Tariff & Non Tariff Barriers

Amit Pathak Gagandeep Singh Harmanpreet Singh Tejinder Singh

Presentation by:

Tax imposed on the goods when they enter or leave the national frontier or boundary.

Purpose of tariffs To protect the domestic industry by increasing the cost

of imported goods.

Tariff Barriers

Types of Tariffs:

Revenue Tariff: To provide state with the revenue. Levied on luxury goods.

Protective Tariff: To maintain and encourage those branches

of home industry protected by the duties.

On the basis of Purpose:

Ad Valorem Duty: Levied as the percentage of the total value of the

imported common duty.

Specific Duty: Levied per physical unit of the imported commodity.

Compound Duty: Levied a percentage ad valorem duty plus a specific

duty on each unit of the commodity. Eg. 1 lac + 10% of the price.

On the Basis of Origin and Destination:

Single Column Tariff: A uniform rate of duty is imposed on all similar

commodities irrespective of the country from which they are imported.

Double Column Tariff: Two different rates of duty have been imposed.

Triple Column Tariff: Two or more tariff rates are levied on each category of

commodity.

On the Basis of Country-wise Discrimination:

Government of the importing country earns in the form of the revenue.

Industries of the importing country would find market for their products as the imported goods will be expensive.

Jobs in the domestic markets are saved.

Business for the ancillary industry, servicing, market intermediation etc. is also protected.

Gains from Tariff

Tariff Barriers tend to Increase:1. Inflationary pressures2. Special interests’ privileges3. Government control and political considerations in economic

matters.Tariff Barriers tend to Weaken:

4. Supply-and-demand patterns5. International relations (they can start trade wars)

Tariff Barriers tend to Restrict:6. Manufacturer’ supply sources7. Choices available to consumers8. Competition

Impacts of Tariff Barriers

Non-Tariff measures include all measures, other than tariffs, the effect of which is to restrict imports, or to significantly distort trade.

Non- Tariff Barriers

It is direct payment made by the government to a company in order to make it more competitive nationally or internationally

Service subsidies: Helps potential exporters with support services to help market the product overseas.

Economic subsidies: These may be designed to keep price lower (compared

with importing produce), To maintain reasonable incomes for producers, To maintain employment within a particular business

sector or industry.

Subsidies

Production subsidy: are payments given by governments to domestic producers faces by the threat of low priced import goods coming into the domestic market.

Export subsidy: is a payment to a firm to encourage it to export its product abroad. It can be either specific, i.e., a fixed sum per unit, or ad valorem, a proportion of value exported.

Commodity

Country Details

Flowers Colombia Export Subsidies

Fruits, Coffee Korea, Colombia

Direct export subsidies to lower marketing costs

Tobacco EU Subsidies to EU farmers

Electrical Components

China Export subsidy and low energy costs

It is a quantitative form of restriction imposed on imports and exports. It specifies the amount of quantity that can be imported or exported.

Types of import quotas: Absolute quotas: are quantitative quotas, i.e., no

more than the amount specified may be permitted during the quota period.

Tariff-rate quotas: provide for the entry of a specified quantity at a reduced rate of duty during a given period. Quantities entered in excess of the quota for the period are subject to higher duty rates.

Import quotas

It is Variation of import quota.

In VER, the exporting nation, after consultation with the importing nation, voluntarily fixes the quota regarding the maximum

amount of quantity which it will be exporting to the concerned nation.

The exporting nation agrees to VERs in order to avoid the more strict measures like import quotas, tariffs, etc. which could be applied by the importing nation.

Voluntary export restraints (VER)

Commodity

Country Details

Tea Iran a) Importers can import 1½kgs at 4% duty if they purchase 1 kg of tea domestically,

b) Import of tea in packets of more than 10kgs is banned.

Cotton Fabrics Nigeria Ban on Imported Fabrics

Special Woven and Knitted Fabrics, Clothing

Colombia Import license is granted on for used goods only if domestically not produced.

Apart from the formal ways of interfering in trade, nations resort to intentional administrative policies, which are rules and procedures to be followed,

With the objective of discouraging imports and encouraging exports.

Administrative policy

Commodity

Type Country

Details

Meat Products, Honey

Certification Russia, Japan

Non conformity of EIC conformity certificates.

Tea Documentation

Iran Cumbersome & complex L/C procedures

Chemicals Documentation

UAE Attestation of documents by UAE which is costly and time consuming.

Forms of anti-dumping policy: Sporadic dumping: is the practice of occasionally

selling excess goods or surplus stock in overseas markets at lower prices than the domestic price or below the cost. Its basic objective is to liquidate the excessive inventories without initiating a price war by reducing the price in the home market.

Predatory dumping: its objective is to force the competitors to leave the market, thus, enabling the predator to raise the price in the long run.

Persistent dumping: refers to the consistent tendency of a firm to sell goods at lower prices in international markets.

Anti-dumping policy

Commodity

Country Details

Steel Korea Initiated on 21.06.07

• Fittings• Bicycle

Tyres and tubes

Turkey • $305-400 per ton anti-dumping duty,• 20% and 60% duty respectively.

Fish US Custom Bond Requirements

Some specific fraction of the product be produced locally.

Sometimes, this fraction is specified in terms of value of product and sometimes, in physical terms.

Developed nations use it in order to protect employment and local industry.

Developing nations apply it in order to change the position from a simple importer of assembler to a manufacturer or it could be to develop an industry or to protect and enhance employment opportunities

Local content requirement

Normally, when goods enter a nation, the custom officials try to classify and find out the correct value of goods in order to collect the ad valorem duty.

It becomes further complex as, sometimes, exporters and importers misclassify or undervalue their products intentionally or by accident.

As a result, when custom officials go for valuation they increase the value and impose penalties for custom valuation violation.

Sometimes, this custom valuation can also be used as an instrument (intentionally) by a nation to discourage imports or exports.

Customs valuation

Commodity

Country Details

Beer, Wine and spirits

Chile 15%, 15% and 27% of ad-valorem tax respectively.

Chemicals Syria 5% commission on the total value of product imported.

Paper products

Canada, EU, NZ, Indonesia, US

Surcharges, Port Charges etc.

Agriculture Products

Colombia Cumbersome, High fees, Delays

Standards are set for Health Welfare Safety Quality Size Measurements In order to create barriers for foreign products.

Standards

Commodity

Country Details

Agriculture Products

Korea Strict Standards, Non-transparent.

Graphite electrodes

Russia Excessive packaging costs, quality criteria.

Paper products,

Canada, EU, US, NZ, Uruguay, Indonesia.

Engineering Goods

EU CE marking raises the costs of exports especially for SMEs.

The nations use this concept in order to interfere in the international trade on the grounds of preserving foreign currency reserves to secure jobs or to secure technology.

In this, the importing nation asks the exporting firm to take payment in terms of goods or to promise to buy merchandise or services in lieu of cash payments.

Reciprocal requirements or counter-trade

Have emerged as potent Protectionist tool.

It being less transparent, its difficult to identify and quantify its impact.

Impact of NTBs:

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