What are customs duties? An explanation and key points for international trade

Customs duties are taxes that a country levies on goods when they cross its borders, usually upon importation. They are mandatory payments that must be made primarily by importers and, in some cases, by exporters. They are applied when goods pass through customs and form part of what are known as tariff barriers.

There are import duties, which are applied when a product enters the country and serve to protect domestic production. Export duties are used to control certain products, whilst transit duties apply when goods pass through one country in route to another.

To calculate these duties, the product’s customs value is taken as a reference; the tariff rate is applied, and the product is classified and its country of origin identified to take account of tariff agreements.

The main function is to generate revenue for the State; it allows for the control of the flow of goods and protects domestic industry from foreign competition.

The consequence is that imported products become more expensive, thereby reducing external competition.