CHANAKYA NATIONAL LAW UNIVERSITY, PATNA
CUSTOM DUTIES AS TRADE BARRIERS
Subject- Indirect Tax
Faculty - Submitted by:Mr. G.P. Pandey Name Shrey Apoorv
Semester - 8th Roll No - 5463ACKNOWLEDGEMENT
It is my greatest pleasure to be able to present the project
topic Custom Duties as trade barriers of Indirect Tax. It very
interesting to work on this project.
I would like to thank my teacher, Mr. G.P. Pandey, for providing
me with such an interesting project topic and for his constant
support and guidance.
I would also like to thank my librarian for helping me in
gathering data for the project. Last, but not the least, I would
heartily thank my family and friends for their unwavering support
without which this work would not have been possible.
I hope that the readers will appreciate this project work.
Shrey Apoorv
RESEARCH METHODOLOGYMethod of ResearchThe researcher has adopted
a purely doctrinal method of research. The researcher has made
extensive use of the library at the Chanakya National Law
University.Aims and Objectives:The aim of the project is to present
a detailed study and analysis of the Custom duties as Trade
Barrier
Sources of Data:The following secondary sources of data have
been used in the project-1. Books1. Websites
Method of Writing:The method of writing followed in the course
of this research paper is primarily analytical.
Mode of Citation:The researcher has followed a uniform mode of
citation throughout the course of this research paper
INRODUCTION TO TRADE BARRIESTrade barriersare government-induced
restrictions oninternational trade.[1]The barriers can take many
forms, including the following: Tariffs Non-tariff barriers to
trade Import licenses Export licenses Import quotas Subsidies
Voluntary Export Restraints Local content requirements Embargo
Currency devaluation[2] Trade restrictionMost trade barriers work
on the same principle: the imposition of some sort ofcoston trade
that raises the price of the tradedproducts. If two or more nations
repeatedly use trade barriers against each other, then atrade
warresults.Economists generally agree that trade barriers are
detrimental and decrease overalleconomic efficiency, this can be
explained by thetheory of comparative advantage. In theory,free
tradeinvolves the removal of all such barriers, except perhaps
those considered necessary for health or national security. In
practice, however, even those countries promoting free trade
heavily subsidize certain industries, such
asagricultureandsteel.Trade barriers are often criticized for the
effect they have on the developing world. Because rich-country
players call most of the shots and set trade policies, goods such
as crops that developing countries are best at producing still face
high barriers. Trade barriers such as taxes on food imports or
subsidies for farmers in developed economies lead to overproduction
and dumping on world markets, thus lowering prices and hurting
poor-country farmers. Tariffs also tend to be anti-poor, with low
rates for raw commodities and high rates for labor-intensive
processed goods. TheCommitment to Development Indexmeasures the
effect that rich country trade policies actually have on the
developing world.Another negative aspect of trade barriers is that
it would cause a limited choice of products and would therefore
force customers to pay higher prices and accept inferior quality.
