Those customs duties that are still imposed today are usually either one of two types—specific duty, a tax levied on the quantity, whether by weight, size, or number, of the goods; or ad valorem duty, a percentage of the foreign or domestic price. The ad valorem duty is generally considered to be preferable but more difficult to levy, requiring complex procedures to determine the value of goods. Specific duties are best applied for protectionist purposes, since their size varies inversely with the prices of imports. For example, an import taxed at $5 per ton, and costing $100 per ton, may have an effective duty of 5%. However, if its price drops to $80 per ton—a threat to domestic producers—the effective duty may rise to more than 6%. Certain tariffs are also designed to offset dumping.
Sections in this article:
- Modern Tariffs
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