What is a tariff?

 

Tariffs are a type of barrier to trade, generally imposed on imported goods. There are a range of different barriers to trade, not all of which are tariffs. All barriers to trade have the effect of protecting or favouring one supplier or manufacturer over another, however tariffs are specifically characterised by the imposition of a monetary penalty.

Types of tariff

The main two types of tariffs are 'specific tariffs' and 'ad valorem tariffs'. Specific tariffs are fixed fees levied on units of imported goods. They are generally fairly uniform in their application. However, they are generally goods specific, varying substantially for different types of goods, depending on the government’s current perception of the need for a particular industry to be protected. As ad valorem is Latin for 'according to value', ad valorem tariffs are levied on goods on a percentage basis based on that good’s value.

Tariffs are generally out of favour with the international community which promotes open trade and anti-protectionism. Whilst tariffs protect vulnerable or weak local industries and therefore local jobs and the local economy, they distort trade, leading to inefficiencies and higher prices for consumers.

Tariff rules

The General Agreement on Tariffs and Trade (GATT) is an international treaty made by the World Trade Organisation (WTO) which encourages and facilities anti-protectionism. Under the GATT, quantitative restrictions such as taxes, tariffs, duties and export licences are to be eliminated. All Members must reveal and report all concessions and subsidies provided to domestic producers and businesses. And the ‘Most Favoured-Nation’ principle applies so that any trade concessions granted to one Member are applied immediately and without conditions to all other Members, and Members may not use internal measures to discriminate between domestic goods and those imported from Members.

To find out how tariffs affect your industry, speak to an international trade lawyer or commercial lawyer. Before expanding your operations into other countries, you must be aware of their trade policies and the legal and financial implications. An international trade lawyer can investigate the tariffs or other protective measures that may apply to your particular type of good or service and the country with which you wish to trade.

If you wish to speak to a specialist lawyer dealing with tariff law, call Caven on 08001 221 2299 or fill in the web-form opposite.

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