Learn more about customs tariffs, trade remedies and regulatory requirements
I. Introduction  
  • Customs administrations levy various charges, taxes, and duties both on imports and exports, that increase the cost of goods and, hence, affect competitiveness.

    Such customs charges may include:

    1. Customs tariffs (customs duties),
    2. In some cases, additional duties to remedy unfair trade practices (anti-dumping, countervailing, safeguard duties) or duties to preserve the balance of payments,
    3. Other charges affecting imports (ODCs, fees for formalities).

    Once goods have been subjected to the above duties and charges, they are considered imported. However, to be further cleared by customs for entry into domestic consumption, internal taxes, such as excise tax or VAT, might be collected.

    Table 1: Example of customs duties, charges, taxes and fees levied by importing country

    ATTENTION: For simplicity reasons, this example assumes that tax base for all taxes is CIF. In reality, it is more complicated (see Section IV, Table 2).

    Figure 1: A sample of duties and charges levied at customs on goods
    Figure 1: A sample of duties and charges levied at customs on goods

    The taxes, listed in the Table 1, illustrate a sample of duties and charges levied at customs on goods. These duties and charges are considered indirect taxes. In this context, the distinction between direct and indirect taxes is dually important and complex to make, as it has operational implications and combines legal and economic issues. In practice, the distinction is done through the concept of tax incidence. That concept distinguishes who collects the tax from who ultimately bears the burden of a tax, and consequently whether it is a direct or an indirect tax.

    Direct taxes are assessed on the basis of, and collected directly from, individual taxpayers. They could, as an example, be taxes on wages, profits, interests, rents, royalties, or all other forms of income taxes.

    Indirect taxes are, in contrast, levied - through seller acting as collector - on the final consumer. Examples of indirect taxes include sales, excise, turnover, value added, franchise, stamp, transfer, inventory and equipment taxes, border taxes and all taxes other than direct taxes and import charges [1].

    ITC’s Market Access Map provides information on indirect taxes only, applied on exported and imported goods.

II. Legal framework  

The WTO Agreement provides scope for the application of taxes and regulations and sets disciplines which rest on two cornerstones: non-discrimination and market access. The first cornerstone is ensured through MFN and national treatment. The other, through legally-binding commitments on market access conditions coupled with safeguarding disciplines to preserve the value of these commitments, e.g. general elimination of quantitative restrictions.

With regard to internal taxes, if inappropriately designed or implemented, they could constitute de facto discrimination against imports and reduce or eliminate the value of tariff reductions. Therefore, a fundamental WTO principle – contained in the national treatment clause, codified in GATT Article III – seeks to ensure equality of competitive conditions in terms of internal taxes and other charges and regulations between imported and like domestic products.

Regarding border measures, Article II of the GATT (Schedules of Concessions) requires WTO members not to raise a duty or charge related to the importation above a ceiling level, called bound rate – listed in their schedules of concessions. Therefore, like the customs tariffs, other duties or charges (ODCs) are applied only to imported goods and are “bound” in the same schedules of concessions [2]. The difference with internal taxes is that ODCs are applied only to imported goods, while internal taxes are levied on both domestically produced and imported products.

Finally, the WTO Agreement, in accordance with GATT Article VIII (Fees and Formalities connected with Importation and Exportation), foresees one last group of customs fees. It provides that, goods at customs could be in addition subjected to fees, charges, formalities and requirements imposed by governmental authorities in connection with importation and exportation. However, if these fees are disproportionate to the cost of services rendered and increase the bound tariff level, they might violate both Article VIII and Article II of the GATT [3].

The illustrative list of fees and formalities includes [4]:

  1. consular transactions, such as consular invoices and certificates;
  2. quantitative restrictions;
  3. licensing;
  4. exchange control;
  5. statistical services;
  6. documents, documentation and certification;
  7. analysis and inspection; and
  8. quarantine, sanitation and fumigation
III. Data collection process  

Data in Market Access Map is collected directly from the main institutions and specialized agencies (customs, taxes, revenue authorities). Networks of contacts with these institutions have been established also through the National Focal Points (NFPs), which regularly inform about the national legislations on customs tariffs and internal taxes in effect. Another source of information is through members’ permanent missions to the United Nations and other IOs in Geneva.

The process of data collection is in three stages. First, tax collectors find or update Market Access Map’s tax regulations on a country basis. Second, tax analysts classify taxes and code tax formulas, valuation basis, general rule, exceptions (reductions and exemptions), as well as HS products covered by general rule and all exceptions. Third and last, tax statisticians process all supporting data files and perform data quality checks.

The final step before uploading the data on the application consists of a series of verifications to ensure the quality and the completeness of the data.

IV. Classification of indirect taxes  
  • As discussed in the previous section above, taxes are generally classified as direct and indirect. Below is a business taxonomy of indirect taxes that are those born by economic agents and levied through intermediaries as collectors (e.g. VAT). While in the case of direct taxes, they are collected directly from its payers (e.g. income tax).

    Figure 2: A business taxonomy of indirect taxes that are those born by economic agents and levied through intermediaries as collectors
    A business taxonomy of indirect taxes that are those born by economic agents and levied through intermediaries as collectors

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