Rules of Origin Failure
Trade Compliance & Customs
Example industry: Manufacture of motor vehicles ISIC 2910
Source: Risk Rule GEO_CMP_005 — Trade Compliance & Customs
FTA Disqualification & Price Uncompetitiveness. Loss of preferential trade status triggers the 'MFN Duty Rate' (e.g., 10% for EU-UK cars, 25% for US light trucks). This results in an unhedged margin squeeze (GEO_CMP_002), typically leading to a $3,000 - $5,000 cost increase per unit and potential market-wide volume drops of 15% - 20%.
How This Risk Can Manifest
In Manufacture of motor vehicles (ISIC 2910):
In Jan 2026, an EV producer using Mexican assembly finds its batteries no longer qualify for USMCA preference because the precursor chemicals are refined in Korea using 90% non-FTA inputs. The vehicle is hit with a 25% 'Chicken Tax' duty at the US border, making it $12,000 more expensive than its locally-sourced competitor.
What Triggers This Scenario
This scenario activates when all of the following GTIAS attribute thresholds are met simultaneously:
Scores drawn from the GTIAS 81-attribute scorecard. Click any attribute code to view its definition.
What To Do
Immediate steps to address or mitigate this scenario:
- Shift from 'Global Sourcing' to 'Regionalized Value Chains'
- utilize 'Value-Chain Mapping' to identify specific components for onshoring
- implement 'Duty Drawback' or 'Foreign Trade Zones' (FTZ) for intermediate processing.
Tools & Services to Address This Risk
Vetted tools and services matched to Geopolitical Risk risk — selected for relevance to the challenges described in this scenario.
Common Questions
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