Tariff and Non-tariff Barriers to International Trade

1. Tariff and Non-tariff
Barriers
To
International Trade
Presented By
Rashedul Kabir
Sr. Asst. Secretary, R&D, SEIP
Theoretical Part
Lecture : 2

2. Trade Barrier & Imperfect Competition
• What is Trade Barrier?
• Types of Trade Barrier
• Tariff , Non-tariff and Para tariff on Trade
• Nominal Protection & Effective
Protection
• Dumping and Dumping Remedies
• Tariffs that applied in Bangladesh
• Import Duty & Taxes Overview
• Calculating Price under Barrier

3. Introduction
• International trade is the exchange
of goods and services across the
international boarders or
territories of the world.
• This exchange gives rise to a
world economy, in which prices,
or supply and demand, affect and
are affected by global events.

4. Trade policy to Import & Export
• Trade policy is a collection of rules and regulations
which relate to trade. International Trade policies
deals with the policies of the national governments
relating to import or exports of various goods and
services in various countries either on equal terms
and conditions or on discriminatory terms and
conditions.
• Trade policies also aim at protecting the domestic
industry from the competition of the advanced
countries through imposing quotas and build
competencies by providing subsidies or by other
types of measures.

5. Instruments of Trade Policy
There are broadly two ways to control
the Trade.

6. Trade Barriers
• What is the meaning of barriers to trade?
– Basically it is one type of tax or regulation
imposed on the goods or services when they enter
or leave the national frontier or boundary. It adds
to the cost of imported and exported goods.
• What is the purpose of Trade tariffs?
– To protect the domestic industry
– To protect the Consumers interest
– To protect the domestic employment
– To support National security
– To set as a tool of Retaliation.

7. Types of Trade Barriers
Types of Trade
Barriers
Non-Tariff
Barriers
Tariff
Ad-Valorem
Duty
Specific Duty Simple Duty
Compounding
Duty
Para-Tariff

8. Various types of Trade
Barriers
• Tariff Barriers: Basically it is one type of tax imposed on the
goods or services when they enter or leave the national frontier
or boundary.
• Non- Tariff: Non-tariff measures (NTMs) are policy
measures, other than ordinary customs tariffs, that can
potentially have an economic effect on international trade
in goods, changing quantities traded, or prices or both.
• Para-Tariff: Other measures that increase the cost of imports
in a manner similar to tariff measures, i.e. by a fixed
percentage or by a fixed amount, calculated respectively on the
basis of the value and the quantity, are known as Para-tariff
measures.

9. Types of Tariff Barriers
• Ad-Valorem Duty: A duty based on the value of
imported items. Ad-valorem as a percentage of import
prices.
• Specific Duty: It is a fixed amount duty per unit of an
imported item.
• Simple Duty: A duty based either on the value of an
imported item or on the quantity of that imported item,
i.e. Ad-Valorem or Specific Duty.
• Compounding Duty: A duty based on both the value of
an imported item & the quantity of that imported item, i.e.
both Ad-Valorem & Specific Duty.

10. Nominal & Effective Protection
Nominal Protection: If a commodity is subject to an import duty
of 25 per cent ad-valorem, the nominal tariff is 25 per cent.
Effective Protection:
For example, suppose that T-Shirts sell in world markets for $8, and they are made from factors
of production worth $6. The value added of the production process is $8-$6=$2.
Suppose that a country puts a 25% tariff on imported T-Shirts so that domestic T-Shirts
producing firms can now charge up to $10 instead of $8. T-shirt assembly will occur in the
domestic country if the value added is at least $10-$6.The effective rate of protection for
domestic T-Shirt assembly firms is the change in value added: Ej=($4- $2)/$2= 100%
j
jj
j
u
uv
E



11. Non-tariff Barriers

12. Dumping and Related duties
The practice of selling goods abroad
below the price charged for the same
goods in the domestic market or at a price
below the cost of production, usually
with the aim of driving competitors out of
the market.
Dumping

