CHANAKYA NATIONAL LAW UNIVERSITY,

PATNA

CUSTOM DUTIES AS TRADE BARRIERS

Subject- Indirect Tax

Faculty Mr. G.P. Pandey

Submitted by:
Name Shrey

Apoorv
Semester 8th

Roll No 5463

ACKNOWLEDGEMENT

It is my greatest pleasure to be able to present the project topic Custom

Duties as trade barriers of Indirect Tax. It very interesting to work on this
project.

I would like to thank my teacher, Mr. G.P. Pandey, for providing me with
such an interesting project topic and for his constant support and
guidance.

I would also like to thank my librarian for helping me in gathering data for
the project. Last, but not the least, I would heartily thank my family and
friends for their unwavering support without which this work would not
have been possible.

I hope that the readers will appreciate this project work.

Shrey Apoorv

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RESEARCH METHODOLOGY

Method of Research
The researcher has adopted a purely doctrinal method of research. The
researcher has made extensive use of the library at the Chanakya
National Law University.
Aims and Objectives:
The aim of the project is to present a detailed study and analysis of the
Custom duties as Trade Barrier

Sources of Data:
The following secondary sources of data have been used in the project1 Books
2 Websites

Method of Writing:
The method of writing followed in the course of this research paper is
primarily analytical.

Mode of Citation:
The researcher has followed a uniform mode of citation throughout the
course of this research paper

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INRODUCTION TO TRADE BARRIES

Trade barriers are government-induced restrictions on international trade.[1] The barriers can
take many forms, including the following:

Tariffs

Non-tariff barriers to trade

Import licenses

Export licenses

Import quotas

Subsidies

Voluntary Export Restraints

Local content requirements

Embargo

Currency devaluation[2]

Trade restriction

Most trade barriers work on the same principle: the imposition of some sort of cost on trade
that raises the price of the traded products. If two or more nations repeatedly use trade
barriers against each other, then a trade war results.
Economists generally agree that trade barriers are detrimental and decrease overall economic
efficiency, this can be explained by the theory of comparative advantage. In theory, free
tradeinvolves the removal of all such barriers, except perhaps those considered necessary for
health or national security. In practice, however, even those countries promoting free trade
heavily subsidize certain industries, such as agriculture and steel.

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Trade barriers are often criticized for the effect they have on the developing world. Because
rich-country players call most of the shots and set trade policies, goods such as crops that
developing countries are best at producing still face high barriers. Trade barriers such as taxes
on food imports or subsidies for farmers in developed economies lead to overproduction and
dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs
also tend to be anti-poor, with low rates for raw commodities and high rates for laborintensive processed goods. The Commitment to Development Index measures the effect that
rich country trade policies actually have on the developing world.
Another negative aspect of trade barriers is that it would cause a limited choice of products
and would therefore force customers to pay higher prices and accept inferior quality. Trade
barriers may occur in international trade when goods have to cross political boundaries. A
trade barrier is a restriction on what would otherwise be free trade. The most common form
of trade barriers are tariffs, or duties (the two words are often used interchangeably in the
context of international trade), which are usually imposed on imports. There is also a
category of nontariff barriers, also known as nontariff measures, which also serve to restrict
global trade.
There are several different types of duties or tariffs. An export duty is a tax levied on goods
leaving a country, while an import duty is charged on goods entering a country. A duty or
tariff may be categorized according to how it is calculated. An ad valorem tariff is one that is
calculated as a percentage of the value of the goods being imported or exported. For example,
a 20 percent ad valorem duty means that a duty equal to 20 percent of the value of the goods
in question must be paid. Duties that are calculated in other ways include a specific duty,
which is based on the quantity, weight, or volume of goods, and a compound duty (also
known as a mixed tariff), which is calculated as a combination of an ad valorem duty and a
specific duty.
Duties and tariffs are also categorized according to their function or purpose. An antidumping
duty is imposed on imports that are priced below fair market value and that would damage
domestic producers. Antidumping duties are also called punitive tariffs. A countervailing
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duty, another type of punitive tariff, is levied after there has been substantial or material
damage done to domestic producers. A countervailing duty is specifically charged on imports
that have been subsidized by the exporting country's government. The purpose of a
countervailing duty is to offset the subsidy and increase the domestic price of the imported
product.
A prohibitive tariff, also known as an exclusionary tariff, is designed to substantially reduce
or stop altogether the importation of a particular product or commodity. It is typically used
when the amount of an imported good exceeds a certain permitted level. It may be used to
protect domestic producers. Another type of tariff is the end-use tariff, which is based on the
use of an imported product. For example, the same product may be charged a different duty if
it is intended for educational use as opposed to commercial use.
In addition to duties and tariffs, there are also nontariff barriers (NTBs) to international trade.
These include quantitative restrictions, or quotas, that may be imposed by one country or as
the result of agreements between two or more countries. Examples of quantitative restrictions
include international commodity agreements, voluntary export restraints, and orderly
marketing arrangements.
Administrative regulations constitute a second category of NTBs. These include a variety of
requirements that must be met in order for trade to occur, including fees, licenses, permits,
domestic content requirements, financial bonds and deposits, and government procurement
practices. The third type of NTB covers technical regulations that apply to such areas as
packaging, labeling, safety standards, and multilingual requirements.
In 1980 the Agreement on Technical Barriers to Trade, also known as the Standards Code,
came into effect for the purpose of ensuring that administrative and technical practices do not
act as trade barriers. By the end of 1988 the agreement had been signed by 39 countries.
Additional work on promoting unified standards to eliminate these NTBs was conducted by

