International-Business-Dr-R-Chandran-E-book

B) On the basis of quantification of tariffs
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International Business- Dr. R. Chandran
1. Specific duty: A specific duty is a flat sum collected on physical unit of
the commodity imported. Here, the rate of the duty is fixed and is
collected on each unit imported. For example, Rs. 800 on each TV set or
washing machine or Rs. 3000 per metric ton on cold rolled steel coils.
2. Ad-valorem duty: This duty is imposed at a fixed percentage on the value
of a commodity imported. Here the value of the commodity on the
invoice is taken as the base for calculation of the duty, e.g., 3% advalorem
duty on the C&F value of the goods imported. In the ad-valorem
duty, the percentage of the duty is decided but the actual amount of the
duty changes as per the FOB value of a product.
3. Compound duty: A tariff is referred to as compound duty when the
commodity is subject to both specific and ad-valorem duty.
C) On the basis of the purpose they serve
1. Revenue tariff: It aims at collecting substantial revenue for the
government, but does not really obstruct the flow of imported goods.
Here, the duty is imposed on items of mass consumption, but the rate of
duty is low.
2. Protective tariff: Protective tariff aims at giving protection to home
industries by restricting or eliminating competition. Protective tariffs are
usually high so as to reduce imports. However, if the protective duties are
too high, it may hurt consumers, as imports will stop, leading to
shortages in the consumer market.
3. Anti-dumping duty: Dumping is the commercial practice of selling goods
in foreign markets at a price below their normal cost or even below their
marginal cost so as to capture foreign markets. Many countries follow
dumping practices. It is international practice which has a “do or die”
instinct associated with the company’s policy. It is harmful to less
developed countries where the cost of production is high.
4. Countervailing duty: Such duties are similar to anti-dumping duties but
are not so severe. Countervailing duties are imposed to nullify the
benefits offered, through cash assistance or subsidies, by the foreign
country to its manufacturers. The rate of such duty will be proportional to
the extent of cash assistance or subsidy granted.
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