Trade barriers may occur in international trade when goods have to
cross political boundaries. A trade barrier is a restriction on
what would otherwise befree trade.The most common form of trade
barriers are tariffs, or duties (the two words are often used
interchangeably in the context of international trade), which are
usually imposed on imports. There is also a category of nontariff
barriers, also known as nontariff measures, which also serve to
restrict global trade.There are several different types of duties
or tariffs. An exportdutyis ataxlevied on goods leaving a country,
while an import duty is charged on goods entering a country. A duty
or tariff may be categorized according to how it is calculated. An
ad valorem tariff is one that is calculated as a percentage of the
value of the goods being imported or exported. For example, a 20
percent ad valorem duty means that a duty equal to 20 percent of
the value of the goods in question must be paid. Duties that are
calculated in other ways include a specific duty, which is based on
the quantity, weight, or volume of goods, and a compound duty (also
known as a mixed tariff), which is calculated as a combination of
an ad valorem duty and a specific duty.Duties and tariffs are also
categorized according to their function or purpose. An antidumping
duty is imposed on imports that are priced below fair market value
and that would damage domestic producers. Antidumping duties are
also called punitive tariffs. A countervailing duty, another type
of punitive tariff, is levied after there has been substantial or
material damage done to domestic producers. A countervailing duty
is specifically charged on imports that have been subsidized by the
exporting country's government. The purpose of a countervailing
duty is to offset thesubsidyand increase the domestic price of the
imported product.A prohibitive tariff, also known as an
exclusionary tariff, is designed to substantially reduce or stop
altogether the importation of a particular product or commodity. It
is typically used when the amount of an imported good exceeds a
certain permitted level. It may be used to protect domestic
producers. Another type of tariff is the end-use tariff, which is
based on the use of an imported product. For example, the same
product may be charged a different duty if it is intended for
educational use as opposed to commercial use.In addition to duties
and tariffs, there are also nontariff barriers (NTBs) to
international trade. These include quantitative restrictions, or
quotas, that may be imposed by one country or as the result of
agreements between two or more countries. Examples of quantitative
restrictions include international commodity agreements, voluntary
export restraints, and orderly marketing
arrangements.Administrative regulations constitute a second
category of NTBs. These include a variety of requirements that must
be met in order for trade to occur, including fees, licenses,
permits, domestic content requirements, financial bonds and
deposits, and government procurement practices. The third type of
NTB covers technical regulations that apply to such areas as
packaging, labeling, safety standards, and multilingual
requirements.In 1980 the Agreement on Technical Barriers to Trade,
also known as the Standards Code, came into effect for the purpose
of ensuring that administrative and technical practices do not act
as trade barriers. By the end of 1988 the agreement had been signed
by 39 countries. Additional work on promoting unified standards to
eliminate these NTBs was conducted by theGeneral Agreement on
Tariffs and Trade(GATT) Standards Committee, which in 1994 was
succeeded by the newly createdWorld Trade Organization(WTO). As a
result more than 131 governments accepted the provisions of the
Technical Barriers to Trade (TBT) Agreement enforced by the
WTO.Standards and testing practices can become technical barriers
to trade when they are developed by national or regional interests
and then imposed on the international trading. TheU.S. Department
of Commerce's 1998 report, "National Export Strategy," identified
"the global manipulation of international standards and testing
practices by governments and regional economic blocs" as a major
threat to U.S. competitiveness abroad. Under the TBT Agreement the
WTO is supposed to guarantee due process and transparency in the
establishment of international standards. The Department of
Commerce, however, has presented examples where narrow regional or
market interests have resulted in standards forced on international
trade, and governments and regional economic blocs such as
theEuropean Union(EU) have openly used standards and related
practices to achieve market domination. The United States was among
those countries calling for technology- and trade neutral
standards, especially for markets in Latin America and Asia.Other
types of existing technical trade barriers include environmental,
health, and safety certification requirements. In Europe such
requirements range from banning imported beef from cattle raised
with hormones to not allowing older airplanes to land because of
noise pollution concerns.
Types of Tariffs and Trade Barriers
There are several types of tariffs and barriers that a
government can employ:Specific tariffs Ad valorem tariffs Licenses
Import quotas Voluntary export restraints Local content
requirements SpecificTariffs
A fixed fee levied on one unit of an imported good is referred
to as a specific tariff. This tariff can vary according to the type
of good imported. For example, a country could levy a $15 tariff on
each pair of shoes imported, but levy a $300 tariff on each
computer imported.
Ad Valorem Tariffs
The phrase ad valorem is Latin for "according to value", and
this type of tariff is levied on a good based on a percentage of
that good's value. An example of an ad valorem tariff would be a
15% tariff levied by Japan on U.S. automobiles. The 15% is a price
increase on the value of the automobile, so a $10,000 vehicle now
costs $11,500 to Japanese consumers. This price increase protects
domestic producers from being undercut, but also keeps prices
artificially high for Japanese car shoppers.
