Tariff Glossary
Ad Valorem Rates: Tariff rates expressed as a percentage of the value of the imported goods. For example, a 10% ad valorem duty means the importer pays 10% of the goods’ customs value as a tariff.
Anti-Dumping Rates: Special tariff rates imposed to counteract foreign manufacturers selling goods below fair market value (i.e., “dumping”). These duties aim to protect domestic industries from unfair competition.
Applied Tariffs: The actual tariffs a country collects on imports, which may be lower than the bound rates. Governments often keep bound rates higher for policy flexibility, while applying lower rates in practice to encourage trade.
Bound Tariffs: Tariff rates a country has committed (under WTO or trade agreements) not to exceed. A country can set its applied tariff rates below (or equal to) these bound rates, but cannot raise them above the bound level without compensating affected countries.
Countervailing Rates: Tariff rates imposed to offset subsidies that foreign producers receive from their governments, which can give them an unfair competitive advantage. Countervailing duties aim to level the playing field for domestic producers.
Customs Union: An arrangement among two or more countries to apply a common external tariff (CET) on imports from outside the union, while allowing free trade of goods among member countries (e.g., the European Union).
Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate tariff and non-tariff barriers to trade among themselves (e.g., NAFTA/USMCA, the European Free Trade Association).
GATT / WTO: The General Agreement on Tariffs and Trade (GATT) was the foundational multilateral agreement governing international trade in goods (1948–1995). It was succeeded by the World Trade Organization (WTO) in 1995, which oversees multilateral trade agreements and dispute resolution.
Harmonized System (HS) Code: An internationally standardized system of names and numbers used to classify traded products. HS codes determine which tariff rates or trade measures apply to specific goods.
MFN Rate: The Most-Favored-Nation rate is the standard, non-discriminatory tariff rate a WTO member applies to other WTO members, unless a specific preferential arrangement exists.
Non Ad Valorem Rates: Tariff rates not calculated purely as a percentage of the goods’ value. Examples include specific tariffs (a fixed amount per unit) and compound tariffs (a combination of ad valorem plus a specific amount).
Non-Tariff Measures (NTMs): Trade restrictions that are not in the form of tariffs but affect the flow of goods. These can include quotas, import licensing, sanitary and phytosanitary rules, technical barriers, and rules of origin requirements.
Preferential Tariffs: Reduced or zero tariff rates granted to certain countries under special trade agreements or preference programs, typically aimed at fostering closer economic ties or supporting development goals.
Safeguard Rates: Temporary tariff measures (or quotas) designed to protect a domestic industry from serious injury or threat of injury caused by a surge in imports.
Tariff Duties: The charges levied by a government on imported or exported goods, serving as a source of revenue and/or a protective measure for domestic industries.
Tariff Escalation: A structure in which tariff rates increase with the stage of processing. Low tariffs may apply to raw materials, with higher tariffs on semi-processed and finished goods.
Tariff Rate: The rate at which a customs duty is charged on imported or exported goods, typically expressed as a percentage of the goods’ value (ad valorem) or as a specific amount per unit.
Tariff Rate Quota (TRQ): A system allowing a specified quantity of goods to be imported at a lower in-quota tariff rate, while imports beyond that quota face a higher out-of-quota tariff rate.
Tariff Regimes: The overall structure of tariffs a country or trade bloc applies, encompassing MFN rates, preferential arrangements, and other measures such as anti-dumping or countervailing duties.