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the General Agreement on Tariffs and Trade (GATT) Standards Committee, which in 1994
was succeeded by the newly created World Trade Organization (WTO). As a result more than
131 governments accepted the provisions of the Technical Barriers to Trade (TBT)
Agreement enforced by the WTO.
Standards and testing practices can become technical barriers to trade when they are
developed by national or regional interests and then imposed on the international trading.
The U.S. Department of Commerce' s 1998 report, "National Export Strategy," identified "the
global manipulation of international standards and testing practices by governments and
regional economic blocs" as a major threat to U.S. competitiveness abroad. Under the TBT
Agreement the WTO is supposed to guarantee due process and transparency in the
establishment of international standards. The Department of Commerce, however, has
presented examples where narrow regional or market interests have resulted in standards
forced on international trade, and governments and regional economic blocs such as
the European Union (EU) have openly used standards and related practices to achieve market
domination. The United States was among those countries calling for technology- and trade
neutral standards, especially for markets in Latin America and Asia.
Other types of existing technical trade barriers include environmental, health, and safety
certification requirements. In Europe such requirements range from banning imported beef
from cattle raised with hormones to not allowing older airplanes to land because of noise
pollution concerns.

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Types of Tariffs and Trade Barriers

There are several types of tariffs and barriers that a government can employ:
Specific tariffs
Ad valorem tariffs
Licenses
Import quotas
Voluntary export restraints
Local content requirements
SpecificTariffs
A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff
can vary according to the type of good imported. For example, a country could levy a $15
tariff on each pair of shoes imported, but levy a $300 tariff on each computer imported.
Ad Valorem Tariffs
The phrase ad valorem is Latin for "according to value", and this type of tariff is levied on a
good based on a percentage of that good's value. An example of an ad valorem tariff would be
a 15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the value of
the automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. This price
increase protects domestic producers from being undercut, but also keeps prices artificially
high for Japanese car shoppers.

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TARIFF AND NON TARIFF BARRIERS

Tariffs include any schedule of duties imposed on goods passing through
national frontiers. They may be
i Import duties imposed on goods imported into the country
ii Exports duties imposed on goods originating from the duty levying
country and exported to other countries.
iii Transit duties levied on goods crossing the national frontiers,
originating from abroad and meant for some other country.
Among all these duties the most important are the import duties

Effective tariffs
Tariffs are imposed on imports on or the other basis as mentioned above. Tariff which is
imposed on the basis of value of a commodity is a nomnal tariff. For example on an import of
manufactures a tariff of 20 percent is nominal tariff. Tariffs on imports may differ depending
on the type of a commodity or the stage of manufacturing process that a commodity has
undergone.It is possible a raw material may have no or very low tariff. The rate of tariff may
increase as the commodity undergoes higher states of manufacturing process where the value
added increases. Raw materials like cotton, leather, rubb er etc.may not attract much tariff
where as their final products will be subject to higher percentage of tariff.
Domestic producers are usually protected by a higher rate of tariffs on final goods and a very
low rate on imports of inputs. This encourage the manufacturing of final goods at home by
importing the required inputs.
The effective tariff rate refers to The value of protection provided to a particular process of
production by the given nominal tariffs on a product and on material inputs used inits
production. The process of production involves adding up values to the initial input in the
form of raw material. Larger the difference in the value of raw materials and final output
greater is the degree of effective tariff thereof. The effective tariff rate, or the effective rate of
protection, is the percentage increase in an industrys value added per unit of output that
results from a countrys tariff structure . The standard of comparison is value added under
free trade.