TARIFF AND NON TARIFF BARRIERSTariffs include any schedule of
duties imposed on goods passing through national frontiers. They
may be 0. Import duties imposed on goods imported into the
country0. Exports duties imposed on goods originating from the duty
levying country and exported to other countries.0. Transit duties
levied on goods crossing the national frontiers, originating from
abroad and meant for some other country.Among all these duties the
most important are the import duties
Effective tariffsTariffs are imposed on imports on or the other
basis as mentioned above. Tariff which is imposed on the basis of
value of a commodity is a nomnal tariff. For example on an import
of manufactures a tariff of 20 percent is nominal tariff. Tariffs
on imports may differ depending on the type of a commodity or the
stage of manufacturing process that a commodity has undergone.It is
possible a raw material may have no or very low tariff. The rate of
tariff may increase as the commodity undergoes higher states of
manufacturing process where the value added increases. Raw
materials like cotton, leather, rubb er etc.may not attract much
tariff where as their final products will be subject to higher
percentage of tariff.Domestic producers are usually protected by a
higher rate of tariffs on final goods and a very low rate on
imports of inputs. This encourage the manufacturing of final goods
at home by importing the required inputs.The effective tariff rate
refers to The value of protection provided to a particular process
of production by the given nominal tariffs on a product and on
material inputs used inits production. The process of production
involves adding up values to the initial input in the form of raw
material. Larger the difference in the value of raw materials and
final output greater is the degree of effective tariff thereof. The
effective tariff rate, or the effective rate of protection, is the
percentage increase in an industrys value added per unit of output
that results from a countrys tariff structure . The standard of
comparison is value added under free trade.
Tariff and Non Tariff Barriers
1. Tariff and Non Tariff Barriers Overview
2. Trade Barriers Used to encourage and protect existing
domestic industry Trade barriers are Tariffs that Increase Trade
Weaken Trade Restrict Trade Quotas Boycotts and Embargoes .
3. Impact of Tariff (Tax) Barriers Tariff Barriers tend to
Increase : Inflationary pressures Special interests privileges
Government control and political considerations in economic matters
The number of tariffs they beget via reciprocity Tariff Barriers
tend to Weaken : Balance-of-payments positions Supply-and-demand
patterns International relations (they can start trade wars)
4. Non Tariff - Trade Barriers Non Tariff barriers - are another
way foran countryto control the amount of trade thatit conducts
with another country, either for selfish or altruistic purposes.
Any barrier to trade creates an economic loss, which means it does
not allow the markets to function properly.
5. Six Types of Non-Tariff Barriers 2) Customs and
Administrative Entry Procedures: Valuation systems Antidumping
practices Tariff classifications Documentation requirements Fees 1
) Specific Limitations on Trade Quotas Import Licensing
requirements Proportion restrictions of foreign to domestic goods
(local content requirements) Minimum import price limits Embargoes.
6. Six Types of Non-Tariff Barriers (cont'd.) (3) Standards:
Standard disparities Intergovernmental acceptances of testing
methods and standards Packaging, labeling, and marking ( 4)
Government Participation in Trade: Government procurement policies
Export subsidies Countervailing duties Domestic assistance programs
.
7. Six Types of Non-Tariff Barriers (cont'd.) 5) Charges on
imports: Prior import deposit subsidies Administrative fees Special
supplementary duties Import credit discriminations Variable levies
Border taxes 6) Others: Voluntary export restraints Orderly
marketing agreements 8. New Zealand's apples account for a third of
its agricultural exports but have been banned from Australia since
1921 due to fears about the spread of fire blight, a crop pest.
Apples Banned - Non Tariff Barrier By Doug Latimer in Sydney
Published: 1:00AM BST 13 Apr 2010
9. Mangoes Philippines Restrictions It is a common practice in
many countries to use non-tariff barriers to control the entry of
imports. For instance, Philippine mangoes and bananas have to meet
strict phytosanitary requirements from the US and Australia. 10.
