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Forms of Import Tariffs

Regardless of whether a tariff is bound or applied on preferential versus non-discriminatory basis, the tariff can take several forms. The most common is an ad valorem tariff, which means that the customs duty is calculated as a percentage of the value of the product. Many countries' tariff schedules also include a variety of non ad valorem tariffs.

  • Specific tariffs are computed on the physical quantity of the good being imported, e.g., Australia's 2005 schedule includes a tariff of $1.22/kg on certain types of cheeses and the United States charges $0.68 per live goat. The physical quantity may be expressed in ways that are difficult to determine without laboratory equipment. The European Union charges duties on certain dairy products based on the weight of lactic matter in the product, and the United States charges a tariff on raw cane sugar that varies with the sucrose content of sugar: 1.4606 cents/kg less 0.020668 cents/kg for each degree under 100 degrees (and fractions of a degree in proportion) but not less than 0.943854 cents/kg.
  • Mixed tariffs are expressed as either a specific or an ad valorem rate, depending on which generates the most (or sometimes least) revenue. For example, Indian duties on certain rayon fabrics are either 15 percent ad valorem or Rs. 87 per square meter, whichever is higher.
  • Compound tariffs include both ad valorem and a specific component. For example, Pakistan charges Rs. 0.88 per liter of some petroleum products plus 25 percent ad valorem.
  • Tariff rate quotas are made up of a low tariff rate on an initial increment of imports (the within-quota quantity) and a very high tariff rate on imports entering above that initial amount.

Trade economists typically argue that these non ad valorem tariffs are less transparent and more distorting, i.e., that they drive a bigger wedge between domestic and international prices. In addition, their economic impact changes as world prices change.

The share of tariff lines with non ad valorem rates varies across countries. WITS Advanced Query can compute the share of non-ad valorem tariff lines when it profiles a county's tariff schedule.

Next: Ad Valorem Equivalents of non Ad Valorem Tariffs

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The World Bank, 2010