English for customs officers

excludes the operation of free market forces. Protectionist policy encourages prices to stay high and helps domestic industries to develop.

Tariff trade policy instruments

Customs tariff is the main instrument of foreign trade policy. It is also one of the oldest forms of government intervention in economic activity. The word «tariff» is Arabic in origin and it basically means «that fees need to be paid».

The levying or lifting of trade tariffs can be viewed as a significant aspect of international foreign policy.

Tariffs may differentiate among the countries from which the imports are obtained. They may, for instance, be lower between countries that have previously entered into special arrangements, such as the trade preferences accorded to each other by members of the Commonwealth.

Members of the European Union apply the common Customs tariff (CCT) to goods imported from non-EU countries.

The tariff is the name given to the combination of the nomenclature (or classification of goods) and the duty rates which apply to each class of goods. The tariff is a concept, a collection of laws as opposed to a single codified law in itself.

A tariff can be defined as a systematic set of rates of Customs duties, imposed on goods and other things as they cross national boundaries, usually by the government of the importing country. The boundary may be that of a nation or group of nations that have agreed to impose a common tax on goods entering their territory.

A tariff may be assessed in a number of ways, including directly, at the border, or indirectly, by requiring the prior purchase of a license or permit to import given quantities of the goods. The taxed goods can be anything, but for practical purposes tariffs are usually applied to items that are easily detected, classified, and measured or valued. Thus, many types of services and, of course, successfully smuggled goods tend not to be subject to such taxes.

Tariffs may be levied either to raise revenue or to protect domestic industries.

Tariffs protect domestic industries by changing the conditions under which goods compete in such a way that competitive imports are placed at a

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disadvantage. Protective tariffs are designed to shield domestic production from foreign competition by raising the price of the imported commodity.

A tariff levied primarily for protection may yield revenue. Revenue tariffs1 are designed to obtain revenue rather than to restrict imports. The revenue function comes from the fact that the income from tariffs provides governments with a source of funding. In the past, the revenue function was indeed one of the major reasons for applying tariffs, but economic development and the creation of systematic domestic tax codes have reduced its importance in the developed countries. In some developing countries, however, revenue may still be an important tariff function.

A tariff on imported goods affects supply and demand, producers, consumers and the world market by creating advantages and disadvantages for the concerned parties. Placing a tariff on imported goods has a number of clear outcomes that can be advantageous to some parties while being a significant disadvantage to others:

– promotes local products

When the government chooses to place a tariff on imported goods, the producers can choose to reduce their prices to compensate for the tariff or to pass on the cost to the consumer. When producers choose to pass on the cost to local consumers by increasing their price, it promotes national products, giving national companies a clear advantage.

– increased goverment revenue

The government collects revenue in order to economically support its function. Increased government revenue appears as a clear advantage to the country placing import tariffs on foreign goods.

– discourages trade

When national consumers choose to buy a lower-priced local product, foreign producers become disadvantaged, ultimately leading to less trade with the producing country. Foreign producers are forced to reduce their prices to compete with similar local products. They may choose not to trade as much with the producing country and import their products to other countries where there are no tariffs. A reduction in trade causes producers to make less of their product which could mean workers losing jobs in the producing country.

– reduces consumer choice

1 Фискальный (таможенный) – тариф, взимаемый прежде всего с целью пополнения бюджета, а не защиты отечественного рынка.

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Individual consumer choice remains as one of the greatest consumer benefits to international trade. When tariffs are placed on imported goods, the increased prices and reduced trade prohibit individuals from all choices that could be available in the market. In the event that national companies do not produce a product similar to the imported goods, consumers may be robbed of the opportunity to purchase a product altogether because they pushed a foreign product out of the market with a tariff.

Generally, tariffs are assessed on goods imported or brought into a country across a border. Tarrifs on goods exported also exist but are less common.

Tariffs on imports may be applied in several ways. If they are imposed according to the physical quantity of an import, they are called specific tariffs. A specific tariff is levied as a fixed fee based on the type of item (e.g., $1,000 on any car). If they are levied according to the value of the import, they are known as ad valorem tariffs. (e.g., 10% of the car's value). A combined or compound tariff is a tariff that combines both a specific and an ad valorem component.

