Commercial Tariff Policy Tools

Tariff policy

Firstly trade policy is an integral part of the general economic policy of the state, a part of the sphere of trade and foreign economic relations. Secondly tariff policy can generate higher or lower profits for the state that implements it. Since the regulations are aimed at economic and scientific-technical cooperation in foreign trade operations.

Also in a broader sense, commercial policy means all regulations adopted by the state (with legal, administrative, tax, budget, financial, banking, foreign currencies, etc. e.) To encourage or restore foreign trade and protect the national economy from foreign competition. In general, in the field of trade policy, there are three main categories of instruments and measures:

  • of the tariff (customs) nature
  • non-tariff (including paratariff)
  • of advertising nature (incentives and incentives)

But typically, tariff and non-tariff instruments of commercial policy are aimed at restricting imports. Also advertising instruments are aimed at increasing exports.

The first and most important tool for implementing the state/government trade policy is the type of customs policy that the state uses, which means, implicitly and/or associated, a certain territory of customs reporting and the level of customs duties provided in the Customs tariff of the respective state.

Customs policy as a component of trade policy

Customs policy is a component of the government’s trade policy and is the most important lever by which the state can intervene in foreign trade flows. Also tariff policy is implemented using the provisions adopted by the state aimed at the entry or exit from the country of goods and vehicles. Which provides for control at the time of crossing the state border of goods and vehicles, also the implementation of customs formalities and payment of customs payments (customs taxation).

The customs tariff policy includes a number of tools that help to comply with all regulations adopted by the state regarding the exchange of goods, transportation of people and not only, import of high-quality high-performance technologies but also an exchange of services that help the free movement of the population. Also these taxes to some extent impede imports, which leads to less knowledge of the size of foreign supply from producers in the country. Based on this, the government, collecting them in the state budget, generates new revenues.

The supply of imported goods can be changed by increasing the competitiveness of foreign manufacturers or by setting a favorable price for them. If demand fluctuates very little depending on the price of the product, then the tariff has no economic efficiency. But with their help, the risk of political lobbying and increased corruption is reduced. Such tools include: customs duties, customs tariff, customs code and customs territory.

Also if we presented all the customs policy tools in the diagram, it would look like this:

Customs tax

Customs tax is a tax that applies to goods that have passed through the customs border of a country. Also tax may be aimed at finding out the state budget revenues and/or protecting domestic producers from foreign competitors. As an indirect tax, the customs tax determines that consumers prefer consumer goods, which are in principle cheaper. But for consumers, customs duties can also be a means of protection from high prices or, sometimes, exaggeration practiced by domestic manufacturers, or to reduce the quality of local products. Customs duty is an important instrument of customs policy, which affects the price of important goods in order to reduce imports and eliminate, or at least reduce the trade deficit.

Typology of customs duties:

For tax purposes (or tax level):

  • fiscal customs duties
  • protectionist customs duties

By subject of taxation (type of foreign trade transaction)

  • import duties
  • export customs duties
  • transit customs duties

By perception (settlement) mode:

  • specific customs duties
  • mixed customs duties

Based on the institution method (established by the state):

  • autonomous customs duties (general)
  • ordinary customs duties (contractual)
  • preferential customs duties (in favor)
  • customs refund duties (reply):
  • anti-dumping duties;
  • compensation fees;

The customs tariff provides for taxable goods and the amount of taxes levied on each product. But according to its contents, the customs tariff is a catalog in which all goods subject to customs taxation and the amount of customs duties levied on each product or product group. But along with the legislation on this issue, regulations, administrative provisions relating to foreign trade, etc. The customs tariff is the main component of the customs regime of the country. In addition, as an exception, goods exempted from import may be designated in certain commercial relationships.

Classification of goods at the customs tariff

The classification of goods at the customs tariff can be performed:

  • by the origin of the goods (plants, animals, mineral products);
  • depending on the degree of processing (raw materials, semi-finished products, finished products);

The Community Customs Code establishes and defines the law applicable to the import and export of goods between the Community and third countries. The purpose of this code is to facilitate trade, while guaranteeing a high level of border security.

Customs territory

The customs territory is the territory in which a certain customs regime, certain customs legislation is in force; As a rule, the customs territory coincides with the national territory, but there are situations (currently numerous) when the customs territory is larger or smaller than the national one. Therefore, in the post-war period, there are two directions/strategies regarding the customs territory, namely:

Expansion of the customs territory when two or more states agree to form a customs union, which will include the territories of the member states.
The restriction of the customs territory when states decide that certain ports, areas or settlements should be exempted from the application of the usual customs regime.

If two or more states agree to create a customs union together, then the customs territory summarizes the territory of the states participating in this union. In this case, the customs territory is expanded.

Customs Unions

Customs unions are the main form of expansion of the customs territory and come in two forms:

  • Ideal (or complete). All targeted products that are mutually exclusive with third parties;
  • Imperfect (incomplete). Only part of the products are exchanged with each other and with third parties.

A free trade zone is also a secondary form of expansion of the customs territory. But in their case, the countries participating in the field remove tariff and non-tariff barriers in relations with third parties, do not establish a single commercial policy, each member country retains its independence in the matter of commercial policy. Also the goal of the ideal is all products that change each other. But the goal of the imperfect is only to part of the products that change each other.

The restriction of the customs territory is the exemption from the existing customs regime of a part of the national state (port, part of the port or other commercial or industrial zone). But in these areas, import duties are not levied. Also these zones, exempted from the current customs regime, are called free zones. At the international level, they have different names, such as: tax-exempted port zones, commercial free zones, economic zones, free ports, etc. There are also customs warehouses.

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