Glossary of Terms: Tariff and Tax in International Trade

Glossary of Terms

Common Market

Common Market amalgamates the elements of free trade are and customs union. “It involves an agreement among two or more countries under which is established common tariff and import-related procedures for the importation of extra-regional good s and services for the free trade within the common market of goods and services, whether locally-produced or imported, without the imposition of further tariffs or custom restraints” (1).

Customs Transit

Customs procedure used to facilitate the movement of goods between two points of a customs territory, via another customs territory, or between two or more different customs territories. It allows for the temporary suspension of duties, taxes, and commercial policy measures that are applicable at import (2). This allows formalities to take place at the destination rather than the point of entry into the customs territory.

Customs Union

Customs Union is a relationship between two or more bordering countries that create a common trade barrier for all the participating countries to the entry of goods from nonmember countries. Any goods imported into the custom union region will be issued the same harmonized tariff schedule and be subjected to the same rules regarding trade. It is important to note that tariffs could be levied by the individual countries that compose the customs union for the movement of goods between country borders.

Documentary Tax

A tax that is paid as a percentage of the value of the transaction engaged in under the document being taxed. Some countries collect document taxes and fees.

Duty Types:

Free Trade

Preferential Duty (discounted)

Standard WTO Rate

Economic Union

Economic Union is an economic community where the national economic policies have been harmonized to the point where they are virtually the same. The only example of an Economic Union is the European Union.

Free Trade Agreement

Free Trade Agreement “is an arrangement between two or more countries under which they have agreed to permit some or all goods (and sometimes services) produced within one or some combination of the members to circulate within their territories free of all or most tariffs and other restrictions” (3). Identifying trading agreements between supplier country and destination country is essential data for the project.

Other Taxes

User fees, cost reimbursements, storage fees, and similar payments ostensibly to offset costs incurred by the importing government in order to service importation are sometimes assessed on imported goods (4).

Retaliatory Tariffs

Tariffs imposed on imported goods in excess of the published tariffs if the imported goods are among those against the country of origin. This excess tariff is for nonconformance by the country of origin to the detriment of the country of importation as permitted under the terms of GATT and WTO.

Rules of Origin

Non-preferential rules of origin—apply when no tariff preferences are involved or when other trade measures need to specify a particular non-tariff treatment of goods from a given country.
p. Preferential rules of origin—apply when tariff preferences are involved due to trade agreements or when other trade measures specify a particular preferential treatment for a country of origin or specific goods from a country of origin.

Surtaxes and Tariff surcharges

Tariff surcharges and other surtaxes on imported goods maybe encountered (5). A (5-10) % surcharge is identical to an additional (5-10) % tax imposed on top of the normal importation fees.


Tariff (custom duty) is a tax on the importation of particular goods. It is charged by a national government and payable to it when the item/good crosses the nation’s customs boundary. It is also important to note that in some cases there are tariffs on exported items. Nations have tariff schedules that show an absolute amount of duty to be paid on a variety of imported items/goods. The tariff schedule of destination countries will be essential data for the project.


Treaties is another notable source for the understanding the complex international system of tariffs. Treaties may “establish the bilateral free trade areas of common markets between and within two countries” (5).

Value Added Tax (VAT)

Customs duties and value added tax are expressed as a percentage (%) of the value of the goods being declared for importation. The value of imported goods is one of three elements of taxation that provides the basics for assessment of customs debt, which is the technical term for the amount of duty that has to be paid, the other ones being the origin of the goods and customs tariff (6).


(1) Basics of International Systems of Customs and Tariffs (pg. 5)


(3) Letterman, G. Gregory, Basics of International Systems of Customs and Tariffs (pg. 4) 2001

(4) The International System of Customs and Tariffs

(5) Letterman, G. Gregory. Basics of The International System of Customs and Tariffs.

Transnational Publishers, Inc. 2001