The global trade environment in 2026 is defined by volatility. Successive rounds of tariff escalation, export controls, and near-shoring mandates have fractured what was once a relatively predictable international trading system. For any business with cross-border supply chains, this volatility translates directly into contractual risk — and, increasingly, litigation.
1. The Tariff Allocation Problem
When a government suddenly imposes or increases tariffs on imported goods, who bears the cost? The answer depends almost entirely on how your supply contracts are drafted — and for most businesses, the answer is more ambiguous than they realise.
Standard INCOTERMS allocate transport and insurance risk, but they say nothing about tariff liability. The question of who bears the cost of a sudden 25% tariff increase is a matter of the underlying sale contract. In our experience, the majority of long-term supply agreements currently in force have no provision addressing this scenario. The absence of such a provision does not mean liability is split equally — it typically means the party that bears the legal obligation to pay the tariff (usually the importer) bears the economic cost, full stop.
"Most supply contracts were drafted for a world of relatively stable trade policy. That world no longer exists. Your contract needs to reflect the reality of 2026, not the assumptions of 2015."
— Richard Sterling, Managing Partner, Dominion Legal Chambers
2. Export Controls: The New Compliance Frontier
Beyond tariffs, export controls — particularly those targeting advanced semiconductors, dual-use technologies, and strategic materials — have created an entirely new category of compliance risk for international supply chains. US BIS controls, EU dual-use regulations, and UK Export Control Order restrictions now apply to a rapidly expanding range of goods and technologies.
The compliance challenge is acute for businesses that are not obvious defence contractors or technology firms. A manufacturer of industrial equipment may find that a component they purchase contains controlled technology. A logistics company may find that they are facilitating the export of controlled goods without knowing it. The penalties for violation — including criminal liability in some jurisdictions — are severe.
Export Control Red Flags
Key red flags that should trigger an export control review: goods destined for dual-use applications, customers in restricted jurisdictions, requests for unusual payment terms or routing, and products incorporating advanced semiconductor or encryption technology.
3. Drafting for Tariff Resilience: Key Contract Provisions
Every long-term international supply agreement should now include clear provisions addressing the following scenarios:
- Tariff Change Clauses: Define precisely which party bears cost increases resulting from changes in import/export duties, and within what timeframe and threshold the clause is triggered.
- Material Adverse Change (MAC) Provisions: Consider whether tariff escalation above a specified threshold constitutes a MAC event permitting renegotiation or termination.
- Country of Origin Flexibility: Where possible, build in flexibility for suppliers to source from alternative origin countries if a specific origin becomes economically or legally untenable.
- Compliance Representations: Require suppliers to represent and warrant ongoing compliance with applicable export control regimes and to notify you promptly of any classification changes.
- Dispute Resolution: Specify an appropriate forum for supply chain disputes — ideally international arbitration with an enforcement-friendly seat.
4. Near-Shoring and the Contractual Implications
Many businesses are restructuring their supply chains — moving manufacturing closer to end markets to reduce tariff exposure and geopolitical risk. This structural shift creates significant contractual complexity: existing long-term supply agreements must be renegotiated or terminated; new suppliers must be onboarded; and intellectual property licensing arrangements must be reviewed to ensure they are compatible with the new supply chain geography.
Near-shoring is not a free fix. It involves transition costs, termination liability under existing agreements, and the need to replicate quality and compliance infrastructure in new locations. A comprehensive legal review before committing to a near-shoring strategy is essential.
Conclusion
The era of set-and-forget supply chain contracts is over. In an environment of structural trade volatility, your supply agreements must be actively managed legal instruments — reviewed annually, updated to reflect regulatory changes, and structured to allocate tariff and compliance risk deliberately. Dominion Legal Chambers advises multinational clients on international trade law, supply chain contract structuring, and export control compliance.