McDonald France Big Beef McDonalds France in 1998, ran a print ad
campaign featuring overweight cowboys complaining about the fact
that McDonald's France refuses to buy American beef but uses only
French, to "guarantee maximum hygienic conditions" an unsubtle
effort to identify the Global
Tariffs and Non-Tariff MeasuresUnder the WTO's Doha Development
Agenda, the non-agricultural market access (NAMA) negotiating
groups mandate is "to reduce, or as appropriate, eliminate tariffs,
including the reduction or elimination of tariff peaks, high
tariffs, and tariff escalation, as well as non-tariff barriers, in
particular on products of export interest to developing countries.
Product coverage shall be comprehensive and without a priori
exclusions. The negotiations shall take fully into account the
special needs and interests of developing and least-developed
country participants, including through less than full reciprocity
in reduction commitments.Tariff Barriers:By late June 2006, there
was an emerging consensus that the best mechanism to achieve the
Doha mandate would be a Swiss formula applied to all tariff lines,
with two coefficients (one for developed countries and one for
developing countries) that would reduce high tariffs by
proportionately more than low ones. Canada favours a Swiss formula
with an aggressive (low) coefficient for developed countries in
order to improve our access to those markets, as well as a
developing country coefficient that, while somewhat higher, would
still deliver meaningful gains in major emerging markets.To take
ambition beyond what a formula would likely achieve, Canada is a
leading supporter of sectoral agreements, in which tariffs for
certain industrial sectors would completely eliminated or at least
harmonized and reduced by greater-than-formula cuts. Canada has
proposed agreements for forest products, fish and fish products,
chemicals (including fertilizers) and raw materials, and other
members sectoral proposals are also being considered. We have been
advocating high ambition by all members with respect to
environmental goods, in keeping with the Doha mandate.
NON TARIFF BARRIERSNon-tariff barriers to trade (NTBs) are trade
barriers that restrict imports but are not in the usual form of a
tariff. Some common examples of NTB's are anti-dumping measures and
countervailing duties, which, although they are called "non-tariff"
barriers, have the effect of tariffs once they are enacted.Their
use has risen sharply after the WTO rules led to a very significant
reduction in tariff use. Some non-tariff trade barriers are
expressly permitted in very limited circumstances, when they are
deemed necessary to protect health, safety, or sanitation, or to
protect depletable natural resources. In other forms, they are
criticized as a means to evade free trade rules such as those of
the World Trade Organization (WTO), the European Union (EU), or
North American Free Trade Agreement (NAFTA) that restrict the use
of tariffs.Some of non-tariff barriers are not directly related to
foreign economic regulations, but nevertheless they have a
significant impact on foreign-economic activity and foreign trade
between countries.Trade between countries is referred to trade in
goods, services and factors of production. Non-tariff barriers to
trade include import quotas, special licenses, unreasonable
standards for the quality of goods, bureaucratic delays at customs,
export restrictions, limiting the activities of state trading,
export subsidies,countervailing duties, technical barriers to
trade, sanitary and phyto-sanitary measures, rules of origin,
etc.Sometimes in this list they include macroeconomic measures
affecting trade.
Non-tariff barriers today
With the exception of export subsidies and quotas, NTBs are most
similar to the tariffs. Tariffs for goods production were reduced
during the eight rounds of negotiations in the WTO and the General
Agreement on Tariffs and Trade (GATT). After lowering of tariffs,
the principle of protectionism demanded the introduction of new
NTBs such as technical barriers to trade (TBT). According to
statements made at United Nations Conference on Trade and
Development (UNCTAD, 2005), the use of NTBs, based on the amount
and control of price levels has decreased significantly from 45% in
1994 to 15% in 2004, while use of other NTBs increased from 55% in
1994 to 85% in 2004.Increasing consumer demand for safe and
environment friendly products also have had their impact on
increasing popularity of TBT. Many NTBs are governed by WTO
agreements, which originated in the Uruguay Round (the TBT
Agreement, SPS Measures Agreement, the Agreement on Textiles and
Clothing), as well as GATT articles. NTBs in the field of services
have become as important as in the field of usual trade.Most of the
NTB can be defined as protectionist measures, unless they are
related to difficulties in the market, such as externalities and
information asymmetries information a symmetries between consumers
and producers of goods. An example of this is safety standards and
labelling requirements.The need to protect sensitive to import
industries, as well as a wide range of trade restrictions,
available to the governments of industrialized countries, forcing
them to resort to use the NTB, and putting serious obstacles to
international trade and world economic growth. Thus, NTBs can be
referred as a new of protection which has replaced tariffs as an
old form of protection.
