Acquiring knowledge about fundamental tariff terminology is crucial for conducting a prosperous trading enterprise. While comprehending every intricate term may be unfeasible, having a grasp of tariff-related terms will significantly deepen your understanding of diverse trade policies. This article aims to shed light on additional terms associated with tariffs that were not previously addressed.
1. (Customs) Tariff Schedule
The tariff concession table is a list of tariff rates by item determined by the Parties to the Agreement through negotiations, and accordingly, tariffs cannot be imposed above the recognized tax rate. In order to amend or withdraw this, consent between the parties is required. In accordance with GATT's regulations, tariff concessions should be applied without discrimination between the parties to the membership (the principle of best-favored country treatment).
2. Tariff Preference
Tariff preferential treatment pertains to a strategy that assigns a reduced tariff rate to goods in a specific country or region under international trade agreements or free trade agreements. It may also involve granting exemptions from tariffs or providing a temporary period of exemption. The terms and conditions of this policy are outlined in meticulous detail during negotiations between the parties involved, typically specifying the item and country of origin for each trade agreement. Importing goods from partner countries can offer price advantages and enhance competitiveness in the domestic markets compared to those originating from non-partner nations. This advantage is typically extended to goods coming from friendly trading partners with established trade agreements. By implementing tariff preferences for certain products, this policy serves as an economic mechanism that considers the interests of partner countries while safeguarding domestic industries' growth prospects. Eligibility for tariff preferential treatment requires adherence to relevant procedures and conditions specified within each agreement.
3. Tariff Equivalence
The principle of trade equivalence serves to alleviate trade restrictions that may arise from disparities in tariff burdens between nations, ensuring fairness and promoting mutual trade potential on an international scale. To prevent any hindrances or disadvantages in specific countries, the tariffs outlined in a trade agreement must be interchangeable among the parties involved for identical goods. This principle is crucial during tariff negotiations as it allows each country to determine its own tariff policy while considering adjustments and benefits provided by other nations. Adherence to this principle of equality facilitates smooth negotiations and coordination, taking into account the mutual interests of all participating countries. The General Agreement on Tariffs and Trade (GATT), established by the World Trade Organization (WTO), guides and enforces the practice of tariff equality.
4. Protective Trade Policy or Trade Protectionism
Protectionism refers to the policy flow in which governments actively intervene in international trade and apply trade restrictions, such as imposing protective tariffs on imported products or subsidizing their own exports. As a result of protection trade, domestic imports of foreign goods will decrease, and it can have the effect of protecting and fostering domestic industries. However, this is against fair trade competition between countries and can be said to be a policy flow contrary to free trades.
5. Tariff Monopoly
A monopoly tariff is a form of protective tariff implemented by a particular country to impose taxes on the importation of specific goods. The purpose behind this action is to safeguard the domestic market for that particular product, support the growth of its local tourism industry, and preserve existing industries. By imposing high tariffs on imported goods similar to those produced domestically, it aims to reduce imports and protect domestic producers. However, if these protective tariffs persist even after the country's industry has flourished sufficiently, certain domestic producers may gain exclusive control over the market. This can lead to a scenario where domestic consumers end up purchasing products of lower quality compared to imports, ultimately harming the international competitiveness of that industry.
6. Tatiff Elimination or Elimination of Customs Duties
In international trade agreements or free trade agreements, tariff elimination refers to the process of phasing out or eliminating tariffs altogether. The parties to the agreement will gradually eliminate their own tariffs on goods of origin in accordance with the tariff elimination plan and their concession table stipulated through negotiations. Therefore, neither party may arbitrarily increase or introduce existing tariffs on the goods. By eliminating these tariffs, the parties to the agreement can lower international trade barriers and promote economic growth and trade activities.
7. Customs Heuristics
As one of the terms that has emerged in recent years, tariff heuristics is developed based on each company's experience and accumulated data analysis. This is an empirical guideline developed by themselves to predict and make optimal decisions based on factors such as tariff rates and rules of origin for specific products, which can be used to establish strategies to minimize pricing or tariff burdens or to respond more actively to changes in tariff policies.
I hope that the tariff-related terminology and conceptual arrangements discussed earlier have been of some help in enhancing our understanding of international trade and tariffs and in facilitating trade activities. With a basic understanding of tariffs, you will be able to engage in easier trade activities.