The hidden customs cost: where food businesses leak profit without realising

The most expensive customs problem? Sometimes, it’s the one nobody notices, because the shipments keep moving.

Goods arrive. Declarations are filed. Duty gets paid. Products reach warehouses and customers. Nobody receives an enforcement letter. Everything seems to be working.

However, a food business can be technically functioning while still leaking margin through classification, origin, valuation, missed preferences, brokerage and administration, storage, and repeated friction points.

Your existing customs operation may already be altering your economics every day – quietly, repeatedly, and unnecessarily.

Three types of customs cost

Customs expenditure can be thought about in three layers:

HMRC itself makes clear that commodity classification determines the rates of Customs Duty and import VAT applicable to imported goods. Customs valuation, meanwhile, establishes the value against which ad-valorem duty is calculated.

Those sound like technical customs mechanics, but together, they’re part of gross margin.

“The new economics of food trade demand a broader definition of customs performance. Leadership must ask: did the shipment clear at the right cost?”

A preferential tariff only creates value if you can claim it

In early 2021, food manufacturer Princes imported three consignments of tinned tomatoes from Italian supplier Calispa.

Preferential tariff treatment was claimed under the new UK-EU trading arrangements – meaning no Customs Duty was paid. But there was a problem: the required statements on origin didn’t exist when the claims were made.

The details are revealing:

• The customs agent selected the code indicating that a valid statement on origin existed.
• Princes had not effectively instructed the customs agent on how the declarations should be completed.
• That same process was repeated across three imports in February, March and June.

HMRC subsequently issued a Post Clearance Demand, with the bill for those three consignments of tomatoes totalling £205,160.02.

“A trade agreement does not save you money simply because it exists. The saving has to be operationalised.”

The point is this: tomatoes may have qualified for preferential treatment on origin grounds, but the customs process needed to capture that benefit correctly, and at the right time.

How one customs assumption becomes a seven-figure problem

Sometimes, the interaction between different customs decisions creates an even larger exposure. Businesses don’t have to be catastrophically non-compliant for customs to hurt profitability.

Uflex Europe imported polypropylene bags (used to package dog and cat food) between 2014 and 2018. It originally classified the bags under a commodity code carrying a 0% duty rate. With no duty apparently payable, the company believed there was no need to submit the proof-of-origin documentation that would have been required to claim a preferential rate.

That original classification was found to be wrong.

Uflex eventually succeeded in establishing a different classification from the one HMRC proposed, but there was another problem: the certificates required to establish preferential origin had not been submitted within the stipulated timeframe. Its attempt to rely on them retrospectively failed.

The assessments involved £937,025.61 in Customs Duty and £194,564.06 in import VAT – £1.13 million in total.

In this case, an incorrect assumption about classification influenced the business’s entire approach to origin documentation – and, repeated across years of imports, the consequences accumulated quietly.

Customs must be managed as part of the cost base

Food businesses scrutinise procurement, freight, labour, production and energy – because each affects margin. Customs deserves the same attention.

“You scrutinise procurement, freight, labour and production costs. How closely have you examined customs?”

Leadership teams need to understand:

• Which products generate the greatest effective duty cost
• Whether classifications remain correct and appropriately governed
• Where preferential treatment is available… and whether it is actually being captured
• Whether origin assumptions and supporting evidence remain robust
• Where delays, storage, brokerage, or administrative effort repeatedly add cost
• How alternative suppliers or manufacturing routes would change the customs position

Valuation belongs in the picture too. HMRC’s primary valuation method starts with the price paid or payable for imported goods – but various additions and deductions can affect the resulting customs value. Even elements such as tooling, development costs, and other payments associated with a sale can matter.

The cost of customs should never be invisible

Princes’ tomatoes crossed the border; Uflex’s packaging entered the country. In both cases, the commercial significance of the customs position only became visible later – at £205,160 and £1.13 million respectively.

Most customs leakage will never produce such a dramatic case study. And that is exactly why it deserves attention.

Unnecessary duty can be repeated quietly. A preference can remain unused. An inherited classification can go unchallenged. Storage, admin, and delays can simply become accepted and absorbed as unavoidable costs of doing business.

But customs must be managed as part of the cost base. A commercially resilient position means understanding what every border crossing costs, why you’re paying it, and whether that cost really needs to be there.