TRENDS IN TARIFF AND NON TARIFF BARRIERS
Although trade barriers are conventionally separated into tariff
and non-tariff measures, this rather simple categorization often
obscures a very broad array of individual measures that are
potential trade barriers. Bourke (1988) provides a more
comprehensive classification of trade measures that are relevant to
the global forest products trade: Specific limitations on trade -
quantitative restrictions, export restraints, health and sanitary
regulations, licensing, embargoes, minimum price regulations, etc.
Charges on imports - tariffs, variable levies, prior deposits,
special duties on imports, internal taxes, etc. Standards -
industrial standards, packaging, labelling and marking regulations,
etc. Government interventions in trade - government procurement,
stock trading, export subsidies or taxes, countervailing duties,
trade diverting aid, etc. Customs and administrative entry
procedures - customs valuation, customs classification,
anti-dumping duties, consular and customs formalities and
requirements, sample requirements, etc.Such a range of trade
measures is clearly diverse. Whether any implemented measure
actually is a fully fledged trade barrier - i.e. whether it
intentionally or unintentionally leads to discrimination against or
restriction of trade - will depend on the circumstances in which
the specific measure is employed. This will clearly vary from
country to country as well as from product to product, which makes
it extremely difficult to analyze and quantify the potential
effects on trade of the use of such measures.
Trends in Non-Tariff Barriers
While tariffs applied to global forest products trade may have
been declining as a result of the Tokyo Round negotiations and
during the lead up to the Uruguay Round, non-tariff measures have
proliferated. Table 1 indicates the extent to which the general
direction of movement in non-tariff trade barriers to forest
products has been the opposite to the reductions in tariff
barriers. Most alarming is that, although many non-tariff import
barriers were generally static or declining in the 1979-85 period
just after the Tokyo Round, since 1985 there has been a general
increase in the use of such barriers. However, whether the recent
trend of increasing non-tariff import measures has had a
significant impact on the forest products trade has again proved
difficult to determine. Some of the more important measures
include: The use of tariff quota/ceiling system by the European
Economic Community (EEC) and Japan. The EEC quantitative
restrictions were applied to a wide range of forest products,
including newsprint, fibre-building boards, plywood (separate ones
for coniferous and non-coniferous), builder's woodwork and some
furniture items. A number of quality controls and quantitative
restrictions have been applied to plywood and veneer in Japan. EEC
phytosanitary standards. Imports of all green coniferous softwood
were prohibited to most EEC countries unless they were either
kiln-dried at 56o C or received a phytosanitary certificate. US
countervailing duties on Canadian softwood lumber. In July 1992 the
US International Trade Commission determined that Canadian softwood
lumber was being subsidized through low stumpage prices for logs
and export rest
Tariff reduction and the growth of international tradeFor goods
and services alike, international trade grew dramatically in the
second half of the 20th century. By the year 2000, total world
trade was 22 times greater than it had been in 1950.This increase
in multilateral international trade occurred at the same time that
trade barriers, especially tariffs, were reduced or in some cases
eliminated across the globe. A major impetus to the global growth
of trade was the General Agreement on Tariffs and Trade (GATT), a
series of trade agreements adopted in 1948. The system created
under GATT encouraged a series of trade negotiations focused on
tariff reductions. The early trade agreements were largely directed
toward tangible goods such as agricultural products, processed
foods, steel, and automobiles. A round of negotiations known as the
Uruguay Round (198694) finally led to the creation of the World
Trade Organization (WTO) in 1995.Advances in information technology
since the 1990s have altered the focus of many trade agreements. In
1997 the WTOs Information Technology Agreement (ITA) and Basic
Telecommunications Agreement (BTA) reduced the tariffs on computer
and telecommunications products and some intangible goods
considered to be drivers of the developing knowledge-based economy.
