Duty Essay

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A duty is a tax on goods imported  into a country, levied by the government  and paid by the purchaser. Duties are commonly  called tariffs. Duties vary by country  of origin, country  of import,  and product type. Duties are usually levied as a fixed rate per unit of good (called “specific tariffs”) or as a percentage of the value of the good (called “ad valorem tariffs”). If the duty is calculated as both a rate per unit and a percentage  of the good’s value, it is called a “compound duty.”

Duties can be distinguished by where they are levied. Most duties are “import tariffs,” which are those levied as a good enters the destination  country. If the duty is levied by the country of origin as it is exported, it is called an “export tariff.” For example, in 2004, China imposed an export tariff on 74 textile products to promote  the use of these textiles within the country. Duties can also be levied by countries  through which a good passes; these are called “transit tariffs.” Governments also levy duties on goods manufactured and  sold within  their  country.  For example,  excise duties are commonly applied to alcoholic beverages, tobacco products, and fuel products such as gasoline, electricity, and coal.

Governments have several reasons to impose duties on products. First, duties act as indirect taxes on the consumption or the use of certain  products.  Duties raise  the  prices  of  imported   goods,  making  them less competitive  within the market  of the importing country. As the price of these products increases, the demand decreases. By controlling price and demand, governments  use duties  to achieve the  correct  balance between  supply and demand.  Second, governments use duties to increase the cost of the good in an attempt  to reduce consumption and importation of that  good. In turn,  these duties protect  domestic industries producing the product by making imported goods more expensive than local. Also, by controlling the  market  for certain  products,  duties  protect  the cultural identity of the domestic country.

Third, duties raise revenues for the governments. Often, this revenue is used to pay for the enforcement of government  regulations  controlling  the  product and related  industries.  A government  can also gain an economic advantage by collecting revenue from a good controlled  by that  country  or in abundance  in the country. Fourth, governments often have political motives for imposing duties. In the past, duties have been used to penalize the county of origin by effectively reducing their exports.

Lastly, duties can also be a tax to reduce the consumption  of luxury  (high-priced  goods  such  as a boat)  or socially forbidden  goods (such as alcohol and tobacco). The efficacy of these duties is limited and some argue that they increase the likelihood of smuggling and the use of black markets. In response, some governments provide limited provisions for personal  use, which has spawned  the creation  and growth  of duty-free  shops, and ports  allowed personal purchase  of a limited number  of goods in the late 20th century.

Information   about  the  duty  amount  each  country levies is available from  the  U.S. Department of Commerce’s   International   Trade   Administration. The agency manages a Web site, www.export.gov, in collaboration  with the 19 federal government  agencies that provide export services. Duties are assessed using the Harmonized  Commodity  Description  and Coding System (or Harmonized  System), which is an internationally   standardized   system  of  commodity nomenclature and categorization.

Bibliography:   

  1. J. Faber and Jan Orbie, European Union Trade Politics and  Development:  ‘Everything  But  Arms’ Unravelled (Routledge, 2007);
  2. Thomas E. Johnson, Export/ Import Procedures and  Documentation,  4th  (AMACOM,  2002);
  3. Christopher Stevens,  Mareike  Meyn,  and Jane Kennan,  Duty-Free, Quota-Free Access: What  Is It Worth? (Overseas Development Institute,  2008), www.odi.org.uk (cited March 2009).

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