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Tariff and Non Tariff Barriers

1. Tariff and Non Tariff Barriers Overview

2. Trade Barriers Used to encourage and protect existing domestic industry Trade
barriers are Tariffs that Increase Trade Weaken Trade Restrict Trade Quotas Boycotts
and Embargoes .

3. Impact of Tariff (Tax) Barriers Tariff Barriers tend to Increase : Inflationary

pressures Special interests privileges Government control and political considerations
in economic matters The number of tariffs they beget via reciprocity Tariff Barriers
tend to Weaken : Balance-of-payments positions Supply-and-demand patterns
International relations (they can start trade wars)

4. Non Tariff - Trade Barriers Non Tariff barriers - are another way for an country to
control the amount of trade that it conducts with another country, either for selfish or
altruistic purposes. Any barrier to trade creates an economic loss, which means it does
not allow the markets to function properly.

5. Six Types of Non-Tariff Barriers 2) Customs and Administrative Entry Procedures:

Valuation systems Antidumping practices Tariff classifications Documentation
requirements Fees 1 ) Specific Limitations on Trade Quotas Import Licensing
requirements Proportion restrictions of foreign to domestic goods (local content
requirements) Minimum import price limits Embargoes.

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6. Six Types of Non-Tariff Barriers (cont'd.) (3) Standards: Standard disparities

Intergovernmental acceptances of testing methods and standards Packaging, labeling,
and marking ( 4) Government Participation in Trade: Government procurement
policies Export subsidies Countervailing duties Domestic assistance programs .

7. Six Types of Non-Tariff Barriers (cont'd.) 5) Charges on imports: Prior import

deposit subsidies Administrative fees Special supplementary duties Import credit
discriminations Variable levies Border taxes 6) Others: Voluntary export restraints
Orderly marketing agreements

8. New Zealand's apples account for a third of its agricultural exports but have been
banned from Australia since 1921 due to fears about the spread of fire blight, a crop
pest. Apples Banned - Non Tariff Barrier By Doug Latimer in Sydney Published:
1:00AM BST 13 Apr 2010

9. Mangoes Philippines Restrictions It is a common practice in many countries to

use non-tariff barriers to control the entry of imports. For instance, Philippine
mangoes and bananas have to meet strict phytosanitary requirements from the US and
Australia.

10. McDonald France Big Beef

McDonalds France in 1998, ran a print ad

campaign featuring overweight cowboys complaining about the fact that McDonald's
France refuses to buy American beef but uses only French, to "guarantee maximum
hygienic conditions" an unsubtle effort to identify the Global

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Tariffs and Non-Tariff Measures

Under the WTO's Doha Development Agenda, the non-agricultural market access (NAMA)
negotiating groups mandate is "to reduce, or as appropriate, eliminate tariffs, including the
reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff
barriers, in particular on products of export interest to developing countries. Product coverage
shall be comprehensive and without a priori exclusions. The negotiations shall take fully into
account the special needs and interests of developing and least-developed country
participants, including through less than full reciprocity in reduction commitments.
Tariff Barriers:

By late June 2006, there was an emerging consensus that the best mechanism to achieve the
Doha mandate would be a Swiss formula applied to all tariff lines, with two coefficients
(one for developed countries and one for developing countries) that would reduce high tariffs
by proportionately more than low ones. Canada favours a Swiss formula with an aggressive
(low) coefficient for developed countries in order to improve our access to those markets, as
well as a developing country coefficient that, while somewhat higher, would still deliver
meaningful gains in major emerging markets.
To take ambition beyond what a formula would likely achieve, Canada is a leading supporter
of sectoral agreements, in which tariffs for certain industrial sectors would completely
eliminated or at least harmonized and reduced by greater-than-formula cuts. Canada has
proposed agreements for forest products, fish and fish products, chemicals (including
fertilizers) and raw materials, and other members sectoral proposals are also being
considered. We have been advocating high ambition by all members with respect to
environmental goods, in keeping with the Doha mandate.