13. Types of Dumping
Types of Dumping
Sporadic
dumping
Predatory
dumping
Persistent
dumping

14. Types of Dumping
• Sporadic Dumping: Occasional sale of a commodity at
below cost in order to unload an unforeseen and temporary
surplus of the commodity without having to reduce
domestic prices.
• Predatory Dumping: Temporary sale of a commodity at
below cost or a lower price abroad in order to derive foreign
producers out of business, after which prices are raised to
take advantage of the monopoly power abroad.
• Persistent Dumping: Continuous tendency of a domestic
monopolist to maximize total profits by selling the
commodity at a higher price in the domestic market than
internationally (to meet the competition of foreign rivals).

15. Case Study
• China is now aggressively expanding into these
markets and meeting resistance from governments
trying to protect their domestic industries.
• In the largest anti-dumping investigation to date
launched by one developing country against another,
India is currently accusing China of dumping silk and
satin into the Indian market.
• India says Chinese silk is dumped in its markets.
China is the world's largest producer of silk and India
is its largest market.
• The problem is that India is also a major
manufacturer of silk. Indian silk producers claim that
the price of Chinese silk in India is so low that they
cannot compete. They say the Chinese must be
"dumping", or selling their products at below what
they cost to produce.
• What is the Adverse effect? What will be the
protectionist path?

16. Measures
• Anti-dumping duty
• Countervailing duty
• Safeguard

17. Tariffs that applied in Bangladesh
 Custom Duty (CD)
 Supplementary Duty (SD)
 Regulatory Duty (RD)
 Advance Income Tax (AIT)
 Advance Trade VAT (ATV)

18. Import Duty & Taxes Overview
Import duty and taxes are due when importing goods
into Bangladesh whether by a private individual or a
commercial entity. The valuation method is CIF (Cost,
Insurance and Freight), which means that the import
duty and taxes payable are calculated on the complete
shipping value, which includes the cost of the imported
goods, the cost of freight, and the cost of insurance. In
addition to duty, imports are also subject to VAT,
Supplementary Duty, Regulatory Duty, Advance Trade
VAT, and Advance Income Tax.

19. Import Duty & Taxes Overview
• Sales Tax
VAT is levied on imports at a standard rate of 15% calculated on the sum
of the CIF value, applicable duty, supplementary duty and regulatory duty
• Minimum thresholds
There is no minimum threshold in Bangladesh. Therefore, duties and
taxes are levied on all imports regardless of their value
• Other taxes and custom fees
-Supplementary duty is applicable on certain products at rates between
0% and 500% calculated on the sum of the CIF value and corresponding
duty.
-Regulatory duty is applicable on certain products at 5% calculated on the
sum of the CIF value, the corresponding duty, and the supplementary
duty if applicable.
-Advance Trade VAT is applicable at 4% calculated on the sum of the CIF
value and corresponding duty.
-Advance Income Tax is applicable at 5% calculated on the sum of the
CIF value and corresponding duty.

20. Calculating Price under Barrier
• Suppose an importer wants to import a car whose CIF value is
$10000. The importing tariff 25% will be charged on the car
import. For your perception let assume the supplementary duty (SD)
is 45%, regulatory Duty (RD) is 5 %, Advance Trade VAT (ATV) 4
%, Advance Income Tax (AIT) 5%. So what will be the total import
value for that car?
• So at first, find out the CIFD
• CIFD = $10000 (1 + 25/100) = 12500
• SD = $ 12500 (1 + 45/100) = 18125
• RD = $ 18125 (1+ 5/100) = 19031.25
• ATV = $ 12500 * 4/100 = 500
• AIT = $ 12500 * 5/100 = 625
• Total Price excluding sales tax 20156.25

21. Trade Barrier & Imperfect Competition
• What is Trade Barrier?
• Types of Trade Barrier
• Tariff , Non-tariff and Para tariff on Trade
• Nominal Protection & Effective
Protection
• Dumping and Dumping Remedies
• Tariffs that applied in Bangladesh
• Import Duty & Taxes Overview
• Calculating Price under Barrier

22. Any ?
Thank You