Tariff and non tariff barriers

tariff and nontariff barriers in international trade

1. IIAM Presentation on - Tariff and Non-Tariff Barriers

2. What is a 'Tariff' A tariff is a tax imposed on imported goods and service. Tariffs are used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers to protect the domestic firms. Tariffs are laid on exports to generate revenue. Sometimes tariff is laid for some of the important products of the country.

3. Tariff Barriers :- Tariff is a tax or a duty on the products that move across borders. The most important of tariff barriers is the customs duty imposed b y the importing country. Sometimes tax might also be imposed on exporting products. The most important tariff barriers are :- 1. Specific Duty : Specific duty is based on the physical characteristics of goods. When a fixed some of money, keeping in view the weight or measurement of a commodity. The value of the product is not considered. This kind of tax system is applicable for barrel of oil.

4. 2. Ad Valorem Duty : This duties are imposed “according to value”. When a fixed percentage of value of a commodity is added as a tariff it is known as ad valorem duty. It ignores the weight, volume or size of commodity. This kind of duty is applicable for art work, ornaments & antiques etc. 3. Combined or Compound Duty : A combination of both a specific rate of duty and an ad valorem rate of duty. Whereas specific duties are based on factors such as weight or quantity, ad valorem duties are based on the value of the goods. Also called mixed duty rate.

5. 4. Sliding Scale Duty : Sliding scale fees are variable prices for products, services, or taxes based on a customer's ability to pay. Such fees are thereby reduced for those who have lower incomes. This type of pricing has the effect of spreading out the consumption of goods and services, although it may reduce consumption for the wealthy. It is prominent in medical industry. 5. Countervailing Duty : It is imposed on certain Imports where products are subsidized by exporting country. As a result of government subsidy, imports become more cheaper than domestic goods to nullify the effects of subsidy, this duty is imposed in addition to normal duties.

6. 6. Revenue Tariff : A tariff which is designed to provide revenue to the home government is called revenue tariff. Generally, a tariff is imposed with the view of earning revenue by imposing duty on consumer goods, particular, on luxury goods whose demand for the rich is inelastic. 7. Anti-Dumping Tariff : At times, exporters will sell their goods at extreme low price to capture the market this is called Dumping. As a result of this domestic company's will find it difficult to survive. So, government will impose Anti-Dumping Tariff on such dumped products. 8. Protective Tariff : Protective tariffs are enacted with the aim of protecting a domestic industry from the foreign competitors. It is the tax added onto goods imported into a country; protective tariffs are taxes that are intended to increase the cost of a foreign import and make them less attractive .

7. NON–TARIFF BARRIERS :- A non tariff barrier is any barrier other than a tariff, that raises an obstacle with the free flow of goods in the overseas markets. Non-Tariff barriers do not effect the price of the goods. Some of the important non tariff barriers are : Quota System : In this system the country will fix in advance, the limit of import quantity of a commodity that would be permitted from various country's during a given period. This quota system can be classified into the following : - Tariff/Customs Quota - Unilateral Quota - Bilateral Quota - Multilateral Quota

8. 2. Product Standards : Most developed country's impose product standards for imported items. The imported item must be in the expected standards. 3. Domestic content requirement : When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place . 4 . Product Labelling : Certain nations insist on specific labeling of the product. For instance, the EU insists on product labeling in major languages spoken in EU.

9. 5. Packaging Requirement : Some country's ask for specific kind of packing material. For instance, EU insists on recyclable packing materials, otherwise, the imported goods may be rejected . 6. Counsular Formalities : A number of importing countries demand that the shipping documents should include consular invoice certificate by their consulate stationed in the exporting country. 7. State Trading : The imports and exports are not allowed to import or export canalized items directly on their own. Like MMTC for India . 8. Preferential Arrangements : A trade pact between countries that reduces tariffs for certain products to the countries who sign the agreement. While the tariffs are not necessarily eliminated, they are lower than countries not party to the agreement. It is a form of economic integration .

10. 9. Foreign Exchange Regulation : The imports has to ensure that adequate foreign exchange is available for import of goods by obtaining a clearance from exchange control authorities prior to the concluding of contract with the supplier. 10. Other Non-Tariff Barriers : There are many other Non-Tariff Barriers such as health and safety regulations, technical formalities, e nvironment regulations, embargoes ect .

11. Done by – Dheeraj