From January 2026, certain goods imported from India and Indonesia will lose their preferential duty rates under the UK’s Developing Countries Trading Scheme (DCTS). We outline what is happening, which products are involved and what customers should be aware of as duty rates begin to change.

Introduction

From 1 January 2026, the UK government will suspend preferential tariff rates on a range of goods imported from India and Indonesia under the Developing Countries Trading Scheme (DCTS). This means that importers who currently benefit from reduced or zero customs duties on those products will move to the full UK Global Tariff (UKGT) rate. For many businesses, this will lead to higher landed costs unless another form of tariff relief becomes available.

The change is part of a process known as “graduation”, which applies when the UK decides that a country has become competitive enough in certain product categories to trade without support from the preference scheme. The suspension will run from 1 January 2026 to 31 December 2028.

What is the DCTS?

The DCTS is the UK’s post-Brexit replacement for the EU’s GSP scheme. It is designed to help developing nations grow their export industries by offering lower or zero tariffs on a wide range of goods. The scheme is split into three tiers: Comprehensive Preferences, Enhanced Preferences, and Standard Preferences. 

Countries like India and Indonesia fall into the Standard Preferences tier, which provides more limited tariff reductions compared to the other categories. Although the DCTS covers 65 developing countries in total, at present only India and Indonesia have products being graduated for the 2026 to 2028 period. All other DCTS countries will continue to receive their usual preferential access during this time.

Which Goods Are Being Graduated?

HMRC has assessed that several sectors in both countries have developed strongly enough to operate without preferential tariffs. As a result, specific product lines will lose access to DCTS benefits for a three-year period. 

For India, the affected categories include textiles, chemicals, and articles of iron, steel and precious metals. 

For Indonesia, the graduated goods include oil-based products, footwear and musical instruments. 

Businesses should refer to the official GOV.UK graduation notice for the detailed HS chapter headings.

What This Means for Importers

For importers, the immediate impact is financial. Goods that previously entered the UK at a reduced duty rate will now attract the full UKGT tariff. Businesses sourcing from India or Indonesia are encouraged to review which of their products fall within the graduated categories and to calculate new duty costs using the UK’s online tariff service.

India: Temporary Gap Before CETA Takes Effect

In the case of India, many of the same goods are expected to be covered by the new UK–India Comprehensive Economic and Trade Agreement (CETA), signed in July 2025. Once the agreement is ratified and implemented, these tariff reductions should return under a longer-term, negotiated framework. However, both countries still need to complete their parliamentary approval processes. This could create a gap period from January 2026 in which neither the DCTS nor CETA applies, meaning importers may face higher duties for several weeks or months.

Indonesia: No FTA in Place

Indonesia’s situation is different. There is currently no bilateral free trade agreement between the UK and Indonesia. Unless negotiations begin or a CPTPP-based arrangement emerges, Indonesian exporters of affected goods will move straight to full duty rates from January 2026 with no immediate route back to preferential access.

A Wider Shift in UK Trade Policy

This shift indicates a broader change in UK trade policy. The government is gradually moving away from unilateral preference schemes towards negotiated free trade agreements with fast-growing economies. For countries like India, graduation is effectively a sign of economic maturity, marking the move from temporary support to partnership under a formal FTA. For Indonesia, it may act as a nudge towards future trade discussions.

Next Steps for Importers

For PFE customers, the most important actions now are to check whether your goods fall within the graduated categories, understand the new tariff costs you may face, and keep track of progress on the UK–India CETA. More information on the DCTS and guidance for importers can be found on the Trading with Developing Nations section on GOV.UK.

As always, PFE will continue to monitor developments closely. If you would like support understanding the tariff changes or reviewing alternative sourcing options, our team are here to help.


References:

GOV.UK – Developing Countries Trading Scheme (DCTS): Goods graduation notice (2026-2028) GOV.UK

GOV.UK – Developing Countries Trading Scheme (DCTS) main page / overview of DCTS and its 65 eligible countries GOV.UK

GOV.UK – UK-India Comprehensive Economic and Trade Agreement (CETA) collection of documents and agreement text GOV.UK

GOV.UK – UK-India trade deal conclusion summary (July 2025) GOV.UK