Tariff vs. duty
The words tariff and duty are often used interchangeably, but there is a difference in their meaning and usage. In essence: When a government and the economy are mentioned, the word tariff is more commonly used; when the rates and the amount paid or owing are discussed, the word duty is more commonly used.
…but let’s delve a little deeper.
Tariff = HS: The Harmonized Commodity Description and Coding System (a.k.a. Harmonized System, or HS) is a standardized system for classifying traded products. The HS is recognized – and used – by hundreds of countries around the world.
Goods for import will fall into one of approximately 5,000 HS categories with unique numeric codes. These codes communicate to customs agencies the material make-up, primary purpose and end-use of an imported item.
A country’s customs agency uses the HS codes to apply the required tariff rate to imported products. The tariff rate is used to calculate the amount of duty owing on the product.
Duty, therefore, is the amount of money paid on a product to an importing country, and is based on the product’s tariff rate classification.
Finally… A customs duty is commonly considered an indirect tax so it is sometimes also referred to as an “import tax.”
Check back our blog for more of these explained differences.