Tariff
A tariff is a government-imposed tax on imported goods, typically referring to the published schedule of duty rates or to specific duties imposed for policy purposes. Tariffs may protect domestic industries from foreign competition, generate government revenue, or serve as trade policy tools to influence trading partner behavior.
Examples
Protective tariff: A government imposes 25% tariffs on imported steel to protect domestic steel producers from lower-cost foreign competition. Importers pay significantly more, making domestic steel more competitive.
Retaliatory tariff: In response to trade disputes, Country A imposes tariffs on goods from Country B. Importers sourcing from Country B face increased costs, potentially shifting sourcing to other countries or domestic suppliers.
Tariff classification: Products entering a country are classified using the Harmonized System code, which determines applicable tariff rates. Correct classification ensures proper duty payment and avoids penalties.
Definition
Tariffs significantly affect global sourcing economics. A product competitively priced in one country may become uncompetitive after tariffs. Sourcing decisions must consider tariff rates, which can change based on trade policy.
Free trade agreements reduce or eliminate tariffs between participating countries. Sourcing from agreement partner countries may provide tariff advantages versus non-partner countries. Rules of origin requirements determine which goods qualify for preferential treatment.
Tariff uncertainty creates supply chain risk. Policy changes can alter the economics of established sourcing arrangements overnight. Organizations manage this risk through supply chain flexibility, geographic diversification, and scenario planning.
Understanding tariff schedules, classification rules, and available preferences is specialized knowledge. Customs brokers and trade compliance professionals help navigate complexity and ensure compliance while optimizing duty costs.
Previous
Next