NON TARIFF BARRIERS

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Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the
usual form of a tariff. Some common examples of NTB's are anti-dumping measures and
countervailing duties, which, although they are called "non-tariff" barriers, have the effect of
tariffs once they are enacted.
Their use has risen sharply after the WTO rules led to a very significant reduction in tariff
use. Some non-tariff trade barriers are expressly permitted in very limited circumstances,
when they are deemed necessary to protect health, safety, or sanitation, or to protect
depletable natural resources. In other forms, they are criticized as a means to evade free trade
rules such as those of the World Trade Organization (WTO), the European Union (EU), or
North American Free Trade Agreement (NAFTA) that restrict the use of tariffs.
Some of non-tariff barriers are not directly related to foreign economic regulations, but
nevertheless they have a significant impact on foreign-economic activity and foreign trade
between countries.
Trade between countries is referred to trade in goods, services and factors of production.
Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for
the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities
of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary
and phyto-sanitary measures, rules of origin, etc. Sometimes in this list they include
macroeconomic measures affecting trade.

Non-tariff barriers today

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With the exception of export subsidies and quotas, NTBs are most similar to the tariffs.
Tariffs for goods production were reduced during the eight rounds of negotiations in the
WTO and the General Agreement on Tariffs and Trade (GATT). After lowering of tariffs, the
principle of protectionism demanded the introduction of new NTBs such as technical barriers
to trade (TBT). According to statements made at United Nations Conference on Trade and
Development (UNCTAD, 2005), the use of NTBs, based on the amount and control of price
levels has decreased significantly from 45% in 1994 to 15% in 2004, while use of other
NTBs increased from 55% in 1994 to 85% in 2004.
Increasing consumer demand for safe and environment friendly products also have had their
impact on increasing popularity of TBT. Many NTBs are governed by WTO agreements,
which originated in the Uruguay Round (the TBT Agreement, SPS Measures Agreement, the
Agreement on Textiles and Clothing), as well as GATT articles. NTBs in the field of services
have become as important as in the field of usual trade.
Most of the NTB can be defined as protectionist measures, unless they are related to
difficulties in the market, such as externalities and information asymmetries information a
symmetries between consumers and producers of goods. An example of this is safety
standards and labelling requirements.
The need to protect sensitive to import industries, as well as a wide range of trade restrictions,
available to the governments of industrialized countries, forcing them to resort to use the
NTB, and putting serious obstacles to international trade and world economic growth. Thus,
NTBs can be referred as a new of protection which has replaced tariffs as an old form of
protection.

TRENDS IN TARIFF AND NON TARIFF BARRIERS

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Although trade barriers are conventionally separated into tariff and non-tariff measures, this
rather simple categorization often obscures a very broad array of individual measures that are
potential trade barriers. Bourke (1988) provides a more comprehensive classification of trade
measures that are relevant to the global forest products trade:
Specific limitations on trade - quantitative restrictions, export restraints, health and sanitary
regulations, licensing, embargoes, minimum price regulations, etc.
Charges on imports - tariffs, variable levies, prior deposits, special duties on imports,
internal taxes, etc.
Standards - industrial standards, packaging, labelling and marking regulations, etc.
Government interventions in trade - government procurement, stock trading, export
subsidies or taxes, countervailing duties, trade diverting aid, etc.
Customs and administrative entry procedures - customs valuation, customs classification,
anti-dumping duties, consular and customs formalities and requirements, sample
requirements, etc.
Such a range of trade measures is clearly diverse. Whether any implemented measure actually
is a fully fledged trade barrier - i.e. whether it intentionally or unintentionally leads to
discrimination against or restriction of trade - will depend on the circumstances in which the
specific measure is employed. This will clearly vary from country to country as well as from
product to product, which makes it extremely difficult to analyze and quantify the potential
effects on trade of the use of such measures.