Within the Eurasian Economic Union the Unified Customs Tariff is a set of rates of customs duties applied to goods imported into the common customs territory from third countries, classified according to the uniform Foreign Economic Activity Commodity Nomenclature (FEACN).

The Unified Customs Tariff includes the following rates of import customs duties:

ad valorem rates calculated as a percentage of the customs value of taxable goods;

specific rates calculated per unit of taxable goods;

combined rates that combines the ad valorem and specific components.

The use of import customs duties depends on the country of origin of goods.

Tariffs may be further classified into three groups: transit duties, export duties, and import duties.

A duty, charged by Customs, is a tax on goods and other things that are moved across the Customs border of the state.

A transit duty, or transit tax, is a tax levied on commodities passing through a Customs area en route to another country. Import duties are

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imposed on the goods imported to the Customs territory of a country. Similarly, an export duty, or export tax, is a tax imposed on commodities leaving a Customs area.

Non-tariff trade policy instruments

Placing tariff barriers is not enough to protect domestic industries. That is why countries resort to non tariff barriers that prevent foreign goods from coming inside the country. The introduction of non-tariff barriers is the privilege of the state government, and they are not regulated by international agreements. Governments are free to apply any kind of non-tariff barriers, which is not possible with the tariffs, regulated by the WTO. In addition, non-tariff barriers usually do not result in immediate increase of the price of the goods and, therefore, a consumer does not feel their impact in the form of a supplementary tax (introducing a tariff makes the product price increases by the amount of the duty). Non-tariff barriers can be divided into the following groups: quantitative, hidden and financial ones.

Quantitative restrictions include quotas, licensing, «voluntary» export restraints.

A quota is the most common form of non-tariff barriers. Quotas may prohibit the importation of certain commodities or limit the amounts imported. Such quotas are usually administered by requiring importers to have licences to bring in particular commodities. Quotas raise prices just as tariffs do, but, being set in physical terms, their impact on imports is direct, with an absolute ceiling set on supply. Increased prices will not bring more goods in. There are export and import quotas.

Tarrif quatas should be distinguished from import quotas. A tariff quota permits the import of a certain quantity of a commodity duty free or at a lower duty rate, while quantities ecceeding the quota are subject to a higher duty rate. An import quota, on the other hand, restricts imports absolutely. If the quantity imported under a quota is less than that which would be imported in the absence of a quota, the domestic price of the commodity in question may rise. Unless the government maintains some system of licensing importers in order to capture (as revenue) the difference between the higher domestic price and the foreign price, the importing of such commodities can prove a lucrative source of private profit.

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There is also a difference between tariffs and quotas in their effect on revenues. With tariffs, the government receives the revenue; under quotas, the import licence holders obtain a windfall in the form of the difference between the high domestic price and the low international price of the import.

The introduction of quotas brings the following economic benefits:

quotas are a more effective tool, than tariffs on import restrictions, their introduction allows imports to be kept at a constant level, despite the growth in demand that, in its turn, increases the price of a product. At the previous level of imports, domestic production and consumption increase;

quotas are an absolute value and they are inflexible to the price of a product;

they are more effective for rapid actions of administrative authorities, they are easy to manipulate (tariffs usually require the enactment of corresponding legislation);

quotas are a direct source of monopoly profits; they always increase the incomes of producers of import-substituting products; they constrain import competition (tariffs usually permit it).

Quotas are imposed by government authorities through the issuance of licenses. A license is a permission, granted by public authorities for export or import of goods in the assigned amount for a certain period of time. A license is issued by the state through the special authorized agencies.

Licensing may be in the following forms:

an integral part of the quota. In this case, a license is a document which certifies the right to import or export the goods within the obtained quota;

an independent instrument of government regulation. «Voluntary» export restraints» is a government imposed limit on the

quantity of goods that can be exported out of a country during a specified period of time. An importing country forces its trading partner to reduce voluntarily (unilaterally) the exports. The reason of a VERs implementtation is usually the statements of national producers that the importation of some product causes the losses in production and disorganization of the local market. In general, the economic effect of the introduction of voluntary export restraints by an exporter is negative for an importer. However, the amount of its losses reduces due to the increase of imports

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of similar products originating in countries, which do not impose voluntary restraints on their exports.

Hidden methods of trade restrictions allow countries to restrict exports or imports unilaterally. They include: technical barriers, internal taxes and charges, public procurement, local content requirement.

