What are customs duties? How do they work in controlling imported goods?
What will be an ideal response?
There are two main categories of customs duties. Their calculation method is the differentiating factor. They may be calculated either as a percentage of the value of the goods (ad valorem duty), as a specific amount per unit (specific duty), or as a combination of both of these methods. An ad valorem duty is expressed as a percentage of the value of goods. The definition of customs value varies from country to country. An exporter has to determine the duty applicable and the method used for calculations. For countries under GATT conventions the customs value is landed cost, insurance, and freight amount at the port of importation. On the other hand, a specific duty is expressed as a specific amount of currency per unit of weight, volume, length, or other unit of measurement. Specific duties are usually expressed in the currency of the importing country, but there are exceptions, particularly in countries that have experienced sustained inflation. Both ad valorem and specific duties are occasionally set out in the custom tariff for a given product. Compound or mixed duties provide for specific, plus ad valorem, rates to be levied on the same articles.
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