Trends in Non-Tariff Barriers

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While tariffs applied to global forest products trade may have been declining as a result of the
Tokyo Round negotiations and during the lead up to the Uruguay Round, non-tariff measures
have proliferated. Table 1 indicates the extent to which the general direction of movement in
non-tariff trade barriers to forest products has been the opposite to the reductions in tariff
barriers. Most alarming is that, although many non-tariff import barriers were generally static
or declining in the 1979-85 period just after the Tokyo Round, since 1985 there has been a
general increase in the use of such barriers. However, whether the recent trend of increasing
non-tariff import measures has had a significant impact on the forest products trade has again
proved difficult to determine. Some of the more important measures include:
The use of tariff quota/ceiling system by the European Economic Community (EEC) and
Japan. The EEC quantitative restrictions were applied to a wide range of forest products,
including newsprint, fibre-building boards, plywood (separate ones for coniferous and nonconiferous), builder's woodwork and some furniture items. A number of quality controls and
quantitative restrictions have been applied to plywood and veneer in Japan.
EEC phytosanitary standards. Imports of all green coniferous softwood were prohibited to
most EEC countries unless they were either kiln-dried at 56 o C or received a phytosanitary
certificate.
US countervailing duties on Canadian softwood lumber. In July 1992 the US International
Trade Commission determined that Canadian softwood lumber was being subsidized through
low stumpage prices for logs and export rest

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Tariff reduction and the growth of international trade

For goods and services alike, international trade grew dramatically in the second half of the
20th century. By the year 2000, total world trade was 22 times greater than it had been in
1950.
This increase in multilateral international trade occurred at the same time that trade barriers,
especially tariffs, were reduced or in some cases eliminated across the globe. A major impetus
to the global growth of trade was the General Agreement on Tariffs and Trade (GATT), a
series of trade agreements adopted in 1948. The system created under GATT encouraged a
series of trade negotiations focused on tariff reductions. The early trade agreements were
largely directed toward tangible goods such as agricultural products, processed foods, steel,
and automobiles. A round of negotiations known as the Uruguay Round (198694) finally led
to the creation of the World Trade Organization (WTO) in 1995.
Advances in information technology since the 1990s have altered the focus of many trade
agreements. In 1997 the WTOs Information Technology Agreement (ITA) and Basic
Telecommunications

Agreement

(BTA)

reduced

the

tariffs

on

computer

and

telecommunications products and some intangible goods considered to be drivers of the

developing knowledge-based economy. The rapid growth of the Internet and electronic
commerce (e-commerce) represented some of the most challenging new issues in the
international trade arena, in part because many countries were slow to adopt bilateral freetrade agreements that included provisions covering e-commerce.
The ITA and the BTA represented a dramatic departure from earlier national economic
policies, especially in cases where countries used prohibitively high tariffs and subsidies to
protect their technology industries from foreign competitors. Free-trade advocates and the
WTO have held that WTO-sponsored agreements offer the best means of providing lower
prices for consumers across a wide array of products while creating fairer competitive
conditions for international suppliers.
The work of the WTO came under increasing scrutiny from its critics, especially after 1999,
when trade talks were disrupted by globalization protesters during the WTO ministerial
conference in Seattle, Washington.

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Trade Freedom

Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that
affect imports and exports of goods and services. The trade freedom score is based on two
inputs:

The trade-weighted average tariff rate and

Non-tariff barriers (NTBs).

Different imports entering a country can, and often do, face different tariffs. The weighted
average tariff uses weights for each tariff based on the share of imports for each good.
Weighted average tariffs are a purely quantitative measure and account for the basic
calculation of the score using the following equation:
Trade Freedomi = (((TariffmaxTariffi )/(TariffmaxTariffmin )) * 100) NTBi
where Trade Freedomi represents the trade freedom in country i; Tariffmax and Tariffmin
represent the upper and lower bounds for tariff rates (%); and Tariff i represents the weighted
average tariff rate (%) in country i. The minimum tariff is naturally zero percent, and the
upper bound was set as 50 percent. An NTB penalty is then subtracted from the base score.
The penalty of 5, 10, 15, or 20 points is assigned according to the following scale:

20NTBs are used extensively across many goods and services and/or act to effectively
impede a significant amount of international trade.

15NTBs are widespread across many goods and services and/or act to impede a majority of
potential international trade.

10NTBs are used to protect certain goods and services and impede some international
trade.

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5NTBs are uncommon, protecting few goods and services, and/or have very limited impact
on international trade.

0NTBs are not used to limit international trade.

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Trade Problems for Developing Countries

Developing countries believe they get a raw deal when it comes to international trade. These
problems include

Relying on only one or two primary goods as their main exports

They cannot control the price they get for these goods

The price they pay for manufactured goods increases all the time

As the value of their exports changes so much long term planning is impossible

Increasing the amount of the primary good they produce would cause the world price
to fall .

