🥇Tariffs: types and effects

According with the principles of the WTO (World Trade Organization), in recent times in order to establish a clear and transparent policy, all those types of "import duties and charges" (a.k.a. tariffs) are being suppressed.

Tariff definition

Commonly known as tariff, duty or import tax, is that levy that demanded by the customs authority (from each country or customs territory), when a particular commodity is imported or exported.

Types of tariffs

There are different types of tariffs whose application differs according to the form in which it is fixed:

  • Ad Valorem

    The applicable tariff is presented as a percentage that is applied to a taxable base, known under the name of customs value. This is the most common and known type of tariff duty.

  • Specific

    This tariff duty has a fixed amount on a unit of measure, such as quintals, liters, square meters, etc.

  • Mixed

    It's the combination of applying two types of tariffs: one type "ad valorem" and another "specific".

  • Compound

    An "ad valorem" rate is applicable if the provided value stay between the defined maximum and a minimum values. In case the tax rate is below the threshold the minimum will be applied, else the maximum value will be applied.

Effects of duties

The application of tariffs has various effects:

  1. Tax effect translates into the increase of the GDP (gross domestic product) the state.
  2. In order to protect the local industry, another effect of the application of tariffs is the reduction of imports or exports of products subject to such charges.
  3. As a consequence of the increase in the price of imported product, this fact has a direct effect on the production of the same product that is produced in the national territory, which in turn becomes more profitable.
  4. An increase in the price of the product after the tariff is applied, deriving in a negative way on the final consumer, who sees the price of the product increased in the domestic market.

Tariffs may be reduced or have a preferential rate, depending on the country of origin of the product, as there are bilateral or unilateral agreements with the country or customs territory in which the product is imported.

Likewise, there are also reductions of the general type that is applied to the improper goods, if the producing country is beneficiary of the autonomous policy of the importing country.

There are privileged transactions, which are exempt from the payment of tariffs and other import charges, such as tariff quotas, ceilings or tariff suspensions.

Importance of correctly classifying merchandise in the application of tariffs

A correct classification of the merchandise will be decisive when quantifying the tariffs and other charges that a particular merchandise must bear at the moment of its importation.

Much of the customs and international trade legislation is based on the tariff classification, either through the Harmonized System or the Combined Nomenclature or TARIC code.

It's very important to know the materials of which a product is composed and the use for which it is manufactured to have a detailed description of the merchandise, the way in which it is presented, as well as all the possible information that can help to correctly classify a commodity.

The figure responsible for correctly classifying the goods presented at customs is undoubtedly the customs agent or customs representative, who is knowledgeable about customs legislation and has all the knowledge and skills to classify the merchandise in the correct statistical position , and therefore, apply the rights and tariffs correctly, as well as pass the relevant border inspection services set by customs regulations, Sanitary Authorities, etc.

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