The rapid growth of the Internet and electronic commerce
(e-commerce) represented some of the most challenging new issues in
the international trade arena, in part because many countries were
slow to adopt bilateral free-trade agreements that included
provisions covering e-commerce.The ITA and the BTA represented a
dramatic departure from earlier national economic policies,
especially in cases where countries used prohibitively high tariffs
and subsidies to protect their technology industries from foreign
competitors. Free-trade advocates and the WTO have held that
WTO-sponsored agreements offer the best means of providing lower
prices for consumers across a wide array of products while creating
fairer competitive conditions for international suppliers.The work
of the WTO came under increasing scrutiny from its critics,
especially after 1999, when trade talks were disrupted by
globalization protesters during the WTO ministerial conference in
Seattle, Washington.
Trade Freedom
Trade freedom is a composite measure of the absence of tariff
and non-tariff barriers that affect imports and exports of goods
and services. The trade freedom score is based on two inputs: The
trade-weighted average tariff rate and Non-tariff barriers
(NTBs).Different imports entering a country can, and often do, face
different tariffs. The weighted average tariff uses weights for
each tariff based on the share of imports for each good. Weighted
average tariffs are a purely quantitative measure and account for
the basic calculation of the score using the following
equation:Trade Freedomi = (((TariffmaxTariffi )/(TariffmaxTariffmin
)) * 100) NTBiwhere Trade Freedomi represents the trade freedom in
country i; Tariffmax and Tariffmin represent the upper and lower
bounds for tariff rates (%); and Tariffi represents the weighted
average tariff rate (%) in country i. The minimum tariff is
naturally zero percent, and the upper bound was set as 50 percent.
An NTB penalty is then subtracted from the base score. The penalty
of 5, 10, 15, or 20 points is assigned according to the following
scale: 20NTBs are used extensively across many goods and services
and/or act to effectively impede a significant amount of
international trade. 15NTBs are widespread across many goods and
services and/or act to impede a majority of potential international
trade. 10NTBs are used to protect certain goods and services and
impede some international trade. 5NTBs are uncommon, protecting few
goods and services, and/or have very limited impact on
international trade. 0NTBs are not used to limit international
trade.
Trade Problems for Developing Countries
Developing countries believe they get a raw deal when it comes
to international trade. These problems include Relying on only one
or two primary goods as their main exports They cannot control the
price they get for these goods The price they pay for manufactured
goods increases all the time As the value of their exports changes
so much long term planning is impossible Increasing the amount of
the primary good they produce would cause the world price to fall
.
Developing countries that try to export manufactured goods find
that trade barriers are put in their way. There are two types of
trade barrier - quotas and tariffs. 1. A quota is a limit on the
amount of goods a country can export to another country 1. A tariff
is a tax on imports Other problems that developing countries face
are they are short of the money that is needed to set up new
businesses and industries. Also, developing countries have fewer
people who have the wealth to buy the goods made in local
industries.
CUSTOM DUTY Custom duties are levied on theimported goods and in
a few cases on export goods atthe rates specified in the schedules
to the Customs and Tariff Act, 1975. The taxable event is import
into or export from India.Import duties generally consist of the
following Basic Duty Additional Custom Duty equal to Central Excise
duty leviable on like goods produced or manufactured in India.
