A customs duty refers to a tariff charged on imports or exports of goods crossing international borders. Duties generate government revenue while shielding domestic industries through varying calculable and non-tariff barrier applications.
Calculation Considerations:
- Ad valorem duties apply percentages to customs values like manufacturer selling prices
- Specific duties levy fixed amounts per quantity, e.g. $/ton
- Tariff-rate quotas permit lower duties up to certain import volumes beyond which higher outside rates apply
- Free trade agreements often eliminate or reduce duties between signatories
Example:
The auto-parts maker faced 25% duties on shipments to Brazil after a protectionist government hiked levies to shield emerging local competitors.
Key Takeaways:
Skillful classification and valuation coupled with free trade access mitigation minimize duty burdens that inflate costs in global commerce. However, rates aim to balance trade flows and fiscal needs versus industrial development policies.