reduce duty exposure;
· Assess whether goods meet the relevant Rules of Origin;
· Review commodity codes and supporting documentation;
· Check whether preference claims are being made correctly;
· Carry out customs health checks to identify risks and missed opportunities; and
· Provide practical support with customs declarations and origin requirements.
Not sure whether your business is making full use of available Free Trade Agreements?
Speak to our team about a customs health check or practical support with declarations, Rules of Origin and preferential duty claims.