What is the difference between specific duty and ad valorem duty?

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Matteo Kreiger asked a question: What is the difference between specific duty and ad valorem duty?
Asked By: Matteo Kreiger
Date created: Sun, Jul 11, 2021 9:29 PM
Date updated: Thu, Jun 23, 2022 10:13 AM

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Video answer: Ad valorem tax & specific duty

Ad valorem tax & specific duty

Top best answers to the question «What is the difference between specific duty and ad valorem duty»

A specific duty is a levy of a given amount of money per unit of the import, such as $1 per yard or per pound. An ad valorem duty, on the other hand, is calculated as a percentage of the value of the import… A specific duty, however, penalizes more severely the lower grades of an imported commodity.

Video answer: Types of tariff

Types of tariff

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Ad valorem duties provide the least protection when imports are inexpensive; conversely, protection is greatest when imports are expensive and therefore fall in volume. Specific duties prevent a reduction in revenue when prices fall so they were often favored for commodities which have unstable prices.

Note that specific tariffs are never referenced as percentages. They are always referred to in reference to a unit or quantity of units/weight. Ad Valorem Tariff Rate Calculation. Ad Valorem tariff rates are calculated as a fixed percentage of the assessed commercial value of the goods. If a product you are importing has a stated commercial value of $5,000 and an Ad Valorem tariff rate of 5%, you would pay $250 in tariff rate charges.

Definition of AD valorem Method for charging a duty, fee, or tax according to the value of goods and services, instead of by a fixed rate, or by weight or quantity. Definition of specific duty A specific rate duty is a tariff levied on imports, defined in terms of a specific amount per unit, such as cents per kilogram.

A specific tariff is levied as a fixed charge per unit of imports. 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 US currently levies a 2.5% ad valorem tariff on imported automobiles. Complete info about it can be read here.

Indirect taxes like sales tax or excise duty may be either specific or ad valorem. A specific or per unit tax is stated in terms of the number of rupees which the seller has to pay per unit but sold an ad valorem tax is stated in terms of a percentage of the sales price. A simple example may clarify the point.

Recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under-shifted onto consumers in the presence of imperfect competition.

A specific tariff is a fixed tariff on one unit of goods imported and varies by the type of good. Ad Valorem tariff is the certain percentage of a tariff that is calculated on the total value of imported goods. Main Differences Between Duties and Tariffs. Duties are the taxes collected by the government on import and export goods.

What is the difference between a specific tariff and an ad valorem tariff? A specific tariff is levied as a fixed charge per unit of imports. 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."

Combined duty calculation. The price for one unit of goods is 10 euros. A total of 5 thousand units of products are imported into the customs territory of the state. The ad valorem rate is 5 percent of the customs value; the size of a specific tariff is 50 eurocents per unit of goods.

Specific tariff – This is a fixed tariff that is applied to every unit of goods imported. The value for each unit varies according to the type of goods being imported. Ad Valorem (according to value) tariff – This tariff is variable and is calculated by working out a certain percentage of the total value of the imported shipment.

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Video answer: Finance: what is ad valorem?

Finance: what is ad valorem?