One thing I’ll do with this blog is to periodically provide information that I present to students in my classes. One thing we looked at this week was the US Tariff Schedule. The whole schedule is available from the US International Trade Commission’s website here. For teachers and students, a look through the US tariff schedule offers a quick illustration of several important features of international trade and methods of protection.
First, Chapter 91 covers tariffs on clocks and watches. The list begins with several pages of definitions. Note how precisely the products are defined. On page 10 the tariff schedule begins. The standard MFN tariff, applied automatically to all WTO member countries, is shown in column 1 (General). Note the complexity of the tariff on the watch identified in category 9101.11.40. A 51 cent specific tariff is levied on each imported watch, together with a 6.25% ad valorem tariff on the case and strap, and a 5.3% tariff on the battery.
Column 1 (Special) shows the tariff rate for countries the US has negotiated special arrangements such as Free Trade Areas (FTAs), as with Australia (AU), Chile (CL), Canada (CA) and Mexico (MX), and other special arrangements like the African Growth and Opportunity Act (D), among others. Note that for all of these the tariff is “Free” meaning 0%. However, for watches in category 9101.11.80, Chile currently has a tariff applied that’s in between the General rate and zero. This reflects the transitional part of an FTA. Most of them involve a gradual reduction in tariffs over a 10-15 year period.
Finally, notice that column 2 tariff rates are significantly higher. These are sometimes referred to as the non-MFN tariff rates. These rates could be applied to all non-WTO countries, however, for important countries with whom the US wants to encourage trade, like Russia and Ukraine, MFN tariffs rates have been approved by the US Congress. The only countries that receive column 2 rates are those we have no special agreement with – currently only Cuba and North Korea.
Chapter 7 shows the tariff schedule for certain agricultural goods. Some things worth noting here are; 1) agricultural tariffs are more likely to be specific tariffs rather than ad valorem, this because specific tariffs are more protective when commodity prices fall; 2) as seen with cabbages in category 0704.10.20, some products have different tariffs depending on the time of entry, this to protect US producers more during the domestic harvest season, and 3) the rise in the tariff between category 0704.10.40 (10%) and 0704.10.60 (14%) is an example of tariff escalation, this to protect US food processing industries.