--- title: "The India–UK FTA Is Now in Force: Are Your Commercial Contracts Ready?" date: 2026-07-22 author: "Aurelia Menezes" url: https://ksandk.com/trade-commerce/indiauk-fta/ --- # The India–UK FTA Is Now in Force: Are Your Commercial Contracts Ready? Posted On - 22 July, 2026 • By - Aurelia Menezes ![](https://ksandk.com/wp-content/uploads/The-India–UK-FTA-Is-Now-in-Force.webp) T**ariffs Have Changed. Your Contracts May Not Have. Why Businesses Trading Between India and the UK Should Review Their Supply, Distribution and Procurement Agreements Now.**  The India–UK Comprehensive Economic and Trade Agreement (“CETA” or the “India–UK FTA”) entered into force on **15 July 2026**, creating a substantially different trading environment for businesses operating between India and the United Kingdom.  Much of the immediate attention has understandably focused on tariffs.  India has agreed to remove or reduce tariffs across 90% of tariff lines after the applicable phase-in periods, while the UK has liberalised tariffs on most Indian exports. For businesses whose products qualify for preferential treatment, the resulting savings could be commercially significant. But there is a less obvious question that thousands of businesses may now need to confront: **Who actually gets the benefit of the tariff reduction?**  The answer may not be found in the India–UK FTA.  It may be found in the commercial contract between the exporter and importer.  Long-term supply agreements, distribution arrangements, procurement contracts and manufacturing agreements negotiated before the FTA entered into force were typically priced against the customs regime existing at the time. Many of these contracts may never have contemplated a major bilateral trade agreement fundamentally changing the customs duty payable on the underlying products.  As the India–UK FTA becomes operational, businesses should therefore consider reviewing their existing commercial arrangements.  The tariff has changed. The contract may not have. And that gap could create both opportunities and disputes.  ## **The First Question: Who Gets the Tariff Saving?** Consider a simplified example. A UK manufacturer sells products to an exclusive Indian distributor under a five-year distribution agreement entered into in 2024. The distributor imports the products and pays the applicable customs duties. Following the India–UK FTA, the customs duty on the qualifying product is reduced.  **Who receives the economic benefit? ** If the UK manufacturer continues selling at exactly the same price and the Indian distributor pays lower customs duty, the distributor may retain the entire benefit as additional margin. But the manufacturer may argue that the tariff reduction makes its products more competitive and should therefore lead to increased volumes rather than simply increasing the distributor’s profitability. Alternatively, customers may expect retail prices to fall. The contract may provide no clear answer.  The commercial outcome could depend upon several provisions, including:  - the agreed pricing mechanism;   - whether prices are stated as inclusive or exclusive of customs duties;   - the applicable Incoterms;   - price-adjustment provisions;   - tax and duty clauses;   - change-in-law provisions;   - minimum purchase commitments; and   - contractual renegotiation mechanisms.   For businesses with significant trade volumes, the amounts involved can be substantial.  ## **Existing Pricing Structures May Need to Be Reconsidered** Many cross-border contracts establish prices using a landed-cost model. The price may reflect: **Product cost + freight + insurance + customs duty + taxes + distributor margin.** If customs duty falls materially, the economics of the transaction change. This creates several possibilities.  - The importer may retain the saving.  - The exporter may renegotiate its price.  - The parties may agree to share the benefit.  - The distributor may pass the saving to customers to increase market share.  - Or the parties may use the lower landed cost to reposition the product in the market.  None of these outcomes is automatically required simply because the FTA has entered into force.  The contractual arrangements between the parties will be critical.  Businesses should therefore identify products benefiting from tariff reductions and compare those commercial advantages against the pricing mechanisms contained in their existing contracts. Where the contract is silent or ambiguous, parties may wish to proactively engage in commercial discussions rather than wait for disagreements to arise.  ## **Preferential Tariffs Are Available Only If Rules of Origin Are Satisfied** A reduced tariff under the India–UK FTA is not available merely because goods are traded between India and the United Kingdom. The goods must qualify as originating products under the Agreement’s Rules of Origin, and the importer must satisfy the applicable documentary and procedural requirements to claim preferential treatment.  Businesses should therefore ensure that their commercial arrangements clearly allocate responsibilities for:  - determining originating status;   - maintaining origin documentation;   - obtaining certificates or origin declarations where applicable;   - responding to customs verification requests;   - retaining records; and   - bearing liability if preferential treatment is denied.   Contracts that simply allocate responsibility for customs clearance without addressing compliance with preferential origin requirements may leave important commercial risks unresolved.  ## **Change-in-Law Clauses May Not Always Resolve the Issue** Many commercial agreements include change-in-law provisions intended to address situations where new legislation affects contractual performance. However, these clauses are often drafted with regulatory compliance costs in mind rather than changes that improve commercial economics. A tariff reduction may reduce the cost of performance without making performance impossible or substantially more burdensome. Whether a change-in-law clause permits a party to seek price adjustments will therefore depend entirely on its drafting.  Similarly, force majeure provisions are unlikely to have any relevance where contractual performance remains entirely possible and only the commercial economics have changed. Businesses should resist assuming that standard boilerplate provisions automatically address the consequences of a major trade agreement.  ## **Procurement and Supply Chains Should Also Be Reviewed** The impact of the India–UK FTA extends well beyond traditional export and import contracts. Manufacturers sourcing components from the UK, Indian suppliers exporting finished goods, multinational groups with integrated supply chains, and businesses operating contract manufacturing arrangements may all experience changes in their cost structures.  Lower import duties may justify changes to sourcing strategies, supplier selection, inventory management, or procurement planning. Conversely, businesses may identify opportunities to consolidate supply chains or renegotiate long-term purchasing arrangements to reflect improved commercial conditions. Existing procurement contracts that lock parties into pricing models developed under the previous tariff regime may no longer reflect current market realities.  ## **Future Contracts Should Expressly Address Tariff Changes** The India–UK FTA also offers an important drafting lesson for future transactions. Commercial contracts should expressly address how future changes in customs duties, trade agreements, safeguard measures, or other border-related costs will affect pricing. Rather than leaving the issue to implication or subsequent negotiation, parties may consider including provisions dealing with:  - allocation of tariff savings or additional costs;   - automatic price adjustment mechanisms;   - periodic commercial reviews following significant regulatory changes;   - obligations to cooperate in claiming preferential tariff benefits;   - allocation of responsibility for customs compliance and documentation; and   - procedures for renegotiation where trade policy materially alters the commercial balance of the agreement.   Addressing these issues at the outset can significantly reduce the scope for future disputes while preserving commercial relationships.  ## **A Wider Strategic Opportunity** The India–UK FTA should not be viewed solely as a customs or trade compliance development. For many businesses, it presents an opportunity to reassess commercial arrangements that may have remained unchanged for several years.  Reduced tariffs may create opportunities to expand market share, revisit pricing strategies, negotiate improved supplier terms, introduce new product lines, or enter sectors that were previously less competitive due to higher import duties. A comprehensive contract review can therefore serve not only as a risk management exercise but also as a strategic business initiative that enables companies to maximise the commercial advantages created by the Agreement.  ## **Conclusion** The India–UK FTA has undoubtedly changed the economics of cross-border trade between India and the United Kingdom. What it does not automatically change are the contracts governing those commercial relationships. Businesses should avoid assuming that tariff reductions will naturally flow to one party or another. The allocation of economic benefits will often depend on the wording of existing agreements, the agreed pricing structure, the allocation of customs responsibilities, and the parties’ commercial negotiations.  Companies engaged in India–UK trade would therefore be well advised to undertake a targeted review of their supply, procurement, manufacturing, and distribution agreements to determine whether their contractual framework remains aligned with the new trading landscape.  The tariff landscape has evolved. Ensuring that commercial contracts evolve alongside it will be essential to fully realise the benefits of the India–UK FTA while minimising the risk of avoidable disputes.  *Last Updated on 22 July, 2026* Get King Stubb & Kasiva’s legal updates in your Google feed[![Add King Stubb & Kasiva as a preferred source on Google](https://ksandk.com/wp-content/uploads/google_preferred_source_badge_light_en@2x.png)](https://www.google.com/preferences/source?q=https://ksandk.com/) --- ## Office Locations - [New Delhi](https://ksandk.com/locations/top-corporate-law-firm-in-delhi/) (HQ): +91-11-41318190 | info@ksandk.com - [Mumbai](https://ksandk.com/locations/top-corporate-law-firm-in-mumbai/): 3 offices (Nariman Point, Lower Parel, Andheri) | mumbai@ksandk.com - [Bangalore](https://ksandk.com/locations/top-corporate-law-firm-in-bangalore/): bangalore@ksandk.com - [Chennai](https://ksandk.com/locations/chennai/): chennai@ksandk.com - [Hyderabad](https://ksandk.com/locations/hyderabad/): hyderabad@ksandk.com - [Pune](https://ksandk.com/locations/pune/): pune@ksandk.com - [Kochi](https://ksandk.com/locations/kochi/): kochi@ksandk.com ## Contact - [Contact Page](https://ksandk.com/contact-us/) - General: info@ksandk.com | +91-11-41318190 - WhatsApp: +91-7428567444 - [Privacy Statement](https://ksandk.com/privacy-statement/) - [Terms of Use](https://ksandk.com/terms-of-use/)