UK & EU Supply Chain Tariff Readiness

Checklist

coupa.com Supply Chain Tariff Readiness Checklist: UK & EU | 2

Raw materials like agricultural products, lumber, metals, minerals may increase manufacturing input costs and overall production costs. Know where your raw materials come from and/or where your suppliers source their raw materials.

Intermediate goods, also known as components or semi-finished products. Examples include computer chips, car engines, steel, sugar, and more.

Finished goods such as the completed cars sold in showrooms, packaged goods on shelves, clothing in shops, or anything that’s completed the manufacturing or production process and is ready for the consumer.

5 Steps to Plan and Prepare for Tariffs

1. Identify which components in your supply chain might be subject to tariffs

This is really about visibility: Do you know where you’re most exposed to tariffs?

In 2024, the U.S. was the largest export partner for the EU. (20.6% of goods), and the largest trading partner for the UK (17.4% of total trade), according to the EU and the UK Department for Business & Trade. In this context, the uncertainty around tariffs and potential trade wars has the potential to keep any supply chain leader awake at night.

You might wonder how to prepare when you don’t know how things are going to shift. Should you hold to your current supply chain plans and focus on the long-term? Should you attempt to take advantage of the disruption and find other opportunities? Should you aim to react faster than your competitors and achieve short-term gains that may or may not pay off later?

To help you navigate this uncertainty, we’ve compiled a checklist to ensure you’re ready for the ups and downs of tariffs and shifts in global trade, which may come in an increasingly protectionist environment.

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=USA-EU_-_international_trade_in_goods_statistics#United_States_largest_partner_for_EU_exports_of_goods_in_2024. https://assets.publishing.service.gov.uk/media/67b6f8efbd116e3d7b1cf310/united-states-trade-and-investment-factsheet-2025-02-21.pdf

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According to the World Trade Organisation, rules of origin are, “Criteria used to define where a product was made and are important for implementing other trade policy measures, including trade preferences (preferential rules of origin), quotas, anti-dumping measures, and countervailing duties (non-preferential rules of origin).” These can be quite complicated and vary by commodity, state, territory, or country.

Here are some important nuances in rules of origin regulations to make sure you understand as you prepare your strategy:

Substantial transformation: According to the International Trade Administration, when a good does NOT come entirely from a single country – as is often the case with global supply chains – the principle of substantial transformation is used to determine the good’s origin. If a good is significantly and substantially changed in a country – essentially made into a new product with a new name, character, and use – then it could be said to originate in that country and potentially avoid a tariff.

Suppose a manufacturer imports engine components from multiple countries—cylinder heads from Germany, crankshafts from Japan, and pistons from Mexico. These individual parts are then assembled in the United States into a fully functional automobile engine.

Because the assembly process substantially transforms these components into a new and distinct product (a complete engine), the U.S. may be considered the country of origin. This could allow the engine to qualify under trade agreements or avoid certain tariffs, even though its individual components came from different countries.

Regional value content is the proportion of a product’s final value that comes from a particular country or region. It’s an important part of calculating how much local sourcing and production goes into making traded goods.

For example, the LEAP-1B engine used in Boeing 737 MAX planes is the result of a partnership between GE (U.S.) and Safran Aircraft Engines (France). GE Aerospace builds the core and Safran designs and builds the fan, compressor, and a few other component parts. A partnership such as this may or may not take regional value content into consideration when making strategic planning decisions.

Domestic value addition refers to the value a country adds to the goods and services it makes and sells. It represents the portion of a product’s price that comes from domestic labor, materials, and other inputs used to make it. Companies can increase their domestic value addition to reduce the impact of tariffs on the imported components.

Understanding the nuances of rules of origin can help you understand changes in tariff classification and shift the impact of tariffs. This also goes beyond sourcing; it’s about your global manufacturing and product finishing strategy. It’s also important to understand how your products fit into other enterprises’ manufacturing strategies to avoid potential knock-on impacts.

