Preferential Tariff Rates & Rules of Origin
How to Reduce UK Customs Duties Using Free Trade Agreements
The UK has built an extensive network of Free Trade Agreements (FTAs) since leaving the EU. Businesses that understand how to use preferential tariff rates and meet rules of origin requirements can make substantial savings on customs duties. This guide covers the key FTAs in force, recent updates and how to claim preferential rates correctly.
UK’s Active Free Trade Agreements
The UK currently has active FTAs with a wide range of trading partners. Key agreements include:
- UK–Australia FTA — comprehensive agreement providing tariff elimination across the majority of goods categories
- UK–New Zealand FTA — progressive tariff reduction with full elimination over the implementation period
- CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) — the UK joined CPTPP in 2023, providing access to preferential rates across 11 Pacific nations
- UK–Turkey — trade continuity arrangement maintaining duty-free access for qualifying goods
- UK–EU Trade and Cooperation Agreement — zero tariffs for goods meeting rules of origin requirements
The full list of UK preference agreements is maintained on GOV.UK: Import and export goods using preference agreements.
PEM Rules — Fully Implemented by 1 January 2026
The Pan-Euro-Mediterranean (PEM) rules of origin were fully implemented across all relevant UK trade agreements by 1 January 2026. The PEM Convention allows cumulation of origin — meaning materials from partner countries can be combined and still count towards the product’s origin for the purposes of claiming preferential tariff rates. This is particularly valuable for UK manufacturers sourcing components from multiple countries.
DCTS Updates — Easier Rules for 16 Low-Income Countries (July 2025)
The UK’s Developing Countries Trading Scheme (DCTS) rules were updated in July 2025, making it easier for 16 low-income countries to export goods to the UK at preferential or zero tariff rates. The DCTS update simplified rules of origin requirements for these countries, reducing the compliance burden and encouraging trade with developing economies. Importers sourcing from eligible DCTS countries should review whether they qualify for reduced duty rates under the updated scheme.
Ukraine Tariff Liberalisation — Until 31 March 2028
The UK has extended tariff liberalisation measures for goods originating in Ukraine until 31 March 2028. This means that a wide range of Ukrainian goods can be imported into the UK at zero or reduced duty rates without meeting standard rules of origin requirements. Businesses importing from Ukraine should check the current list of qualifying goods to ensure they are taking full advantage of these preferential arrangements.
How to Claim a Preferential Tariff Rate
To claim a preferential tariff rate, importers must:
- Confirm the FTA applies — verify that the UK has an active preference agreement with the country of origin
- Verify origin — obtain proof that goods meet the relevant rules of origin (e.g., wholly obtained, sufficient processing or cumulation)
- Obtain proof of origin — a valid EUR.1 certificate, origin declaration, or supplier’s declaration as required by the relevant FTA
- Declare preference on the customs entry — include the correct preference code on the import declaration via the Customs Declaration Service (CDS)
- Retain supporting documentation — keep all origin evidence for at least 4 years for audit purposes
Common Rules of Origin Criteria
- Wholly obtained (WO) — goods entirely produced in the exporting country (e.g., minerals, agricultural products)
- Sufficient processing — goods undergo a qualifying manufacturing process in the exporting country
- Value threshold (ad valorem) — non-originating materials must not exceed a specified percentage of the ex-works price
- Tariff shift — the manufacturing process must result in a change in tariff heading
Expert Rules of Origin Advice
Correctly applying rules of origin is one of the most technically demanding areas of international trade. Our specialists provide detailed rules of origin advice and use our duty savings calculator to identify savings available under UK FTAs.
FAQ — Frequently Asked Questions
What is the difference between a preferential tariff rate and an MFN rate?
The Most Favoured Nation (MFN) rate is the standard customs duty rate applied to imports from countries without a specific trade agreement. A preferential tariff rate is a lower (or zero) duty rate available only when importing from a country with which the UK has an FTA, and only when the goods meet the relevant rules of origin.
How does PEM cumulation work in practice?
PEM cumulation allows materials or processing from multiple partner countries to be combined and treated as originating for preference purposes. For example, a UK manufacturer using EU-origin components can still claim preferential origin under PEM, provided the finished product meets the processing requirement in the relevant agreement.
Which countries benefit from the updated DCTS rules?
The July 2025 DCTS update simplified rules of origin for 16 low-income countries. Businesses should check the current DCTS schedule on GOV.UK for the full list of eligible countries and qualifying goods.
How long must I keep rules of origin documentation?
HMRC requires traders to retain rules of origin documentation for a minimum of 4 years from the date of the import declaration. This includes supplier declarations, EUR.1 certificates, and any other origin evidence used to claim preferential rates.
Maximise Your Duty Savings Today
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