Developing countries that try to export manufactured goods find that trade barriers are put in
their way. There are two types of trade barrier - quotas and tariffs.
1

A quota is a limit on the amount of goods a country can export to another country

A tariff is a tax on imports

Other problems that developing countries face are they are short of the money that is needed
to set up new businesses and industries. Also, developing countries have fewer people who
have the wealth to buy the goods made in local industries.

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CUSTOM DUTY
Custom duties are levied on the imported goods and in a few cases on export goods at the
rates specified in the schedules to the Customs and Tariff Act, 1975. The taxable event is
import into or export from India. Import duties generally consist of the following

Basic Duty

Additional Custom Duty equal to Central Excise duty leviable on like goods produced
or manufactured in India.

Countervailing Duty

Surcharge @ 10% of Basic Duty

Special Additional Duty @ 4% to be computed on the aggregate of (i) assessable

value, (ii) basic duty, (iii) surcharge and (iv) additional duty of Customs

Additional duty of Customs @ Rs. 1/- per litre on imported motor spirit (petrol) and
high speed diesel oil.

Anti dumping duty/safeguard duty for import of specified goods.

Valuation
Most of the Customs duties are .ad valorem. Goods have, therefore, to be valued for purposes
of assessment. Valuation Rules, 1988 follow the GATT provisions thereunder the norm is
the transaction value or invoice price but the invoice value to be acceptable should be a fully
commercial and genuine price.
Where the Customs Officer has reasonable doubt about the truth and accuracy of the declared
transaction value (grounds for which, will, at the request of the importer be intimated to him),
he may ask the importer to furnish further information and evidence to substantiate the
declared transaction value and in the event of the importers failure to do so, he may after

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hearing the importer reject the declared transaction value and proceed further under the
Valuation Rules.
Date for Determination of value
The relevant date for determination of value for the purpose of assessment of Customs duty
under Section 14 of the Customs Act, 1962, is the date of importation or exportation and not
the date of contract between the buyer and the seller.
Reliance on prices in other invoices is permissible only if imports chosen for comparison are
contemporaneous, are of same quality and specification and from same manufacturer and
country of productions, size of the comparable consignment(s) is more or less similar and
importers belong to same commercial level (i.e class of buyers).Where several
contemporaneous import values are available, the lowest of the values has to be accepted. But
where the declared price is very low and totally unrealistic, it may even be necessary to value
unbranded goods on the basis of the known price of branded goods and also the goods of one
country or origin (or manufacturer) on the basis of the known price of the goods of another
country of origin (or manufacturer). In case of high seas sale, it is the high seas sale price
inclusive of canalising agencys service which would form the basis of assessment.
Proforma invoice/quotation being only an offer for sale of goods at the price mentioned
therein is a relevant evidence for sale price.
Unless the invoice price already includes ocean freight and insurance, these elements have to
be added as under as per Notification No.39/90-Cus.(N.T.) to make it C.I.F value:i) For Air Cargo : Actual air freight, but not exceeding 20% of f.o.b value
ii) Where actual sea/air freight is not ascertainable : 20% of f.o.b value
iii) Where actual insurance is not ascertainable : 1.125% of f.o.b value
Where goods are generally imported by sea but due to urgent demand they were imported by
air, only sea freight is to be added. Insurance charges paid on the Customs duty are, however,
not includible in the assessable value since they relate to post-importation factor. Landing
charges realized by Port authorities have also to be added at the prescribed flat rate of 1% of
C.I.F value, or on actual basis unless seller or his agent is under obligation to bear it as part of
CIF value.
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Loading on account of royalty or foreign collaboration fee (now reduced to 1% of value of

