Introduction: Tariff and Tax in International Trade

Introduction

This resource is provided to be used as a basic learning tool for personnel new to the international procurement function in a firm. The purpose for the learning included in the document is to allow an in depth snapshot of the detail, complexity and, to some extent, the historical progression of the use and application of Tariffs and taxes in the conduct of international trade.

International trade is standardized among major trading countries. The treaties that set the applicable standards include:

  1. General Agreement on Tariffs and Trade (GATT)
  1. World Trade Organization (WTO).

GATT and WTO Agreements operate on the following principles:

  • MFN Treatment Principle —all contracting Parties are bound to grand each other treatment as favorable as they give to any country in the application and administration of import and export duties. All countries will be treated equally and all immediately partake in the benefits of any moves toward lower trade barriers.
  • National Treatment Principle —imported items from members may not be subjected to more burdensome internal taxes or regulations than are like domestic products.
  • Anti-Non-Tariff Barriers Principle —Protective barriers that aims to protect a domestic industry should not extend beyond custom tariffs or through other commercial methods
  • Tariff Concession Principle —Tariffs and other trade restrictions may only be reduced or eliminated through scheduled, unilateral, or mutually-negotiated further trade liberation(1).

Reference:

(1) Basics of The International System of Customs and Tariffs