What is the purpose of 'customs duty' in international trade?

Key Points

• Customs duty is a tariff or tax imposed on goods when transported across international borders.
• The primary purpose of customs duty is to protect domestic industries by taxing imports, making foreign goods more expensive and less attractive compared to local products.
• It helps in regulating the movement of goods into and out of a country, ensuring that the local markets are not flooded with cheap foreign goods, which could harm domestic businesses.
• Additionally, customs duties generate revenue for the government and can be used as a tool to control the volume and type of goods imported into a country.

Additional Information

• Customs duties are usually calculated as a percentage of the value of the goods or a specific amount per unit.
• The rates of customs duties can vary depending on the type of goods and the country of origin.
• International trade agreements can influence customs duty rates, often resulting in reduced tariffs between member countries.
• Customs duties can also be used to penalize countries that engage in unfair trade practices or to protect national security interests.