Procurement Glossary
Customs preferences: Definition, application and strategic importance in Procurement
November 19, 2025
Tariff preferences enable companies to make considerable cost savings when importing goods by reducing or completely eliminating customs duties. These trade policy instruments are based on bilateral or multilateral agreements between countries and can significantly reduce procurement costs. Find out below what tariff preferences are, how they are used strategically and which methods lead to optimal application.
Key Facts
- Tariff preferences can reduce import duties by up to 100% or eliminate them completely
- Over 300 preferential agreements worldwide offer various customs benefits for different Categories
- Correct documentation and proof of origin preference are a prerequisite for utilization
- Savings of 2-15% of the value of goods can be realized through strategic use
- Automated systems can speed up the identification of suitable preferences by 80%
Contents
Definition: Customs preferences - meaning and basics
Tariff preferences are a central instrument of international trade policy that provides companies with strategic cost advantages.
Basic concept and mode of operation
Tariff preferences are preferential tariffs that are granted to certain countries of origin and lead to reduced or completely eliminated import duties. They are based on trade agreements between countries or economic areas and aim to promote trade and strengthen economic partnerships.
- Bilateral free trade agreements between two countries
- Multilateral agreements such as EU-Mercosur or CPTPP
- Unilateral preferential systems for developing countries (GSP)
- Regional economic partnerships with staggered benefits
Tariff preferences vs. most favored nation tariffs
In contrast to MFN tariffs, which apply equally to all WTO members, preferential tariffs offer selective advantages. While MFN tariffs represent the standard tariff, preferential tariffs can be 50-100% lower.
Importance of tariff preferences in Procurement
For purchasing organizations, customs preferences open up considerable potential for optimizing customs clearance. They not only enable direct cost savings, but also influence strategic supplier decisions and sourcing strategies. However, correct application requires in-depth knowledge of customs tariff classification and precise documentation.
Methods and procedures
The systematic use of tariff preferences requires structured procedures and proven methods for identification and implementation.
Preference analysis and potential assessment
A systematic analysis begins with the evaluation of the current import portfolio and the identification of preferential Categories. Import volumes, current tariff rates and available preferential agreements are compared.
- Analysis of the customs tariff numbers of all imported goods
- Assessment of available preferential agreements by country of origin
- Quantification of savings potential per Category
- Prioritization by volume and level of savings
Documentation management and verification
Proper documentation is the foundation of successful preference utilization. Specific evidence such as EUR.1 preference certificates or supplier declarations are required.
Supplier integration and compliance
The involvement of suppliers in the preference process is crucial for success. Suppliers must have the necessary evidence and be able to provide it in good time. Regular training and clear process guidelines ensure compliance.
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Key figures for managing tariff preferences
Effective key figures enable the measurement and optimization of preference usage as well as the evaluation of the return on investment.
Savings metrics and cost effects
The most important key figures focus on the realized cost savings and their relationship to the expenses for preferential use.
- Absolute customs savings in euros per year
- Preference utilization rate as a percentage of total import volume
- Average savings per shipment
- ROI of preference activities
Process efficiency and compliance metrics
Operational KPIs measure the efficiency of the preference processes and the quality of implementation. A high preference utilization rate combined with a low error rate indicates optimum performance.
Strategic performance indicators
Long-term key figures evaluate the strategic impact of preference use on the procurement strategy. These include the diversification of the supplier base according to preferential countries and the development of new sourcing markets through available customs benefits.
Risks, dependencies and countermeasures
The use of tariff preferences entails various risks that can be minimized by taking appropriate measures.
Compliance risks and audits
Incorrect use of preferences can lead to additional payments, interest and penalties. Customs authorities carry out regular inspections and demand complete documentation of proof of origin.
- Back payment of lost customs duties with interest
- Fines for willful violations
- Loss of preferential entitlement
- Reputational damage in the event of compliance violations
Supplier dependencies and origin risks
Dependence on specific suppliers or countries of origin can become problematic in the event of political tensions or changes to agreements. A diversified supplier base reduces these risks considerably.
Complexity and resource requirements
The administration of customs preferences requires specialized know-how and continuous monitoring. Companies must invest in appropriate expertise or commission external service providers. Regular training and systematic processes are essential for successful customs clearance.
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Practical example
A German automotive supplier imports electronic components worth 5 million euros from South Korea every year. Thanks to the EU-Korea Free Trade Agreement, the company can benefit from a preferential tariff of 0% instead of the most-favored-nation tariff of 4.7%. The annual savings amount to 235,000 euros. The prerequisite is the proper submission of declarations of origin by the Korean suppliers.
- Identification of preferable Categories through tariff analysis
- Training suppliers on correct documentation of origin
- Implementation of automated preference checks in the ERP system
- Regular compliance audits to minimize risks
Trends & developments around tariff preferences
The landscape of tariff preferences is constantly changing due to new trade agreements, technological developments and geopolitical shifts.
Digitalization and AI-supported optimization
Artificial intelligence is revolutionizing the identification and use of customs preferences. Modern systems automatically analyze flows of goods, identify preference potential and optimize sourcing decisions in real time.
- Automated preference check for commodity code determination
- AI-based prediction of agreement changes
- Integrated compliance monitoring
New trade agreements and the impact of Brexit
Brexit and new mega trade agreements such as RCEP or USMCA are creating new preference landscapes. Companies must continuously adapt their strategies and evaluate new opportunities.
Sustainability and preference criteria
Sustainability criteria are increasingly being integrated into preferential agreements. Environmental and social standards are becoming prerequisites for customs benefits, which creates new compliance requirements.
Conclusion
Customs preferences are a powerful tool for optimizing costs in international Procurement . Their strategic use requires systematic analysis, professional implementation and continuous monitoring. Companies that successfully implement preferences not only realize significant cost savings, but also gain competitive advantages through optimized sourcing strategies and expanded supplier networks.
FAQ
What are the requirements for using tariff preferences?
Tariff preferences can only be used if the imported goods originate in a preferential country and corresponding proof is available. In addition, the goods must be covered by a valid preferential agreement and fulfill the specific rules of origin.
How do I identify available preferential agreements for my goods?
Identification takes place via the customs tariff number of the goods and the country of origin. Customs administrations offer online databases such as TARIC in the EU, which display all available preferences. Specialized software can automate and optimize this process.
What documentation is required for tariff preferences?
Depending on the agreement, various forms of proof are required: EUR.1 movement certificates, declarations of origin on invoices, supplier declarations or REX registrations. The documentation must be complete and correct in order to minimize the risk of verification.
How high are typical savings through tariff preferences?
The savings vary between 2% and 15% of the value of the goods, depending on the Category and agreement. In the case of full duty exemption, the savings correspond to the original duty rate. Additional benefits arise from reduced advance import VAT payments and improved liquidity.
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