the goods) is permissible only if such royalty etc. payment has nexus with the imported
goods, pending verification of books of accounts and influence of relationship on price.
Regarding agency commission, where the Indian importer checked the quotations of all
proposed suppliers and finally approved the supplier party (out of those listed by his agent
abroad) and entered into purchase transaction directly with the selected supplier, procurement
charge or commission of 3% paid to foreign agent was held to be not includible in assessable
value. Interest amount (charged for delayed payments made after the permitted credit period
of 90 days) was held to be not includible in assessable value. Board has also accepted that
interest charged to importers by foreign suppliers under deferred payment scheme is not
addable to assesssable value provided such interest charges are shown separately in the
invoice, there is no special relationship between the importer and the exporter and there is no
evidence that the interest has influenced the sale price. Government has the power to fix tariff
values for goods in which case duty is assessed on such tariff value. For goods found
damaged or deteriorated before clearance, proportionate abatement in value is allowable.
Imports of second hand machinery of value above Rs.10 lakhs require a Certificate from an
internationally reputed inspection and certification agency/Chartered Engineer. In case of
import of second-hand plant, charges for dismantling, packing, forwarding, insurance and
compulsory inspection expenses incurred in the country of export are includible in assessable
value.
For calculating additional Customs duty, the value base would comprise of the transaction
value CIF plus basic Customs duty plus anti-dumping duty plus surcharge.
Date of determination of rate of duty
The rates of duty and tariff values as in force on the date of presentation of Bill of entry for
home consumption will be the rate applicable for rate of duty. However, there are two
exceptions to it so far as rate of duty and tariff value are concerned. In case the bill of entry
has been filed in advance of entry inwards of the vessel or the arrival of the aircraft, the
crucial date will be the date of entry inwards of the vessel or the date of arrival of the aircraft.
Secondly, in the case of clearance of goods from a bonded warehouse, the date of actual
removal of goods from the warehouse is the crucial date provided the goods are removed
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during the permitted warehousing period (including extension allowed, if any). But once the
permitted warehousing period expires, the goods cease to be warehoused goods and they are
deemed to be improperly removed from the warehouse. The rate of duty applicable in that
case will be the rate prevalent on the date when the warehousing period (including permitted
extension) came to an end.
As regards exchange rate, the rate notified by the Government and as in force on the date of
presentation of the bill of entry (for home consumption or for warehousing) will be the one
applicable.

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Conclusion
Trade barriers may occur in international trade when goods have to cross political boundaries.
A trade barrier is a restriction on what would otherwise be free trade. The most common
form of trade barriers are tariffs, or duties (the two words are often used interchangeably in
the context of international trade), which are usually imposed on imports. There is also a
category of nontariff barriers, also known as nontariff measures, which also serve to restrict
global trade. Tariffs and other trade barriers have a definite effect on consumption and
production. They serve to reduce consumption of the imported product, because the tariff
raises the domestic price of the import. They also serve to stimulate domestic production of
the product when that is possible, also because of the higher domestic price. Proponents of
tariffs argue that such an increase in domestic production is desirable, while opponents argue
that it is inefficient from an economic standpoint. The overall effect of tariffs and trade
barriers on international trade is to reduce the volume of trade and to increase the prices of
imports. Proponents of free trade argue that both of those results are undesirable, while
proponents of protectionism argue that tariffs may be necessary for a variety of reasons.

Tariff barriers to forest products trade have continued to decline in recent years, particularly
in the post-Tokyo Round era. The extent of the decline in tariffs differs with the market and
product. In developed country markets tariff rates had fallen generally to very low levels even
before the Uruguay Round schedules were agreed. However, tariff escalation has continued in
most developed countries, with specific products such as wood-based panels, builders'
joinery, coated and corrugated paper, kraft, and furniture generally receiving relatively higher
rates.

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Compared to developed country markets, tariff rates have consistently been higher in
developing country markets. Although tariff escalation is a feature in most markets, some
developing countries have preferred a high uniform rate to applied across all forest products.
One important impact of the decline in tariff rates for forest products in developed country
markets is that the tariff differential between MFN and GSP rates has been reduced
significantly. Most tariff reductions have led to a general decline in the MFN rate, while the
GSP rate has been left largely unchanged. This suggests that exporters facing the full MFN
rates may have gained more from falling forest products tariff rates than developing countries
that previously benefitted from GSP and other preferential schemes. This effect is examined
explicitly in the analysis of the effects on the forest products trade of the Uruguay Round
tariff reductions in Section.

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BIBLIOGRAPHY
BOOKS REFERRED

Rao, M. Govinda. "Tax reform in India: achievements and challenges

Pursell, Garry. "Trade policies in India."

Ahluwalia, Montek S. "India's quiet economic revolution."

Lee, Jong-Wha, and Phillip Swagel. "Trade barriers and trade flows across countries and
industries."
Laird, Sam, and Alexander J. Yeats. Quantitative methods for trade-barrier analysis.
Macmillan.

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