2. Understand rules of origin and value addition

https://www.wto.org/english/tratop_e/roi_e/roi_e.htm

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Knowing which strategies and tactics to embrace at different points in the supply chain will help you identify some potential ways to limit tariff exposure and anticipate possible market shifts, which will help you in the next step. Some options include:

Analyse where your demand may move as a result of your customer base considering tariff questions, and work with them to take a cross-enterprise approach

Diversify raw materials sources

Explore alternative materials sourcing

Domesticate certain elements of production

Identify regional partners to whom you can shift production

Identify alternative suppliers for intermediate goods

Consider value-add manufacturing for finished goods

Establish Free Trade Zone (FTZ) operations to defer, reduce, or eliminate tariffs

Utilise tariff engineering by modifying product classifications to qualify for lower duties

Reshore or nearshore production to avoid high-duty imports

Leverage trade agreements (e.g., USMCA, ASEAN) to optimise sourcing and manufacturing locations

Implement bonded warehousing to delay tariff payments until goods enter the domestic market

Optimise supply chain routing to move goods through lower-tariff jurisdictions

Invest in automation to offset higher domestic production costs and reduce dependency on imports

Conduct regular tariff classification audits to ensure compliance and take advantage of lower-duty classifications

Work with customs brokers and trade compliance specialists to identify duty-saving opportunities

Negotiate long-term supplier agreements to stabilise costs amid shifting tariff policies

3. Outline potential strategies in line with business priorities

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Model global and regional shifts in demand

Optimise your manufacturing footprint

Test export-import offsets

Test nearshoring and onshoring options

Model scenarios sourcing from regional suppliers

Test different supplier mixes

Test product-production mixes

Test different transport modes, nodes, and flows

Run incremental costing analyses

Run cost-revenue analyses

Reducing tariff impact without considering all the interconnected parts of your end-to-end supply chain could have an adverse impact on your margins, cost, and service. For companies in the EU and the U.K., it’s important to recognise the demand side of the equation, in addition to the supply side. Using scenario-modeling technology, you can understand the full impact of changes in your raw material, intermediate, and finished goods strategies, as well as potential long-term changes in demand. Here are a few areas to focus on:

Pro tip: Embrace AI tools to make these analyses faster, easier, and more effective. Tools like Coupa Supply Chain Prescriptions can find solutions and recommend options within minutes, freeing up your modelers to focus on evaluating and fine-tuning the best options.

4. Digitally run scenarios to understand the full impact of supply chain shifts

5. Communicate recommendations to key stakeholders

After you’ve sorted through the options and found next-best solutions, contingency plans, or clear tactics to reduce tariff impact, you need to present the information to key decision-makers in a way that’s easy to understand. Here are some tips for how to communicate your recommendations effectively:

Present your top 2-4 recommendations. Don’t overwhelm people with every single potential alternative.

Use a dashboard to visually convey results clearly and concisely.

Show quantifiable impact aligned with key business metrics, such as how changes will impact the total cost-to-serve, carbon emissions, margins, etc.

Speak in terms your audience will understand. Speaking with a CFO? Communicate your recommendations in terms a CFO will understand. Talking to your procurement counterparts? Know what metrics they care about and help them understand how changes to the supply chain design will not only reduce tariff impact, but also reduce things like overall spend.

https://www.coupa.com/resources/maximize-margins-and-minimize-supply-chain-risk/ http://www.coupa.com/benchmark

Preparation in the face of uncertainty

Tariffs can be stressful and complicated. While uncertainty is not new, the pace of change has

accelerated. But with the right technology, people, and processes, you can tune out some of

the erroneous noise and plan ahead in order to navigate these challenges more effectively. We

recommend focusing on three or four key scenarios that will have the greatest impact on your supply

chain, rather than scattering your focus across every single potential possibility.

Coupa Supply Chain Solutions helps you build the Adaptive Supply Chain through world-leading

scenario-based supply chain decision-making, so you can respond proactively to disruptions like

tariffs and rapid changes in global trade. The strategies and practices you embrace now can help

your organisation become stronger and more resilient going forward.

Start mitigating tariff impact now

https://www.coupa.com/products/supply-chain-design/tariff-impact-planning/