Countervailing Duty Surcharge @ 10% of Basic Duty Special
Additional Duty @ 4% to be computed on the aggregate of (i)
assessable value, (ii) basic duty, (iii) surcharge and (iv)
additional duty of Customs Additional duty of Customs @ Rs. 1/- per
litre on imported motor spirit (petrol) and high speed diesel oil.
Anti dumping duty/safeguard duty for import of specified
goods.ValuationMost of the Customs duties are .ad valorem. Goods
have, therefore, to be valued for purposes of assessment. Valuation
Rules, 1988 follow the GATT provisions thereunder the norm is the
transaction value or invoice price but the invoice value to be
acceptable should be a fully commercial and genuine price. Where
the Customs Officer has reasonable doubt about the truth and
accuracy of the declared transaction value (grounds for which,
will, at the request of the importer be intimated to him), he may
ask the importer to furnish further information and evidence to
substantiate the declared transaction value and in the event of the
importers failure to do so, he may after hearing the importer
reject the declared transaction value and proceed further under the
Valuation Rules.Date for Determination of valueThe relevant date
for determination of value for the purpose of assessment of Customs
duty under Section 14 of the Customs Act, 1962, is the date of
importation or exportation and not the date of contract between the
buyer and the seller.Reliance on prices in other invoices is
permissible only if imports chosen for comparison are
contemporaneous, are of same quality and specification and from
same manufacturer and country of productions, size of the
comparable consignment(s) is more or less similar and importers
belong to same commercial level (i.e class of buyers).Where several
contemporaneous import values are available, the lowest of the
values has to be accepted. But where the declared price is very low
and totally unrealistic, it may even be necessary to value
unbranded goods on the basis of the known price of branded goods
and also the goods of one country or origin (or manufacturer) on
the basis of the known price of the goods of another country of
origin (or manufacturer). In case of high seas sale, it is the high
seas sale price inclusive of canalising agencys service which would
form the basis of assessment.Proforma invoice/quotation being only
an offer for sale of goods at the price mentioned therein is a
relevant evidence for sale price.Unless the invoice price already
includes ocean freight and insurance, these elements have to be
added as under as per Notification No.39/90-Cus.(N.T.) to make it
C.I.F value:-i) For Air Cargo : Actual air freight, but not
exceeding 20% of f.o.b valueii) Where actual sea/air freight is not
ascertainable : 20% of f.o.b valueiii) Where actual insurance is
not ascertainable : 1.125% of f.o.b valueWhere goods are generally
imported by sea but due to urgent demand they were imported by air,
only sea freight is to be added. Insurance charges paid on the
Customs duty are, however, not includible in the assessable value
since they relate to post-importation factor. Landing charges
realized by Port authorities have also to be added at the
prescribed flat rate of 1% of C.I.F value, or on actual basis
unless seller or his agent is under obligation to bear it as part
of CIF value.Loading on account of royalty or foreign collaboration
fee (now reduced to 1% of value of the goods) is permissible only
if such royalty etc. payment has nexus with the imported goods,
pending verification of books of accounts and influence of
relationship on price.Regarding agency commission, where the Indian
importer checked the quotations of all proposed suppliers and
finally approved the supplier party (out of those listed by his
agent abroad) and entered into purchase transaction directly with
the selected supplier, procurement charge or commission of 3% paid
to foreign agent was held to be not includible in assessable value.
