Describe and compare the different types of tariffs (duties).
Answer: A tariff, or duty, the most common type of trade control, is a tax that a government levies on a good shipped internationally. If collected by the exporting country, it is known as an export tariff; if collected by a country through which the goods have passed, it is a transit tariff; if collected by the importing country, it is an import tariff. The import tariff is by far the most common. Import tariffs primarily serve as a means of raising the price of imported goods so that domestically produced goods will gain a relative price advantage.
A tariff may be protective even though there is no domestic production in direct competition. Tariffs also serve as a source of governmental revenue. Import tariffs are of little importance to large industrial countries, but are a major source of revenue in many developing countries. Transit tariffs were once a major source of revenue for countries, but they have been nearly abolished through governmental treaties. A government may assess a tariff on a per-unit basis, in which case it is a specific duty. It may assess a tariff as a percentage of the value of the item, in which case it is an ad valorem duty. If it assesses both specific and an ad valorem duty on the same product, the combination is a compound duty. A specific duty is easy for customs officials who collect duties to assess because they do not need to determine a good's value on which to calculate a percentage tax. Because an ad valorem tariff is based on the total value of the product, meaning the raw materials and the processing combined, developing countries argue that the effective tariff on the manufactured portion turns out to be higher than the published tariff rate.