The term «technical barriers» refers to mandatory technical regulations and voluntary standards that define specific characteristics that a product should have, such as its size, shape, design, labelling / marking / packaging, functionality or performance. Technical barriers arise from the fact that national technical and administrative rules prevent the imports of goods. It occurs in such cases as:

non-correspondence of the imported goods to the enforceable standard of quality, health and safety, which are applied to the similar domestic products;

non-correspondence of agricultural products to the sanitary and phytosanitary norms, applied to prevent the imported pests and diseases that do not exist in a given country.

State and local governments may impose various direct internal taxes and charges on the imported goods with a view to enhance their internal prices and decline competitiveness in the domestic market.

The policy within the government procurement is that the public authorities and enterprises must buy certain goods only from national firms, even if these goods are more expensive than the imported ones.

The method of local content requirement involves the legal establishment of a share of the final product, which should be produced by local (national) manufacturers, in case of selling this product in the domestic market.

The purpose of financing, as a method of the international trade regulation, is discrimination of foreign companies for domestic producers and exporters by reducing the value of the exported goods and enhancing their competitiveness in the world market. Financial methods of trade policy include: dumping, subsidies, export crediting.

Dumping is the export of goods at prices lower than the cost of production, or, at least, at lower prices than in the domestic market.

Subsidy is monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest.

Governments use export credits for providing financial incentives to develop exports by domestic producers.

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The art of trading policy is to find the point of balance between two trends: free trade and protectionism. Each policy has its own advantages and disadvantages, depending on the circumstances, time and place of its applying.

EXERCISES

I. What are the synonyms from the text of the following

II. Answer the following questions.

1.What does regulation of international trade involve?

2.Can the government interfere in free trade?

3.What government practices can act as barriers to trade?

4.What is a tariff?

5.Why do tariffs usually apply to items that are easily detected, classified, and measured or valued?

6.What is the purpose of imposing a tariff?

7.What are protective tariffs designed to do?

8.What are revenue tariffs aimed at?

9.What are advantages of tariffs?

10.What are counter-arguments to the advantages of tariffs? Is tariff a negotiable instrument?

11.What are the ways in which tariffs on imports may be applied?

12.What is a transit tariff or transit duty levied on?

13.What is an export duty or export tax imposed on?

14.What are quotas usually introduced for?

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15.In what way do quotas differ from tariffs?

16.What are the economic benefits of the introduction of quotas?

17.What is licensing?

18.What are the main characteristics of hidden and financial nontariff barriers to trade?

III. Find the odd ones out.

FOLLOW-UP ACTIVITIES

I. Look at the chart and discuss with your partner in what industries different methods of distribution are possible. Has Customs anything to do with this process?

Direct method

Producer Consumer

Inderect method

Producer Wholesaler Retailer Consumer

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II. Agree or disagree with the following statements. Give your reasons.

1.The contrast between the wealth, freedom and harmony of the developed world and the poverty, oppression and discord of the developing world has never been so sharp as in the 21st century.

2.Protectionism will crumble.

3.A booming European economy will create new international markets.

4.Most major commercial barriers will be in the CIS countries.

5.East-West trade will boom.

6.A severe financial crisis will be caused by the default of a developing country.

7.International relations are shaped primarily by those states perceived to be Great Powers.1

8.The US dollar will go into a prolonged slump.

9.Customs procedures will be simplified.

10.In the last decade, political and economic changes – most spectacularly in a large number of transition and developing economics – have emphasized the values of market-based competition.

11.Policies directed at protecting and supporting «domestic» firms and products have become more difficult to implement, not least because of the difficulty of identifying «national origin» with any real meaning in a globalizing world.

12.The growing links between trade and investment as means of doing business are fundamental characteristics of globalization.

13.Market-based approaches and competition values in domestic policy are equally desirable internationally.

14.Lack of (or constraints on) market competition can give rise to international friction.

15.The scope of impediments, de jure and de facto, to market access and of distortions in the international marketplace has grown.

16.Governments should focus their attention on a more balanced, comprehensive, targeted and co-ordinated approach to market access, one that aims to promote the openness of markets to global competition.

1 A great power is a sovereign state that is recognized as having the ability to exert its influence on a global scale. Great powers characteristically possess military and economic strength, as well as diplomatic and soft power influence.

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