Interest amount (charged for delayed payments made after the
permitted credit period of 90 days) was held to be not includible
in assessable value. Board has also accepted that interest charged
to importers by foreign suppliers under deferred payment scheme is
not addable to assesssable value provided such interest charges are
shown separately in the invoice, there is no special relationship
between the importer and the exporter and there is no evidence that
the interest has influenced the sale price. Government has the
power to fix tariff values for goods in which case duty is assessed
on such tariff value. For goods found damaged or deteriorated
before clearance, proportionate abatement in value is
allowable.Imports of second hand machinery of value above Rs.10
lakhs require a Certificate from an internationally reputed
inspection and certification agency/Chartered Engineer. In case of
import of second-hand plant, charges for dismantling, packing,
forwarding, insurance and compulsory inspection expenses incurred
in the country of export are includible in assessable value.For
calculating additional Customs duty, the value base would comprise
of the transaction value CIF plus basic Customs duty plus
anti-dumping duty plus surcharge.Date of determination of rate of
dutyThe rates of duty and tariff values as in force on the date of
presentation of Bill of entry for home consumption will be the rate
applicable for rate of duty. However, there are two exceptions to
it so far as rate of duty and tariff value are concerned. In case
the bill of entry has been filed in advance of entry inwards of the
vessel or the arrival of the aircraft, the crucial date will be the
date of entry inwards of the vessel or the date of arrival of the
aircraft. Secondly, in the case of clearance of goods from a bonded
warehouse, the date of actual removal of goods from the warehouse
is the crucial date provided the goods are removed during the
permitted warehousing period (including extension allowed, if any).
But once the permitted warehousing period expires, the goods cease
to be warehoused goods and they are deemed to be improperly removed
from the warehouse. The rate of duty applicable in that case will
be the rate prevalent on the date when the warehousing period
(including permitted extension) came to an end.As regards exchange
rate, the rate notified by the Government and as in force on the
date of presentation of the bill of entry (for home consumption or
for warehousing) will be the one applicable.
ConclusionTrade barriers may occur in international trade when
goods have to cross political boundaries. A trade barrier is a
restriction on what would otherwise befree trade.The most common
form of trade barriers are tariffs, or duties (the two words are
often used interchangeably in the context of international trade),
which are usually imposed on imports. There is also a category of
nontariff barriers, also known as nontariff measures, which also
serve to restrict global trade. Tariffs and other trade barriers
have a definite effect on consumption and production. They serve to
reduce consumption of the imported product, because the tariff
raises the domestic price of the import. They also serve to
stimulate domestic production of the product when that is possible,
also because of the higher domestic price. Proponents of tariffs
argue that such an increase in domestic production is desirable,
while opponents argue that it is inefficient from an economic
standpoint. The overall effect of tariffs and trade barriers on
international trade is to reduce the volume of trade and to
increase the prices of imports. Proponents of free trade argue that
both of those results are undesirable, while proponents of
protectionism argue that tariffs may be necessary for a variety of
reasons.
Tariff barriers to forest products trade have continued to
decline in recent years, particularly in the post-Tokyo Round era.
The extent of the decline in tariffs differs with the market and
product. In developed country markets tariff rates had fallen
generally to very low levels even before the Uruguay Round
schedules were agreed. However, tariff escalation has continued in
most developed countries, with specific products such as wood-based
panels, builders' joinery, coated and corrugated paper, kraft, and
furniture generally receiving relatively higher rates.Compared to
developed country markets, tariff rates have consistently been
higher in developing country markets. Although tariff escalation is
a feature in most markets, some developing countries have preferred
a high uniform rate to applied across all forest products.One
important impact of the decline in tariff rates for forest products
in developed country markets is that the tariff differential
between MFN and GSP rates has been reduced significantly. Most
tariff reductions have led to a general decline in the MFN rate,
while the GSP rate has been left largely unchanged. This suggests
that exporters facing the full MFN rates may have gained more from
falling forest products tariff rates than developing countries that
previously benefitted from GSP and other preferential schemes. This
effect is examined explicitly in the analysis of the effects on the
forest products trade of the Uruguay Round tariff reductions in
Section.
BIBLIOGRAPHYBOOKS REFERRED Rao, M. Govinda. "Tax reform in
India: achievements and challenges Pursell, Garry. "Trade policies
in India." Ahluwalia, Montek S. "India's quiet economic
revolution." Lee, Jong-Wha, and Phillip Swagel. "Trade barriers and
trade flows across countries and industries." Laird, Sam, and
Alexander J. Yeats. Quantitative methods for trade-barrier
analysis. Macmillan.
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