International Trade - Theory and Policy, 2010a

imported, the U.S. government collects $510 in tariff revenue. In this case, $510 is collected whether the
watch is a $40 Swatch or a $5,000 Rolex.
An ad valorem tariff is levied as a fixed percentage of the value of the commodity imported. “Ad valorem”
is Latin for “on value” or “in proportion to the value.” The United States currently levies a 2.5 percent ad
valorem tariff on imported automobiles. Thus, if $100,000 worth of automobiles are imported, the U.S.
government collects $2,500 in tariff revenue. In this case, $2,500 is collected whether two $50,000
BMWs or ten $10,000 Hyundais are imported.
Occasionally, both a specific and an ad valorem tariff are levied on the same product simultaneously. This
is known as a two-part tariff. For example, wristwatches imported into the United States face the $0.51
specific tariff as well as a 6.25 percent ad valorem tariff on the case and the strap and a 5.3 percent ad
valorem tariff on the battery. Perhaps this should be called a three-part tariff!
As the above examples suggest, different tariffs are generally applied to different commodities.
Governments rarely apply the same tariff to all goods and services imported into the country. Several
countries prove the exception, though. For example, Chile levies a 6 percent tariff on every imported good,
regardless of the category. Similarly, the United Arab Emirates sets a 5 percent tariff on almost all items,
while Bolivia levies tariffs either at 0 percent, 2.5 percent, 5 percent, 7.5 percent, or 10 percent.
Nonetheless, simple and constant tariffs such as these are uncommon.
Thus, instead of one tariff rate, countries have a tariff schedule that specifies the tariff collected on every
particular good and service. In the United States, the tariff schedule is called the Harmonized Tariff
Schedule (HTS) of the United States. The commodity classifications are based on the international
Harmonized Commodity Coding and Classification System (or the Harmonized System) established by
the World Customs Organization.
Tariff rates for selected products in the United States in 2009 are available in Chapter 1 "Introductory Trade
Issues: History, Institutions, and Legal Framework", Section 1.8 "Appendix A: Selected U.S. Tariffs—2009".
Saylor URL: http://www.saylor.org/books
Saylor.org
11