Canadian Solar EMEA GmbH v HMRC [2025]: A Warning on Cross-Border Classifications and Duty Liability

In a landmark decision handed down by the Upper Tribunal in 2025, the case of Canadian Solar EMEA GmbH v HMRC brought renewed attention to the importance of product classification and origin rules in cross-border trade. While the decision focused on the importation of solar panels, its implications go far beyond one sector.

At the heart of the dispute was the interpretation of the Union Customs Code and whether Canadian Solar had correctly declared the origin and classification of solar panels imported into the UK. HMRC disputed the declarations, arguing that the panels were liable for significant anti-dumping duties and VAT because they contained components originating from countries subject to trade defence measures. The tribunal’s ruling offered much-needed clarity on what constitutes sufficient transformation of goods to alter their country of origin—and how businesses might still qualify for remission of duties where genuine errors are made.

This case is not just relevant for large multinational importers; it serves as a cautionary tale for UK SMEs navigating the often opaque world of customs rules and cross-border trade compliance.

 

Background: What Was at Stake?

 

Canadian Solar EMEA GmbH, part of a global solar technology group, imported photovoltaic panels into the UK that had been assembled in Vietnam using solar cells produced in Taiwan. Under UK and EU trade rules, certain goods originating from Taiwan and China were subject to anti-dumping duties and countervailing duties—trade defence measures intended to prevent unfair competition and protect domestic industries.

Canadian Solar classified the imported products in a way that did not trigger these additional duties, relying on the fact that the final assembly occurred in Vietnam. HMRC, however, took the view that the goods should be considered Taiwanese in origin due to the critical component—the solar cells—being manufactured there. As a result, they assessed the company for unpaid duties and import VAT.

 

Tribunal Findings: Substance Over Simplification

 

The tribunal sided with HMRC in its analysis of the goods’ origin. It ruled that the transformation of the goods during assembly in Vietnam was not substantial enough to shift their country of origin under the rules of the Union Customs Code. Therefore, the goods were rightly considered to be of Taiwanese origin and were liable for the corresponding duties and VAT.

However, the tribunal went on to consider whether the company could obtain relief from the duties under Article 120 of the Code, which provides for a remission in cases where an error has been made without deception or obvious negligence. In Canadian Solar’s case, the court found that the company had:

 

• Acted in good faith
• Sought legal advice
• Made reasonable efforts to comply with customs law
• Based its classification on a genuine belief about the origin rules

 

Because there was no deliberate avoidance or carelessness, the tribunal agreed that Canadian Solar should be granted a remission of the duties under the special circumstances provision.

 

What Does This Mean for Me? – Practical Lessons for UK SMEs

 

Although this decision involved a multinational enterprise, the implications are directly relevant to UK SMEs involved in importing goods, especially from outside the UK and EU. Many small and medium-sized businesses rely on third-party logistics providers, trade agents, or overseas suppliers for customs declarations. This case underlines the risk of blindly relying on external parties or making assumptions based on incomplete information.

Here’s how the ruling may impact and guide SMEs:

 

1. Understand the Rules of Origin

The origin of a product is not just where it was assembled or shipped from—it’s determined by specific transformation criteria. SMEs should familiarise themselves with these rules, especially if they import products composed of multiple components from different countries.

 

2. Take Ownership of Classification

Commodity codes and customs declarations must be accurate. Misclassification can lead to retroactive duty assessments, interest, and penalties. Even if you rely on freight or customs agents, the legal responsibility lies with the importer of record—often the SME itself.

 

3. Act in Good Faith, But Document Everything

If you make a genuine mistake, as Canadian Solar did, you may be eligible for duty remission—but only if you can prove that you were not negligent. Keeping a full audit trail of internal advice, external legal opinions, and the rationale for classification decisions is essential.

 

4. Be Prepared for Scrutiny

Customs authorities are increasingly using data analytics and international intelligence sharing to detect anomalies in import patterns. SMEs are no longer under the radar, and any inconsistencies or irregularities in declarations could trigger investigations.

 

5. Build Internal Compliance Capability

As international supply chains become more complex and politically sensitive, businesses—even small ones—must invest in customs literacy. This might mean staff training, consulting a trade adviser, or subscribing to regulatory updates.

 

Conclusion

 

Canadian Solar EMEA GmbH v HMRC is a clear demonstration of how serious—and expensive—misunderstandings about origin and classification can become. The case also shows that the courts are willing to consider remission in situations where businesses act transparently and responsibly, even if they get it wrong.

For UK SMEs, the lesson is straightforward: customs compliance isn’t just for big corporates. Whether you’re importing electronics, parts, foodstuffs, or retail goods, the responsibility is yours. Accuracy, diligence, and documentation are your best defence—and may be the only thing standing between your business and a large, unexpected tax bill.