diff --git a/src/huggingface_inference_toolkit/utils.py b/src/huggingface_inference_toolkit/utils.py
index 64304d38..af6a984c 100644
--- a/src/huggingface_inference_toolkit/utils.py
+++ b/src/huggingface_inference_toolkit/utils.py
@@ -185,6 +185,8 @@ def check_and_register_custom_pipeline_from_directory(model_dir):
         logger.info(f"Found custom pipeline at {custom_module}")
         spec = importlib.util.spec_from_file_location(HF_MODULE_NAME, custom_module)
         if spec:
+            # add the whole directory to path for submodlues
+            sys.path.insert(0, model_dir)
             # import custom handler
             pipeline = importlib.util.module_from_spec(spec)
             sys.modules[HF_MODULE_NAME] = pipeline
diff --git a/tests/resources/custom_handler/custom_utils.py b/tests/resources/custom_handler/custom_utils.py
new file mode 100644
index 00000000..30d73a8b
--- /dev/null
+++ b/tests/resources/custom_handler/custom_utils.py
@@ -0,0 +1,3 @@
+def test_method(input):
+  """reverse string"""
+  return input[::-1] 
\ No newline at end of file
diff --git a/tests/resources/custom_handler/pipeline.py b/tests/resources/custom_handler/pipeline.py
index 51f04887..d3adeb4a 100644
--- a/tests/resources/custom_handler/pipeline.py
+++ b/tests/resources/custom_handler/pipeline.py
@@ -1,6 +1,8 @@
+from custom_utils import test_method
 class PreTrainedPipeline:
     def __init__(self, path):
         self.path = path
 
     def __call__(self, data):
-        return data
+        res = test_method(data)
+        return res
diff --git a/tests/unit/test_utils.py b/tests/unit/test_utils.py
index cf827a5f..feecd3bb 100644
--- a/tests/unit/test_utils.py
+++ b/tests/unit/test_utils.py
@@ -154,7 +154,7 @@ def test_local_custom_pipeline():
     pipeline = check_and_register_custom_pipeline_from_directory(model_dir)
     payload = "test"
     assert pipeline.path == model_dir
-    assert pipeline(payload) == payload
+    assert pipeline(payload) == payload[::-1] 
 
 
 def test_remote_custom_pipeline():