Tariff systems tax goods for resale, with protectionists advocating for tariffs to protect a country’s economy and free trade proponents seeing them as unnecessary government interference. Import and export tariffs vary in type and purpose, with some implemented to protect domestic production and others used as economic sanctions. Harmonized tariff systems ensure equal classification of products between countries.
A tariff system is a system whereby goods are taxed into or out of a country for resale. The concept generally has both supporters and opponents. Protectionists advocate the use of tariffs as a way to protect a country’s economic system, while proponents of free trade see tariffs as unnecessary government interference in the market.
Fare systems can use a variety of fare types. The most common type is the import tariff, or customs tariff, which imposes an additional cost on products imported into the country applying the tariff. The types of import tariffs also vary from ad valorem tariffs, which impose a tax that is a standard percentage of the product’s value, to specific tariffs which are pre-determined tax amounts that do not vary as the market price of the product may rise or fall. .
In addition to import duties, there are export duties which are imposed on products when they leave the country imposing the tax. These types of fares are less common, but seen as an important source of revenue. Due to the fact that income taxes, or sales taxes, may not be received on these products, the export tariff is seen as a way to recoup some of that lost tax revenue. Export tariffs can also have the benefit of encouraging a company to find domestic markets.
Typically, a tariff system is implemented in order to protect the production of a similar good or service within the country. For example, the production of ethanol in the United States is relatively expensive compared to that of Brazil, simply due to the products used, the availability of those products and the costs associated with its production. Without a significant tariff on imported Brazilian ethanol, the US ethanol industry would likely be decimated, because it would be unable to compete on price. It is also argued that this type of tariff helps spur innovations in renewable energy.
In addition to using a tariff system to protect a country’s production of a product, it is sometimes, though less frequently, used to impose economic sanctions on other countries. For example, if a product comes from a country that is generally regarded by the importing country as having undesirable policies, a tariff may be imposed to damage that country’s economic position. A more common application of economic sanctions, however, is an outright ban on importing products from that country. The ban on Cuban cigars in the United States is one example.
While a fare system is generally used to refer to the fare policies of an individual country, it can also be used to refer to fare systems between countries. A variety of these types of tariff systems are in use today, but the most common type is the harmonized tariff system. This system works to ensure that all products are classified equally. For example, some countries may consider a cotton garment to be an agricultural product because it is made from cotton. Others may see it as a textile product. The harmonized system settles the debate.
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