From 1 January 2027, Indonesia will no longer benefit from preferential tariff rates under the UK’s Developing Countries Trading Scheme. We explain what is changing and what businesses importing goods from Indonesia need to consider ahead of the new year.
The UK government has confirmed the graduation of Indonesia from the Developing Countries Trading Scheme (DCTS).
This means that Indonesian-origin goods which currently qualify for reduced or zero rates of customs duty under the DCTS will no longer be able to use those preferences. Instead, goods imported from Indonesia will be subject to the applicable UK Global Tariff (UKGT) rate.
What is the Developing Countries Trading Scheme?
The DCTS is the UK’s preferential trading scheme for developing countries. It reduces or removes tariffs on thousands of products imported into the UK, with the aim of supporting economic development while also reducing import costs for UK businesses and consumers.
Indonesia currently falls within the scheme’s Standard Preferences tier. Under this tier, 65% of product lines can benefit from a zero tariff and a further 26% from reduced tariffs, although some Indonesian goods have already had these preferences suspended under separate goods graduation rules.
Why is Indonesia leaving the scheme?
Eligibility for the DCTS is linked to a country’s level of economic development.
Under the scheme, a country that is classified by the World Bank as an Upper Middle-Income Country for three consecutive years is no longer eligible for DCTS preferences. Indonesia received this classification in 2022, 2023 and 2024 and therefore met the threshold for graduation in July 2025.
The government introduced an 18-month transition period to give businesses time to prepare. Indonesia will therefore remain eligible for the DCTS until 31 December 2026, before leaving the scheme on 1 January 2027.
How is this different from the tariff changes introduced in January 2026?
Some businesses importing from Indonesia will already have seen changes to their duty rates this year.
From 1 January 2026, selected Indonesian goods lost access to DCTS preferential tariffs through a process known as goods graduation. This applies when particular product groups are considered competitive enough to trade without preferential treatment.
The latest change is much broader.
Rather than particular categories of goods being removed from preferential treatment, Indonesia itself is graduating from the DCTS. As a result, any Indonesian-origin goods that are still benefiting from DCTS preferences will cease to do so once the country leaves the scheme.
What will this mean for goods imported from Indonesia?
The applicable rate of customs duty will be determined by the UK Global Tariff rather than the DCTS preferential rate.
The actual impact will vary by product because UK tariff rates are determined by commodity code. Businesses should therefore not assume that every product will see the same increase. Where the UKGT rate is higher than the DCTS rate currently being used, however, the change will increase the customs duty payable and therefore the overall landed cost of the goods.
This makes it important for businesses sourcing from Indonesia to understand which products currently benefit from DCTS treatment and what tariff rate will apply once that preference ends.
What should businesses do now?
There is still time to prepare before the change takes effect.
Businesses importing goods from Indonesia should review the commodity codes they currently use, identify whether DCTS preference is being claimed and check the corresponding UK Global Tariff rate that will apply.
This is particularly important for products that were not affected by the goods graduation changes introduced at the start of 2026. These goods may still be receiving preferential treatment today but will lose that benefit when Indonesia graduates from the DCTS.
The government’s online Trade Tariff can be used to check commodity codes and the relevant rates of customs duty.
How PFE can help
PFE’s customs team can support customers importing from Indonesia by helping to review the relevant commodity codes, understand the tariff rates that will apply and ensure that import declarations reflect the correct treatment once the change takes effect.
Reviewing this now will give businesses time to understand any change in landed costs and factor the new duty position into their planning for 2027.
PFE will continue to monitor the change and any further developments that could affect customers importing goods from Indonesia.
Sources:
GOV.UK – Country Graduation from the Developing Countries Trading Scheme: Indonesia
GOV.UK – Developing Countries Trading Scheme; GOV.UK – UK Trade Tariff
PFE – UK to Suspend Preferential Tariffs on Selected Goods from India and Indonesia
