tariff, or customs duty, Tax levied upon goods as they cross national boundaries, usually by the government of the importing country. The words tariff, duty, and customs are generally used interchangeably. Usually assessed on imports, tariffs may apply to all foreign goods or only to goods produced outside the borders of a customs union. A tariff may be assessed directly, at the border, or indirectly, by requiring the prior purchase of a license or permit to import specified quantities of the good. Examples of tariffs include transit duties and import or export taxes, which may be levied on goods passing through a customs area en route to another destination. In addition to providing a source of revenue, tariffs can effectively protect local industry by driving up the price of an imported item that competes with domestic products. This practice allows domestic producers either to charge higher prices for their goods or to capitalize on their own lighter taxes by charging lower prices and attracting more customers. Tariffs are often used to protect “infant industries” or to safeguard older industries that are in decline. They are sometimes criticized for imposing hidden costs on domestic consumers and encouraging inefficiency in domestic industries. Tariffs are subject to negotiation and treaties among nations (see General Agreement on Tariffs and Trade; trade agreement; World Trade Organization).
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