Trade Barriers
Tariffs refer to a customs duty or a tax on products that move across borders
. The most important tariff barrier is the customs duty imposed by the importing country. A tax may also be imposed by the exporting country on its export. However, governments rarely impose tariff on export, because countries want to sell as much as possible to other countries. The main important tariff barriers are as follows:
1. Specific duty
Specific duty is based on the physical characteristics of goods. When a fixed sum of money, keeping in view the weight of measurement of a commodity, is levied as tariff it is known as specific duty.
2. Ad-valorem duty
Ad-valorem duties are imposed at a fixed percentage on the value of a commodity imported. Here, value of the commodity imported is taken as a base for the calculation of duty. Invoice is used as a base for this purpose. This duty is imposed on the goods whose value cannot be easily determined e.g. work of art, rare manuscript, antiques, etc.
3. Compound duty
It is a combination of the specific duty and Ad-valorem duty on single product. For example, there can be a combined duty when 10% of value (ad-valorem) and Rs. 1/- on every meter of cloth charged as duty. Thus, in this case, both duties are charged together.
4. Sliding scale duty/Seasonal duties
The import duties which vary with the prices of commodities are called sliding scale duties. Historically, these duties are confined to agricultural products, as their prices frequently vary, mostly due to natural factors. These are also called as seasonal duties.
5. Countervailing duty
It is imposed on certain imports where products are subsidized by exporting governments. As a result of government subsidy, imports become cheaper than domestic goods. To nullify the effect of subsidy this duty is imposed in addition to normal duties.
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 a view of earning revenue by imposing duty on consumer goods, particularly, on luxury goods which demanded from the rich is inelastic.
7. Anti-dumping duty
At times, exporters attempt to capture foreign markets by selling goods at rock-bottom prices, such practice is called dumping. As a result of dumping, domestic industries find it difficult to compete with imported goods. To offset anti-dumping effects, duties are levied in addition to normal duties.
8. Protective tariff
In order to protect domestic industries from stiff competition of imported goods, protective tariff is levied on imports. Normally, a very high duty is imposed, so as to either discourage imports or to make the imports more expensive as that of domestic products.
9. Single column tariff
Under single column tariff system, the tariff rates are fixed for various commodities and the same rates are made applicable to imports from all countries. These rates are uniform for all counties as discrimination is not made as regards the rates of duty.
10. Double column tariff
Under double column tariff system, two rates of duty on all or on some commodities are fixed. The lower rate in made applicable to a friendly country or to a country with bilateral trade agreement. The higher rate is made applicable to all other countries with which trade agreements are not made.
11. Triple column tariff
Under triple column tariff, three different rates of duty are fixed. These are- (a) general rate (b) international rate and (c) preferential rate. The first two rates are similar to lower and higher rates while the preferential rate is substantially lower than the general rates and is applicable to friendly countries.
A non-tariff barrier is any barrier other than a tariff that raises an obstacle to free flow of goods in overseas markets. Non-tariff barriers, do not affect the price of the imported goods but only the quantity of imports. Some of the important non-tariff barriers are as follows-
1. Quota System
Under this system, a country may fix in advance, the limit of import quantity of a commodity that would be permitted for import from various countries during a given period. The quota system can be divided into the following categories.
(a) Tariff/Customs Quota: - A tariff quota combines the features of the tariff as well as the quota. Here, the imports of a commodity up to a specifically volume are allowed duty free or at a special low rate duty. Imports in excess of this limit are subject to a higher rate of duty.
(b) Unilateral Quota: - The total import quantity is fixed without prior consultations with the exporting countries.
(c) Bilateral Quota: - In this case, quotas are fixed after negotiations between the quota fixing importing country and the exporting country.
(d) Mixing Quota :- Under the mixing quota, the producers are obliged to utilized domestic raw materials up to a certain proportion in the manufacturing of a finished product.
2. Prior Import Deposits
Some countries insist that importers should deposit even up to 100% of their imports value in advance with a specified authority, normally their central bank. Only after such deposits, the importers are given a green signal to import the goods.
3. Foreign Exchange Regulations
The importer 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.
4. Consular Formalities
Some countries impose strict rules regarding consular documents necessary for importing goods. They include import certificates, Certificate of origin and certified consular invoice. Penalties are provided for non-compliance of such documentation formalities.
5. State Trading
State trading is useful for restricting imports from abroad as final decision about import are always taken by the government. State trading acts are one non-tariff barrier.
6. Export Obligation
Countries, like India, impose compulsory export obligation on certain importers. This is done to restrict imports. Those companies, who do not fulfill export obligation (to compensate for imports) have to pay a fine or penalty.
7. Preferential Arrangements
Some nations form trading groups are preferential arrangements in respect of trade amongst themselves. Imports from member countries are given preferences, whereas, those from other countries are subject to various tariffs and other regulations.
8. Other Non-tariff Barriers
There are a number of other non-tariff barriers such as health and safety regulations, technical formalities, environmental regulations, embargoes etc.
by: govindam
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